Winter 2013 Financial Partner Magazine

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FarmCreditEast.com

Learning the Ropes Farming’s next generation prepares to lead

INSIDE News & Views 2 CEO Letter 3 Cover Story 4 Loan Tips 10 Photo Contest 11 OSHA Dairy Inspections 12 Webinar Series 13 Sharing Their Time 14 CSA Profile 15 Consulting Profile 16 Tax Prep Profile 17 Washington Update 18 Community Support 20

NEWS &v iew s

FarmCreditEast.com

Funding Research to Advance NE Agriculture What’s New at the Movies?

Do you have a generational transfer plan in place? Are you confident that it will ensure that your farm’s senior generation will be comfortable in retirement and the younger generation will be prepared for ownership and management of the business?

In “Generational Transfers for Farm Businesses,” business consultant Jon Jaffe takes you through some important steps to understanding the transition process for family businesses. In this five-minute video, Jon explains the challenges that many farm families face in transitioning the business to the next generation. He points out how the generations often have different views on the future of the business and explains how working with an outside consultant can help both generations separate family relationships from their business relationships.

This summer, Farm Credit East and CoBank joined New York dairy farmer Sheldon Brown to contribute $600,000 to Cornell University’s ag research and education programs.

The gift will support a faculty fellowship focused on agricultural sustainability, including production practices and opportunities for agricultural growth given increased interest in local foods.

In addition, a portion will be used to fund student scholarships.

Farm Credit East and CoBank each committed $250,000 to Cornell, to be paid over the next five years. Brown, who graduated from Cornell in 1968 and previously served on the boards of both organizations, committed $100,000.

“We believe in the future of Northeast agriculture and the need for strong

education, extension and research programs that support success in the farm community,” said Farm Credit East’s Bill Lipinski. “We are pleased to support this unique position because it will help expand opportunities for agriculture in our region.”

Brown, who owns and operates a dairy farm in Salem, N.Y., said he made the contribution out of gratitude for the benefits he received from his Cornell education. “Cornell helped me understand that agriculture is and always will be a knowledge industry,” he said. “It is vital that we continue to promote research and education in the field of agriculture in order to maintain the competitive advantage that our nation has built.”

For more, go to FarmCreditEast.com/ CornellGift.

To view this video, go to FarmCreditEast.com/GenerationalTransfer.

Bill Lipinski, Farm Credit East CEO; Sheldon Brown, Cornell class of ’68; Kathryn Boor, Ronald P. Lynch Dean of the College of Agriculture and Life Sciences at Cornell University; and Scott Markham, CoBank Board member

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The Maine Point Merger of two associations

CEO’s Message

brings new opportunities Bill Lipinski, CEO, Farm Credit East

I am excited to announce that the stockholders of Farm Credit East and Farm Credit of Maine have overwhelmingly voted to merge our two leading agricultural credit associations.

The merger, which takes effect January 1, 2014, is the culmination of strategic planning initiatives in both associations to sustain growth and customer value for Farm Credit. With this merger comes new opportunities that include a tremendous team of Maine employees who will “deepen our bench” in a variety of job areas. We will work hard to ensure that significant financial benefits accrue to our expanded family of stockholders in the next several years.

Because both ACAs have had excellent years and are financially and operationally strong, the timing for this merger could not be better. This is a strategic opportunity to position Farm Credit in the Northeast for future change and to maintain Northeast agriculture’s continued access to global money markets.

In the words of Farm Credit East Board Chairman Andy Gilbert: “If your business is not moving forward, then you’re falling behind.” That principle, in our view, is as true for our financial cooperative as it is for any individual business.

The Board challenges me to create

“ … If your business is not moving forward, then you’re falling behind.

”

opportunities for our customers as well as for our employees. The merger of Farm Credit East and Farm Credit of Maine achieves many of the Board’s goals. That is, our merged association will create the opportunity for enhanced earnings, portfolio diversification and a stronger capital base. It will also offer enhanced member service through an expanded pool of talent and experience. In 2014, we will

continue to build on those goals as well as move forward on other positive initiatives that provide high-value customer service and expand our diversity of stakeholder groups.

We know that agriculture goes through cycles. We’ve demonstrated our commitment for almost 100 years to fund agriculture through every cycle. As our customers tell us, “When you’re in agriculture for keeps, it’s good to know that your lender is, too.”

Our dedication to providing you with a reliable source of credit and financial services will never change. Both boards look forward to bringing together best-inclass credit and financial services teams to deliver long-term value for our customerowners and for future generations of Northeast agriculture. This next chapter in the Farm Credit East story ensures that your financial cooperative remains strong within our marketplace and retains a respected place at the table in national Farm Credit System discussions.

With this vote, customers of both associations have expressed their confidence and trust in the Board and management of Farm Credit East. Over the next few years, we will continue to repay that trust and achieve our goal of “promises made, promises kept” to our members.

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“ … I learned that leadership is really about knowing your strengths and weaknesses and showing confidence in your employees.”

Ben Hull Hull Forest Products Pomfret Center, Conn.

