GreenStone FCS
Winter 2016
Promoting the business success of our customers and the rural community
Michigan Berry Start-up Customer Patronage
DRIVEN TO DAIRY
Farm Credit Centennial
WINTER 15 5 YBSF Feature. Kendell Zemple of Manawa, Wisconsin grew up on his parent’s beef farm, and after attending Fox Valley Technical College and working off the farm for six years, he started his own dairy operation with help from GreenStone.
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21 GreenStone Story. As we welcome 2016, we are celebrating not only the New Year, but also a significant milestone in our association’s history.
28 Country Living Feature. Four years ago Jerry and Yulia Coon decided to pursue their dream of starting a small farm growing gooseberries and currants.
32 Crop Insurance Feature. Make sure you have a risk management plan in place to protect your investment.
35 Tax Feature. As the formation of corporations become more popular in the farming community, there are several factors that should be considered before deciding whether your farm will be a C corporation or S corporation.
3 CEO Comments. President and CEO, Dave Armstrong, looks back on 2015 and share his perspective on the new year.
24 Legislative Matters. Living and working in one of the world’s most productive agriculture regions in the world creates a unique responsibility to use the land wisely.
9 Guest Column. Well-structured business meetings can be a valuable time and money saver.
25 Directors’ Perspective. Four board directors share a bit of their history with Farm Credit.
11 Market Outlook. Bob Utterback forecasts 2016 and addresses the balance of supply and demand.
30 Health and Wellness. Here are some helpful tips on how to accomplish your New Year’s resolutions.
14 Guest Column. Take a look at Michigan’s Farmland Preservation Program. 17 Patronage Day. This year, we are again looking forward to Patronage Day, which will be on March 23. 17 Farm Forward Mentorship Program. We are proud to launch the pilot of the Farm Forward Mentorship program with 16 producers.
18 MAEAP. Michigan forest land is the first to become MAEAP verified. 20 Agricultural Leaders of Michigan. Working together, eight commodity groups and agribusiness organizations are focused on promoting Michigan agriculture. 23 PAC Progress. Your MI GreenStone PAC successfully disbursed a total of $13,500.
37 Farmland Values. The 15-state AgriBank District average cropland and pastureland values slowed in growth, but did not decline.
8 Where Are They Now 15 Member News 19 Behind the Scene 19 Pause for Applause 26 Calendar of Events
31 Indoor Projects for Kids 31 Commodity Cuisine... Lobster Stuffed Deviled Eggs
33 Crop Insurance News 34 Crop Insurance Calendar 38 Tax Calendar
Editor’s Note: Several years ago, my family farm put up the green and yellow honorary Michigan centennial farm sign…as a teenager I remember the excitement of recognizing the 100 years, but I certainly never sat down and thought about all that the accomplishment symbolized—a century of advancements, countless weather anomalies resulting in flooded fields or cracked soil droughts, five generations of transition, the curse of the 1980s financial crisis, and the millions of bushels of crops and gallons of milk produced. Now, as GreenStone celebrates its 100th anniversary, I have a whole new appreciation for both milestones. 2016 is a year when Farm Credit acknowledges all that history has taught us, and all it has prepared us for in the next century of promoting the success of our customers and the rural community by being the best at providing credit and financial services. As you read through this issue of Partners, you will find various accounts of what the centennial means to GreenStone, to Farm Credit, and to you—our owners and members. While we as employees of the association take great pride in what this year means to our industry, the real appreciation comes in knowing what each of you have produced over these last 100 years, and that we are only here today because of the astounding measures you all contribute each and every day. Farm Credit’s 100th anniversary is no more a celebration as it is a commitment…using the 100 years of experience to be prepared and committed as your financial partner for 100 more. And as we welcome all the year has in store, we invite you to take a minute to read through this issue of Partners, reflect on where you have been, and celebrate all the coming year will provide. Happy reading, happy New Year, and happy centennial anniversary!
This newsletter is published quarterly for the customers of GreenStone Farm Credit Services. Partners 3515 West Road East Lansing, MI 48823 517-318-2290 marketing@greenstonefcs.com
38 Tech Tip Let’s Be Social
Connect with us online for news and updates.
CEO Comments:
percent of the association’s net earnings to eligible members who did business with GreenStone in 2015. Net earnings are estimated to be approximately $141 million which would yield a total patronage payment of $35 million, for about a 0.5 percent (on average) reduction in interest paid in 2015. All of us at GreenStone are very pleased to be able to continue to return this type of real value to our members as many face a challenging year ahead. This is our eleventh year of the patronage program which has paid out $235,000,000 since its inception. Please see the article on page 17 for more details. OUTLOOK FOR 2016 Interest Rates
From My Perspective–2016 AS ANOTHER NEW YEAR GETS UNDERWAY, THIS IS THE TIME TO REFLECT ON WHERE WE HAVE BEEN AND START PLANNING ON WHERE WE ARE GOING. From my perspective, 2015 was another very good year for GreenStone. Loan growth was up nearly 8 percent over 2014, past due loans greater than 30 days delinquent remained well under 1 percent, loans with significant credit weaknesses (adversely classified) made up less than 2 percent of the portfolio. Earnings were well above budget and only lagging last year’s record due to additional loan loss provisions being taken in the face of what will likely be a more financially challenging year in 2016 for some segments of our portfolio.
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To put 2015’s performance in perspective, I will refer to the internal index I have referenced in the past, which we use to quickly gauge the performance of the organization at any given time. The index is based on a scale of 0-1000 with 1000 being the very highest level of achievement. We reached this pinnacle at the end of 2014 and maintained it through the end of 2015, which I believe says it all. While GreenStone’s “dashboard indicators” are currently all “green,” we understand the challenges being faced by many of our members and stand ready to work with them through whatever 2016 may bring. PATRONAGE Consistent with 2015’s strong performance, GreenStone’s Board of Directors voted at their December 2015 meeting to pay 25
For the first time in nearly ten years, the Federal Reserve raised the Fed funds rate on Dec. 17, 2015 by .25 percent. This rate increase has been anticipated for a long time by the financial markets and was already priced into intermediate and long term rates. It is interesting that the Federal Reserve chose to make this move at a time when several other developed economies are lowering rates due to continued economic malaise. In fact, Federal Reserve Board Chair, Janet Yellen, said “the first thing Americans should realize is that the Fed’s decision (today) reflects our confidence in the U.S. economy.” While the economy has recovered from the great recession of 2008-2009, the progress has been erratic and very slow when compared to other recoveries. Recent job gains, particularly in the services sector, are projected to continue, resulting in 4.7 percent unemployment by the end of the year. However, with anticipated declines in energy costs, inflation is projected to not exceed 1.6 percent, well below the Fed’s target of 2 percent. The real key to this move is how frequently and by how much future rate hikes may occur. In my opinion, while the U.S. economy has and continues to recover, there is still softness, particularly when it comes to those who gave up looking for work since losing their jobs in the recession and/or are underemployed, along with its vulnerability to the economic slowdown around the world. Fed officials even stated they expect “only gradual increases” the next few years, which would indicate they are keenly aware of the economy’s fragile footing. While a .25 point hike is relatively inconsequential to overall borrowing costs
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hile short term interest rates have ticked up, W current wisdom is not forecasting any substantial increases between now and year-end.
given the current low rate levels, it could further strengthen our dollar and reduce the level of United States agricultural exports that are so vital to our industry’s profitability. Effective Jan. 1, 2016, GreenStone increased its variable rate 0.25 percent due to the source of funding for this portfolio increasing as a result of the Feds move. However, intermediate and long term rates remain relatively unchanged; the 10-30 year fixed rates were actually 0.15 to 0.20 percent lower the third week of December 2015 as compared to the same time one year ago. Commodities Based on current futures markets, 2016 does not appear to be much better for grains than last year. Increases in worldwide surpluses and input costs for corn and soybeans remain relatively static from 2015, and will continue to pressure margins unless rents can be renegotiated. Class three milk futures also reflect ample worldwide supplies of dairy products with prices staying below many producers’ breakeven price levels through most of this year, with negative price differentials in some areas continuing sporadically as supplies coming to market continue to swell. Hog inventories have improved since the PEDV outbreak last year, and market prices are down as a result. Most finishing operations will likely experience breakeven economics as feed costs adjust seasonally throughout the year. Many cattle feeding operations are experiencing the impact of higher feeder steer prices coupled with falling demand as retail prices have abated in order to maintain sales as the consumer trend continues moving toward increased pork and chicken. Negative margins are currently forecast for finishers through most of this year. For the most part, other commodities produced in our territory should produce positive margins barring any unforeseen adverse weather or market disruptions. Land Values Michigan and northeastern Wisconsin land values are projected to remain relatively stable through this year. Values were actually up just over 1 percent in Michigan in 2015. Due to
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commodity economics, lower quality land will likely show deeper declines than good quality soils for 2016. Iowa Farm Credit benchmarks indicated an 8-9 percent decline in 2015; our territory typically lag trends there by a year or two. Overall, Purdue University has projected a 15-20 percent decline in land values in the upper Midwest over the next 2-5 years, but are not predicting a bust like the 1980s.
and agribusinesses through authorities to finance rural infrastructure, residential lending, food processing, aquaculture, and biofuel production to name a few. Many of these authorities were extended to meet the rural community and agricultural financing needs not available from other lending institutions, while evolving to align with agriculture as it continues to vertically integrate.
Summary
Today, GreenStone is the sixth largest out of 74 associations in the national Farm Credit System with $7.2 billion in assets and nearly 24,000 customers. It also has one of the most diverse portfolios of any institution in the System, serving the full breadth of the agricultural industry and the rural communities in its market place, while diversifying the risk posed by a homogeneous portfolio of only production agriculture.
2016 looks like it may be a rerun of 2015 with tight margins across the board. While short term interest rates have ticked up, current wisdom is not forecasting any substantial increases between now and year-end. However, it is a good time to stay abreast of what rates are doing to take advantage of locking in longer term rates while they are still very reasonable. FARM CREDIT —100TH ANNIVERSARY 2016 marks the 100th anniversary of the national Farm Credit System. This is a significant milestone in any organization’s journey, and as you will read in this edition of Partners, GreenStone, along with the entire Farm Credit System, will be celebrating the historic event both at a national and local level throughout the year. The Farm Credit System was created on July 17, 1916 by Congress with an initial investment of $8.89 million (about $70 million in today’s dollars) as a way to ensure a dependable source of credit to America’s farmers and ranchers. In those days, the banking system was relatively unstable which meant farmers could not always depend on commercial banks to provide them with the credit they needed from one year to the next. Since that initial investment, the System repaid the Federal government and later became a GSE (Government Sponsored Enterprise), which allows it to access low cost funding as a result of an implied government guarantee for those who invest in it. Without a dependable source of credit for the nation’s food production, you could argue the country’s food supply would also, in turn, be uncertain. Since that time, the System has evolved to serve the financial needs of rural communities
We have been here for the last 100 years. Though our name may have changed, from Production Credit, Federal Land Bank, Farm Credit Associations, or a Bank for Cooperatives, we remain committed to serving the unique and ever-changing financial needs of rural America, and we continue to be very well positioned to serve your needs for 100 more! Thank you for choosing us to be your financial provider of choice and best wishes for a healthy, safe, and successful 2016! If I can ever be of assistance, please feel free to contact me.
Dave Armstrong
517-318-4105 dave.armstrong@greenstonefcs.com Partners — Winter 2016
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DRIVEN TO DAIRY By Jennifer Vincent Kiel
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GROW
KENDELL ZEMPLE MET HIS NOW WIFE, COURTNEY, IN APRIL 2009, A YEAR BEFORE HE BOUGHT MILKING COWS. “IT’S PROBABLY A GOOD THING, ELSE I PROBABLY WOULDN’T HAVE SNAGGED HER,” HE SAYS, REFLECTING ON THE LONG, PAINFUL, BUT REWARDING HOURS REQUIRED TO ESTABLISH A DAIRY FARM FROM SCRATCH.
In his second year of college, Kendell joined his father and took a job at Sturm Foods. He was at school (part-time) by day and at work by night. “In my last year of school I knew I wanted to farm.”
Kendell, 31, was raised on his parent’s Manawa, Wisconsin, beef farm that also dabbled in poultry. “I grew up on a Farmall H tractor—my dad always called it my tractor,” he says. “Not sure why. Maybe he already knew that I was going to farm myself.”
By 2010, he was ready to have cows. “I talked to GreenStone and said, ‘This is what I’ve done with the farm; this is my commitment to keep debt load down. I also built up a year of feed inventory the year before. I just need money for cows.”
Just what kind of farming was yet to be determined. His parents, Ronald and Virginia, own about 210 acres. “I did a lot of field work while my dad worked off the farm as a plant manager for Sturm Foods,” Kendell says. “My brother, Wendell, and I would fight over the field work. I had freedom to go anywhere on the farm, and I was outside from school to dark.”
For six years he worked third shift at Sturm Foods, generating income to convert the farm where he grew up, which included an old barn. During that time, he rented out another 40 acres and concentrated on building infrastructure. In 2005 he built a milk house, followed by one major project every year, including a new well, rewiring electrical in the barn, gutting the barn, pouring concrete in the barnyard and installing new tie stalls. He purchased a pipeline and a used bulk milk tank.
