Deciding to settle down in the country and buy a rural home is exciting! You will be able to enjoy the benefits of rural America in your own backyard – like the ability to have a campfire with your children, enjoy a summer evening on the patio, or snuggling up by the fireplace on a wintery morning. 

If this is your first time purchasing a home, there are a few things you need to know to get started with the process before calling a realtor. 

The Documents you Need

Before getting in contact with your realtor, it’s best practice to find a lender so you know how much money you qualify for to attain a home loan.

Once you have worked with a lender, like GreenStone, to review your finances and have determined how much you can afford, you will take that pre-qualification letter to a realtor for them to help you search for a home in that price range. 

Other physical documents you should have handy for your realtor include your contact information and how you want to be reached by them. You should also provide the contact information for your lender so your realtor and lender can communicate. 

The Information you Need to Bring to the Table

The biggest thing you need to think about once you have established your pre-qualification price range is your wish list. 

Ask Yourself:

• What type of house are you looking for?
• How much property do you want?
• Is there a specific area or school district you want to live in?
• How many bedrooms and bathrooms do you want/need?
• Do you need certain appliances to come with the home?
• Are there deal breakers?

Having your clear list of reasonable “wants” will help your realtor narrow down options for you. 

Another thing your realtor needs to know: Will your purchase be contingent on selling your current home or property, if you have one? This could impact the timeline or likelihood of certain home purchases.

The final thing you need to consider before meeting with your realtor is concessions. These can be things like only putting 5% down and asking the seller to cover your closing costs. These are things your realtor needs to know to assist you in making an offer on a home.

You Have a Team

Buying your dream country home can be challenging, but in the end, extremely rewarding for you and your family. It’s important to remember that you’re not alone; you have a team of experts helping you every step of the way.

Choosing the right lender and realtor that shares your vision can help make this a seamless process.

GreenStone has an experienced team of experts helping you finance your dream country home. Learn more about our home financing options here. 

Coming from two different backgrounds, Cassie Eadie and her husband Andrew’s ag expertise varied drastically. Andrew grew up on the family dairy farm in Ottawa county and running an operation was second nature. However for Cassie, this was a whole new world. After beginning the transition and purchase of E-D Farms from Andrew’s parents, she knew she needed to get up to speed quickly. 

For new farmers like Cassie, GreenStone’s CultivateGrowth Mentorship provides a way for industry leaders to share their lifetime of these lessons and expertise with young, beginning, and small farmers. The current 2022-2024 mentorship class which Cassie is a part of, is underway and both mentors and mentees have already benefited from the friendships formed.

Cassie joined the mentorship program to connect specifically with a female farmer who has a similar human resources role in managing employees of varying demographics and cultural differences. Cassie knew having a mentor in a similar position would help advanced her operation by getting guidance on the current operational challenges she’s facing. With her specific goals in mind, GreenStone paired Cassie with mentor Anna Link, a part-owner of Swiss Dairy Farms in Kent County that currently milks over 5,000 cows. 

GreenStone’s program began with an in-person kick-off event and throughout the 18-month program, participants are expected to connect often and meet in-person at least quarterly. Pairs are encouraged to meet more often to maximize both the mentor and mentee’s program experience – something Anna and Cassie have certainly taken advantage of. The two have stayed on track by meeting right away to review Cassie’s goals and tour each other’s operation. They now meet in-person monthly and have weekly calls to connect and ensure those goals are on track. 

“Anna’s been helping me with my five-year business plan, implementing HR management plans that our farm has been in need of and helping me to do ‘coaching vs. warning’ with employees,” Cassie says. “She gives me book recommendations on enterprises or how to run a profitable business and shares updates from her operation for ideas on what we could be doing.” 

Since the mentorship program, Cassie has implemented a multitude of enhancements on her operation to improve efficiency and better her own leadership skills. One change Cassie focuses on is adding more coaching into her operation with her employees. If an employee has attendance issues, rather than giving them warnings prior to termination, Cassie has redirected her approach to focus on how she can better understand her customers and what might be the real problem.