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Learning the Ropes Farming’s next generation prepares to lead

For young farmers ready to take the reins of the family business, Dad and Mom are invaluable in learning the essentials of operating a farm. But in the ever-changing world of agricultural business, there’s no such thing as knowing too much about growing a successful farm operation.

Farm Credit East’s GenerationNext program deepens young farmers’ knowledge and helps them hone their management skills.

Held in three one-day sessions over three months, GenerationNext prepares farmers from the ages of 20 to 35 to effectively manage employees, finances, marketing and risk to their business in order to become more effective owners.

Recently, four graduates of the GenerationNext program stopped by the Farm Credit East coffee shop to chat about their experiences in joining the family business and how the program has made them more effective managers.

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Although Ben Hull of Hull Forest Products in Pomfret Center, Conn., felt comfortable with his knowledge of business operations, he saw the GenerationNext program as a chance to increase his comfort with bookkeeping. “I thought it would be worthwhile as a refresher, but I also needed more depth of knowledge with accounting concepts,” he acknowledged.

Developing solid accounting and budgetary practices was at the top of the list for Kristopher Kane of 21 Brix Winery in Portland, N.Y. “My mother has always done our farm accounting,” he said. “But I wanted to see how her system could be utilized to its full extent.”

Brendan Moquin has been involved in the cranberry-growing business for as long as he can recall. He now serves as the assistant controller and financial analyst of Morse Brothers, Inc., in North Easton, Mass. His focus in the GenerationNext program was on developing solid communication skills to bring back to the bog. “My biggest challenge is learning how to facilitate communication between the generations in order to help keep the company running smoothly.”

For Michele Dutton, of Sherman Farms in Conway, N.H., the seminars allowed her to think about good leadership on a day-to-day level. “I was taking over the business end of our farm from my grandmother and even though we all think that we are great leaders, I realized that I didn’t understand all aspects of leadership.” With an entire day’s program dedicated to leadership and employee management, Michele walked away with plenty of tips to put into practice.

Michele Dutton Business: Sherman Farm, LLC Location: East Conway, N.H. Description: “We are an ag retail business that sells farm stand products, vegetables, milk and meat. We grow everything from brussels sprouts to tomatoes and operate six heated greenhouses and seven additional greenhouses for tomato production. We retail between 24,000 and 30,000 pounds of tomatoes annually. We grow our own beef and pork and sell milk that we glass bottle ourselves.”

Years in business: “All my life and for five years full time” Position: “I am the head controller and chief financial officer. I also focus on marketing. We do a lot of community outreach in schools to give the public a greater understanding of agriculture.”

Let the Numbers Do the Talking As with most industries, good data has become the name of the game in agriculture. Michele learned how to do so in practical terms through the GenerationNext program. “Now I can use a profit and loss statement to say, ‘This is what we did this month,’ and explain to others what’s behind those numbers,” she said. And gaining the confidence to do so goes beyond simply providing rationale — it has also improved communication within the family business. “It’s nice to be able to explain

“ GenerationNext provided me with the education and facts to show that I know what I’m talking about.”

Michele Dutton Sherman Farms, LLC East Conway, N.H.

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c o v e r to my brother why we can’t get new tires or a new tractor based on the financial picture. I can say when would be a better time.

It’s made us a more cohesive unit because we understand each other’s part of the business.”

Knowing how to read the company’s data has also helped Michele and her family bridge the generation gap. “Coming into a business as a member of the third generation, the first and second generation can still see you as their kid,” she said. “GenerationNext provided me with the education and facts to show that I know what I’m talking about.”

Playing the Team to Their Best Advantage A key aspect of good management lies in knowing when to trust the team. Kris acknowledged that the GenerationNext program taught him the value of empowering his employees and delegating responsibility. “You tend to think that a leader goes out and does the task. From this class, I learned that leadership is really about knowing your strengths and weaknesses and showing confidence in your employees,” he said. “Now when I hire, I look for people with strengths I don’t have, and surround myself with a team that I feel comfortable delegating to.”

Ben agreed, adding that his experience with GenerationNext allowed him to diversify his leadership skills. “I learned that a leader needs to adapt to the situation. Is this my employee’s first job or am I directing a 35-year veteran? It requires very different leadership styles,” he explained. “A veteran may know more than I do, so I lead in a more consultative, collaborative way.”

Ben also discovered that good employee management begins well before hiring. “The program helped me to improve my development of job descriptions, which I call performance profiles. If employees are asking you what to do, you probably haven’t written an adequate description of what is expected of them.”

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Ben Hull Business name: Hull Forest Products Description: “We are a hardwood saw mill and a forest land management service. We conserve forests through the sale of conservation easements to organizations like the Nature Conservancy. We have 8,500 acres under conservation easement and about 13,000 acres of company woodlands in Massachusetts, Connecticut and Maine. We also custom manufacture a variety of premium flooring products for wholesale distribution and retail markets.”

Location: Pomfret Center, Conn.