He was approved and on Memorial Day weekend of that year, the first load of 14 cows were dropped off. It took three days to break new cows in and it took a toll on Kendell’s body. “My muscles were sore from all those different bending motions that I wasn’t used to, but Courtney encouraged me to continue on,” he says. That fall, with the herd now up to 40 cows, Kendell quit his job at Sturm Foods. “I knew I could cash flow debt at that point,” he says. “GreenStone’s Daniel Gitter, who has now moved to commercial loans, had faith in me with the initial cow loan and then after purchasing the cows with an operating loan as a reserve.”
From a 4-H Cloverbud to his high school years, Kendell showed a horse, rabbits, poultry, a dog and, in his last two years, steers. So what prompted him to pursue a dairy enterprise? “My dad always had Red Herefords. Isn’t it human nature to want something you don’t have,” he says with a chuckle. “No really, I just thought it would be nice to make a living on the farm. For beef cattle, it would require too many to make a full-time living with a steady income. “ He got a taste for dairy life in high school, working as a relief milker for a neighbor. The interest was planted, but making this dream grow would require deep determination—something Kendell did not have. Not yet. After graduating high school in 2003 and seeing the value in broadening his knowledge base, he attended Fox Valley Technical College in Appleton, Wisconsin studying agriculture/outdoor power equipment. “I didn’t know it at the time that I was going to milk cows,” he says. “I just wanted a well-rounded education that would give me options to work with other ag businesses.”
➡ Kendell Zemple of Manawa, Wisconsin grew up on his parent’s beef farm, and after attending Fox Valley Technical College and working off the farm for six years, he started his own dairy operation with help from GreenStone.
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Good but not great
“I had a good facility for what my knowledge was when I started, but I could see what I still needed,” Kendell says. With the milking barn only holding 25 cows, an existing, small loafing shed a few hundred feet away from the barn was being used for extra and dry cows. “I hated the bedding pack – constantly trying to keep things clean,” he says. “I bought freestalls, poured concrete, and it’s just amazing what a difference that was. I liked it so well, I added onto the barn, which was also financed through GreenStone.” The freestall barn now has poly carbonite panels, which allows light in and creates a nice airy environment Kendell likes. Sand was added as bedding. “We expanded in steps, so as not to stick our necks out too far.”
ways to improve his business,” Fanslau says. “He was bit by the farming bug when he was younger, and he never gave up on it.” Another improvement was covering what were outside manure alleys. “We had a concern with manure run-off,” Kendell says. “So, I signed up for a NRCS Comprehensive Nutrient Management Plan and covered the manure alleys. NRCS helped some with funding.” Roof gutters were also installed. Looking ahead
This year there’s no new buildings, but plenty of “odds and ends with concrete,” Kendell says. He has plans to bring springing heifers into the dry cow barn, and is drawing up sketches for his next project—some type of heifer barn. A manure pit is also under consideration. Also on the docket, Kendell would like to begin the transition of land by buying out his parents. The generational farm was recognized at the state fair in 2014 with the Century Farm Award. Kendell and Courtney married on Sept. 14, 2013, and they recently welcomed a son, Jacob, on Sept. 16, 2015.
The barn is now 66x134 feet and has been added on three times, all through GreenStone and the last being financed through GreenStone financial services officer, Corey Fanslau.
“Eventually I would like to grow the business and have one full-time employee and more family time,” Kendell says.
“I enjoy working with Kendell—he’s very proactive in searching for and researching different
Courtney, who worked off the farm with a trucking compliance company, is now staying at home with their little guy.
Now retired, Kendell’s dad is his main help with feeding baby calves and heifers up to breeding age. Kendell also has two friends on call if he needs a night off.
➡ Kendell and his wife Courtney welcomed a son, Jacob on Sept. 16, 2015. His parents, Ronald and Virginia, helped Kendell get his start on the family farm.
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Kendell is still all hands on, from maintaining equipment and dissecting bills, to cow health and nutrient management—and let’s not forget occasional diaper changes.
Where Are They Now...
He’s added equipment, buying a new manure spreader in the fall of 2011, and upgrading and adding skid steers. “I have a sweet spot for my International 1086, although I do occasionally rent from a local John Deere dealer for deep tillage. It’s a true farm tractor—reasonable to buy and reasonable to fix. I’m definitely not buying a new tractor for $150,000, when this is $15,000. Instead of one I can have four. Sure a new tractor would be nice, but the price is nice too.” Kendell has used his technical degree to develop a small workshop on the farm. When time allows, he fixes what he can himself to trim costs. “Also, my brother is a mechanic, and I draw advice from him and the dealer.” Building knowledge through others is something Kendell has relied on. “There’s a larger farm not too far from us,” Kendell says. “I have a very good relationship with one of the owners. He’s a good source for dairy replacements, and we talk about once a week—I bounce ideas and questions. He calls to ask how the cattle are doing. He’s been my mentor.”
DeBacker Family Dairy, LLC Dagett, MI Terry and Tracy DeBacker Summer 2011
Kendell says farming is just built into him. He gets up and skips breakfast to quickly get to the farm, which is about two miles down the road. “I have to get things rolling…. what’s next?” ■
How has your business changed since 2011? “We are now bottling homogenized milk in plastic in gallons, half gallons and quarts, and also creamline milk in glass bottles. We are still doing the ice cream and butter as well. We also have our license to go in to the state of Wisconsin with our dairy products.”
Straight Talk With Kendell Zemple
When you were eight, what did you want to be when you grew up?
“ I don’t know at that time. I always wanted to take care of the cattle dad bought in the spring.”
When did you first realize that you wanted to be a farmer for a living?
“Probably in high school.”
What future plans do you have for your operation?
What is the biggest challenge for young, beginning or small farmers today?
Our plans for the future include trying to get in to as many stores as possible in Wisconsin, and trying to get our dairy products distributed in Michigan’s Lower Peninsula.
“Capital to get started.”
What advice do you have for young, beginning or small farmers starting out?
What advice do you have for other young farmers?
“ If you really want to do it, if there is a will, there is a way if it’s in your heart. Don’t listen to naysayers.”
Who do you look up to; who is your mentor?
My advice is to know that farming is hard work every day, but if you enjoy what you do it isn’t a job. Change is hard sometimes, but if you don’t try you will always wonder what it would have been. ■
“ I have several—my parents, my brother, who also shares an interest in farming.”
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Meeting This Morning!
Much of the popular press about meetings lament the time wasted in unproductive team gatherings. This may be true for the corporate world, but for my clients, effective meetings are an underutilized tool. These meetings give team members more clarity around expectations and appreciation for each other’s roles. They help employees get more work done in a shorter time—increasing productivity and saving money. There are a few keys to ensuring a meeting is effective. 1. Cover the right content with the right people in the right amount of time.
How meetings can make you money By Barb Dartt, DVM, MS LAST SUMMER I WROTE ABOUT HOW AN INVESTMENT IN “OVERHEAD”— IN THE FORM OF AN EXECUTIVE ASSISTANT—COULD GIVE YOUR BUSINESS MORE EFFICIENCY AND YOU SOME PEACE OF MIND. KEEPING WITH THE THEME OF BASIC INVESTMENTS THAT ENHANCE BUSINESS PRODUCTIVITY AND PERFORMANCE, TODAY’S TOPIC IS AROUND HOLDING GREAT MEETINGS.
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Effective meetings are not “one-size-fits-all.” Rather, a meeting’s length, frequency and attendees are matched to its purpose. One meeting many of my clients hold regularly are stand-up or dispatch meetings. They are at the beginning of the day, in the shop or break room where folks clock in or start their day. The purpose is usually to assign resources for the day—who is working on what project, who needs extra help, what parts or equipment are required, etc. The time frame discussed is short—a day or two. The meeting is short —usually 15 minutes. And the meeting happens frequently—every day. The challenge begins when in a short, focused meeting, someone asks a longer-term question. “Should we replace the 7230 or do an overhaul this winter?” OR… “The way our co-op is doing the soil sampling maps isn’t very helpful to getting our fertilizer bids in. What can we do differently?” As the meeting leader, if you engage in this question, you have just sunk your meeting effectiveness. In the first example, the decision can’t really be made in this meeting. In the second example, the topic is very specialized and only affects one or two folks. These discussions more appropriately belong at a monthly or quarterly planning meeting where attendees are prepared to make a capital replacement decision. Or, a topic that only affects one or two people should be tabled and discussed later with only those affected. However, if your daily meeting is the ONLY meeting you have, it’s hard to move the discussion to an appropriate setting
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I t takes time, commitment and persistence to build the habit of effective meetings. Be ready to adjust the agenda, frequency and timing of your meetings.
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The mix of meetings you need for your business depends on its size and complexity. Here are a few kinds: • Daily stand-up or dispatch meetings as described above. • Monthly or quarterly financial and planning meetings cover financial performance, anticipated capital purchases, talent discussions, or even marketing plans. These meetings generally last 1-3 hours. • Annual long-term planning meetings develop strategic priorities. Topics could include landlord relationships, succession planning, expansion planning, or a review of key opportunities and challenges faced by the business. These meetings should be half or even a whole day long. 2. Prepare for the meeting— designate a facilitator, assign a purpose and develop an agenda. A facilitator owns the meeting process—of starting and ending on time, of knowing and achieving the purpose, of ensuring everyone has an opportunity to contribute and of following the agenda. Obviously, for a facilitator to be effective, someone (or the group) has to set up these expectations ahead of time! Many producers are challenged by the need for a meeting agenda. It’s hard to get into the habit of bringing up topics ahead of the meeting. Note that the daily meetings can be effective without a new agenda each time—the topics covered are routine and you can stick to a standing agenda that is
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consistent. An agenda for the monthly or quarterly planning meetings can be developed by attendees at the beginning of each meeting. Two standing topics at monthly/quarterly meetings ought to be confirming the purpose of the meeting and reviewing the action items from the previous meeting. For long-term planning meetings, an agenda should be developed in advance. 3. Record decisions and action items. While tough to get done, this practice has a big impact on efficiency. Recording decisions allows attendees to avoid re-plowing ground covered in prior meetings. The ability to refer back to previous action items can speed discussion and helps avoid conflict over differing recollections. Rather than attempting to record all the discussion, I suggest simply recording decisions and action items (who agreed to do what by when). The facilitator and recorder fill an additional function in the meeting aside from providing content. These additional functions often diminish their ability to share in the discussion. I suggest rotating this role, but not for every meeting. Allow someone to practice their role and
ecording decisions allows R attendees to avoid re-plowing ground covered in prior meetings.
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get a rhythm going before shifting the responsibility. It takes time, commitment and persistence to build the habit of effective meetings. Be ready to adjust the agenda, frequency and timing of your meetings. Your first try will not be a perfect fit…but don’t throw the baby out with the bathwater! Be persistent and adjust to meet you and your team’s needs. This may not be a very glamorous new practice, but I have seen meetings energize employees, create momentum and increase team productivity. Over time, folks enjoy the opportunity to come together, plan their work, share accomplishments (and challenges), and feel like an interconnected and focused team. And a productive team that enjoys their work can certainly make you (and save you) money. ■
ABOUT THE AUTHOR
Barb is a consultant with the Family Business Consulting Group, working with families and management teams to help them keep their business healthy and the people happy. Barb can be reached at 269-382-0539 or dartt@thefbcg.com
The opinions stated herein are not necessarily those of GreenStone Farm Credit Services.
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2016 Market Outlook By Bob Utterback THE HOLIDAY SEASON IS NOW BEHIND US, BUT SOME TIME IS BEFORE US BEFORE THE FIRST RUSH OF SPRING COMES. IT IS NOW IS TIME TO SIT DOWN AND REFLECT. DID YOU MAKE ANY MONEY LAST YEAR? WHERE IS THERE ROOM FOR IMPROVEMENT IN YOUR OPERATION? WHAT CAN WE EXPECT IN 2016 AND BEYOND?
These questions all lead me to my usual questions at this time of year. How much can producers pay for cash rent, new machinery and other capital expenditures? I suspect many are starting to ask even harder questions—is the current price weakness in all commodities simply a shortterm adjustment or is it indicative of more severe issues in the global supply/demand relationship? This leads me to the really hard question—should producers let land go or do they go for it? While it is my professional responsibility as a grain/livestock commodity economist to give an unbiased opinion of the future, I am only human. No matter how objective I am I still have some built-in biases. So here they are. I feel very strongly that it is not my responsibility to make producers more bullish; producers do that naturally. So in presenting my arguments, if I am going to error, it will always be to the negative rather than positive side. Sorry, that is how I have called it since I started in this business and I am too old to change my spots now.
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I n a nutshell, we had an “exceptional period of high
profits that motivated production increases both domestically and internationally. We are now entering a time when demand is sputtering, debt is piling up and financial uncertainty is increasing about the world’s overall economic growth potential to pay.