“If an employee shows up late three days, why give them a written warning when instead we can work together to figure out what’s going on? There might be something personal going on and we can help coach them through that,” Cassie explains. “My goal is to help my employees be better people, along with myself through this program.”

Cassie isn’t the only one benefiting from her mentorship with Anna. As her father-in-law, Arden, continues the transition process, Anna has shared her experience in the transition their own operation previously underwent. This has helped Arden, Cassie and Andrew get on a similar page with the succession plan. 

“This is really beneficial for young farmers who are going into farming, especially people like me, who married into it,” Cassie says. “It’s very different for me, I didn’t grow up in this like Anna did and just having a mentor be there to guide and listen is a huge thing!”

The next class of mentees and mentors will kick off fall 2024 but interested farmers can apply online now.

To determine eligibility for a loan, GreenStone and many financial institutions use the five C’s of credit to make a determination – character, capacity, capital, conditions, and collateral. Rightfully, the word “collateral” can leave you with an anxious feeling about putting things like your land, home or even commodities up to secure a loan.

The good news: With a lender who works with you, focused on ensuring your capacity to repay is sufficient to be able to make the payments on your loan, you should be comfortable securing your promise to repay the loan.

Why does my lender need collateral from me?

Before a lender issues you a loan, they want to know you have the means to repay it. Collateral is an extra layer of security for the lender to ensure there is less risk by having the collateral to cover the loan if the financial need arises.

When a lender has a claim on one or more of your assets for collateral, it’s called a lien. For example, if you put your home up as collateral to secure a loan to build a barn, your lender has a lien on your home.

We view a lending relationship as a partnership, where GreenStone is the “silent partner” of the business we invest in. Your willingness to pledge collateral is part of our evaluation of your confidence in your ability to financially perform as you have projected. GreenStone is a cashflow and earnings lender, with collateral serving as a secondary source of repayment in the unlikely event you are unable to make scheduled payments from the ongoing farm business’s day to day operation. The amount of collateral you are willing to pledge is factored into the final pricing of your loan, in general terms the more you pledge, the better your loan pricing.

Proactive, respectful communication is the key to any healthy relationship. GreenStone’s philosophy is to develop a strong relationship with each customer, practicing and encouraging proactive, two-way communication.  This sets the foundation for working through financial challenges when they arise.  Our goal is to arrive at a “win – win” solution when the need to modify existing loan terms is needed.  We refer to this as “rebalancing or restructuring” your balance sheet debt that matches your available cash flow to service your debt which we do for our customers when it is needed.

Unfortunately, relationships sometimes break down.  Thankfully, this is a very rare occurrence with our customers as evidenced by our customer satisfaction which has consistently scored in the mid-90s out of 100 points for many years now.  It is only when there has been a serious default of the terms of a loan agreement that communications have broken down and we are unable to arrive at a mutually agreeable plan, directed by you, to correct your financial challenges.  We work with you to evaluate your plan to adjust your business that will result in improved net income margins needed to service your debt in a timely manner.  When operational improvements are not adequate, we evaluate your plan to sell non-productive assets.  If we cannot agree on the first two steps, we will work with you on a timeline to refinance your GreenStone loans with another lender.  When it becomes apparent that we will not be able to arrive at an agreement to reorganize or refinance, we are left with the last option of legally enforcing the terms of the loan agreement in the event of default.  This may include foreclosing on the collateral pledged to secure the repayment of the loans.

How much collateral you should expect to pledge

In general, the higher your risk profile, the more collateral we will request to secure your loan(s).  Most financial institutions, including GreenStone, typically take collateral based on what we are being asked to finance along with additional collateral pledge requests customized to your individual financial position.  For example, if you are taking out an operating loan, at a minimum, you would pledge operating assets like crops and accounts receivable. If you’re taking out a land loan, you will use real estate you own as collateral.