Years in business: “Since I could hold a shovel” Position: “I focus on marketing and sales as well as developing new revenue streams for our wideplank flooring products, energy wood and export log sales.”

Talking It Through Keeping the lines of communication open can be a challenge in any business, never mind one that sprawls over 11 locations.

Brendan learned that it was a challenge that Morse Brothers, Inc. couldn’t ignore. “My biggest lesson from GenerationNext was the importance of employee buy-in. So we started Monday morning bog meetings for the foremen. The first few were a struggle, but before long the foremen would come to the meetings with lists of upgrades or inefficiencies,” he said. “I could see that they started to work together more effectively and improve how they kept their properties up — which resulted in a better crop and a better bottom line.”

Kris also learned the value of good communication. “Every morning, I work with our production team to compare how we are doing against our weekly goals, and I ask the team how we can make those goals,” he said. Kris also emphasized the need for follow-up, recognizing employees’ efforts with a thank-you note, pizza party or even a group ski-trip. “It’s good for morale and we all know it’s good for the business.”

Michele agreed. “Like Kris, we make our employees feel that they are part of the family. We just started sharing our sales winter 2013

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Kristopher Kane Business: 21 Brix Winery, part of Olde Chautauqua Farms and Olde Chautauqua Vineyards Description: “We are a 300-acre grape-growing operation with 18 acres of pick-your-own cherries and asparagus.”

Location: Portland, N.Y. Years in business: “I have been in the business since I was about seven years old, trimming, tying and picking grapes.”

Responsibilities: “I opened the winery in 2011 and eventually want to vertically integrate the two businesses by utilizing most of the fruit from our farm in the wine and opening different channels to sell grapes.

I manage and run the winery and am responsible for production management, product and equipment acquisition all the way to front-door sales.”

“ You won’t find a better program for its value, or one that brings more confidence to your business.”

Kris Kane 21 Brix Winery Portland, N.Y.

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numbers for the month with employees. We say, “This is what we did for August of last year; how can we do more?” Before GenNext, we were hesitant to share our numbers with our staff.

Letting go of that is hard, but once you do, it all blossoms from there.”

Good Management, Good Balance Each member of our coffee-shop talk agreed that GenerationNext helped him or her develop the management skills they need to work smarter, not harder — and that translates to a better work/life balance. “Time management is my biggest challenge. I have a 17-month-old and a newborn, run two businesses and work on the farm with my father as he and my mother step back a little,” Kris explained. “I worry how I will manage all of these responsibilities, but the answer is found in education like GenerationNext, where I can network with others in similar situations.”

Brendan echoed Kris’s praise: “I would definitely take the class again; knowledge is power.”

Ben added that learning good hiring skills has allowed him to bring more people on his team which, in turn, frees him up to spend more time with his wife and three children.

Kris also noted that what he learned from GenerationNext has proven invaluable. “You won’t find a better program for its value, or one that brings more confidence to your business,” he said. On that note, our group took their last sip of joe and headed back to the field, bog, forest and vineyard, respectively. ◆

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“ My biggest lesson from GenerationNext was the importance of employee buy-in.”

Brendan Moquin Morse Brothers, Inc. North Easton, Mass.

Brendan Moquin Business: Morse Brothers, Inc. Description: “Morse Brothers owns about 380 acres of cranberries in 11 different Massachusetts towns and 380 acres in Quebec. The company packages fresh fruit for Ocean Spray and supplies stores nationwide.”

Location: North Easton, Mass.

Years with Morse Brothers: 3 years Active in the cranberry industry: “Since I was born.”

Responsibilities: “I am the assistant controller and financial analyst. I work in a variety of areas, from product development, financial planning and forecasting to field work with the guys during harvest season.”

Mind the (Generation) Gap Building a program for today’s young farmers With each young farmer that Bill Martin met as a former loan officer and branch manager and today as a Farm Credit East business consultant, the problems begin to sound the same: issues with work/life balance, discomfort with financial data and difficulty in maintaining good communication among staff and family members — to name a few.

Along with others at Farm Credit East, Bill and a team of business consultants and branch managers decided to use what they were hearing in the field to promote the GenerationNext program, designed to prepare young farmers for the early stages of leadership and management and help them lay the groundwork for future years of profitability. Not only does the program get participants ready for future opportunities in their business, it helps give previous generations confidence in the abilities and know-how of the up-and-comers.

The program goes beyond providing basic training and best practices in operating an ag business. It also furnishes invaluable networking opportunities and the chance for young farmers to hear that they’re not “the only one” when faced with a particular challenge — and how to best tackle it.

Bill and other organizers spread the GenerationNext program over three months with a one-month break between each of the three sessions. According to Bill, “This allows participants to absorb and apply what they’ve learned about leadership, management and labor.”

If you or a young farmer you know would benefit from in-depth training in running an ag business, go to FarmCreditEast.com/GenerationNext to learn more.

Or contact your local branch to find out about the program closest to you.

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“ Be aware that every action is an opportunity to build your argument either for or against your creditworthiness.”