With that out of the way, what do I feel is ahead for 2016? 1. Overall corn, soybean and wheat production was good for 2015 for both the domestic and global producers. Granted, the eastern Corn Belt got nailed this year, but it was made up by the western producers. 2. Limited 2015 corn and soybean supplies were sold early. With a very uncertain wet spring and limited forward selling of inventory was seen for 2015 corn and soybean production. 3. As we move into 2016, I believe that a larger amount of unpriced inventory still exists on farm for corn, soybeans and [to some degree] wheat. 4. The end result is an unhealthy amount of corn and soybeans will likely be held into the summer in expectation of some type of seasonal price bounce as a result of delayed planting or dryness associated with the El Niño and La Niño patterns.
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In summary, it’s a classic case of producers painting themselves into a corner and waiting for a Hail Mary pass to bail them out. With regard to demand, I suggest the following best explains the lay of the land.
I see only three things that can effectively cause major price moves.
1. The Federal Reserve is under a lot of pressure to continue slowly increasing the interest rate to avoid the long-term consequences of a runaway inflation due to excessive money supply. However, since the domestic economy is still weak in the knees and foreign economies need the U.S. to stay strong, I would not be surprised if we see less than 0.5 percent increase through the first half of 2016.
1. A major weather event occurs in the U.S., China or South America. Most producers think about bad weather. I must strongly point out that, if we were to have trend line plus yields in 2016, it would force the price down. So it comes down to your perception. If you want to plan on a crop failure somewhere, then you are bullish. However, I ask what happens if we simply have trend line yields, not to mention a bumper crop?
2. Next year is an election year so limited action will come out of Congress. This implies that, with no significant federal program to stimulate the economy, the overall U.S. debt structure will worsen. In fact, I would not be surprised to see the overall debt exceed $20 trillion by early 2017.
2. The global market would experience an unexpected recovery. The thinking would be that it would ignite overall commodity exports. But remember, oil producers have been arguing this for a while and prices continue to slide. For demand to pick up and benefit from a weaker U.S. dollar, we must see foreign economies start to really take off!
3. The big uncertainty will be the level of economic progress of foreign countries. I suspect China’s economy will continue to struggle to exceed 6.5 percent annual growth. Likewise, the European Union will find it difficult to experience more than 1.5 percent growth rate which does not exceed inflation. Finally, Brazil’s and Argentina’s economies will continue to struggle and that will place a lot of pressure on increasing agriculture commodities for hard currency from those regions.
3. Watch outside market indicators. A major upward trend reversal in crude oil and gold will be seen as the first step to suggest an overall commodity low is in place. The U.S. dollar would have to start to drop, but the S&P holds firm to suggest economic stability has been achieved in the U.S.
I expect supply to be overall adequate along with only a stable demand for most of 2016. This suggests the market will essentially be ranged bound for all commodities with a bias to the downside. What has to happen to get the grain markets out of this pattern?
I believe both the weather and U.S. dollar are simply short-term events that do not really change the long-term dynamics of the agriculture commodity complex that much. In a nutshell, we had an exceptional period of high profits that motivated production increases both domestically and internationally. We are now entering a time when demand is sputtering, debt is piling up and financial uncertainty is increasing about the world’s overall economic growth potential to pay. Remember, demand is the ability to “pay” for a product; in the end there is no free lunch.
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If South America has a big crop and the U.S. keeps soybean acres up due to tight cash flow considerations, the risk is soybean carryover will double by the fall of 2016. This implies producers need to be very conservative with how much risk they take from March to July.
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With these assumptions, what should be done about 2016? Corn—Historically speaking, now is not the time of year to be a big seller. The seasonal for the March to July is quite strong. I suggest that, if anyone is forced to sell now because of cash flow needs, consider buying the July corn contract in a limited risk strategy below $3.65 by no later than early March. As for new crop, one selling period [late December 2015] has passed; that was when March 2017 got above $4.05. Because of the seasonally weak time period, no general pricing action should be considered until May to early July in my opinion. I, however, strongly suggest being very conservative when pricing and be willing to sell expected 2016 production. Use both time and price guidelines. Start at $4.05 basis the March 2017 contract and be done by $4.40. Sell in even increments. Just remind yourself that if you don’t get it priced, the crop will be more than likely held all the way to the summer of 2017 in the hope that we see a reduced supply event somewhere in the world’s major production regions.
Soybeans—The same type of historical pattern exists, in that prices normally improve from March to July. The problem is this year could be one of those years that go against the norm. If South America has a big crop and the U.S. keeps soybean acres up due to tight cash flow considerations, the risk is soybean carryover will double by the fall of 2016. This implies producers need to be very conservative with how much risk they take from March to July. I propose selling soybeans before selling corn expected production. Also avoid cash flow focus on cash sales over the futures market. Finally, if faced with yield variability and the need to use paper to establish a price for soybeans, I prefer buying deep-inthe-money puts. Then roll-up the puts 20 cents in strike price when it can be done at less than 8 cents premium. Essentially, this should provide a floor and it is a way to improve the net selling price if a July/August weather event occurs. Again, if cash flow is tight, first fund the corn hedging strategy and then only the soybean long put buying strategy if adequate cash flow exists. ■
ABOUT THE AUTHOR Fall 2015
GreenStone FCS
Bob Utterback is the Farm Journal Economist and President of Utterback Marketing in New Promoting the business success of our customers and the rural community Richmond, IN. Call Bob for strategy updates at 877-898-4324. Email Recreational comments on Outlook to Land Feature utterback@utterbackmarketing.com. Market Outlook
The opinions stated herein are not necessarily of GreenStone Farm Credit Services.
Hunting Safety those Focus
material has been prepared by a sales or trading employee or agent of Utterback Marketing Services, EYE This ON
INDEPENDENCE Inc. and Taxes & Healthcare Reform
is, or is in the nature of a solicitation. This material is not a research report prepared by Utterback Marketing Services, Inc. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. Distribution in some jurisdictions may be prohibited or restricted by law. Persons in possession of this communication indirectly should inform themselves about and observe any such prohibition or restrictions. To the extent that you have received this communication indirectly and solicitations are prohibited in your jurisdiction without registration, the market commentary in this communication should not be considered a solicitation. The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Utterback Marketing Services, Inc. believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.
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The Farmland Preservation Program, run by the Michigan Department of Agriculture and Rural Development (MDARD), uses a robust process that includes transferring Agreements from old to new owners, splitting of Agreements into smaller qualifying parcels, correcting of legal descriptions, handling extension and expiration of Agreements, filing and discharge of liens, recording of Agreements, and reviewing new applications. Today, the Farmland Preservation Program has 44,000 agreements that protect 3.2 million acres of farmland. In 2014, this amounted to 8,746 property tax credits issued, ringing in at $43,577,888. Part of reviewing new applications is determining eligibility. The qualifications for enrollment are: (1) the parcel is at least 40 acres or larger and a minimum of 51 percent of the land is devoted to an agricultural use; (2) the parcel is at least five acres but less than 40 acres in size, at least 51 percent of the land is devoted to an agricultural use, and the agricultural land produces a gross annual income of $200 or more per tillable acre; or (3) the parcel has been designated as a specialty farm by MDARD, is a minimum of 15 acres, and has a gross annual income exceeding $2,000 per year. Each part of the process plays a role in preventing abuse, helping to ensure the continuance of the program.
FARMLAND PRESERVATION PROGRAM
However, it is important to understand the structure of the Farmland Preservation Program. The funding comes from farmers pulling property out of the program. When they end the Agreement, they are required to repay the last seven years of tax credits attributable to the Agreement, or part of the Agreement, plus 6 percent simple interest. However, the amount of farmers pulling property out of the program has decreased. There has also been recent delays in the approval of enrollment in the Farmland Preservation Program; in some situations it has been stated that the self-sufficient nature of the program is causing delays in approval of enrollment.
By Becky Whaley, GreenStone’s Legal and Legislative Specialist
DIFFERENT PROGRAMS ARE OFTEN DEVELOPED BY GOVERNMENTS TO INCENTIVIZE ACTIVITIES IMPORTANT TO THE ECONOMY AND CITIZENS, AND THE FARMLAND PRESERVATION PROGRAM IN MICHIGAN (FORMERLY KNOWN AS P.A. 116 AND ALSO KNOWN AS FARMLAND DEVELOPMENT RIGHTS AGREEMENT) IS NO EXCEPTION.
The misalignment challenges have several compound implications as enrollment and use of the program is expected to increase as lower commodity prices squeeze margins. Farmers will seek to become more efficient by lowering their operating costs, and financial and tax advisors will be suggesting the Farmland Preservation Program as part of the solution. However, delayed approvals will result in farmers having inaccurate projected cash flows, and in extreme circumstances could put farmers in unfavorable situations. As a result, GreenStone is working to help provide solutions to the Farmland Preservation Program challenges for the benefit of Michigan’s hardworking farmers.
It was created in 1975 because vital cropland was being taken out of production at alarming rates and farmers were paying approximately a quarter of their farm income on property taxes. As a result, the program was designed to essentially lower the property tax paid through a refundable credit to landowners who had voluntarily set aside their development rights.
For more information on the Farmland Preservation Program check out the MDARD website, www.michigan/gov/mdard/. ■
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CONNECT
NEWS: GREENSTONE HOSTS SOUTHEAST MICHIGAN URBAN AG TOUR This fall GreenStone hosted an agricultural tour in southeastern Michigan to help educate our federal lawmakers on the diversity of agriculture in the area. The group toured a variety of urban farm operations in and around Detroit, including those that supply local farmer’s markets and area restaurants. The tour also included a stop at Southeastern High School, where the group met with agriculture education teacher Mike Suchy and his FFA students. Mr. Suchy talked about the chapter’s partnership with Hantz Farms, an organization that has set out to transform Detroit blight into wooded parks and green space. The FFA students use wild grape vines cleared from abandoned lots to make wreaths that are sold in the high school’s flower shop. The FFA class also maintains a greenhouse, raises chickens, and works on many beautification projects around the school. The tour offered an inside look at the diversity and strength of agriculture in southeastern Michigan, and in urban areas in particular. GreenStone plans to continue offering similar tours in the future, providing valuable insight and education to our lawmakers. ■ ➡ The tour grouped stopped for lunch at the restaurant, Gold Cash Gold in Detroit. The restaurant had excellent food, and directly purchases many of its fruits and vegetables from local farmers. Lisa Howze, the Chief Government Affairs Officer for Detroit Mayor Mike Duggan’s office, spoke to the group during lunch.
GREENSTONE CONNECT RECEPTIONS Join us for your unique opportunity to hear a short update on the year, have the opportunity to ask questions, and connect with your local GreenStone team. • Participate in the 2016 Cow College farm tour on Jan. 19, 2016 in Waupaca County, WI! Visit www.waupaca.uwex.edu for more information and to register for the event. After the tour, join us for the GreenStone Connect Reception at the Waupaca VFW Hall beginning at approximately 1:30 p.m. All GreenStone members and guests are welcomed to join us at the reception, regardless of whether or not you are registered to attend the Cow College. 15
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• Visit the GreenStone booth at the Great Lakes Crop Summit, Jan. 27 – 28, 2016 at the Soaring Eagle Casino and Resort in Mount Pleasant, MI. Also join us at the GreenStone Connect Reception on Wednesday, Jan. 27 from 5 – 6 p.m. • Also visit the GreenStone booth at the Great Lakes Regional Dairy Conference, Feb. 4 – 6, 2016 at the Soaring Eagle Casino and Resort in Mount Pleasant, MI. On Feb. 4., mingle with us during another GreenStone Connect Reception beginning at 5 p.m. These will conclude the series of GreenStone Connect Receptions until the fall. ■
GreenStone Recognized for Support of Manitowoc County UW-Extension Agriculture Programs GreenStone received the 2015 Friend of UW-Extension Agriculture and Natural Resources Extension (ANRE) Award, which recognizes a Wisconsin organization for their support of the educational efforts of the ANRE program area. As part of the Farm Credit organizations serving Wisconsin, GreenStone has been a strong partner with UW-Extension by collaborating with county agents, educators and state specialists through sponsoring programs, encouraging and recruiting participants, and providing and hosting planning meetings and educational programs that keep Wisconsin’s $88 billion agricultural industry strong and growing. ■
Ladies’ Day Out The 2016 event for our GreenStone customers will take place Feb. 11, 2016 at the Radisson Hotel and Conference Center in Green Bay, WI. This year’s agenda includes motivational humorist, Deb DiSandro. Her “Slightly Off” perspective will leave the audience laughing! GreenStone’s Wisconsin customers recently received an invitation in the mail with the necessary details to RSVP for the event. Contact any of the Wisconsin branches for more information! ■
2016 Scholarship Program GreenStone is now accepting applications for its 2016 scholarship program! GreenStone plans to once again award up to $40,000 to incoming college freshmen pursuing a degree in an agriculture-related field in the amount of $2,000 each to selected students attending a four-year college program and $1,000 each to selected students attending a two-year college program. For complete program guidelines and application, visit www.greenstonefcs.com. Act now, the application deadline is Feb. 26! ■
Farm Women’s Symposium The 25th annual program will be held on March 9–11, 2016 at the Park Place Hotel in Traverse City, MI. The Farm Women’s Symposium is designed to strengthen agriculture by addressing the ever-changing needs of farm families. It will provide women opportunities for leadership and professional development, enhance communication and management skills, build effective family and family teams, and develop a network of supportive friendships. Visit the website for more information, www.farmwomenssymposium.com, or inquire at your local Michigan GreenStone branch. ■
GreenStone Earns National Honor as One of the Best and Brightest Companies to Work For®
WISCONSIN DEER CHALLENGE
The National Association for Business Resources (NABR) has named GreenStone Farm Credit Services one of the Best and Brightest Companies To Work For® in the country. This marks the third year GreenStone has earned this honor at the national level, also taking home an award in 2012 and 2014, in addition to regional recognition in 2011 and 2012.