For a short-term loan, which is typically under ten years, our maximum loan to appraised value of collateral is 75%.  For farm real estate, we typically underwrite a loan to an appraised value of 65% or less of your assets, and with a country living loan, the loan needs to equate to a value of 80% or less of the capital value.  Variance to this guidance is considered on a case-by-case basis.

Your lender will discuss options for your collateral to decide what is best for you to put up to secure the loan you are seeking.

Does every loan require collateral?

Unsecured lending terms are typically reserved for the lowest risk customer for short-term lending circumstances.  We will evaluate the strength of the other Four C’s of credit that would mitigate the need for collateral.  If you financially qualify, it is a request we will consider.

We’re Here to Help

At GreenStone, we want to make the loan approval process as simple and streamlined as possible. Pledging collateral should only be as concerning as the idea of not being able to repay your loan. Our team of experts is here to walk you through every step of the process.

GreenStone offers a full list of loan products and expert staff to meet your individual needs. Give our local team a call to discuss your options!

 

This article was published in Michigan Farm News here.

When it comes to financing the construction of a new home, GreenStone can provide options. Whether the construction plan includes hiring a contractor or a DIY approach, there are several advantages and challenges to each option.

Do-it-Yourself

What could be more fun and exciting than building a home? Picking and choosing everything and make changes whenever you like because you are in charge of the project. In a perfect world, it would be that easy; but the reality is not everyone is ready for all that is required in building a home themself.

Often, the decision is based on whether the homeowner is up to the task of managing the entire project to make the freedom of choices and changes worth it.

Fully-Contracted

For those that decide to hire a contractor to build the home, be sure to research when choosing the contractor. This is one time when the lowest bid may not always the best bid. Take the time to check references and view their existing work.

The major advantage of hiring a contractor is they know what is required in the home building process. This includes permits, scheduling of materials and sub-contractors, realistic cost estimates, and time frames for work to be completed. 

The disadvantage of a fully-contracted build project is homeowners will likely be giving up some flexibility with changes and materials. Change orders can raise the cost of building a home significantly. The project will also be limited to the schedules of their chosen sub-contractors as to when the work will be completed. 

However, a good contractor will give a professional building estimate package, including a detailed contract and evidence of insurance. There is a fee for hiring a general contractor, but it may worth it once factoring in their discounted material pricing and efficiency. 

A Third Option

The last option to consider is more of a hybrid scenario. An individual would act as their own contractor, but hire a project manager to oversee the construction. This project manager should be well-versed in home construction and able to assist in developing timelines for the project. The homeowner would still be the one in control, but has someone to assist in decision making.

Whichever option, GreenStone’s flexibility and lending solutions will be a benefit. We have significant experience in all three scenarios, and are known as one of few lenders who understand the do-it-yourself concept. We discuss the loan options and draw process with the homeowner and the contractor or your project manager, to help make the construction process a simple and enjoyable experience.

For more information on GreenStone’s Country Home Mortgage, Home Construction and Vacant Land loan, contact [email protected] or stop by a branch near you.

As profit margins tighten and the cost of new and used equipment continues to climb, many producers are leveraging financing to spread out their machinery costs and reduce the financial burden of keeping their equipment up to date.

For more than a decade, GreenStone has partnered with AgDirect®, one of the fastest growing equipment financing programs in the nation, to offer competitive loan, lease and refinancing* options.

Through this partnership, GreenStone customers can count on attractive rates, fast decisions and flexible terms no matter where you choose to buy. Because AgDirect has no manufacturer rebate or financing restrictions, customers can also take advantage of manufacturers’ cash payment discounts and still finance though the AgDirect program, allowing you to leverage the best of both worlds.