Mike Haycook vice president and branch manager

Tips for First-Time Loan Applicants Farm Credit East customers know how to work with loan officers on their credit needs. But the next generation coming along may not have that knowledge. We encourage Farm Credit East members to share this article with our future members — your children and others who will be your farm’s next generation.

Applying for credit for the first time is a big step. First-time borrowing is often a sign of a business in transition, such as one that’s just getting started, one that’s outgrown its start-up capital or perhaps one that’s on the verge of failing. Regardless of the need, first-time borrowing can be challenging for both the loan applicant and the lender although it doesn’t have to be if you keep these tips in mind: • Know your industry. Come prepared to show your lender that you understand your business and have the knowledge that you need to be successful.

• Understand your financial position. The lender’s analysis of your financial statements should not surprise you. Be ready to discuss your business profitability and how you acquired your equity and also be ready to demonstrate that you understand what effect the borrowed funds will have on your financials. Keep your income and expense records up to date and prepare your projections in advance.

• Borrow with purpose and have a strategy. Tie your request to a specific project or purpose. Demonstrate to the lender how your request will benefit the business and anticipate any needs you may have over the next 12 months. Coming back to the lender multiple times doesn’t inspire trust or confidence in your overall business strategy.

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• Be prepared to offer collateral. This demonstrates that you are committed to being successful and are willing to put skin in the game.

• Have a back-up plan. Be prepared to offer a cosigner or to provide additional collateral if your original request does not meet underwriting standards. Keep in mind though that a cosigner is only as good as his or her ability to repay the loan on your behalf.

• Plan to communicate with your lender — even after your loan is approved. Keep him or her informed of changes in your strategy, challenges that you are facing and how your business results compare to what you anticipated. No surprise lending works well for both the borrower and lender.

• Start early. This doesn’t mean giving your lender extra time to review your request, even though that is helpful. Be aware that every action is an opportunity to build your argument either for or against your creditworthiness. Examples range from how you manage your credit card debt to how well you honor your suppliers’ terms or even to whether you return your neighbor’s equipment on time. Your actions and how you manage your business relationships go a long way toward building your reputation as a good risk.

“ We encourage you to share this article with ... your farm’s next generation.”

Congratulations to our Photo Calendar Contest Winners

And thank you to all who participated

Each year, Farm Credit East holds our annual contest for talented photographers to showcase the diversity of agricultural operations across the Northeast and life in the country during all seasons of the year.

More than 700 photos were submitted during 2013, and our team had quite a task picking 50 photos for our 2014 Agricultural Views Calendar.

What made each shot a winner?

Technical quality, clarity and composition, of course, but we also looked for photos that captured a unique view of Northeast farming, horticulture, forestry and

commercial fishing or that celebrated country life across New England, New York or New Jersey.

We send our sincere thanks to all the talented photographers who participated in the calendar contest. Because of your work, we will very proudly have our calendar displayed in homes and on office walls across the Northeast in 2014.

We have calendars available in our branches, so stop by and take one home or simply enjoy the winning photos on our website at FarmCreditEast.com/Calendar.

To all you shutterbugs We hope that you keep getting out there with your cameras, capturing photos during every season around the farm, forest, greenhouse or dock. Go ahead and dust off your digital cameras during every month — even the cold winter ones — and upload your best work to our website.

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Dairy Farmers: Are You Prepared for an OSHA Inspection?

The Federal Occupational Safety and Health Administration (OSHA) plans to target New York dairy farms for inspection starting sometime in 2014. Could your farm be targeted? And, if so, are you ready for an OSHA inspection?

The initiative will focus on random, unannounced compliance inspections of dairy farms. Although safety is important for all farm operations at all times, dairy farms that could be targeted need to get ready to avoid being caught off guard.

What you can do now OSHA inspections can be painful, but they don’t have to be. Here are a few tips to help you prepare: • Know if you fall under OSHA jurisdiction. If an OSHA inspector shows up at your farm, first determine if the farm is eligible for inspection. If not, inspectors will depart immediately.

• Go through your farm with a safety mindset and correct any hazards. Use the “Dairy Dozen” as a handy checklist to help you prepare. Be aware that recordkeeping of employee training is as important as the training itself.

• Designate a company representative (and possibly a backup person) who can interact with inspectors in case the owner is not available. Since most inspections are unannounced, a designated company representative can keep the inspection “on track” and avoid an aimless walk around your facility.

• Conduct safety training and keep records of your training. Notify employees that they have the right to speak or not speak with OSHA inspectors.

• Go to FarmCreditEast.com/Webinars to view playbacks and other presentation materials from webinars that we cohosted on this subject with Northeast Dairy Producers Association (NEDPA), New York Farm Bureau (NYFB), New York Center for Agricultural Medicine and Health (NYCAMH) and Cornell’s PRO-DAIRY program. They will answer many of your questions and help you sort out what you can expect:

Karl Czymmek Senior Extension associate Cornell University PRO-DAIRY Program

The Dairy Dozen: Areas of Concern for OSHA

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1. Manure storage facilities and collection structures 2. Dairy bull and cow behavior/worker positioning 3. Electrical systems 4. Skid-steer loader operation

• Understanding OSHA Requirements for Dairy Farm Businesses

5. Tractor operation

• OSHA Compliance: What Farm Businesses Need to Know

6. Guarding of power takeoffs (PTOs)

Could your farm be targeted?

