As printed in the latest edition of Michigan Farm News.
By Tom Frisk
Applying for a loan is the first step in the relationship between the applicant and the lender.
The complexity of the loan request and type of operation will determine the amount of information needed, and the questions that will be asked by a lender. In the side-by-side relationship, it is important to provide accurate and up-to-date financial information, including a balance sheet, income statement, and projected cash flow statement. Transparency and documentation of assets and liabilities is critical to help avoid surprises such as incorrectly valued assets or forgotten liabilities. Although the loan amount will dictate how much detail the potential borrower will be expected to provide, here are some questions you can expect from the lender.
- What are you requesting and for what purpose? What amount and terms?
- What assets are you going to pledge to secure the loan?
- What off-farm income is received? From what source?
- Is the loan going to be in individual names or an entity?
- Do you have a Trust?
- Provide verification of accounts, employment, major assets and debts.
- Any major changes in the next 12 months? If so, what are they?
- What is your credit history?
Financial Statement/Balance Sheet
This could consist of individual and entity balance sheets
- Provide verification of assets (statements to prove cash, investments, 401K).
- What are the terms on the loans that are listed?
- What inventory do you have?
- Do you have any investment in growing crop?
- Provide livestock specifics.
- Are there any prepaid expenses such as land rent or fuel?
- What supplies do you have on hand?
- Are there any capital leases?
- What are the account payables and taxes owed?
- Do you have a succession plan?
It is necessary to provide balance sheets with reasonable values, including debt obligations and schedules. This information helps the lender ensure that debt structure meets the special needs of the individual growers.
Income statements – Profit and loss – Income tax returns
- Provide details of your operation
- Do you contract your production? If so, what percentage and at what price?
- How many acres do you own verses how many acres do you rent?
- How long are your rental contracts and how much do you pay per acre rent?
- What was your production last year?
- What do you project in terms of production this year? Including price, yield, number of acres, crop, etc.
- Do you have production insurance for crop (multi-peril, revenue assurance) or milk (LGM)?
- Do you plan for any changes compared to last year?
- Do you pay yourself through payroll or distributions (only entities)?
- What is your family’s living expense?
The information that lenders request helps determine the customer needs and understand their goals; these may be business, personal as well as family. The most productive producer-lender relationships are made when the producer has considered their short and long-term strategies. The information requested assists the lender to understand the business, the customer’s goals, and structure the operation for a long-term, successful relationship.
Tom Frisk is a senior financial services officer.
As printed in the latest edition of Michigan Farm News.
By Jim Garvey
Over the last four to five years, much has been written about farmland values. Many reports have documented the rapid increase in land values fueled by record farm incomes, more recently the focus has changed to speculation on how big a correction in land values to expect.
Farmland rental rates are closely, but not perfectly, correlated with land values. In general, rental rate trends lag land value or farm income trends. Consequently, many farm operators are now faced with rental rates negotiated at a time when farm income prospects were much better than we are facing now, with sub $4.00 corn and sub $10.00 soybeans. It is pretty tough to pencil out a profit at these prices when paying land rent of $150 - $250 per acre. So, what are the options?
Renegotiating land rents is difficult; few landlords are going to welcome the opportunity to cut their income. Hopefully you have cultivated a good relationship over the years with these individuals and can leverage the economic realities of lower farm income into a lower rental rate.
A hybrid lease, also known as a flex lease, may be an available option. This type calls for a base cash rent, with the opportunity for additional payments to the landowner if certain price levels or yield results are attained. This kind of lease can provide the landowner with a means of capturing additional rent when market conditions improve, without locking the farm operator into a non-economic rent if market conditions do not improve.
Renting on shares could be another possibility. Many years ago, before cash rents became popular, share leases were the norm. With this option, the landlord receives a percentage of the crop as rental payment, and is then responsible for marketing the crop. This exposes the landowner to both production and pricing risks, but also creates the opportunity to reap the benefit of high yields and/or high prices. The advantage to the farm operator is that it reduces the amount of working capital needed to pay cash rent. However, it does present a challenge. Production from a farm rented on a share basis must be segregated and accounted for separately from other rented or owned land.