“One of the reasons AgDirect has been successful is its connection to the Farm Credit System,” says Scott Welden, an AgDirect Territory Manager in Michigan, Indiana and Ohio. “As part of the Farm Credit System, customers can count on a lender that has been serving agriculture just as long or longer than some of the major equipment manufacturers. It’s rewarding to play such a critical role in helping producers afford the equipment they need so they can remain competitive and profitable. And AgDirect earnings help offset the operating expenses of participating Farm Credit System associations which helps pay their eligible customers patronage.”

Celebrating 25 years of simple, fast and flexible financing

Since 1998, AgDirect has been serving customers and dealers by offering loan, lease and refinancing options for both new and used equipment purchases completed at the dealership, at auction or through private party transactions.

 

The AgDirect model scales back the length of the application and accelerates credit decisions. Customers can complete their loan application and have a credit response within minutes.

At the dealership, 70% of AgDirect’s credit decisions are made in less than 30 seconds, allowing customers to count on quicker closing and funding for their equipment needs. To apply, participating AgDirect dealer salespersons simply enter the customer’s financing application online.

A dedicated financing team and network of AgDirect territory managers are available to assist with auction and private party purchases and can help both dealers and producers with quoting and selecting the best financing solutions. And when it comes to customer service, 100% of calls are answered by a live person during business hours.

Dedicated to the customer experience

As part of AgDirect’s evolution, the technology used to support customers and dealers through the transaction process has evolved. Online tools like a built-in payment calculator allows dealers to provide customers with accurate pricing options and financing comparisons were introduced.

An online application, electronic signatures and a mobile app also contribute to the ease of use and provide anytime access. Thanks to these tools, customers can now submit secure financing applications 24/7, sign documents remotely and run different scenarios before making a purchase decision all from their mobile phone.

“It goes back to our focus of serving agriculture’s machinery and equipment financing needs,” says Scott. “All of our digital tools serve a fundamental purpose of maintaining that focus while creating flexibility, faster turnarounds and a sense of convenience.”

*Farm Credit System debt is ineligible for refinance.

**Excludes leases over $500,000.

Nobody finances ag equipment like AgDirect

Subject to approval, there are several other advantages to choosing AgDirect equipment financing:

• As low as $0 down
• 2-7 years terms on most equipment – up to 10-year term on pivots
• Competitive variable and fixed rates for new and used equipment
• Delayed payments up to 15 months
• No prepayment penalties**

When you are in the market to buy, lease or refinance equipment, be sure to ask for AgDirect financing. Call your financial officer with any questions or contact AgDirect at agdirect.com or 888-525-9805.

AgDirect is an equipment financing program offered by Farm Credit Services of America and other lenders, including participating Farm Credit System Institutions.

 

To view the article in the online 2023 Summer Partners Magazine, click here.

Eric Vandivier

10 years of service
Senior Tax Accountant
Little Chute, WI

How does your role carry out GreenStone’s mission of supporting rural communities and agriculture?

My role as a tax accountant is crucial for our customers, particularly as they approach year-end or look to make changes in their business (creating, selling, expanding, transitioning, etc.).  I try to take the knowledge I have in tax, accounting and payroll law and pass that on to customers so that they can make the best financial decisions for their particular situation.

What do you enjoy about your role?

I enjoy being the go-to person for one of the most complicated issues our customers deal with. Taxes aren’t fun but they don’t have to be the headache that some people think they are. Tax accountants can be as trusted of an advisor as doctors or therapists. I enjoy building that personal relationship with my customers as well.

What changes have been incorporated to meet evolving customer needs?

Tax laws and regulations change on an almost annual basis. So, no tax year is ever the same. My role requires me to stay on top of all these changes so I can educate and serve my customers to the best of my ability.

How do you see GreenStone moving forward?

Our department has gone through a good deal of changes since I started back in 2013, but every change has been made to make our lives as tax accountants, and the lives of our customers, easier. We’ve used automation in our software to allow us to provide better financial reports in a timelier fashion to our customers. We’ve educated ourselves on ever-changing financial programs like PPP loans and Employee Retention Credits to try to get as much money back in our customers pockets as possible. We’ve used better technology to streamline how information flows back and forth between our department and our customers.

