Financial uncertainty hits B.C. dairy farmers as major operation forced into creditor protection

Ted Dykman grew up on the Abbotsford dairy farm an accounting firm now oversees.

Over the past 60 years, his family-owned cattle company has navigated industrial change, weather woes and the raising of large-scale livestock — only to see a dispute with a bank bring the business to its knees. 

A B.C. Supreme Court judge placed Dykman's farm into creditor protection late last month following an application from the Bank of Nova Scotia citing a default and mounting interest payments on $75 million worth of debt.

The order appointing PwC Canada as monitor for an enterprise responsible for more than one per cent of British Columbia's milk supply has sent shockwaves through an industry struggling to cope with mounting financial pressures from climate change, interest rates and soaring land values.

"I think it's definitely concerning," says Sarah Sache, a Fraser Valley-based farmer who sits on the boards of both the B.C. Dairy Association and Dairy Farmers of Canada.

"We've seen them trying to make it work, and we've seen it not work out. And so I think for those of us who are trying to grapple with succession specifically, grapple with having a future in the industry, if they can't make it, then we do have to wonder what that means for us."

'Active and aggressive in lending'

The order placing Dykman's farm under the control of a court-appointed monitor follows a bitter dispute.

The farmer wouldn't comment on the case, and Scotiabank did not return an email from CBC, but their affidavits lay out a charged and, at times, emotional conflict over the fate of one of the province's larger dairy farms.

In court filings, Dykman describes a relationship that began in 2019 when he says he was approached about moving financing on what was then a $44 million debt from Farm Credit Canada to the Bank of Nova Scotia.

He claims penalties associated with the transfer meant he never realized the benefits of the deal, and while the bank provided money to expand his business, subsequent defaults following interest rate hikes left him making crippling $463,000 monthly interest payments to the bank.

He says he's not alone.

"The dairy community in British Columbia is relatively small, and I have friendly relationships with a large number of farmers across the province. As I understand it, in 2019, right around the time of the loan, The Bank [of Nova Scotia] became very active and aggressive in lending to the dairy industry," Dykman's affidavit says.

"I am personally aware of at least six other dairy farmers who are in a similar position as me with the bank in that they fell into default as a result of increased interest rates or other circumstances outside their control and are now either in a forbearance agreement with the bank or being pushed to sell lands, quota or entire operations."

'Ultimately felt we had no choice'

According to Dykman's affidavit, his parents bought the land that grew to become today's 483-acre farm in 1965. The operation has grown from 80 cows to more than 1,800 — producing about 27,000 litres of milk a day.

The farm is home to Dykman, his wife, Cynthia, their four children and five grandchildren. They also rent residences on the farmland to some of their 12 full-time employees.

The family plan was to have two of Dykman's sons take over the business — which includes acreage in Vanderhoof to grow feed crop — "just as I took over from my father," the affidavit reads.

"We have always operated the farm with a view to preserving it as a family operation."

Dykman's affidavit says the quota system through which B.C.'s Milk Marketing Board governs the amount of milk farms are allowed to sell to the market means his farm's revenue "is essentially fixed."

"As a result, when costs rise, the farm is necessarily less profitable because there is no way of increasing revenue to keep up with increased costs," he writes.

Dykman faults the bank for insisting he sell a portion of his quota to generate cash to pay creditors — "reducing the farm's capacity to earn."

"Despite our reservations, Cynthia and I ultimately felt we had no choice," he claims.

'Overwhelmed by emotion and anger'

The court filings detail an angry 11th-hour meeting at which senior Bank of Nova Scotia accounts manager James Cook claimed Dykman said that "unless the bank agreed to write-off a significant portion of the debt, there was 'nothing in it' for the Dykman family."

"In the context of these discussions ... we discussed that the abrupt shut down of operations would threaten the health and well-being of the companies' animals," Cook wrote.

He cited "grave risk" to the cows in an initial call for day-to-day operations of the farm to be ceded to a third party.

In his version of events, Dykman says he "was overwhelmed by emotion and anger at the idea of losing everything, and I lashed out."

"I would never put our cows or any other farm animals at risk," Dykman's affidavit says.

"For absolute certainty, as long as the bank does not force me out by appointing a third-party operator for the farm, I intend to continue farming as I always have, together with my children."

The court ultimately left Dykman in charge of operations — but says he must consult with PwC, which has wide-ranging powers over every aspect of the business including the sale of property.

'It's pretty pervasive right now'

Sache wouldn't comment on the specifics of Dykman's battle with the bank, but she said the issues at play are on the minds of all B.C dairy farmers.

She points to a string of climate-related disasters which have resulted in huge ongoing costs: flooding in the Fraser Valley, a heat dome, even a recent snap frost.

Increased land values have turned small family operations into multi-million dollar businesses, attracting banks but complicating management and finances around ownership and succession.

And then there are interest rates.

"It's the number one thing. Cost is a huge challenge. So even when we meet together as producers, that's the number one we talk about. When we advocate with the provincial government, the national government, all of things, the number one concern for B.C. dairy farmers is cost," Sache says.

"It's pretty pervasive right now, to be honest. We really are dealing with considerable cost pressures."

Without going into specifics, Sache called on governments to support dairy farmers through tough times.

She also said the public can play a role — by continuing to drink milk.