Farms are businesses, but farmers are not quite like any other businesspeople. Yes, they want to be successful and build value in their operations, and they are probably more business-savvy than urbanites might give them credit for.
But compared with other business owners, many farmers have different priorities, say Trevor Sproule, Assistant Vice President and Head, Agriculture Banking, and Georgina Knitel, Assistant Vice President and Agrologist, Prairies Region, at CWB.
For instance, they have seen a number of farms worth more than $100 million in their careers, with owners taking out minimal draws each year. “Why wouldn’t they sell the farm and take the cash? That’s generational wealth forever,” Sproule says. “But that doesn’t matter to them. They love the lifestyle and it’s about building the farm for the next generation – and the next and the next. That is way more important than cash in the bank.” Adds Knitel: “Even if they’re incorporated, most farms are still family-owned and operated. For them, everything centres on the farm – it’s their history and their legacy, where they work and live and celebrate. It’s all tied together.”
Knitel and Sproule, based in Lethbridge, Alta., come by their knowledge of Canadian farmers honestly. Both grew up on Alberta farms (Knitel still has a specialty Wagyu beef herd and irrigated crop land at her home outside Lethbridge); both have specialized education, Knitel in agricultural economics and Sproule in business management; and as bankers, they have decades of joint experience supporting farmers.
So when CWB launched a farm-specific banking practice in February 2021, they were natural fits for its senior management team not just because they understood the complex factors that affect the business of farming, but also because they understood farmers. “Farming is a passion for both me and Georgina, and agriculture clients are near and dear to our hearts,” Sproule says. “We try to take more of a relationship-based approach to farmers than other banks might – to be a real part of their team, as opposed to just being their banker.”
It’s an approach that has found a home at CWB, which for more than 35 years has supported Canadian small and medium-sized enterprises with a depth of expertise and breadth of financing solutions. For farmers, whose business is unlike any other, specialized knowledge from their banker can certainly come in handy. So can the flexibility to find the right financing solution for operations whose fortunes are tied not just to sound management practices and production yields, but also to global markets, commodity prices, land values, interest rates, environmental regulation, new technologies and on and on.
The CWB Agriculture Team can also help with financing and advice for farm families navigating intergenerational transitions (for instance, when children move back to the family farm); among her other credentials, Knitel is a certified Family Enterprise Advisor (FEA). The different experience CWB offers farmers, Sproule says, “starts with our products and structures that aren’t as widely available at other banks – longer amortizations, interest-only loan availability, easier debt service tests and other things – and then ends with the support we can give on family transitions and other long-term issues.”
How does CWB help farmers? One important part of the Bank’s value proposition is the deep understanding the Agriculture Team brings to the challenges farmers face today. For instance: rising input costs. For many Eastern Canadian farmers, 2021 will come in as a bumper year thanks to strong yields and rising global commodity prices, Knitel says, but it will be less so to the West, where crop yields were poor due to drought and heat stress. Yet for farmers across the country, a strong commodity market is something of a double-edged sword, because it is also inflating farm’s input costs.
Seed, fertilizer, and chemical prices, in particular, are expected to see dramatic increases – and perhaps even double or triple – next year. To avoid potentially crushing input cost inflation, “many clients want to buy fertilizer now to use next year,” Sproule says. “Because we understand farmers, we understand why – and why we need to consider loaning them the money to help them do that.”
The reality of rising costs speaks to the importance of maintaining healthy cash flow, Knitel says. “We are very mindful that farmers need enough working capital to make their best management decisions – and not be forced to make bad ones,” she adds. To help, the CWB Agriculture Team works to make sure farmers’ loan payments work in sync with the operation’s cash flow; as Sproule notes, scheduling loan payments in the spring for a cow producer that sells in November does not make much sense.
As well, farmers might benefit from an interest-only payment schedule on loans for new farm facilities (like a barn, for example), at least until the facility is completed and productive. The Agriculture Team might also help farmers improve their cash position by offering longer amortization periods to reduce loan payments, or by providing leasing options for equipment financing. “Maybe you can arrange a five- or seven-year lease on equipment with a 40% residual and cut your recurring equipment costs in half – that’s a huge benefit to the farm,” Sproule says.
Knitel adds that people outside the sector often do not realize how quickly technology is reshaping agriculture – or how eager farmers are to use tech not only to improve efficiency, but also to reduce their environmental footprint. She calls farmers “true early adopters,” and the CWB Agriculture Team can support them with flexible and responsive financing and leasing options.
With CWB’s support, one client recently bought a high-tech spot sprayer that distributes herbicides directly on weeds rather than the whole field, resulting in lower costs, less environmental impact and a 40% reduction in chemical use. Another client – again with CWB financing – is buying new headers for his combine 42 feet wide rather than 32, consuming less diesel fuel, leaving more straw in the field for moisture preservation, and resulting in less wear-and-tear on the farm tractor. When it comes to technology, “we just have to keep up with our clients and make sure we can help, whether it’s finance or lease or covered by cash flow,” Knitel says. “On tech, they are way ahead of us.”
Sproule and Knitel acknowledge that their style of banking is a “high-touch” process, one that’s based on frequent and early conversations with farmers – dealing with issues before they become problems. Their team is structured to make that easy: the CWB Agriculture Team works out of eight key agricultural centres throughout Western Canada, and it includes a credit specialist to make dealing with the bank efficient and simple for clients. And clients have taken notice.
“I had one phone me to thank us for what we did and tell me it was the best harvest he’d ever had,” Sproule recalls. “He knew he was set up right. He knew appropriate financing was in place. Everything we did just took the stress off his shoulders.”
With satisfied customers like that, it’s not surprising that the CWB agriculture practice is on track to exceed its first-year business target by a wide margin, Sproule says. And while the right products and services are of course important to clients of any bank, the CWB Agriculture Team offers something more: a team of dedicated experts who are committed to helping farmers and who deeply understand their unique business and family challenges and priorities.
“That’s one of the things that makes CWB – and us – different from what other banks do,” says Knitel. “We draw on our understanding of not just agriculture, but the culture of agriculture.”