What do you enjoy doing in your free time?

I most enjoy spending time with my family. My wife and I recently welcomed our second child, Tristan, to the world back in November. With my 2-year-old daughter, Addison, loving her role as big sister, we spend as much time as possible making irreplaceable memories. Of course, when there is a moment to catch our breath as parents you might find us golfing, at our cabin up north or relaxing and watching a movie.

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Mark Buuck

20 years of service
VP of Lending
Adrian, MI

How does your role carry out GreenStone’s mission of supporting rural communities and agriculture?

In my role, I’m able to provide reliable products and services to farmers that assist them in running an efficient and profitable business. Their success is GreenStone’s success, giving me the opportunity give back through donations and volunteering to support the rural community and be involved in local agriculture.

What do you enjoy about your role?

What I enjoy about being a part of GreenStone  is the people I get to work with and the people we serve together. Whether it’s buying a piece of farmland or receipting a loan payment, it’s all of us working together towards a common goal.

What changes have been incorporated to meet evolving customer needs?

Improvements in technology have allowed me to be more flexible in my role. It also allows me to be more accessible to customers, and improving our ability to meet their needs that much faster.

How do you see GreenStone moving forward?

Moving forward at GreenStone, I’m in a position to grow with our customers in good times and in times of stress. Building strong relationships with customers and being involved in the rural community positions me to be a reliable resource that understands what is happening on a local level.

What do you enjoy doing in your free time?

I enjoy spending time with my family, whether at our kids sporting and school events, or going to the lake.

 

To view the article in the online 2023 Summer Partners Magazine, click here.

Recipe Summary

Prep Time: 25 mins

Additional Time: 8 hrs 5 mins

Total Time: 8 hrs 30 mins

Servings: 4

Yield: 8 kebabs

Ingredients

• ¾ cup balsamic vinegar
• ¾ cup extra-virgin olive oil
• 2 tablespoons whole-grain mustard
• 1 tablespoon dried oregano
• 1 tablespoon dried rosemary
• 2 cloves garlic, sliced
• ½ teaspoon salt
• ½ teaspoon ground pepper
• 1 pound tri-tip sirloin steak, trimmed and cut into 32 chunks
• 16 button mushrooms
• 16 cherry tomatoes
• 1 small bell pepper (any color), cut into 16 pieces
• 16 (1 inch) chunks red onion

Directions

1. Whisk vinegar, oil, mustard, oregano, rosemary, garlic, salt and pepper together in a small bowl.
2. Skewer beef, mushrooms, tomatoes, bell pepper pieces and onion chunks, alternating evenly, on 8 metal or wooden skewers. Place the kebabs in a 9-by-13-inch baking dish and pour the marinade over them. Refrigerate (or store in a cooler packed with ice) for at least 2 hours, up to 8 hours.
3. Preheat grill to medium-high. Remove the kebabs from the dish; discard the marinade. Grill the kebabs, turning once, to desired doneness, 6 to 8 minutes total. To grill over your campfire, hold the skewers over the flames (but do not let the flames touch the food), turning regularly, until the meat is cooked to your liking, about 15 minutes for medium.

Source: eatingwell.com

 

To view the article in the online 2023 Summer Partners Magazine, click here.

For Gary and Roxanne Pedersen, family means everything. After spending years in their Houghton Lake, Michigan home located closer to the center of town, they were ready for something more private.

After another financial institution was unable to help Gary and Roxanne, they made their way to GreenStone where, now retired, Financial Services Officer Brian Peariso was ready to help.

“They came to me back at the beginning of 2018 to inquire about doing a self-build. When you’re able to help someone after they haven’t had success with another financial institution, it’s very rewarding. We were able to appraise it and move forward,” said Brian.

And move forward, they did. The two broke ground on a new piece of property in West Branch, Michigan which would soon become their brand-new four-bedroom paradise.