Landlords need to recognize there is collection risk involved in renting their farmland. Years ago I did an appraisal for a customer that had several homes he rented to others. I made the comment to him that the rent price he was charging seemed low. His reply was, “I’d rather deposit $400 every month than continually chase $600.” As a landowner, keep in mind accepting a lower rent than you have received in the past may be a better alternative than attempting to collect one that is not economically sustainable.
Jim Garvey is a VP - Chief Appriaser for GreenStone Farm Credit Services.
By Teresa Vicary
The halls have been decked and holiday treats are abounding at the GreenStone Corporate office in East Lansing. But more importantly, the true spirit of Christmas and our Core Values resonates through our office. Each year the corporate office selects several special charities to support. Over the last number of years, we have provided gifts of service, money, or tangibles to Big Brother Big Sister, Haven House, Ele’s Place, Volunteers of America, the Capitol Area Humane Society, local schools, military families, and more! This year our office has generously donated to Toys for Tots and Small Talk Children’s Assessment Center.
Toys for Tots is sponsored by the local Salvation Army and will deliver our donated toys to children around the Lansing area. We find that donating to Toys for Tots provides two gifts; one for the child and the second for the parent whom can receive the gift of giving. Small Talk Children’s Assessment Center provides local child victims and child witnesses of assaultive crimes with a safe, child centered location to meet with professionals to discuss events and be interviewed in a way that is supportive, non-traumatizing, and appropriate for children under the age of 18. It is truly an under advertised organization that manages this worthy cause. GreenStone employees personally donated over $1,000 to their mission and goal of purchasing a new counseling center.
GreenStone we would like to thank all of our employees for helping our community celebrate the true meaning of the holidays and honor them for their generous support.
Teresa Vicary is a Human Resources Generalist at GreenStone Farm Credit Services.
By Mark Klett
I recently had the opportunity to participate in a TV shoot for the Michigan Out-of-Doors (MOOD-TV) Television show. The segment highlights a new hunting regulation for Zone 3 (the lower half of the Lower Peninsula) that allows the use of pistol cartridges in a rifle. This new regulation goes back roughly four years, and passed with the help of the Michigan United Conservation Clubs and Natural Resources Commission. The new law is similar to the regulations that have been enacted in Indiana for about nine years now. The MOOD-TV story highlights a couple of the common cartridges that are now allowed.
We did part of the story at my home farm land, and then also did some “in the field” testing by taking a doe on a local farmer’s crop damage permit.
I’ve been lucky enough to do this a few times with the show and there is always “the curse of the camera” to be reckoned with. Shooting a doe is pretty straight forward where they are doing damage, but making a perfect shot while being filmed does add to the challenge. I refer to the curse as it seems like when the camera isn’t there, there’s deer galore to pick from. But add the camera to the mix, and it just seems to mess up the whole day for the hunter.
The show’s producer, Gabe Vanwormer, hails from the Perry area. He’s a great guy to spend the time with and an outstanding outdoorsman. So all in all, being highlighted in a story is more nerve racking than one might think, but it’s still a great experience.
The crew from MOOD-TV is always looking for new stories, so don’t hesitate to contact them. They’re easy to find on Facebook or the internet. Ya never know who will be on next!
You can watch the episode on YouTube at http://youtu.be/xa8ctbNQ8G4.
Mark Klett is a Crop Insurance Specialist for the Corunna and Saginaw branches.
As printed in the latest edition of Michigan Farm News.
By Steve Junglas
The use of robotics is becoming more common in the agricultural industry, but there is a new wave of machines emerging that will change the way producers work. With this change would come a potential disruption in the traditional order of operations.