Dairy farms subject to random inspections are those that: • Have had more than 10 employees, not including immediate family members, at any time during the past 12 months preceding the day an inspector shows up.

Note that a part-time employee counts as one employee for this purpose.

• Or have provided housing to temporary labor (even one person), at any time during the past 12 months.

Farms that do not fall into the guideline categories are not subject to inspection.

By the way, OSHA inspectors do not enforce immigration law and will not ask you or your employees about immigration status.

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“ NYCAMH, NEDPA, PRO-DAIRY and NYFB have formed an OSHA Workgroup to help prepare farms for OSHA’s proposed Local Emphasis Program for dairy farms. The goal is to help the dairy industry by communicating with OSHA and developing and distributing information to address OSHA’s Dairy Dozen target areas of inspection on New York’s dairy farms.

The workgroup is coordinating on-farm and off-farm meetings to assist farm owners and management staff better prepare for and understand rights and obligations under the OSHA inspection process. Farm Credit East is also an important partner in this process.”

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7. Guarding of other power transmission and functional components 8. Hazard energy control while performing servicing and maintenance of equipment 9. Hazard communication 10. Confined spaces 11. Horizontal bunker silos 12. Noise

Winter

Webinar Series

The Farm Credit East Winter Webinar Series presents information about critical topics for today’s progressive agricultural, forest products and commercial fishing businesses. All webinars are live, free and sponsored by Farm Credit East’s Knowledge Exchange. If you miss a webinar, you can later view it, at your convenience, on the members-only section of our website.

To register for each of the following webinars, go to FarmCreditEast.com/Webinars.

Healthcare Reform and Your Business

Navigating the Grant Process

Tuesday, December 17, 2013 10:00 a.m. to 11:30 a.m.

The Affordable Care Act, or Obamacare, is the most comprehensive overhaul of our healthcare system in a generation. New provisions of the law will take effect in 2014 and 2015. This webinar, featuring labor law attorney Robert Noonan, will cover what farm businesses need to know to comply with the law. Although the employer mandate has been put off until 2015, there are still things you need to know for this year.

Thursday, February 27, 2014 10:00 a.m. to 12 noon This webinar will provide answers to questions about the grant process. For example: What kinds of grants are available to Northeast producers? Who funds them? What application processes are like? What can farmers apply for on their own and when should they engage a grant writer? What services does Farm Credit East provide?

This webinar features Farm Credit East consultant Nathan Rudgers.

2014 Dairy Outlook

FCE Financial results and New Initiatives

Friday, January 17, 2014 10:00 a.m. to 12 noon The 2014 Dairy Outlook webinar will look ahead to 2014 and what’s coming in dairy economics and regulation. This webinar will feature: Mark Stephenson, dairy economist with the University of Wisconsin; reaction from Farm Credit East dairy consultants; and an environmental update from Karl Czymmek, Cornell University.

Tuesday, March 18, 2014 10:30 a.m.

Farm Credit East CEO Bill Lipinski will present an overview of the association’s financial results for 2013.

2014 Agricultural Economic Outlook and Ag Labor Update

The Northeast Dairy Farm Summary Release TBD, April 2014 Chris Laughton, Farm Credit East director of Knowledge Exchange, will present the results of the Northeast Dairy Farm Summary, otherwise known as the “Blue Book.”

Thursday, February 13, 2014 10:00 a.m. to 12 noon This webinar will look at agricultural markets in 2014 and what the road ahead looks like. Following will be an agricultural labor update, including a look at the status of the H-2A program. Presenters will be Terry Barr, economist with CoBank, and Monte Lake, attorney and agricultural labor expert.

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Sharing

Their Time

FCE employees invest in their local communities

In the spirit of agricultural cooperatives, Farm Credit East employees have been giving back to their local communities for almost 100 years.

Here is a small sampling of how some employees contribute.

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Jan Bitter

Brian Monckton

Vice president and branch manager, Cortland, N.Y. Steering committee, Northeast Dairy Challenge

Regional manager, Batavia, N.Y. Director, LEAD NY

“Every fall, more than 100 dairy science students from 14 colleges and universities across the Northeast gather for the Northeast Dairy Challenge. Students work in mixed-university teams to solve real-world dairy farm situations that they later present to the farm family.

“The gathering of the best and brightest among future northeastern dairy leaders is run entirely by volunteers, including agribusiness people, academics, farmers and students. My 10 years on the committee have been enjoyable, especially when I hear alumni say how the program opened their eyes to careers in the dairy industry. That’s what keeps volunteers like me coming back year after year.”

“Close to 400 people have graduated from Lead NY since it first offered leadership training in 1985. I am humbled to be one of those graduates and equally humbled to serve alongside a group of committed individuals on the LEAD Board. We strive to build on a program that develops leaders for the food, agriculture and natural resource industries.