The fifth annual GreenStone Deer Challenge was a success! Open to all hunters in northeast Wisconsin and Michigan’s Upper Peninsula, the contest is available to adults and junior hunters. The top hunters in each category were awarded cash prizes and entered to win game cameras and Cabelas’s gift cards! Here is a list of this year’s winners:
The 2015 winning companies were assessed by an independent research firm which reviewed a number of key measures relative to other nationally recognized winners. Key measures included: compensation, and benefits, employee engagement and retention, education and development, diversity and inclusion, work-life balance and strategic company performance, among others. GreenStone staff also participated in an employee engagement survey as part of the application process, which measured how meaningfully and personally connected they are to their work and to GreenStone.
Adult Competition • Lew Drefahl, First Place, $400 (featured below, top) • Bruce Long, Second Place, $200 • John Baldwin, Third Place, $100 Junior Competition (17 and Younger) • Houston Gretzinger, First Place, $200 (featured below, bottom) • Kyle Finger, Second Place, $100 Door prizes also went to Kyle Kostreva and Dean Baehman, both of whom received game cameras. Randy Finger and Austin Stodola won the drawings for $25 Cabela’s gift cards. Thanks to everyone who participated in this year’s challenge! ■
Beth Barker, chief human resources officer for GreenStone said that the company’s focus on people is one of the main reasons it continues to be recognized at this level. “We focus on creating an environment that fosters productive and positive relationships in the workplace,” Barker said. “High levels of employee engagement create strong retention rates, and also strong customer satisfaction. Our overall success is directly related to the positive and meaningful relationships our staff builds with our customers. This honor once again shows that we are moving in the right direction as a company—both in business and in corporate culture.” ■
ANNUAL REPORT NOTICE This is an official notice that the 2015 GreenStone Farm Credit Services annual report will be available for viewing online at www.greenstonefcs.com by Friday, March 15, 2016. In addition, the annual report will be mailed to all stockholders within 90 days of year-end. ■
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100 YEARS YIELDING MILLIONS MORE FOR YOU The start of 2016 marks Farm Credit’s centennial anniversary; when you tie that with the 11th year of GreenStone’s patronage program, it means 100 years yielding millions more for you! Because GreenStone is owned by the hardworking people we support, we are proud to return approximately $35 million of our net earnings back to members like you. That means money back in your pocket which you can reinvest in your operation, give back to your community, or devote to the needs of your family and home. As a financial cooperative, GreenStone is committed to remaining a stable, reliable association that will continue to be here, supporting our customers with a little extra, however they choose to use it.
FARM FORWARD MENTORSHIP PROGRAM
Participating mentors receive the satisfaction of helping and teaching the next generation while learning new ideas and gaining experience in the art of mentorship. The mentees will in turn have access to a broad knowledge 17
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This year, we are again looking forward to Patronage Day, which will be on March 23. We hope to see you in your local branch, picking up your check and connecting with your friends and neighbors. While markets may shift and change, there is one thing of which you can be certain: we will be here to support you. Through the tough times—now and in the future—GreenStone is committed to our customers and to ensuring that patronage is one of the many benefits of membership. ■
some of which will include creating an effective business plan, managing risk, utilizing resources and managing day-today operations. Professional business coaches and mentoring consultants will facilitate the process and guide the participants throughout the year. Carl Jessen, former GreenStone President and CEO, currently of Jessen Coaching, LLC and Susan Combs, Coaching & Consulting, LLC will lead the group through the Farm Forward Mentorship program.
GREENSTONE RECOGNIZES THAT STARTING A CAREER IN FARMING CAN BE CHALLENGING. TODAY’S FARMERS ARE AMERICAN AGRICULTURE’S GREATEST ASSET. The scope of their knowledge goes far beyond the field. With this in mind, and in coordination with GreenStone’s centennial celebration, we are proud to launch the pilot of the Farm Forward Mentorship program with 16 producers located through the association’s territory.
Through the decades, we have developed deep roots in the rural communities we call home. We have built a 100 year foundation that has stood the test of time and affords us the strength to give back to our members, even in the tough years.
base of industry dynamics and practices, have the opportunity to network with key industry contacts and gain a better understanding of the business model of agriculture today. The programed officially launched for the eight mentor/mentee pairings in early January with a one-day training in East Lansing, MI. Throughout the year, the program includes several coordinated conversations and site visits to mentor and mentee farms, all designed to foster conversations around business areas the pair have prioritized,
Throughout the year, follow our Farm Forward participants’ journey on GreenStone’s social media and Open Fields blog. We will be sharing participant features, including their personal stories, insights, and program experiences! GreenStone is committed to supporting organizations, programs and initiatives dedicated to advancing agriculture— today and tomorrow. The Farm Forward Mentorship program is one more way Greenstone supports and encourages a new generation of producers beyond providing financial services. ■
➡ Warren Suchovsky is the state’s first landowner to achieve the Forest, Wetlands and Habitat System verification under the Michigan Agriculture Environmental Assurance Program.
Michigan Forest Land is First to Become MAEAP Verified Warren Suchovsky of Stephenson, Michigan (Menominee County) became the state’s first landowner to achieve the Forest, Wetlands and Habitat System verification under the Michigan Agriculture Environmental Assurance Program (MAEAP). Mr. Suchovsky said the main reason he sought the verification was to encourage other landowners in Michigan to do so as well. “The MAEAP Forest, Wetlands and Habitat System requires the development of a management plan based upon the landowner’s objectives to maximize the economic impact while also instituting good management practices enhancing the benefits to wildlife, water quality, and the overall environment,” said Suchovsky. GreenStone financial services officer, Ann Harrington said Suchovsky, a board member of the Michigan Association of Timbermen, has actively managed his land under forest stewardship programs for many years. “It is great to see Warren recognized as the first in Michigan to earn the MAEAP verification for forest land. Over 500 acres of his land was verified as part of the process.” Suchovsky noted that verification was a simple process, and he hopes others in Michigan will consider seeking verification as well. To become MAEAP verified, the landowner must complete three comprehensive steps which include attending an educational seminar, conducting a thorough on-farm risk assessment, and
developing and implementing an action plan addressing potential environmental risks. Michigan Department of Agriculture and Rural Development conducts an on-farm inspection to verify program requirements related to applicable state and federal environmental regulations, as well as other beneficial management practices. When completed, the producer receives a certificate of environmental assurance. MAEAP is a multi-year program allowing producers to meet personal objectives, while best managing both time and resources. The program encompasses four systems designed to help producers evaluate the environmental risks of their operation. Each system – Livestock; Farmstead; Cropping; and Forest, Wetlands and Habitat – examines a different aspect of an operation as each has a different environmental impact. By participating in all four systems, producers can comprehensively evaluate their entire operation for potential environmental risks. MAEAP is housed within the Michigan Department of Agriculture and Rural Development with local technical assistance for Suchovsky’s verification provided by the Menominee County Conservation District. To learn more about MAEAP, visit the program website at www.maeap.org. ■
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BEHIND THE SCENES WITH DAVE ARMSTRONG
Q &A
AS WE KICK OFF GREENSTONE’S 100TH ANNIVERSARY, IT IS FITTING TO TAKE A FEW MOMENTS WITH OUR PRESIDENT AND CEO, DAVE ARMSTRONG, TO REFLECT ON HIS PERSONAL PERSPECTIVE OF WHERE WE HAVE BEEN AND WHERE WE COULD BE GOING IN THE NEXT 100 YEARS OF FARM CREDIT.
What kind of technology do you think farmers will be using 100 years from now? “ As technology advances, the use of robotics in all phases of production will continue to accelerate to the point where the “farmer” may never actually walk in a “barn” or ride in a “tractor” to plant
and/or harvest a crop. I also think it is safe to say cash as we know it today will be obsolete. Transactions will be completed electronically via “Bitcoin” or some other similar technology.”
Pause for Applause... 1. Congratulations to, Sarah Dilon, GreenStone’s customer
services representative in Hillsdale, MI, on receiving the Hillsdale County Farm Bureau Outstanding Young Ag Leader award, which recognizes young farmers for outstanding leadership roles in Farm Bureau, agriculture and the local community.
2.
Gov. Rick Snyder recently appointed GreenStone customers Pete Crawford and Mike Sahr to the Michigan Soybean Promotion Committee (MSPC) directors. The MSPC strives to be the innovative leader for the sustainable future of Michigan soybean farmers, and the board of directors gives the committee leadership and direction.
3.
GreenStone customer, Adam Kolb of Cleveland, WI, was selected as a semi-finalist of the 2016 Farm Bureau’s Rural Entrepreneurship Challenge. As a semi-finalist, he received $10,000 to invest in his operation, Kolb Farms, a diversified farm that includes grassfed beef marketed directly to consumers, custom calf raising, crop production and custom field services.
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What historical event do you think has impacted Farm Credit the most?
What is your favorite / funniest memory of working for Farm Credit?
“ Besides the signing of the Federal Farm Loan Act of 1916 which created the Farm Credit System, the agricultural “depression” of the 1980s had the biggest impact on Farm Credit, something I personally experienced early in my career. The financial collapse of thousands of farmers, ranchers, and agribusinesses during that time was likely only surpassed by the Great Depression of the 1930s. As a result, the System implemented a number of initiatives to better protect itself and its members from similar economic events in the future.
During my first ten years there weren’t many things to laugh about (1981-1991), but one that comes to mind is a former CEO I worked for who had an insatiable appetite for chocolate and was known to work around the clock at times. Occasionally, while working late at night he would “raid” staff offices looking for chocolate to sustain him for a few more hours. We always knew who had worked late the night before because we would find chocolate wrappers in various areas of the office and those who had their own chocolate “stash” would find it missing the next morning. ■
SERVICE ANNIVERSARIES Help GreenStone congratulate and thank these staff members who are celebrating an employment milestone. From five to 35, the years represent the dedication and service all employees provide our members.
February: January: Nannette Rennells (35) Gregory Hotchkin (35) Beth Klotzbuecher (30) Gene Harrington (30) Tracy Koch (20) Maria Vennix (25) Kathy Freeburn (15) Carol Walikangas (15) Mary Carter (15) Renee Harkness (15) Emelee Rajzer (10) Teresa Rodgers (15) Nicole Wesoloski (15) March: Christina Holda (5) Therese Hill (10) Erin DuBois (5) Mindy Leonard (10) James Murphy (5) Paolo DiLernia (5) Kortni Lefevre (5) Jordan Wernette (5)
4. Congratulations to the winners of Michigan Farm Bureau’s 2015 Young Farmer Awards: • GreenStone customer, Michael Bodtke of Van Buren County, MI, was recognized as the Outstanding Young Farm Employee for his contributions to the success and long-term profitability of his employer, Cornerstone Ag, as well as for his leadership involvement in Farm Bureau, agriculture and the community. • Brent Skinner received the Young Farmer Achievement Award recognizing his outstanding achievement in the business of farming and leadership in the agricultural community. Skinner is the sole owner of two agricultural-based businesses: a contract swine finishing and cash crop farm, and a trucking company hauling grain and feed ingredients between farm and feed mills. Skinner is also a GreenStone customer. • Jeremy and Steve Glaspie of Tuscola County, MI were presented with the Excellence in Agriculture award for their involvement in Farm Bureau, agriculture and the local community. • Janna Fritz was named the Outstanding Young Agriculture Leader for her outstanding leadership roles in Farm Bureau, agriculture and her local community.
Working together, eight commodity groups and agribusiness organizations are focused on promoting Michigan agriculture, participating in the ongoing dialogue about issues affecting the state, and harnessing agriculture’s potential to grow Michigan’s economy. GreenStone is a member of ALM. Other members include the Michigan Agri-Business Association, Michigan Corn Growers Association, Michigan Milk Producers Association, Michigan Pork Producers Association, Potato Growers of Michigan Inc., Michigan Soybean Association, and Michigan Bean Commission. In 2015, ALM continued their effort to be proactive with members of the public and lawmakers. It is critical that agriculture be at the table, and by engaging on key issues throughout the year, ALM helped to promote Michigan agriculture and encourage pro-agriculture policy in Lansing and Washington, D.C. Here are a few examples of ALM’s recent accomplishments:
AGRICULTURAL LEADERS OF MICHIGAN WORK TOGETHER TO EDUCATE PUBLIC, POLICYMAKERS MICHIGAN AGRICULTURE HAS A POSITIVE STORY TO TELL—BUT TOO OFTEN, DECISION-MAKERS AND CONSUMERS DO NOT FULLY UNDERSTAND THE WORK HAPPENING ACROSS OUR INDUSTRY. THAT IS WHY THE AGRICULTURAL LEADERS OF MICHIGAN (ALM) WAS FOUNDED FOUR YEARS AGO.