According to Harvard Business School professor Clayton M. Christensen, a disruptive technology is defined as one that displaces an established technology and shakes up the industry; or a ground-breaking product that creates a completely new industry. In order to stay relevant and profitable, agriculture may need to be prepared to change the way it works. More staff time will be spent using an electronic dashboard than directly with the livestock or in the field. Employees will be spending a larger portion of their day analyzing data to determine the health of the livestock or quality of the crop.
Traditional agricultural robotics such as automated milking machines, feeders, cleaners and harvesters, offer improved automation and collect greater amounts of data than previous methods. The big difference now is that all this data can be joined with other outside systems, which can be used for correlation analysis to help predict problems early. Robotics will also be a major factor in addressing labor issues. I have heard from a number of successful farm operations that they think of their robotics as prepaying for labor.
Unmanned Aerial Vehicles (UAVs), or more commonly known as drones, will continue to be more powerful and easier to operate. The use of drones for crop reconnaissance can dramatically increase yields while reducing the time to physically walk the fields. Three of the most common sensors included on drones are imagery, spectral and thermal. Visible imagery captures high-resolution photos that can be examined to assess plant health and measurements. Plant stress detection can be seen using spectral imaging; a healthy leaf will appear differently than a stressed or dead leaf. When spectral and visible sensors are used together, they provide precise weed coverage data. Thermal imaging sensors are used to measure relative moisture status. Drones are already an important tool in crop scouting, measuring plant health, weed identification and irrigation.
Since new regulation on drones is coming soon, care must be taken not to violate any laws. All states have trespass and anti-stalking laws, along with unlawful surveillance, which apply to the use of any technology. A good piece of advice before going out and purchasing a drone is for farmers to start by contracting with a consultant.
Steve Junglas is the executive vice president, chief information and security officer at GreenStone Farm Credit Services.
By Dan Kaufman
Our summer vacations are over, we're back into the routine of work and school, and we long for the summer days to return. Yet, for over one million hunters heading into the Wisconsin and Michigan woods to hunt deer, the fun is just beginning.
Leaves start turning colors and hunters begin showing off their trail camera pictures, talking about the most recent big buck sightings, and sharing their passion for hunting with family and friends.
Few traditions rival that of deer hunting in Wisconsin and Michigan. Deer camps share their hunting wisdom and strategies from generation to generation and history is shared while each year new memories are created. For many, a successful season is defined by the time spent with family and friends and it never hurts to put a few deer on the pole either. Some are even lucky enough to harvest the trophy buck that many of us have been dreaming about since last season.
GreenStone Farm Credit Services’ northeast Wisconsin and Upper Peninsula branches would like to share in the tradition and fun by offering prizes for successful hunters. Hunters can enter their bucks in our Big Buck Contest to win cash prizes or enter their does or bucks to win Cuddeback Game Cameras or Cabelas gift cards. Hunters who shoot their first deer will receive a “First Deer Club” trophy from GreenStone.
GreenStone is proud to offer loan products to help hunters realize the dream of owning their own deer hunting property where they can chase big bucks, turkeys, and bears. Contact your local GreenStone office if you’re in search for property of your own and we’d be happy to help you realize that dream.
We wish everyone a safe, successful, and memorable deer season!
Dan Kaufman is a Financial Services Officer at the Coleman, Wisc. branch.
By Brent Spencer
What a great time to be a Michigan dairy farmer! The U.S. dairy market has been on a historic run up in price and profitability over the past year, and the 2015 outlook is extremely positive. The September class III milk price has recently traded at over $24.50 per CWT. Even with the run up in the milk price, feed costs continue to decline and have recently reached four year lows. According to NASS, the income over feed cost over the last fifteen years has averaged $8.13. The September – October income over feed cost is estimated to be $15.75, which is nearly double the historic average.
A combination of things has led to the historically high dairy margins. The drought in 2012 and the high corn and soybean prices that ensued led to a very low income over feed cost, which reduced profitability for dairies in 2012. At the same time, high beef prices led to heavy cull rates which created a slight contraction of the U.S. dairy herd. While milk production has been relatively flat, the domestic and world demand for U.S. dairy products continue to grow. Over the past few years, exports of dairy products have reached 17 percent of U.S. production. A large share of the increased exports has gone to China. This is partially due to the Chinese people’s distrust of their own dairy industry. In the U.S., demand has also been strong in recent years. This can be illustrated by the fact that U.S. butter consumption hit a 40 year high in 2014.
