Thanks, Rob.
As mentioned, I'm the vice-president of agricultural and commercial services at Libro Credit Union. We're based in southwestern Ontario, serving our owners west of the GTA to Essex County and from Lake Huron to Lake Erie.
Libro has the largest credit union agricultural portfolio in Canada. Many of our founding member owners in the 1940s and 1950s were farmers, and agriculture remains a crucial part of our credit union today, as it has over the past 70 years.
We provide state-of-the-art financial services to primary producers and agribusiness in every major commodity group. Our commitment to agriculture has been unwavering throughout our history, when times were good, as they have been for the past few years, and when times were bad, such as the high-interest-rate days of the 1980s.
While we have some concerns when we look at the future of farming, we are excited about the future of agriculture and food processing in southwestern Ontario and across Canada. As Rob noted, the population of the world continues to grow and the increased disposable income in countries like India and China grow the demand for quality Canadian-grown food. Canada, with land, water, research, technology, and, most important, some of the world's most talented farmers, will have the opportunity to play a leading role in meeting the increased demand for quality Canadian food. In short, the demand side of agriculture in Canada looks very positive.
There are, however, concerns that all involved in agriculture must be cognizant of. Over the past 10 years the price of farmland has increased dramatically across the country, particularly in southwestern Ontario. It now sells in some areas for more than $20,000 per acre, so a 50-acre farm sells for more than $1 million. While this has positively increased the value of farm assets, it has also significantly increased farm debt in many cases.
Increased production, decent commodity prices, and low interest rates have resulted in some of the most prosperous years ever experienced by Canadian farmers, but we all expect interest rates to increase someday, and with much larger debt loads farmers need to be prepared to have the income to pay higher interest rates. A 2% increase in rates means an extra $20,000 in annual interest on a $1-million debt, a significant impact on cash flow.
The impact of rising rates will depend on how high they go and also the speed at which they climb. A slow and steady climb in interest rates toward their historic norms would allow farmers time to adjust and to moderate the impact of the rate increases. Of course, rapid rate increases would be difficult to manage. Although we do not see rapid rises in the near term, we at Libro encourage and coach our farm owners to manage their debt wisely, to pay down debt as quickly as possible when profits are strong, and to lock in today's low interest rates for as long a period as possible. Of course, other credit unions do this also.
Predicting the future is impossible but we do know there will always be good times and not-so-good times, but I can predict with certainty that Libro will always stand with its farmers during lean times and in times of plenty.
One last area of concern I wish to address is farm succession. While increasing numbers of young people want to return home to take over the family farm, the current high value of farmland and farm equipment and other farm assets makes it difficult for them to ever save the money for a down payment large enough to be able to purchase a farm operation if they are required to pay today's market rate for the assets to be purchased.
We acknowledge some of the work that Farm Credit Canada does to support young farmers with their young farmer loans. These loans fill gaps in the marketplace and enable young farmers to enter the market and grow. However, high asset prices, the retirement of older farmers, and young talented farmers struggling to get a toehold in the industry are still a fearsome challenge for the sector.
I don't have an answer to solve this problem today, but all of us, government and the private sector, need to work together to come up with workable solutions that will enable our bright young farmers of the future to realize their farming dreams.
I appreciate this opportunity to speak to you today. The future of agriculture is bright. Working together, we as stakeholders can make it even brighter.
We look forward to any of your questions. Thank you.