Meetings with Federal Lawmakers ALM members had an opportunity to meet for breakfast with several members of Michigan’s Congressional delegation. Following coffee with the members of Congress, ALM members also received a policy update briefing from staff of the U.S. Senate Agriculture Committee. Lunch and Learn events at the Michigan Capitol ALM’s “Lunch and Learn” events provide a chance for lawmakers, their staff, as well as executive branch officials from the Michigan Department of Agriculture and Rural Development to learn about key issues in our industry. Each month, ALM brings expert speakers to the state capitol who are well prepared to discuss key issues in our industry. Women in Agriculture Event In August, ALM had the opportunity to welcome USDA Deputy Secretary Krysta Harden and Sen. Stabenow to Lansing, MI for an event focused on women in Michigan agriculture. Bringing together more than 100 women from across our industry at
all levels of leadership, the half-day event served as a springboard for professional development, networking and information sharing. Radio updates on WJR radio and MLive ALM members worked together this year to record a weekly agricultural update that airs every Sunday evening on WJR radio and its statewide affiliates. The WJR reports give GreenStone and other member organizations a chance to share updates on our industry, reaching an audience that does not connect with agriculture often. The WJR report is also turned into a short post on MLive, Michigan’s statewide online news outlet, and posted to ALM’s social media pages. Working with Policymakers and the Media In addition to these key events, ALM came together in support of many different issues impacting our agriculture sector throughout the year. Members worked together on a media teleconference supporting trade normalization with Cuba, sent letters to Congress urging commonsense policy on GMO labeling, child nutrition and other key issues, and brought large trucks to the Michigan Capitol to highlight the benefits of Michigan’s unique truck weight regulations. Looking Ahead ALM is already looking ahead to continue advocating for our industry. The organization will be ramping up its social media presence with the launch of a YouTube channel, continue engagement with state and federal lawmakers through the Washington, D.C. breakfast and monthly lunch and learn events, and continue education for consumers through WJR radio, MLive and other media outreach. ■
You can learn more about the Agricultural Leaders of Michigan by visiting www.agleadersmi.com or visiting ALM on Facebook and Twitter.
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GreenStone Story:
ESTABLISHED 2016… As we welcome 2016, we are celebrating not only the New Year, but also a significant milestone in our association’s history. This July, GreenStone will officially be 100…a century of history holding a collection of memories, challenges, and triumphs. As we reflect on what has brought us to where we are today, we can’t help but first recognize the reason we are here—you, our dedicated, hardworking members. It is because of our cooperative owners that GreenStone has reached this significant milestone, and we are proud to commemorate it together. The Farm Credit System was established July 17, 1916 when President Wilson signed the Federal Farm Loan Act into law. Almost one year later the first long-term, low interest amortized agricultural loan was made on April 10, 1917 in Larned, Kansas. As the years marched on, Farm Credit was there supporting our nation’s farmers through some of the most trying times in American history: two World Wars, the Great Depression and the 1980s farm crisis. Through it all, we have stood the test of time with you, and fortified our reputation as a stable and reliable financial institution.
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One hundred years and a mission as simple and strong as it has always been: to provide reliable and consistent credit and financial services for rural communities and agriculture. And while we are consistent in that mission, it allows us to adapt to requirements of the modern world. You can be assured we will continue to meet your changing needs and remain a steady source of funding for our borrowers, day in and day out, amidst market fluctuations and economic flares. We acknowledge and honor our long and rich history, yet this anniversary is certainly not all about reflecting on the past. Today’s rural communities are innovative, expanding and active, and we are evolving to meet their needs. From technology advancements to innovative community outreach, we are advancing the way we provide service to you and the communities we call home. And we are doing it in a responsible and financially dependable way to ensure we are here to celebrate the next 100 years with you as well. As we move forward, GreenStone is committed to supporting organizations, programs and initiatives dedicated to advancing rural communities and agriculture —today and tomorrow. From encouraging the new generation of producers, to helping educate consumers about the importance of agriculture, GreenStone’s commitment to thriving rural communities extends beyond providing financial services. The launch of GreenStone’s Farm Forward Mentorship program is one way we are fostering that focus on the future. The inaugural class of the program includes eight mentor and mentee pairs from across our territory, allowing seasoned professionals to pass on their knowledge to the next generation of farmers. We appreciate the vision and commitment it takes to remain successful over time in agriculture and constantly evolving rural industries, and we are pleased to be the conduit that will help share that vision, passion and knowledge. We believe the future of our industry will be defined by individual fresh perspectives, and we will do what we can to nurture that growing entrepreneurial spirit. What began as the Federal Farm Loan Act of 1916 has grown into a successful financial network supporting rural communities and agriculture. The last 100 years have set us on a path that leads to even greater events to come. As we look forward to the next century, we are proud to be part of this legacy—your legacy—of providing the food, fuel and fiber that keeps America running. ■
GreenStone is part of the Farm Credit System, which is also commemorating the centennial on a national scale, starting with the Fresh Perspectives search for 100 leaders in agriculture. Nominations closed in December, and the 100 top honorees will be announced March 15, 2016, National Ag Day, at a National Press Club event in Washington, D.C. Farm Credit leaders will also be connecting with decision makers on Capitol Hill to communicate the importance of agriculture and Farm Credit in America. Visit FarmCredit100.com to learn more about the history of the Farm Credit System in America through an interactive timeline and historical archive. You will also find stories from farmers around the country and learn how Farm Credit is celebrating those innovators who are shaping our rural future.
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i advisor vet those identified based on individuals that will benefit from hearing the Farm Credit story and are supportive of the agriculture industry’s contributions to the economy.
PAC PROGRESS YOUR MI GREENSTONE PAC SUCCESSFULLY DISBURSED A TOTAL OF $13,500 TO 34 MICHIGAN SENATE AND HOUSE OF REPRESENTATIVE MEMBERS THAT WERE IDENTIFIED AS KEY LEADERS WHO VALUE AND RECOGNIZE AGRICULTURE’S CONTRIBUTIONS TO A THRIVING ECONOMY ACROSS THE STATE OF MICHIGAN. In order to successfully coordinate the delivery and share the message of the Farm Credit System’s member-owners, the MI GreenStone PAC is structured to be nimble. This allows for the capitalization on strengths, and efficiently uses resources to operate in the changing government environment. A first step in the process is identifying those elected officials serving, or who have the potential of serving, on agriculture, banking, or appropriations committees, as well as leadership positions within the state legislature. GreenStone’s Board of Directors, management team, and an independent
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PAC checks are often hand delivered at fundraising events or one-onone meetings. In addition, GreenStone participates in agricultural tours and Michigan Ag Day at the Capitol to maintain relationships. Advocacy for the prevention and elimination of regulatory barriers hindering our members—both the agriculture industry and rural community—continues to be the primary focus of discussions. As stewards of the Farm Credit System and partners in the Michigan agriculture industry, the highest importance is placed on ensuring that the future of agriculture is bright. Your support of agricultural-minded legislators is commended and ensures communication channels are open in the future as issues arise. The message will remain positive and simple: sound policies will continue to strengthen rural communities and the diverse agriculture economy.
Michigan GreenStone Members: Do not wait to return your patronage pledge for the MI GreenStone PAC. Be sure to send your voluntary pledge before Jan. 31 to direct dollars from your patronage check to the PAC; or you can make a direct contribution to the PAC at any time. You will join hundreds of other concerned members of agriculture and rural Michigan in influencing sound and supportive agricultural policies. ■
BOARD COMMITTEE STRUCTURE Audit Committee Eugene College, Chair Andy Snider, Vice Chair Christine Crumbaugh Dale Wagner Finance Committee Matt Berge, Chair Terri Hawbaker, Vice Chair Hank Choate Gilbert Ritter Legislative/Public Policy Committee Laura Braun, Chair Ron Lucas, Vice Chair Tom Durand Dennis C. Muchmore Executive Committee Scott Roggenbuck, Chair Ed Reed, Vice Chair Darl Evers Bruce Lewis Compensation Committee Ed Reed, Chair Scott Roggenbuck, Vice Chair Darl Evers Bruce Lewis
FOOD INTAKE AND LEGISLATIVE OUTPUT THERE IS A TREMENDOUS NEED FOR FOOD IN OUR COMMUNITIES, LET ALONE THE ENTIRE WORLD. LIVING AND WORKING IN ONE OF THE WORLD’S MOST PRODUCTIVE AGRICULTURE REGIONS IN THE WORLD CREATES A UNIQUE RESPONSIBILITY TO USE THE LAND WISELY. Our Midwest farmers have indeed been fine stewards of the land to create tremendous value for the world in a diversity of agricultural commodities. Protecting agriculture land remains a big challenge for legislative policy. Complex issues find their way to the top of legislative agendas and have stayed there. The United States Department of Agriculture (USDA) strongly influences the legislative policy dialogue with our legislators. The USDA Office of the Chief Economist’s agenda of topics may be looked at as the guide posts of these discussions. A Climate Change Program Office has been established within the Chief Economist oversight to coordinate responses on climate change, focusing on implications of climate change on agriculture, forests, grazing lands and rural communities. Overall it is intended to “ensure the USDA is a source of objective, analytical assessment of the effects of climate change and propose response strategies for the USDA and its partners.” It is a quick step from climate change into global food security. This is where the legislative policy and every aspect of agriculture production are affected. “ Will climate change be detrimental to food security” may be a subject of debate, but there is no doubt the related policies will impact U.S. agriculture producers in areas of transportation, land use, crop management, water use, labeling, and GMO attribute. All these issues get baled together, and require knowledge and skilled communication to address with sound legislative policy. For more information on the USDA view, see their video
on the subject of climate change and impact on food security: http://www.usda.gov/oce/climate_change/ FoodSecurity.htm. The food system, whether local or global, includes all activities related to producing, transporting, trading, storing, processing, packaging, wholesaling, retailing, consuming and disposing. It also now includes, more than ever, the “legislative making” piece in the puzzle for our Midwest roll in the production. As communication moves so fast through social media using the likes of Facebook, Twitter and text messaging, it become as important as ever that agricultural producer voices are heard on legislative issues. The issues require input from many sources. As much as we may want to stay on our tractors and get to work, part of our work now includes communicating from the grassy graze lands to assure legislative output is sound. It may be easy to get frustrated as to the status of legislative policy making, but it is clear that if we do not stay engaged, decisions on policy will be made without engagement. We have all heard the debate on climate change. We have all heard the debate on GMO’s in labeling. We all are familiar with the importance of water in the environment. Therefore, legislative policy will continue to need our input. ■
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Laura Braun
Directors’ Perspective:
Multi-generational farms that grow and thrive over many years are points of pride in agricultural communities, as well as for the families involved in them. However, sometimes it is necessary for a sibling that wants to farm to go off on his or her own. This was the case for my husband and me. When we married, we were partners in my in-laws operation. Circumstances made it so that it was in our best interest to sell our portion of the business and relocate. Farm Credit Services of Michigan’s Heartland, one of the associations that merged to become GreenStone, made it possible for us to do that and to begin an operation of our own. Picking up, moving half way across the state with six young children, and starting over was rather frightening
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for all of us. Farm Credit was instrumental in alleviating some of the many concerns we had along the way. In the 22 years since, GreenStone has worked alongside of us, helping us grow a successful business. The relationships we have had with our loan officers over the years have helped build our loyalty to the System. At one time, the woman from whom we purchased a piece of property was homebound. Our loan officer came to her home for the closing so that she would not have to go to town. I feel certain we would not have had that kind of personal service from any other lender. For these reasons—for security, for personal service, and for the affordable and reliable source of credit—I would recommend GreenStone.
Hank Choate
In 1990 our farm started to plan for expanding the dairy herd with building a new parlor and dairy barn. It was in the early winter of 1990 that I started to work with the Concord branch of Farm Credit. Prior to that, my parents had worked with Farm Credit. In 1990, the timeline of my first loan from start to approval was about 4-5 months.
AS PART OF GREENSTONE’S 100TH ANNIVERSARY CELEBRATION, WE HAVE ASKED EACH OF YOUR BOARD DIRECTORS TO SHARE A BIT OF THEIR HISTORY WITH FARM CREDIT.
We felt that the Farm Credit System had the greatest understanding and commitment to agriculture of any lender, and they wanted to make sure our farm was able to grow.
Take a minute to hear from four directors as they share how they started with Farm Credit, why they continue to choose GreenStone as their financial partner, and even some of their favorite memories working with the association. Check each issue of Partners this year to hear this same perspective from other directors as we reach this centennial milestone!
Since then, my favorite memory continues to be all of the friendly and knowledgeable people I have dealt with at Farm Credit. I would recommend GreenStone to others because they not only loan money to farmers, they help make them better business operators.
