It's good to see Glenn Black taking up my long-term warnings that Farm Credit Canada is too aggressive about lending money.
Once before taxpayers had to bail these open-handed lenders out of technical bankruptcy - to the tune of a couple of billions of dollars.
This time it could be much, much more.
And, as with the last time in the 1980s, farmers who manage to meet their loan commitments will be carrying a lot of the load for those who throw in the towel, or have it thrown in for them by their financial managers.
Black notes that the FCC now has loans outstanding of about $20 billion.
Eighty per cent of that is at floating interest rates.
And rates, according to Janet Yellen, who sets them for the United States, are going up this year.
How far up? Nobody knows. Not even Yellen at this point.
Black also notes that the FCC "stress test" is a two per cent increase in interest rates.
Ah, but does the "stress test" say anything about declining asset values? I think that's the bigger risk.
One big question hangs over the value of quota. Everybody seems to agree the prices are too high. But so far the plug has not been pulled. Some day it will be.
The other big asset is farmland. It's a close cousin to house prices in Vancouver and Toronto.
The Conservatives, when Harper was pulling the strings, kept warning about house prices being too high. They said nothing about the taxpayer risks associated with farmland prices and the FCC.
The Liberals seem intent on changing course on most Conservative policies. I hope they do it for the FCC.
My recommendation remains the same: sell it while there may still be buyers!
When quota prices begin to decline, when interest rates begin to rise, a lot of long-in-the-tooth farmers may decide it's finally time to sell and retire. And when things reach that tipping point, it could be a rapid decline in farm and quota prices.
They say a word to the wise is sufficient. And they also say that fools never listen.