Gary has a background in construction, but this was the first time his wife Roxanne has worked with him on a build.

“Gary is a handyman so it’s always awesome to work with people who have a background in construction,” said Brian.

 A learning curve for her, the two made the most out of the experience together.

“I worked for a builder to put me through college, but this is the first time Rox and I worked on something together,” Gary explained.

“I pretty much learned on the fly, but I had a good teacher,” said Roxanne.

Gary and Roxanne had some help from contractors, but built about fifty percent of the home entirely on their own. Roxanne jokes that being able to go to her job during the day and only work on the house in the evening is what kept her going.

“He worked day and night on this place, but I had the luxury to go to work during the day,” said Roxanne.

As expected, there were some compromises along the way.

“One of the best decisions we made was on the back porch,” Roxanne explained. “It’s half covered. I get to be in the sun and he gets to be in the shade.”

That compromise was important – because of their work arrangements.

“I work outside, and she works in the office, so we flip-flop when we get home,” said Gary.

Among many of their projects, one thing Roxanne is happy to show off is their beautiful stone fireplace.

 

“That was a fun project,” Roxanne remarked. “It was like playing Tetris because I got to pick out the rocks and he got to place them together.”

But the thing they’re most proud of is having a space where they can host their family.

“It’s a house built for a family of twelve, but there’s two of us,” Roxanne joked. “It’s awesome because when our granddaughter comes up to visit, there’s room to play.”

That extra room was the goal all along.

“We always hosted family, but now, we actually have the room,” said Gary. “The kids can go outside during the winter time. During the summer, there’s a slip-and-slide going down the hills. There’s a little creek out back to cool off. There’s plenty of room depending on where you want to visit at.”

Gary and Roxanne said this would not have been possible without the help of Brian and GreenStone.

“GreenStone has been really easy to work with,” said Gary. “Everyone requires certain amounts of documents, but GreenStone makes it easy. It’s nice that they are family-oriented and blue-collar-oriented.”

Gary also appreciates GreenStone’s commitment to giving back to our member-owners through our Patronage program. In 2023 alone, GreenStone returned $120 million of profits to our members.

“The Patronage program helps out,” said Gary. “It’s awesome to get a bonus check in March to get caught back up in the winter.”

Gary and Roxanne enjoyed their experience with GreenStone so much that when they decided to put up another building on their property, they knew exactly who to call.

“Gary called me not too long ago, and said they wanted to build a barn,” said Brian. “We had such a good relationship with them, and I was happy to assist them.”

 

After a quick process, Gary and Roxanne were able to begin building their dream barn.

“The construction loan was pretty darn easy. Everything went smoothly,” said Gary.

The barn will be used for storage, a game room, and Gary and Roxanne’s newfound passion – his woodworking business.

“It’s kind of a hobby and a stress reliever, and I thought we could make some money at it, and we have.”

If that business ever needs an expansion, Gary knows exactly who to reach out to.

“I’m not just a number at my branch, they know my name,” said Gary. “We tell everyone to call GreenStone.”

And our staff, like Brian, will always be ready to take that call. “If something sounds like a solid plan, GreenStone will try to make it work.”

 

To view the article in the online 2023 Summer Partners Magazine, click here.

Each season farmers face growing environmental challenges and the need to adopt more sustainable practices on their operation continues to rise.

Luckily, farmers seeking guidance along their journey in creating a more sustainable operation can turn to the Michigan Department of Agriculture and Rural Development (MDARD) and the Michigan Agriculture Environmental Assurance Program (MAEAP).

Responsible for promoting the growth and sustainability of the state’s agricultural sector, MDARD is committed to supporting agricultural businesses, ensuring food safety and security, protecting animal and plant health, and promoting environmental stewardship. The department oversees various programs and initiatives related to agriculture, including crop and livestock inspection, pesticide regulation, food and dairy inspection, and promotion of local food systems. In collaboration efforts with farmers, industry stakeholders, and local community members, MDARD is working to advance Michigan’s agricultural economy while preserving natural resources and supporting rural communities.