Winter 2016 — Partners
Scott Roggenbuck
We took our first loan out with Farm Credit in 1983. My wife, Cindy, and I were married about a year and renting a house from a buddy who had just told us he too was getting married and we had to move out. A farm just down the road from my folks came up for sale at that time and it had a nice home on it with 160 acres of good land. Our local bank told us the loan was too much for them, so we looked to Farm Credit. Since then we have moved all of our financing to GreenStone, and have been very happy with how we have been treated. The first years were tough through the 80s. I learned a lot about budgeting during those lean times, how to fix and maintain equipment, and get another year—or three—out of that combine or tractor. Dale Wagner
Our Farm Credit story began about 15 years ago. My parents were Farm Credit customers for many years, but we did not have the opportunity to take over the family farm as my brother, who is older than I, had already claimed it. My wife and I instead purchased a neighbor’s farm in the mid-1980s when it was challenging to get anyone to lend
In the last 33 years, I have had three different financial services officers. In 2007, I was elected to GreenStone’s board, and have had the honor of working with 27 different directors, two CEO’s, and a great management team. It is always the people that provide me with my fondest GreenStone memories. And one of my favorite activities was planting trees with the employees in Detroit at the Hantz Woodland project the last two years. I would recommend GreenStone to anyone who is serious about making agriculture their life. GreenStone understands the up and down cycles of agriculture and will not step out when times get hard. It may not mean they will always lend you all the money you want, but it means they will work with you to loan you the money you need. This is an important part of surviving these agricultural cycles.
money to purchase a dairy farm. We were able to secure a loan with a local bank, mainly because the loan officer was willing to go out on a limb. We had a few successful years and were about to begin a second expansion when suddenly the bank was purchased by a larger bank, and our loan officer was let go. At the same time, the bank seemed to have lost interest in lending money to farms. Luckily, the financial services officer from the local Farm Credit branch had been out to visit us numerous times, and on one of those visits I told her that given the right
situation we would certainly give Farm Credit a shot. This was definitely the right time, and we have been with Farm Credit ever since. We really appreciate the level of expertise and commitment we receive from GreenStone. Yet, I feel the most impressive part of our GreenStone experience is that they are really true to their values —customer first, deliver quality, get involved, and do the right thing. This starts from the local customer service representative and follows through the entire company right up to the CEO! ■
Mark Your Calendar... JANUARY
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GreenStone Offices Closed In honor of Martin Luther King, Jr. Day UW-Extension Cow College Farm Tour & Connect Reception Waupaca County, WI Wisconsin Ag Day at the Capitol Monona Terrace, Madison, WI Great Lakes Crop Summit (27-28) & Connect Reception (27) Soaring Eagle Casino & Resort, Mount Pleasant, MI
FEBRUARY
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Great Lakes Regional Dairy Conference (4-6) & Connect Reception (4) Soaring Eagle Casino & Resort, Mount Pleasant, MI
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Winter Potato Conference (10-12) Crowne Plaza Hotel, Lansing, MI
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Ladies’ Day Out Radisson Hotel & Conference Center, Green Bay, WI
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GreenStone Offices Closed In honor of Presidents Day
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Great Lakes Builders Show (17-18) Suburban Collection Showplace, Novi, MI
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Michigan State FFA Convention (9-11) MSU Wharton Center, East Lansing, MI
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Outdoorama (25-28) Suburban Collection Showplace, Novi, MI
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Farm Women’s Symposium (9-11) Park Place Hotel, Traverse City, MI
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Michigan Farm Bureau Growing Together Conference (26-28) Radisson Plaza Hotel, Kalamazoo, MI
MARCH Wisconsin Ag Women’s Summit (4-5) Madison Marriot West, Madison, WI
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15
National Agriculture Day
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Ultimate Sports Show (17-20) DeVos Place, Grand Rapids, MI GreenStone’s
23 Patronage Day Wisconsin Public
29 Service (WPS)
Farm Show (29-31) EAA Grounds, Oshkosh, WI
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Berry-Licious
LIVE
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Winter 2016 — Partners
FOUR YEARS AGO JERRY AND YULIA COON DECIDED TO PURSUE THEIR DREAM OF STARTING A SMALL FARM GROWING GOOSEBERRIES AND CURRANTS.
They sold their home in town and moved to the country, where they recently wrapped up their first productive growing season on their small farm. From the berries, the couple makes infused vinegars and syrups, which they sell at farmers markets and craft shows. Many Americans may be unfamiliar with the exotic super fruits, but both Jerry and Yulia have long standing histories with the healthful, tart berries.
Jerry grew up on a farm about 40 miles south of where he now resides in Coleman, Michigan. His parents grew corn, wheat and soybeans, and when he was just a small child, they discovered gooseberry bushes growing in the yard. The berries flourished, despite the lack of care the family provided them. “Those berries were trampled on, mowed over, you name it, and yet they continued to produce berries year after year,” said Jerry. As he grew older, Jerry suggested that the family try to grow the berries for commercial production, but his parents did not want to pursue it at the time. “It was always in the back of my mind,” he said. “I thought it could be a great niche market here in Michigan.”
T hose berries were trampled on, “mowed over, you name it, and yet they continued to produce berries year after year. ”
He couldn’t know that halfway across the world his future wife, Yulia, born and raised in northern Russia, was cultivating her own love for similar berries, black and red currants. “They are very popular in Russia,” she said. At the age of 32, Yulia moved to the United States and soon began to miss a taste of home. After the couple married, Yulia bought a few currant bushes online and planted them in the garden at their home in Midland, Michigan. Soon the couple began discussing the idea of growing more than just a few bushes. The berries thrived, reassuring the couple that gooseberries and currants were worth pursuing. “We started doing market research and looking deeper into the idea,” Yulia said. “Gradually we were convinced we could be successful in the berry business.” In 2012 they sold their home in the city and moved to a farm house on 40 acres. When they listed the home for sale, the couple expected that they would have ample time to find the right property for the farm, but it didn’t work out that way. “We listed our property for sale at 10 a.m. and by 6 p.m. that evening, we had a full price offer,” Jerry said. This meant that the couple had to find the perfect farm house, and fast. As luck would have it, the couple was able to find a property with perfect ground for their berry bushes. Jerry knew they would have to find the right lender to finance the farm within the time constraints created by selling their city home so soon. After some searching online, Jerry went to his local GreenStone branch in Mt. Pleasant. “GreenStone made it easy,” said Jerry. “It happened much faster than we expected.” Elise Pillote, GreenStone financial services officer, worked with the couple on the purchase of their new home. “They needed financing on their new farmhouse; GreenStone specializes in exactly this type of lending, so we were able to meet their deadline and make it a smooth transaction for them.”
➡ Opposite page: Red currants are small, tart berries. These freshly harvested berries were grown on Jerry and Julia’s farm in Coleman, Michigan. Right, top to bottom: Black currants growing on a bush at Coon’s Berry Farm. A collection of the syrups, vinegars and teas sold by Jerry and Yulia Coon at local farmers markets and craft shows. Jerry and Yulia are in the process of renovating this centuryold barn on their property.
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for a bush to fully mature, and they have three years of growing under their belt so far. In 2015 the 250 bushes that are currently producing berries yielded 800 pounds of black currants. As additional bushes mature, they expect that yield to increase to nearly 5,000 pounds in 2016. Eventually, they envision all 30 tillable acres filled with berry bushes. “So far we have been able to handle it with just us. We will probably have to hire help for the next season,” Yulia said. They offered u-pick this past summer to help with some of the harvest. It proved to be very successful with local residents, with many families coming to the farm to pick berries. “It’s a great opportunity for people to visit their property, and learn more about these unique berries,” said Elise. At u-pick and at farmers markets, Jerry and Yulia enjoy educating others about the health benefits of the berries. Currants are packed with vitamin C, potassium and calcium. The farm’s website, www.coonsberryfarm.com, is full of health information on black currants, which are considered by some as the most nutritious fruit in the world.
Coon’s Berry Farm was officially open for business this past summer. They currently have 3,200 plants in the ground on four acres, growing currants, gooseberries and raspberries. With 30 tillable acres available on their property, the couple plans to expand in the near future. It takes five years ➡ Jerry and Yulia Coon sold their home in the city and moved to a 40 acre farmhouse to pursue their dreams of growing currants, gooseberries and raspberries.
i
Besides enjoying the berries fresh, people love the berry syrups, vinegars and tea blends made from dried currant leaves. Jerry says the response to their products has been wonderful. One of the most common questions the couple gets asked is exactly how to use the syrups. Jerry and Yulia have a long list of tasty ideas, including over ice cream, on cheesecake, as a topping for English muffins, or with baked brie or goat cheese. The syrup can also be used as a mixer for cocktails. Most Americans know of cream de cassis, a sweet, dark liqueur made from black currants. Without the alcohol, cream de cassis is essentially currant syrup. The couple plans to market their black currant syrup as cassis, which can be mixed with white wine or champagne. “Mixed with white wine, it is a popular drink in Europe called kir,” Yulia explained. “When mixed with champagne, it is called kir royal.” As the couple looks to the immediate future, they are renovating a century old barn on their property and working on getting their own commercial kitchen space. Currently, they produce the syrups, vinegars and teas in their own home under Michigan’s Cottage Food Law. The commercial kitchen would allow greater efficiency in production and open the opportunity for commercial sales. Eventually, Jerry and Yulia hope to make this their full-time business and to sell their products in grocery stores across Michigan. “The response to our products has been so encouraging,” said Jerry. “We are very excited to see where this venture takes us.” ■
FOLLOW ALONG ON THE OPEN FIELDS BLOG GreenStone publishes regular updates on our Open Fields blog. Check out some of the posts you may have missed at www.greenstonefcs.com! • Choose the Best Wood to Burn in Your Fireplace or Woodstove: Wood burning fireplaces can be cozy and even save you heating costs, but there are some important safety points to consider when choosing what kind of wood to burn.
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Winter 2016 2015 — Partners
•M ichigan Out of Doors TV Fans Vote for Most Unique Deer Blind: We teamed up with the folks at Michigan Out of Doors TV to find Michigan’s most unique deer blind. After reviewing hunter submissions, show hosts Jimmy Gretzinger and Jordan Browne narrowed it down to three finalists. Facebook followers voted for their favorite; see the winning blind posted to our blog! Stay tuned to our Facebook page for similar contests in the future! ■
HOW TO ACCOMPLISH YOUR NEW YEAR’S RESOLUTIONS EACH JANUARY, ROUGHLY ONE IN THREE AMERICANS PLEDGE TO BETTER THEMSELVES IN SOME WAY, BUT A MUCH SMALLER PERCENTAGE OF PEOPLE ACTUALLY MAKE GOOD ON THOSE PROMISES. IT IS DIFFICULT TO KEEP UP THE ENTHUSIASM MONTHS AFTER THE NEW YEAR CELEBRATIONS, BUT BY FOLLOWING THESE TIPS YOU CAN ENSURE ACHIEVING YOUR RESOLUTION, AND BEYOND! • Be realistic. Setting a New Year’s resolution that is too extreme or beyond your reach will ultimately make you feel overwhelmed or disheartened when you inevitably fall off track. Instead of striving to NEVER eat your favorite junk food again, aim for one or two goals that are sensible. Such as cooking a healthy dinner at home at least four nights a week, or simply increase your fruit and vegetable intake. Strive for a goal that is realistically attainable. • Write it down. Jotting down your New Year’s resolutions will automatically turn your thoughts into something that is tangible, rather than it solely being a mental vow. Be sure to post your goals in a place where you will be forced to look at them regularly, and as you read them again and again, the words will form a stronger impression in your mind.
• Focus on one thing at a time. Instead of feeling overwhelmed by trying to set several resolutions that require multiple behavior changes, keep it simple! Take a moment to figure out what one thing you could do or change right now that would help you succeed, and then make that small change. By keeping your eyes set on the next step right in front of you, you will stay in control of the situation. • Reward yourself. This does not mean indulge in an entire box of chocolates if your resolution is to eat better. Instead, treat yourself to something you enjoy and will not contradict your end goal, such as new fitness clothes, a day of pampering or going to a movie with a friend. These little rewards allow you to celebrate your progress without completely derailing it. • Be patient with yourself. Keep in mind that change rarely happens overnight. Your small, daily actions will bring about big changes, and consistency is key. Before you know it, your small steps will have a snowball effect and generate huge results. Also, try not to beat yourself up over occasional slips, take one day at a time! ■
Source: www.everydayhealth.com, www.health.com
TOP FIVE NEW YEAR’S RESOLUTIONS New Year’s resolutions come in all shapes and sizes! Although it is important to create a goal that is meaningful to you and fits your lifestyle, below are some of the more common ones others strive to achieve. 1. Lose weight 2. Stay in touch with friends and family 3. Save money 4. Reduce stress 5. Get more sleep
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INDOOR PROJECTS FOR KIDS Winter is perfect to spend time outdoors building a snowman or catching snowflakes with your children, but as the temperature fluctuates, the frigid cold can keep everyone indoors. This is an excellent time to read countless books, play board games and just relax; but eventually, the inevitable winter crazies set it. Here are couple activities to keep your children busy indoors when it is too cold to venture outside! Baking Soda and Vinegar Volcano. This is a great hands-on project that helps bring science to life!
Homemade Play Dough. An inexpensive project the kids can help with! YOU WILL NEED: • 1 cup white flour • 1 cup warm water • 2 tablespoons salt
• 2 tablespoons cream of tartar • 2 tablespoons cooking oil • 3 ounce pack of Jell-O
INSTRUCTIONS: 1. Mix all of the ingredients together in a small saucepan; let the kids help with the measuring and mixing. 2. Cook mixture over medium heat, stirring continuously until it thickens into a ball of dough. 3. Remove from pan and allow dough to cool, approximately 20 – 30 minutes. 4. Next, let the children knead it, adding in about ½ cup of flour until it is no longer sticky. You can also add in extra food coloring to make the colors more vibrant, or even glitter. 5. Play with it! Remember to store in the refrigerator between uses in an airtight container.