The 2015 futures market indicates a return to closer to historic margins for dairy producers. The average class III milk price for 2015 is between $17 and $18 per CWT. Even with this $6 plus decline in milk price, the margin over feed cost will still remain strong. There are a few reasons for the expected decline in the milk price. As one would expect, the record high margins have triggered expansion in the dairy industry and production has begun to increase. Exports should also begin to slow down. The U.S. dollar has been gaining strength against most of the world currencies. This will cause our products to be more costly outside of our borders. Currently, the U.S. dairy price is considerably higher than the EU and Oceania prices. To illustrate this point, U.S. CME butter prices have traded at over $3 per lb. This is double the New Zealand butter price of $1.50 per pound and is $1.34 higher than the Dutch butter price. Even with U.S. over quota tariffs on butter, it will still be profitable for overseas butter to reach U.S. markets.
As mentioned previously, corn and soybean prices have reached four year lows and in the short term there appears to be little potential for any significant increase in their prices. In the September report, the USDA increased their projected yield on corn to 171.7 bushels per acre. If correct, this will give the U.S. a record crop of 14.395 billion bushels. The increase yield projection was offset some by an expected increase of usage due to the lower price. This increased usage still leaves the U.S. with projected ending stocks of 2.002 billion bushel. This is nearly double last year’s ending stocks. There are limited opportunities for exporting the excess corn since the global corn stocks are at 15 year highs.
Soybeans have a similar story. The September USDA report increased the projected U.S. yield by 1.2 bushels per acre to 46.6. This would be a U.S. record soybean crop of 3.913 billion bushels and, despite an increase in usage, would leave the estimated global ending stocks at 90.17 million metric tons. The previous record global inventory was 70.29 million metric ton in 2010.
Even with the futures class III milk price trending lower, the excellent crop yields for 2014 should keep the income over feed cost at or above historic levels. While 2015 does not look to be the record setting year 2014 is turning into, the lower feed costs should keep the margins profitable and make 2015 another profitable year for Michigan’s dairy farmers.
Brent Spencer is a VP of Commercial Lending for GreenStone Farm Credit Services.
As printed in the latest edition of Michigan Farm News
By: Beth Barker
There is no better time to cultivate a career in the agricultural industry than today. With the agricultural economy strong both in Michigan and the U.S., many employers are expanding their workforce.
Those of us in the industry need to reach out to young people while they are in high school or middle school, to educate and promote the wide variety of career opportunities available in agriculture. Arranging company and farm tours, along with developing internship programs, are some of the ways companies are working to get students interested in this sector. GreenStone focuses on educating our future talent through collaboration with local schools and colleges to help individuals build strong resumes and polish interview skills, our employees raise awareness by getting involved in their local communities and serving in leadership roles with organizations like student marketing groups, and we partner with organizations such as FFA and 4-H to provide hands-on learning. Regardless of the specific actions taken, it is crucial to keep this industry at the forefront of young peoples’ minds.
Thanks to a broad agricultural industry, the job possibilities go far beyond what you might naturally consider part of agriculture, including opportunities for those with backgrounds in fields such as business, education, science and technology. As a financial services institution, GreenStone employs nearly 500 people across our Michigan and Wisconsin territory. If you add up all of the employers within the national Farm Credit System, we collectively employ roughly 15,000 people with careers in lending, underwriting, loan processing, crop insurance, tax and accounting, information services, human resources, finance, marketing, and many more.
As the baby boomer generation continues to age, it is critical to replenish the workforce with talented and passionate individuals committed to providing the world with a safe and sustainable food supply. These are exciting, challenging jobs, many with excellent pay, benefits, and room for advancement.