Newly appointed in March 2023 as the Director of MDARD, Dr. Timothy Boring brings years of industry knowledge from prior leadership roles, his education on crop and soil sciences and experiences growing up on a dairy farm. His focus on conservation will be at the helm of MDARD’s goals and program development moving forward. This focus on conservation mirrors the same values farmers have: both provide vast benefit to the farm operation and surrounding communities.

“The value of conservation is around resiliency and sustainability, not only for the farms but for rural communities too,” Dr. Boring explains. “Building stronger, more resilient systems, being able to weather increasing climate challenges, having increased biological capacity, more diverse cover crops and less tillage.”

MDARD continues to be a sound resource for farmers looking to implement conservation practices on their operation. One notable program, the Michigan Agricultural Environmental Assurance Program (MAEAP), assists farmers in  environmentally conscious practices and being good stewards of the land.

“MAEAP has improved management of farms in a variety ways and has increased the overall average production capacity and environmental protection on farms today,” says Dr. Boring. “[MDARD’s goal] is to increase the understanding of how agricultural investments are consistent with improving conservation. You can’t grow different things if you don’t have the infrastructure or processing to support different things being grown in your community.”

While there are a plethora of both internal and external resources MDARD connects farms with, such as Farm Bill and state-level programs, much of the focus is on educating growers on the importance of it all. Conservation is here to stay and MDARD plans to continue offering support by defining what good management looks like and helping farms get there.

“The environmental conditions we are dealing with are not getting any less challenging and these challenges are becoming more consistent with farms looking to build and expand,” explains Dr. Boring. “The department is prioritizing connecting with growers and producers one-on-one and we recognize the importance those connections are. There are lots of face-to-face local workshops and field day meetings for growers to attend.”

As you begin to implement environmentally-conscious changes and conservation practices on your farm, turn to MAEAP and the programs available through MDARD. These resources are here to support your conservation journey and streamline your process.

GreenStone recognizes the proactive work of our agricultural community and the efforts of farmers n embracing environmentally conscious practices. For more information on becoming MAEAP verified, conservation practices to implement and how they can bring long-term value to your farm, visit www.maeap.org.

 

To view the article in the online 2023 Summer Partners Magazine, click here.

Crop insurance continues to be the number one method used to mitigate the financial risks involved with growing a crop, and this year Margin Protection and the Enhanced Coverage Option deserve a closer look.

Both programs are quality tools to reduce financial risk on the farm as 95% coverage is available with higher subsidy percentage than other alternatives. Let’s compare and contrast the programs.

Margin Protection is an area-based insurance plan for corn and soybeans that provides coverage against an unexpected decrease in operating margin (revenue less input costs), caused by reduced county yields, reduced commodity prices, increased prices of certain inputs, or any combo of these. Coverage is available up to 95%. It is important to remember that Margin Protection is an area-based insurance product. This means an individual’s actual performance in the 2023 crop year will not be a determining factor in how an indemnity is calculated.

Enhanced Coverage Option (ECO) is also an area-based insurance plan for corn, soybeans and wheat producers that provides coverage against an unexpected decrease in county revenue. Losses are caused from lower revenue from reduced county yields and/or reduced commodity prices. This area-based supplemental shallow-loss coverage shields loss from 86% up to 90% or 95%.

Both programs offer up to 95% protection. Margin Protection covers from 95% (the coverage you select) the entire way to down to $0, if both the Margin Protection and underlying policy have a claim then the Margin Protection policies claim is reduced. For ECO the protection is from 95% down to 86% and a producer could be paid for the full amount from 95% to 86% and it does not impact the underlying policy claim.

Do I need to purchase an underlying policy?