Lobster Stuffed Deviled Eggs Directions: 1. C hop lobster meat, saving 24 small pieces for garnish.
YOU WILL NEED: • 6 cups flour • 2 cups salt • 4 tablespoons cooking oil • 2 cups water • 2 tablespoons of baking soda • 6 drops of liquid detergent
• Red food coloring • Vinegar • Large bowl • Plastic bottle • Baking pan
INSTRUCTIONS: 1. In a large bowl, mix the flour, salt, cooking oil and water with your hands; an opportunity for the kids to help! 2. Stand the bottle in the center of the baking pan. 3. Mold the dough around the bottle in a cone shape, but leave the bottle top uncovered. 4. Fill the bottle almost to the top with warm water, and add a few drops of food coloring. 5. Squeeze the drops of detergent into the bottle, add the baking soda and lastly, slowly pour vinegar into the bottle. 6. This will spur a chemical reaction, and your volcano will fizz and erupt red lava! ■ Source: www.kidspot.com, www.modernparentsmessykids.com
Ingredients: • 12 ounces lobster, fresh or frozen (thawed) • 12 hard-cooked eggs, peeled and halved, yolks set aside
2. P lace yolks in mixing bowl. Add mayonnaise, sour cream, lemon juice, hot pepper sauce and garlic powder; mix until yolks are smooth. Fold in lobster, parsley, and chopped tarragon. Add salt and pepper to taste. Cover and refrigerate mixture, if desired, up to 2 hours.
• 1/3 cup mayonnaise
3. F ill each egg white with a heaping spoonful of lobster mixture. Top each half with reserved pieces of lobster and sprig of tarragon; sprinkle with paprika. Serve immediately.
• 1/2 teaspoon garlic powder
Commodity Cuisine...
• 1/3 cup sour cream • 2 teaspoons lemon juice • 1 1/2 teaspoon hot pepper sauce • 1 1/2 tablespoon parsley, chopped • 1 1/2 tablespoon fresh tarragon, chopped • 24 small tarragon sprigs • Salt and pepper, to taste • Paprika, as needed Provided by Michigan Allied Poultry Industries Inc. (from the American Egg Board)
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Winter 2016 — Partners
LEARN
PRICE FLEX- Applies coverage at the enterprise unit level regardless of underlying policy structure. Growers must insure all acreage under Price Flex, with a minimum of 25 acres. Producers must have an underlying RP or ARP policy. It is available on corn and soybeans. ADDED PRICE OPTION (APO)- Allows you to buy up your projected price on corn and soybeans. Losses can be paid on an optional/ basic unit basis even with an underlying enterprise unit policy. With APO, you choose your price, not an alternative discovery period.
CROP INSURANCE:
REVENUE NET- An add-on policy for producers that carry RP or an ARP policy. This allows the producer to choose a different discovery period to lock in a projected price for corn and soybeans. The Revenue Net discovery periods are 15 days, and the policy must be purchased in advance of or during the desired discovery period.
By Brandon Walters, Crop Insurance Specialist We are all painfully aware of the downturn the cash crop market has experienced the past couple of years. Prior to that, we had seen some of the best commodity crop prices in recent memory, but like all good things, it appears that time is coming to an end, and markets seem to be getting back to more “normal” levels. That being said, making sure you have a risk management plan in place that guarantees some level of profitability is becoming more difficult. In response to declining market prices, most of the crop insurance companies GreenStone works with have developed private products that are designed to optimize the price protection a producer receives on their crop insurance policy. Using corn as an example, a federally
subsidized Revenue Protection (RP) policy uses a projected price that is established based on the average closing for December corn futures during the month of February. Above and beyond the federally regulated policies that offer price protection, most approved insurance providers also offer some sort of private product that addresses revenue guarantees in similar ways. They generally allow you to use alternate or multiple discovery periods when setting the projected price for your crop insurance policy, but there are subtle differences between them. You’ll find a list of these policies with a brief explanation of each:
MULTIPLE PRICE DISCOVERY (MPD)This product allows you to add two, three or four extra months to your February discovery period, allowing you to use the highest price out of those months for coverage. A revenue protection policy must be carried to purchase MPD as well. MPD also follows enterprise unit rules similar to the Price Flex policy. The bottom line is, if you are concerned about making sure your crop insurance guarantee is profitable, these supplemental policies give you the ability to guarantee yourself a price above the federally established crop insurance price, which is hovering dangerously close to break-even for many producers. If you are interested in finding out more about any of the above-mentioned private products, contact your GreenStone crop insurance specialist today! ■ Partners — Winter 2016
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CROP INSURANCE
NEWS:
MANAGING PROFIT STARTS WITH MANAGING RISK As every farmer knows, production agriculture is a risky business. Input costs seem to increase year after year, with no assurance the seed you plant will actually grow into a marketable product. Luckily, there are several risk management tools available to help mitigate risk as well as provide you opportunities to maximize your profits. Using crop insurance, you can set a bottom line for your operation before your first acre is planted. GreenStone offers coverage for a variety of commodities including everything from the most commonly grown commodities to specialty varieties of apples and organic crops. Because multiple peril crop insurance (MPCI) is federally-subsidized, the cost of premium for equal coverage is the same with every agent that offers crop insurance, but here at GreenStone we believe there are a few things that sets us apart from our competition: • One Stop Shop: GreenStone offers insurance, lending, tax and accounting services. That means you get the convenience and value of working with a company that understands your entire financial picture.
• Experience: For 100 years, GreenStone has been the financial engine that keeps Michigan and northeast Wisconsin agriculture running. Our experts can help you navigate difficult decisions and tough economic times.
• Power of the Team: At nearly 500 strong, we are a knowledge powerhouse when it comes to agriculture, crops, and making the important decisions that impact financial outcomes.
• Confidence: GreenStone understands agricultural finance in ways unmatched by any other financial entity. You can be sure GreenStone will be there for you regardless of market or industry fluctuations. Our mission is always to support the rural communities we call home. ■
• Responsive: Our team is responsive and professional. Our local team is positioned to assist you quickly, because your time is money.
GREENSTONE CROP INSURANCE PARTNERS At GreenStone, we choose to partner with a number of top rated approved insurance providers (AIPs) in order to match your needs with the company that can provide you with the best crop insurance experience possible. The providers we currently partner with include: Rural Community Insurance Services (RCIS), Great American Insurance Company, ADM Crop Risk Services, QBE NAU, and Rain and Hail. Each of these companies carry at least an A- (excellent) credit rating with A.M. Best, ensuring they are financially stable. While they all provide great service to their customers, there are some differences in their product offerings. As your agent, our goal is to help you choose the company that best fits your operation and helps manage your crop production risk. If you are ever unhappy with any part of your interactions with an AIP, please let us know as we can help resolve your problem or assist in the transfer to a different carrier. ■
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Livestock Gross Margin Dairy Livestock Gross Margin (LGM) Dairy is a pilot program administered by the Risk Management Agency (RMA) to help dairy producers protect against the combination of lower milk prices and higher feed prices. The program allows you to set a floor on the Class III milk price and a ceiling on your feed costs, protecting the gap (margin) in between. Because it is a pilot program, the RMA has limited the amount of premium dollars that can be written by crop year to $14.9 million dollars. The biggest benefit to using LGM is it allows you to set a floor for losses, but does not limit your upside potential. LGM will continue to be offered on a monthly basis as long as there is premium subsidy available. Availability will be handled on a firstcome-first-served basis. At this time, there is still funding available and the sign up period is the last business Friday of the month. Make plans now so you do not miss out on a great opportunity to protect your business from a downturn in the milk price! If you are interested in looking into an LGM-Dairy policy, contact your GreenStone crop insurance specialist today! ■ Early Plant Dates Early plant dates may have changed and vary by location within the state. Be sure to contact your GreenStone crop insurance specialist to get the specific date for your area. It is important to note that crop acreage planted before the early plant date is not eligible for replant payments, but will still be eligible for insurance coverage. The insurance guarantee is not impacted as long as producers follow good farming practices. ■
Organic Crops As a reminder, the USDA Risk Management Agency now requires all insured organic certified producers to provide a copy of their organic crop plan and organic certificate to their agent before the acreage reporting date. ■ Contract Price Addendum The Risk Management Agency offers a contract price addendum that would allow a producer who receives a contract price for their crop to receive a crop insurance guarantee that is more reflective of the actual value of the crop. Under the addendum, insured producers would have the ability (where available and by choice) to use their personal contract price as their price election, or to use the existing crop insurance price election. If you grow specialty crops under contract and are interested in possibly using your contract price to set your crop insurance guarantee, make sure to ask your crop insurance specialist about the new contract price addendum. ■ Person Types & Identification Numbers To better accommodate data reconciliation between the Farm Service Agency and the Risk Management Agency, there have been some changes made to the social security number and employer identification reporting requirements for individuals, estates and trusts. If you have recently made a change in how an entity has been set up, let you crop insurance specialist know to ensure your policy is renewed using the correct identifying numbers. These records need to be updated before the March 15 deadline. ■
OPTIMIZING PRICE PROTECTION The past handful of years have been some of the best for commodity crop prices in recent memory, but like all good things, it appears that time is coming to an end, and markets seem to be getting back to more “normal” levels. That being said, making sure you have a risk management plan in place that guarantees some level of profitability is becoming more difficult. In response to declining market prices, most of the crop insurance companies we work with have developed private products designed to optimize the price protection a producer receives on their crop insurance policy. Using corn as an example, a federally subsidized Revenue Protection (RP)
policy uses a projected price that is established based on the average closing for December corn futures during the month of February. A producer could also purchase a private pricing product that would allow them to potentially lock in a higher projected price. This of course comes at additional expense, but it could mean the difference between insuring a break-even price, or insuring a loss. If you may be interested in looking into a private policy that can protect prices above federal crop insurance options, connect with your GreenStone crop insurance specialist today! The longer you wait, the smaller your window of opportunity becomes. ■
Crop Insurance Calendar... JANUARY
15
Fruit Acreage Reports / Yield Reports and Pre-Acceptance Worksheets Due
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Deadline for January LGM Sign Up
FEBRUARY
1
End of Insurance Period (loss reporting deadline) for Apples
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Deadline for February LGM Sign Up
MARCH
15
Final date to sign up or make changes for a Spring 2016 Crop Insurance policy. • If you are interested in changing your coverage level, type, or need to add a crop, please call your GreenStone crop insurance specialist to review your options. All changes need to be completed by the March 15 deadline! • Note: Even if you are not making any changes, you must return your signed application. Your policy will automatically renew at the same level you insured at in 2015.
APRIL
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Production reporting deadline for Fall 2015 harvested crops. • Before you get busy in the field this spring, be sure to have your production reports completed, signed and submitted before April 29.
* Please note that can vary by county. Please check with your crop insurance specialist for specific dates if you are unsure.
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EXPLANATION OF ADVANTAGES $50,000 - $75,000 tax at lower rates: When a business is a sole-proprietorship, the income generated is subject to self-employment taxes with both the employer and employee portions totaling 15.3 percent. This tax is in addition to the normal tax rate. When a business is a C corporation, its income is not subject to self-employment tax on the individual’s 1040, rather the corporation pays taxes at the corporate level. Distributions to the individual are then included on the 1040 and taxed again. If the business is going to perpetually exceed a $50,000 to $75,000 income range, the C corporation may not be the best type of business entity because the personal tax brackets will be lower. Tax deductible fringes/ lodging: A C corporation may own a house allowing the company to deduct depreciation as well as the expenses associated with owning the house. This is an advantage for agriculture because the corporation can require the farmer to live on the property allowing for the deduction of the housing expenses on the corporate tax return. Fiscal year flexibility/deferral: S corporations are generally limited to using the calendar year for their tax year unless they seek IRS approval for the change or meet one of the exceptions to change it; this is done on a Form 1128.
The Pros & Cons of Farm Corporations By Christopher Perryman, Associate Tax Accountant AS THE FORMATION OF CORPORATIONS BECOME MORE POPULAR IN THE FARMING COMMUNITY, THERE ARE SEVERAL FACTORS THAT SHOULD BE CONSIDERED BEFORE FINALIZING WHETHER YOUR FARM WILL BE A C CORPORATION OR S CORPORATION, RATHER THAN A SOLE PROPRIETOR. BOTH TYPES OF CORPORATIONS HAVE ADVANTAGES AND DISADVANTAGES, WHICH IF OVERLOOKED, CAN CAUSE PROBLEMS FOR THE FUTURE. Advantages of Farm Corporations
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C corporations
S corporations
$50,000 - $75,000 tax at lower rates
X
Tax deductible fringes/ lodging
X
Fiscal year flexibility/ deferral
X
Self-employment savings from realty lease
X
X
Use of stock gifts and sales in succession planning
X
X
Winter 2016 — Partners
C corporations have the ability to change their fiscal year which allows the corporation to align their tax year with their natural business cycle. Self-employment savings from realty lease: The advantage that exists here comes when the shareholders keep the real estate, mainly land, out of the corporation and in turn rent the land to the corporation. This can allow the elimination of self-employment tax when compared to a sole proprietorship. Two key points to remember: 1. There should be a valid lease agreement between the corporation and the shareholder for the land. 2. The self-employment savings may only occur when there is no material participation within the corporation. It is becoming more popular to put the land in a separate entity rather than leasing the land to the other corporation which could result in the self-employment tax savings. Use of stock gifts and sales in succession planning: Succession planning is one of the most important business decisions that a manager needs to define and design. A corporate shareholder may gift stock to their children as a way to transition the company. Keep in mind, stock gifts are limited to the $14,000 per person per year limit for gifts. A gift tax return may need to be completed when the amount is over that limit and other rules will apply.