“I chair the finance committee and serve as liaison to the NYS Ag Society. LEAD recently graduated its fourteenth class. This class’s field travel experience was in Turkey, which is a country out of the normal ‘comfort zone’ of prior class trips.”

Craig Pollock

Holly Walters

Vice president and branch manager, Sangerfield, N.Y. President, The Northeast Cooperative Council (NECC)

Customer service, Burrville, N.Y. Leader, 4-H Dairy Club Secretary, Lewis County 4-H Advisory Committee

“During my tenure on the Board and now as its president, I am proud to say that NECC has delivered high-quality conferences to managers and directors of major cooperatives. In addition, we have helped prepare young members for leadership positions in their respective cooperatives.

“Most recently, we reestablished a course at Cornell on cooperative structure. I have always had a soft spot for educational pursuits. I enjoy working with my fellow board members, who are thoughtful, accomplished people. In short, I have benefited as much from being a part of this organization as I hope that I have given to it.”

“My 4-H leader impacted my life in so many important ways that I’ve wanted to help youth enjoy the same opportunities ever since. As a 4-H leader, I’ve helped organize our Lewis County Dairy Bowl team and watched members go to the state competition.

“As secretary of the dairy advisory committee, I help organize the annual Dairy Camp, where youth learn how to wash, bed, clip and show their animals. This year, we will run our Enhancement Calf Scholarship, which awards a registered calf to the scholarship winner. I once won this scholarship, which may be why I still show cattle today.”

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Sharing the Risk through Community Supported Agriculture Chris & Katie Cashen Farm at Miller’s Crossing Hudson, N.Y. Organic CSA, wholesale & retail operation Have worked with Farm Credit East on lending, taxes, consulting and appraisals

The CSA method of farming debuted in the United States in the mid-1980s when the first two CSAs were created, one in Massachusetts and the other in New Hampshire. Since then, this movement has been ever growing across our 50 states.

When Chris and Katie Cashen first got started farming together back in 2000, the Farm at Miller’s Crossing was primarily wholesale, with a small CSA on the side. But as their business continued to expand, they started to experience some of the turbulence that comes with wholesale marketing — price fluctuation and often too much of a crop they couldn’t sell.

As their CSA continued to develop, Chris and Katie saw an opportunity to expand this portion of their business. “We realized the CSA was safer because we had a guaranteed market,” said Chris. “With a CSA, we essentially enter into a contract with the consumer so we know the majority of our products are sold before they’re even planted.”

Over the past 13 years, Chris and Katie say they’ve learned a lot. Their plantings and harvestings require a great deal of planning to ensure they have variety available for their members each week. “Our goal is to give people what they want even though

they aren’t selecting it themselves,” said Katie. “We want our members to have variety to prepare meals without excess produce just sitting in their fridge.”

A typical weekly share consists of 7-to-10 items, including at least one head lettuce or salad green, one cooking green, one root crop, one herb and one fruit item, among other items depending on the season. In addition, the Cashens also offer a grass-fed beef share, a winter share and a canning share.

Although Chris and Katie have found CSA farming to be less of a gamble, as with any type of farming, risk can never be eliminated. You never know when a heat wave might hit or flooding rains or damaging winds will sweep through the area, destroying the crop. And, in the Cashen’s case, a crop that has been destroyed by weather conditions means that it can’t be delivered even though it has already been purchased.

“That’s where the ‘community support’ idea comes into community supported agriculture,” explained Chris. “The community shares our risk. They’re going through the same heat or rain that the farm experiences, so they understand if we can’t provide a particular product as we planned.”

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Lynn Murray and Family Murcrest Farms, LLC Copenhagen, N.Y. Dairy farm

Consultant Services Lead to Greater Profit for Murcrest Farms

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Look Before You Leap Lynn Murray will be the first to tell you: When it comes to managing your farm, what you don’t know can hurt you.

In 2004, the time felt right for Lynn and his family to expand their dairy farm. “We had too much equipment and labor with not enough cows,” recalled Lynn. “It wasn’t an efficient size for us.”

But before moving forward with an expansion, the Murrays brought Farm Credit East consultant John Lehr into the fold — and they were glad they did.

“John immediately pointed out that a less profitable year was the best time for us to expand, which was a surprise,” said Lynn. John suggested that the Murrays would be at less risk in a down year, given that they were already sacrificing income. Additionally, they would be better positioned to take advantage of the higher prices in an up cycle once they completed their expansion.

Looking to the Murray’s numbers, John also saw several ways to mitigate the risk of an expansion. The Farm

Credit East dairy benchmark program focused the Murrays’ attention on their feed costs, which were higher than other farms of their size. “We were spending too much on purchased feed concentrate mixes. Focusing on that made a big difference in our bottom line,” said Lynn.

John encouraged the Murrays to focus separately on variable and fixed costs to better evaluate their overhead, and used budget projections in a gross margin format. “As we did that, we could model future changes,” John said, “adding cows, getting the parlor up to capacity. The gross margin format was a great tool to use to visualize changes.”