There are many resources available online to assist with finding a position in the agriculture industry. In addition to the broad job boards, there are also industry specific sites like www.AgCareers.com which attract a wide range of large and small companies and candidates to their site. Jobs posted cover most of agriculture specialties, such as agronomy, crop protection and chemicals, biotechnology, dairy, equipment and machinery, agricultural finance, to name just a few. GreenStone’s job openings are posted on our website, www.greenstonefcs.com, and nationally, the Farm Credit System opportunities are at www.farmcredit.com.
What an exciting time to begin a career in agriculture! It is a place where someone can build expertise, give back to the community, and help sustain the industry for generations to come.
Beth Barker is the executive vice president and chief human resources officer for GreenStone Farm Credit Services.
On Aug. 19 all seven GreenStone interns took a trip to two dairy farms in the area. Our day consisted of touring each facility, talking with the owners and seeing thousands and thousands of dairy cows.
For some interns that have a strong agriculture background, much like myself, these tours were a chance to see inside the dairy operations while being able to chat with the farmers. For the handful of interns that have little to no ag background, the experience of being on the farm was a new and enlightening. Not only were we all able to see these farms in their time of growth and prosperity, but the farmers also shared their background stories, which included some hard pressed times. Each farm owner discussed the hardships that they have experienced and were able to tell us how GreenStone aided them through some of the worst decades in farming. After learning about the Farm Credit System all summer, we could finally complete the circle of what we do on a daily basis and how it truly does help agriculturalists in our community.
At the end of our afternoon, we walked into the birthing barn to find a cow in labor. Within minutes a new baby calf was on the ground. Although having a birth on the farm is far from a rare event, it truly represented our lesson of the day. Just as this calf had been brought into the world with a lifetime of growth ahead of it, GreenStone gives new light to farms in Michigan and Wisconsin to grow and expand to their highest potential.
We had a great time on our farm visits and it was inspiring to see the operations that GreenStone has supported for many decades. As our internship comes to a close, we are able to see how important our work is here at GreenStone and we are all grateful for the experiences we have had this summer!
About the author: Abby Carpenter is a regional sales intern.
Recently, I had the experience of job shadowing two of GreenStone’s financial services officers. I spent the day in the Lapeer branch with Marty Kasperski who focuses on agricultural customers, and Sandy Arnold, who assists customers with their country home and vacant land financing needs. The experience was eye-opening in terms of how GreenStone does business with their customers.
Interning in the credit department, I do not have involvement with the customers. I am a number cruncher, and as one credit analyst recently put it, sometimes it may mean being a “dream crusher” when those numbers don't work out.
I felt in order to get a holistic view of GreenStone, I needed to see the other side of the business. Sales are what drive any business and I was interested to see what differentiated GreenStone from the competition. I can confidently say I found my answer.
When people hear the word “sales,” an image that first comes to mind is the pushy salesman we have all experienced. Honestly, I had the same mindset when I asked to job shadow in one of the branch locations. GreenStone prides itself on being a relationship lender and not that pushy salesman we all envision.
GreenStone’s mindset can be described like a field that is planted. The field has to be tended to make it grow into a fruitful crop. The financial services officer plants the seed with their customers and then, like any good farmer, they have to tend to the field in order for it to grow while managing the ups and downs of the growing season. It is the same with any customer relationship. It takes time and diligence to build the relationship and produce a fruitful crop that not only benefits GreenStone, but the customer as well.
The financial services officers are referred to as relationship managers and this title fits them perfectly. Their job is to bring in money through completing deals for loans, but as I described above it, it is so much more than only that. At GreenStone, it is about managing the relationship to ensure financial security for GreenStone and also for the customer. To put it simply, if our customers thrive, GreenStone thrives as well. We are all in this together.
Making sure, through relationship management, our customers prosper is priority number one. The main thing I learned is managing customer relationships is, and will always be, the focus and key to GreenStone’s success.
About the author:
Joshua Jordal is a credit intern in GreenStone's East Lansing corporate office.