Disadvantages of Farm Corporations
C corporations
S corporations
Insufficient tax basis/excess liabilities
X
X
Double entry record keeping
X
Double taxation issues
X
Extra tax return & filing fees
X
Inability to switch from C to S status because of built in gains tax
X
Corporately owned residence will be ineligible for gain exclusion upon sale
X X
Cash flow mismatches (too much or too little income or cash in the corporation)
X
EXTRA TAX RETURN & FILING FEES: With an S corporation there will be a requirement to file a 1120s for the corporation and flows to the individual 1040 return. A C corporation pays taxes at the corporate level, and as dividends are distributed to the individual, the dividend would be included on the individual’s 1040. Each corporation is required to file their own tax return which will result in an additional fee for completion. Inability to switch from C to S status because of built in gains tax: Switching from a C corporation to an S corporation could result in the built in gains tax which is a high level of tax at 35percent. If you have a C corporation and are doing transition planning, it is vital to speak with your GreenStone tax accountants to help properly plan and execute this type of transition to minimize or eliminate the built in gains tax.
EXPLANATION OF DISADVANTAGES Insufficient tax basis/excess liabilities: When assets are transferred to a corporation that has greater liabilities than it has basis in the assets, a taxable event occurs on excess amount of liabilities over the total adjusted basis of all properties. For example, if you transfer property with $1,000,000 of basis but it is encumbered with $1,250,000 in liabilities, the $250,000 is a reportable event whether or not the liabilities are assumed by the corporation.
Corporately owned residence will be ineligible for gain exclusion upon sale:
Double entry record keeping:
Cash flow mismatches:
This disadvantage is fairly simple and just refers to the requirement and additional cost for a corporation to keep and maintain proper books and records for the corporation and would require a separate bank account. The recommendation would be to use software such as AgManager or QuickBooks to help maintain the records for easy transition to the tax return at the end of the year.
Cash flow mismatches can be the biggest problem with a corporation. Having excess cash in a corporation over the amount of working capital needed can have ramifications that will hurt the business. The first impact on the business is that it lowers your return on assets (ROA). For example, if you have $150,000 in cash, $1,000,000 in total assets, and a net income of $100,000, the overall ROA would be 10 percent. If we assume that $100,000 of the cash is excess, the new ROA would be 11.1 percent or an increase of 11 percent, illustrating a higher efficiency of using assets to generate earnings.
Land that is corporately owned will not be able to utilize IRC §121, which allows the exclusion of the gain on the sale of a personal residence up to $250,000 ($500,000 for certain joint returns) if it is your principle residence.
Double taxation issues: With C corporations, the income generated at the corporate level will be taxed at the corporate rates. If there are dividends that are paid to the shareholders, this income is then taxed again at the individual level resulting in a double taxation of the income generated by the corporation. Listed below are the tax brackets for C corporations as well as Married Filing Jointly for 2016. 2016 Married Filing Jointly Tax Brackets Sole proprietor and S corporation tax rates 0-$18,550
10% of taxable income
$18,551 - $75,300
$1,855 + 15% of the amount over $18,550
$75,301 - $151,900
$10,367.50 + 25% of the amount over $75,300
$151,901 - $231,450
$29,517.50 + 28% of the amount over $151,900
$231,451 - $413,350
$51,791.50 + 33% of the amount over $231,450
$413,351 - $466,950
$111,818.50 + 35% of the amount over $413,350
$466,951 +
$130,578.50 + 39.6% of the amount over $466,950
2016 Corporate Tax Brackets
C corporation Tax Rates
$0 - $50,000
15% of taxable income
$50,001 - $75,000
$7,500 + 25% of the income over $50,000
$75,001 - $100,000
$13,750 + 34% of the income over $75,000
$100,001 – $335,000
$22,250 + 39% of the income over $100,000
$335,001 - $10,000,000
$113,900 + 34% of the income over $335,000
$10,000,001 – $15,000,000
$3,400,000 + 35% of the income over $10,000,000
$15,000,001 - $18,333,333
$5,150,000 + 38% of the income over $15,000,000
$18,333,334 +
$6,416,667 + 35% of the income over $18,333,333
The second impact of excess cash is the increase to the cost of capital. When a company has a cost of capital of 10 percent and their ROA is 6.5 percent, the company will effectively be losing money on the invested capital. The longer the relationship between ROA and cost of capital is negative, the risk of the company will continue to increase and could result in the deterioration of the corporation to the point of liquidation. The third impact of excess cash is that it can lead to the over confidence of management by reaffirming that the company does not need to change because the bank account is flush with cash. This increase in confidence could lead to the acquisition of poor performing assets that do not produce enough revenue to validate their purchase, and also creates a positive feedback loop by allowing the management to pay for the mistake with the excess cash and increases the speed of asset and cash deterioration. The choice of how to operate your business is complex and is defined on what you want to accomplish within the rules of the IRS. Given the list of advantages and disadvantages above, we would recommend that you speak to a GreenStone tax accountant to help with further explanation and details of designing your business entity setup. ■
Self-employment tax: 15.3%
Partners — Winter 2016
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AGRIBANK DISTRICT FARMLAND VALUES: SLOWER GROWTH, BUT SECTORS VARY By AgriBank The 15-state AgriBank District average cropland and pastureland values slowed in growth, but did not decline, in 2015, according to United States Departments of Agriculture (USDA) 2015 survey data. For the District in 2015: FARM REAL ESTATE—Increased 2.0 percent, compared to the U.S. average growth rate of 2.4 percent CROPLAND VALUES—Trailed the U.S. average growth rate for the first time in several years, growing at a 0.5 percent rate compared to a 0.7 percent growth rate nationally PASTURELAND—Exceeded the national growth rate, increasing at a 5.0 percent rate compared to just 2.3 percent for the U.S. average. In August, the USDA released its annual agricultural land value and cash land rent survey data for 2015. The land values and cash rents are derived from an annual nationwide 37
Winter 2015 — Partners
survey the USDA conducts in June and July. The slower growth in farmland values is due to considerably lower commodity prices that result in lower net farm incomes in the grains and oilseeds sector. The U.S. Department of Agriculture’s Economic Research Service (USDAERS) projects U.S. aggregate net farm income (NFI) to decline from the revised final estimate of $91.1 billion in 2014 to a forecasted $58.3 billion in 2015. The overall decline in 2015 NFI is driven by lower receipts for both crops and livestock primarily due to lower expected prices, especially for corn, soybeans, and other grains. AgriBank District Benchmark and Fed Surveys: Wide Range in Farmland Values The AgriBank District continues to monitor agricultural land values. We conduct an annual Benchmark Survey, completed by licensed real estate appraisers, of a sample of benchmark farms selected to represent the lending footprint of affiliated Farm Credit Associations throughout the District. The District’s most recent real estate market value survey indicates that District real estate values changed from -10.5 percent to 10.6 percent over the 12-month period ending June 30, 2015.
These results match up well on geographic basis with those of the USDA survey. Note that the USDA procedure differs substantially from the AgriBank District Benchmark Survey. The USDA data is based primarily on producer surveys with statistical validity checks and final revisions based on some benchmarking data from the Census of Agriculture. AgriBank District Benchmark Survey land value estimates are based on actual appraised values of selected benchmark farms that remain mostly constant over the lifetime of the survey. Qualitative surveys of lending officers compiled by the Federal Reserve Banks of Chicago, Kansas City, and St. Louis as of the end of the second quarter 2015 indicated steady to slightly declining farmland values. The Federal Reserve Banks surveys cited a year-over-year change in the average value of non-irrigated farmland ranging from no change to a 3.0 percent decline. The most recent information available from the Federal Reserve Bank of Minneapolis as of the end of the first quarter 2015 indicated that the average value of nonirrigated cropland in the District fell by almost 4.0 percent from a year earlier.
What’s Next for Cropland Values? The outlook for most crop producers looks challenging for the next five years with most forecasters projecting corn and soybean prices to be at or near break-even levels. Producers may benefit from USDA commodity title programs that, under the 2014 Farm Bill, could be triggered by lower commodity prices. These programs, combined with disciplined risk management practices and the generally strong financial condition of borrowers comprising the District’s crop portfolio, are expected to mitigate the initial impact of lower margins. What does this mean for District cropland values? The answer may lie in the implied cropland capitalization rate, which is calculated by dividing the USDA District average cropland cash rent by the average District cropland value. The District cap rate has held steady in the 3.25 percent to 3.5 percent range every year since 2011 and has not followed the interest rate (measured by the U.S. 10-year Treasury yield) to its record lows,
i
set in early 2013. This indicates the market is building in a risk premium that’s larger than the expected growth rate in cash rents. The cap rate was almost unchanged from 2014 to 2015, declining by three points from 3.38 to 3.35 percent. Meanwhile, the preceding 12-month average 10-year Treasury rate dropped by 48 points, from 2.71 percent to 2.23 percent. In other words, the cap rate continues to hold well above the more volatile 10year Treasury rate.
Tax Calendar... JANUARY
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• Fourth quarter income tax estimate due for individuals. • Qualifying farmers pay your estimated tax for 2015 and you will have until April 18 to file your 2015 return and pay any additional tax due.
FEBRUARY
Our analysis the past several years has consistently determined that, despite moderating commodity prices that result in lower net farm incomes, the U.S. farm sector remains in the best financial shape in over a generation. Some farming operations may face unique challenges that lead to unique financial difficulties. However, given recent trends and current economic expectations, we continue to anticipate a “soft landing” in the farmland marketplace without a “speculative bubble” that was characteristic of the 1980s farm crisis. ■
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• Form 1099 due to recipients of certain payments made during 2015 for interest, rent, contract labor, veterinarian services, etc. • Provide employee Form W-2 for 2015. • Farm employers file Form 943 to report social security, Medicare, and withholding. • Non-farm employers file Form 941 for the fourth quarter to report social security, Medicare, and withholding. • Employers file Form 940 for federal unemployment tax.
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• File Form 1096 and Form 1099 with the Internal Revenue Service. • All employers file Form W-3 and Form W-2 copy A with the Social Security Administration.
MARCH
KEEPING THEM SAFE ONLINE...
Many new gadgets get opened over the holidays. Along with making sure you got the right features, it is also important to ensure your children stay safe while using them online. Here are a few tips to help. Most importantly, be involved in their online world. Be there to help them get acquainted; even if you have older children, frequently “drop in” to observe their experience. Setting and communicating a few family computing rules is also a good idea. These rules should include what type of sites are acceptable, how much time they are allowed to be online, who they can communicate with, what types of online activities they can participate in, and what can be shared. You might also consider requiring system use in a family area to promote transparency and improve your ability to “check in.”
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• Qualifying farmers file tax return and pay tax due if you do not have a safe estimated tax amount paid in and you owe over $1,000 in tax.
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• Corporations file a 2015 calendar year tax return (Form 1120) and pay any tax due. If not able to file, file Form 7004 to request an automatic six month extension. • S corporations file a 2015 calendar year income tax return (Form 1120S) and pay any tax due. Provide each shareholder with a copy of Schedule K-1. If not able to file, file Form 7004 to request an automatic six month extension.
APRIL
There are also services available to assist you in monitoring and regulating activity. For instance, those that may have received a new Windows computer or tablet for Christmas, or if you have recently upgraded to Windows 10, can benefit from a great family feature from Microsoft. Setting up a Windows account will provide you with the family services, which will allow you to block adult or other specific websites, or select which sites your children can see. You also have the ability to set which age appropriate applications and games can be downloaded. Activity reports are also available to monitor usage along with the ability to set limits on the amount of time spent online. Visit this site for more information: https://account.microsoft.com/family.
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• Individuals file a 2015 income tax return (Form 1040) and pay any tax due. If not able to file, file Form 4868 to request an automatic six month extension. • First quarter estimate due for 2016 for individuals that pay estimated taxes. • Partnerships file a 2015 calendar year return (Form 1065). Provide each partner with a copy of Schedule K-1. If not able to file, file Form 7004 to request an automatic five month extension.
...Tech Tip
• Corporations deposit the first installment of estimated income tax for 2016.
Partners — Winter 2015
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3515 West Road East Lansing, MI 48823
Coverage is more than a policy. Don’t settle for crop insurance alone, harness the power of the team! With GreenStone your coverage delivers a reliable partner, experience, and the financial tools needed to both successfully manage and protect your farm. Contact one of our 36 locations today.
800-444-FARM
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