According to Lynn, Farm Credit East helped his family to see threats and opportunities that they may otherwise have missed during a 10-year period of growth. “It’s hard to see every detail when you live the business every day,” he said. “I am certain John’s work moved us faster and more profitably through expansion.”

Navigating – the Twists and Turns of –

Tax Law FCE tax specialists take the mystery out of filing Jim Entwistle and Family Entwistle Brothers Farm, LLC Litchfield, N.Y. Dairy farm

The Entwistle family will not be using the 1040-EZ tax form this year … or ever, for that matter. With a farm that includes three LLCs, a rapidly growing herd and three generations of operators, tax time can feel like untangling a very large ball of twine.

“We have a complicated business that includes my parents, Robert and Alma, and my three brothers, Robert, Jr., Steven and Joseph,” acknowledged Jim Entwistle. “My brothers and I are winding down our father’s business and growing ours. Our parents also gifted the rest of the real estate to us last year. It’s taken a lot of thought.”

To ensure that their tax returns are accurate, Jim turns to Farm Credit East tax specialist Paul VanDenburgh. “Paul prepares returns for our multiple entities as well as many of our personal returns. He’s knowledgeable and keeps us up to speed on tax laws,” he said.

For the Entwistles, filing annually is only one part of an ongoing process. “We meet with Paul and our loan officer two or three times throughout the year,” said Jim. “That lets us work together on what short- and long-term decisions to make and how much money to spend.”

Jim sites the changing cap on write-offs as an example of how Farm Credit East helps bring a strategic perspective to the tax process. “When the government was trying to stimulate the economy, you could spend up to $500,000, which you can rapidly depreciate

in one year rather than over 7 or 10. With that in mind, Paul kept us informed so that we could plan our capital purchases,” Jim said.

Paul stresses the importance of taking the long view with regard to tax liability. “Some clients can be unrealistic about getting refunds every year. It’s better to pay a little tax all the time than pay a huge amount one year and none the next,” he explained. “I like to take the peaks out as well as the valleys.”

For businesses like Entwistle Brothers Farm, LLC, accomplishing that objective can include strategies such as prepayment, capital purchase decisions or transferring assets from one generation to another. Regardless of the strategy Paul ultimately recommends, he focuses on a team approach in creating a plan. “I work closely with the family’s attorney to minimize eventual estate issues,” he said. “There’s also close coordination with their credit, records and tax staff at Farm Credit East. That collaboration makes for smooth delivery.”

Jim and his family recognize the importance of having an informed and engaged tax specialist on their team. Farm Credit East fills that crucial role. “Taxes make up a huge part of our planning throughout the year,” said Jim. “There’s a lot of trust involved when you have someone manage your records and taxes. But honestly, without Paul’s advice, we’d have spent a lot more money over the years.”

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washington Update Robert A. Smith Senior Vice President for Public Affairs

Should the Farm Bill include Nutrition Programs?

With 80 percent of farm bill spending going to nutrition programs, an increasing number of people are asking, “Does it make sense to combine farm programs with nutrition programs in one farm bill?”

This option almost became reality this year as the House moved separate bills on farm and nutrition programs before the conference committee was established.

The historical view was that farm programs and food stamps made a good marriage, because bringing the two programs together gained support from both rural and urban members of Congress. With less than 50 of the 435 House members from rural/agriculture districts, it made sense to seek urban/suburban support by tying the two together.

The fact that the Senate and House agriculture committees have jurisdiction for both the SNAP and farm programs is the underlying reason why the marriage worked. From a pragmatic viewpoint, agriculture committee members who support farm programs included food stamps in order to gain backing from urban members. The combining of the two interests has ensured the necessary support to pass the farm bill.

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“ The reality is that it may be hard to maintain farm programs unless they are packaged with something else.”

But the process broke down this year.

As SNAP went from a $25 billion annual expenditure 10 years ago to its $76 billion price tag today, it became a red flag.

Many members from rural districts are far more concerned with increasing federal expenditures than with farm programs.

Conversely urban members found little reason to support a farm bill that made cuts to SNAP. The reality is that it may be hard to maintain farm programs unless they are packaged with something else. Lisa Kelly, of the National Council of Farmer Coopera-

tives, shared this perspective: “The farm bill must preserve the longstanding, rural-urban alliance that reinforces the fact that food security, investment in rural America and a safety net for those in need are priorities benefitting the entire nation. Adding to the importance of this effort is the fact that rural America’s population is, by its very nature, smaller than that of urban and suburban America. As such, it is ill-advised to seek a separation of nutrition programs from the farm bill, especially at a time when the agriculture industry is seeking to better connect with its consumers.

“Should this farm bill put farm policy and food policy on separate paths, it could impact farm bill reauthorizations in the years ahead and farm policy stands to lose the most in that scenario.”

Note: At the writing of this article, the farm bill is in a House-Senate conference committee. While it appears that nutrition and farm programs will stay together in this bill if the conference committee is successful, this issue will remain a key area of discussion in the future.