For Margin Protection an underlying policy is not required, however most producers still purchase their normal Revenue Protection policy. For ECO an underlying policy is required for which most producers purchase Revenue Protection. A producer could also purchase yield protection, but then the ECO policy is focused on county yield.

A producer can select Margin Protection with the Harvest Price Option or without. ECO matches the underlying policy, for most producers that is Revenue Protection, which includes the harvest price option.

Timeline to sign up

Margin Protection selection is different than you might expect – the sign up period for the 2024 corn and soybean crop is currently underway with a sign up deadline of September 30, 2023.

Enhanced Coverage Option sign up deadline for corn and soybeans is March 15, 2024, while the wheat deadline is September 30, 2023.

Since you can only pick one program, here are a few considerations to think about when deciding to purchase Margin Protection vs. waiting for ECO.

• Does the current Margin Protection guarantee provide you with the floor you need for 2024?
• Do you think prices could fall between now and February? Is so, Margin Protection would provide more protection.
• Do you think prices will rise higher going into February? If so, waiting for ECO and deciding then could be the better alternative.

How are guarantees set up?

Margin Protection Liability is county based with the producer selecting the “protection factor” to choose if they are a better producer than the county average or lower than county average. The producers can choose from 1.2 to .8 protection factor. If a producer selects 1.2 then they would receive $1.20 for every $1.00 the county has a loss.

ECO is triggered with a loss in the county, but the liability/guarantee is established based on a producer’s Actual Production History (APH). If a producer has a higher APH, then they have a higher liability.

So Why Should Producers be Looking at Margin Protection for 2024?

2024 Corn and soybean market prices are now at a price that allows most producers to operate at a profit. These prices could go up, but they also could go down. Margin Protection is unique in that it allows you to set a price for corn and soybeans now.

It’s important to note that Margin Protection is normally bought in tandem with the more popular and well-known Revenue Protection product. A premium credit is even applied lessening the cost of Margin Protection when a Revenue Protection policy is purchased in tandem. Revenue Protection will gather prices for 2024 crop in February of 2024. If the price continues to go up, a producer’s Revenue Protection policy could secure that higher price in February. If prices go down, a producer may have established a much higher amount of coverage per acre than their respective Revenue Protection policy would afford them.

So How Does Margin Protection Work?

The United States Department of Agriculture’s Risk Management Agency (RMA) is the governing arm of crop insurance. RMA has determined the average expected yield for each county for the 2024 crop year. This bushel per acre average is multiplied by the 2024 projected price for the applicable crop creating an expected revenue. The projected price is determined by collecting the closing trading price of 2024 futures from August 15 to September 14 (December futures for corn and November futures for soybeans) and averaging them out. RMA then subtracts both fluctuating costs (diesel, interest, urea, potash, etc.) and fixed input costs (depreciation, labor, etc.) creating a margin. The fluctuating costs are given a projected price just like grain with the same time period being used for most.

Come harvest, the price of grain is established again, referred to as the harvest price, along with the actual county average yield. The fluctuating costs are also gathered again but with the harvest price discovery period being from April 1 to April 30, 2022 for most fluctuating inputs. If the harvest margin is less than the expected margin minus deductible, an indemnity is due.

This can be simplified with the following:

Margin Protection- Expected Margin (expected yield x projected price – input costs) x coverage level = Trigger Margin

Harvest Margin- (actual county average yield x harvest price – actual average input costs).

Trigger Margin- Harvest Margin = any applicable indemnity

Should you Purchase Margin Protection for the 2024 Corn and Soybean Crop?

GreenStone’s Optimum quoting software can greatly help producers evaluate the options and answer this question by looking at how this product would have performed historically for their operation, as well as offering the ability to perform “what if” scenarios, and profit and loss matrixes.

Be sure to contact your local GreenStone crop insurance specialist to see how Margin Protection would fit your individual farm.

If you want more certainty for 2024, consider purchasing one of these insurances which gives you up to 95% coverage.

 

To view the article in the online 2023 Summer Partners Magazine, click here.