Congressional Perspectives Farm Credit East is pleased to have a number of members of the House Agriculture Committee who have advocated Northeast agricultural interest in the farm bill debate. Here are five perspectives on the nutrition/farm program issue.

Representatives Gibson, Collins, Kuster and McGovern serve on the House Agriculture Committee and Representative Owens previously served on the agriculture committee and now is on the appropriations committee. We thank them for their input on this issue.

“As a member of the House Agriculture Committee, I worked to draft a bipartisan Farm Bill that was ultimately voted out of committee by an overwhelming majority vote. Unfortunately, that bill failed to pass the House in June. It became clear to House leaders that it was necessary to separate the farm programs and nutrition title in order to get all these important issues to Conference Committee with the overall goal of having a comprehensive, five-year Farm Bill in place for the benefit for our farmers, ranchers and producers. I am pleased the Committee is currently working toward making that a reality.”

- Congressman Chris Collins, R-New York (first elected in 2012)

“Traditionally, the farm bill has been put together with a broad bipartisan coalition. We have an institutional framework in place that addresses nutritional needs of our vulnerable citizens, while providing a safety net for our farmers and ranchers who produce our high-quality food. I am hopeful that the completion of the farm bill will regroup this historic coalition and produce a bipartisan product that remarries the nutrition title with agriculture programs. Continuing to link these two portions of the bill will give us the best chance at passing a final bill and thereby reforming and improving these programs.”

- Congressman Chris Gibson, R-New York (first elected in 2010)

“I strongly believe that farm and nutrition programs belong together in one Farm Bill. The Farm Bill is intended to ensure that our nation has a robust food system that supports jobs and provides our families and children with fresh, nutritious food. The farm support programs within the Farm Bill are important to the rural economy, and the nutrition programs are equally important because that money goes right back to the farmers who are providing that nutritious food. If we don’t have both parts of that equation, then the Farm Bill isn’t going to comprehensively meet the needs of both farmers and consumers.”

- Congresswoman Annie Kuster, D-New Hampshire (first elected in 2012)

“Splitting nutrition programs from the rest of the farm bill would be a very bad idea —particularly in the current political climate. These valuable programs are under attack. We have already seen a stand-alone nutrition bill pass the House that would have slashed $40 billion from SNAP.” - Congressman Jim McGovern, D-Massachusetts (first elected in 1996)

The Two Sides of the Argument Split farm programs and nutrition programs apart • Agriculture is only 20 percent of farm bill funding. We shouldn’t give the public the impression that big expenditures are being spent on agriculture.

• Nutrition programs have social purposes. Farm programs should be viewed as programs that advance food security and economic development.

• Farm programs deserve their own focus.

• Nutrition programs are too controversial and a detriment to agriculture.

Keep them together • A rural and urban coalition is essential for building support.

• Farm programs cannot generate necessary support on their own, because there are not enough members of Congress with strong ag interest.

• Agriculture should think in terms of food security at all levels, from production to consumer.

• This gives more authority to agriculture committees and undermining this authority would be detrimental to agriculture in the long run.

“A comprehensive Farm Bill unites America’s diverse interests by ensuring votes from both rural and urban districts. Dividing the bill sets a dangerous precedent for farmers who count on Congress to deliver the certainty of a five-year bill. This legislation is too important for farmers, New York’s economy, consumers, and the millions of vulnerable seniors, children, and veterans who rely on the SNAP program. They deserve a comprehensive solution, which is long overdue.”

- Congressman Bill Owens, D-New York (first elected in 2009)

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Community Support Dairy Challenge Receives AgEnhancement Grant Farm Credit Northeast AgEnhancement Program recently awarded a $5,000 grant to the North American Intercollegiate Dairy Challenge (Northeast Region) to support a three-day event for agriculture colleges where dairy students in mixed school teams analyze all aspects of a dairy farm and make recommendations to a panel of judges. This gives students the opportunity to develop skills and provide insights as well as to compete, share and make contacts within the dairy industry.

According to Farm Credit East’s John Lehr, an active program leader, “Putting students with different skills from different schools on a team to find solutions is an important learning experience. Today’s businesses require employees to succeed with all types of personalities. The Dairy Challenge teaches technical knowledge and helps students develop people skills.”

John added, “In addition, the program brings all aspects of the dairy industry together. It is a tremendous opportunity for participating dairy farms to receive consulting advice and for agribusiness sponsors and students to meet and discuss prospective working relationships.”

Students ask questions to Lance Rovers, far right, of Rovers Farm in Chazy, N.Y. Fourteen colleges and universities sent 119 students to this year’s Dairy Challenge.

For details • Bob Smith: 800.327.6588 • Email proposals to: AgEnhancement@ FarmCreditEast.com • Proposal deadlines: April 1, August 1 and December 1 • FarmCreditEast.com/Industry-Support.aspx

AgEnhancement Grants since 1996 • Total grant dollars: $1.473 million • Total projects supported: 553