Partners - Fall 2007

Fall 2007

Inside this issue:

Today’s Growing Wine Industry...

Editor’s Note

Editor’s Note Yes, harvest season has arrived, and with it come those most enjoyable aspects of fall…sunny days and cool nights, the changing colors, pumpkin carving and weekend football games to name just a few. We wish everyone a safe and successful fall harvest, and we hope you’ll find just a few minutes during this busy time of year to relax and enjoy this latest issue of Partners. Inside, you’ll find bios on this year’s GreenStone scholarship winners, information on the upcoming Holiday Card Contest, and a feature article on an aspiring entrepreneur.

Happy reading…and as always, your comments and ideas are welcomed.

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CONTENTS

FALL2007

FEATURES

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A Big Dream...

Rockie Rick would like to own a winery someday, and he made a start last year.

He bought 10 acres of land and planted wine grapes.

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Scholarship Awards GreenStone Farm Credit Services recently awarded $2,000 scholarships to six outstanding students.

IN EVERY ISSUE

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CEO Comments Market Outlook Director’s Corner Young, Beginning, and Small Farmer Focus News Update

COLUMNS

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What Employees Want

by Dr. David Kohl

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Lessons from a Clean Closet

by Barbara Dartt

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Recreational Land Financing

by Larry Johnson

CEO Comments

CEO Comments

by Jim Schiller

F

all 2007 is here, replacing a

funds continuously accessible now and into the foreseeable

relatively hot and dry

future—it’s a great system that many times we take for granted.

summer. The bright colors and cool

The general economy continues to feel the effects of a

nights make it a welcome change.

decline in the housing industry. The significant slowdown in

The four seasons in my opinion are a

new construction sends a major ripple throughout the

significant advantage for us living in

economy. The Federal Reserve also met on September 18 and

the great states of Michigan and

lowered the target Federal Funds rate by one-half percent, thus

Wisconsin (one may contest that on

affecting short-term interest rates and lowering the prime rate.

some winter days).

GreenStone has in turn lowered its variable rate by one-half

Fall also marks the harvest season when agriculture

percent effective October 1, as our short-term funding costs

measures results. This year we will see different results for

have been reduced. The rate cut was the first in more than

different parts of the territory. Some will see significant losses

four years and was double the quarter-point reduction many

from drought; some will see reduction in yields from drought,

economists had expected.

and others that received the timely showers will have average-

Financial Performance

to-good yields. We all know that agriculture is a cyclical

Your GreenStone organization continues with an

industry and that we need to manage risk and prepare for the

excellent year of financial performance. All of our financial

down cycles. Fortunately, better crop insurance products are

disciplines are meeting or exceeding targets. Strong financial

available that can mitigate production and revenue risk.

performance in the agricultural sector continues to spur

Hopefully, if you are in one of those drought areas, you have

demand for credit. GreenStone’s loan volume as of August 31,

taken advantage of that risk management opportunity.

2007 is up 16.8 percent over August 31, 2006. Credit quality

It is fortunate that many of our customers have built

remains sound, and financial services revenue is strong. More

additional liquidity over the past few years to help survive the

detail can be found in our quarterly reports which are located

down cycles. GreenStone remains strong with good financial

on our web site at www.greenstonefcs.com.

resources and staff expertise second to none to make sure that we provide reasonable alternatives for those customers in need.

Interest Rates Short-term interest rates continue to be volatile. Recent

Agricultural Opportunities Agriculture continues to be the bright spot for the economies of Michigan and Wisconsin. It is a significant boost for the Michigan economy as it is more closely tied to the auto

headlines about the sub prime lending activity of some finan-

industry. We should all take pride and feel good about our

cial institutions caused investors to sit on the sidelines which

connection to this dynamic industry. Renewable energies,

ultimately caused a liquidity crisis for those lenders. The

biotechnology, enhanced genetics, etc., will continue into the

Federal Reserve immediately took action to lower the discount

foreseeable future. It is good not just for us but future

rate 50 basis points which calmed the marketplace quickly. In

generations as well.

my opinion this liquidity issue was more a perception than reality and should work its way through the system over the next few months.

Best wishes for a successful harvest. We value your business

and welcome your comments and questions.

The good news for the Farm Credit System is our funding source. It was not affected, and our bonds with GSE status, AAA ratings, overall System strong capital position, high asset quality, and favorable investor perception make our source of

Fall 2007 PARTNERS

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Market Outlook

By Ken Lake

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n the summer issue of Partners Magazine I wrote that the bullish May 12 USDA corn supply and demand numbers were not a surprise. The fact that the trade had, at the time, gotten the sense that U.S. corn farmers were about to plant less corn in favor of soybeans had already caused July and December corn futures to peak, a classic “buy-the-rumor, sell-the-fact” market.

In USDA’s August Supply and Demand report, they pegged the nation’s corn crop at 13.054 billion bushels with a yield of 152.8 bushels per acre, giving us a carryout for the 2007-2008 crop-year of 1.516 billion bushels. Private forecasters have spent the past thirty days performing yield checks on the corn fields throughout the country. FC Stone reported this week a corn yield of 152.9 bushels per acre and production at 13.062 billion bushels. Informa surprised us when they reported a bigger yield of 156 bushels per acre and production of 13.323 billion bushels. Ag Resource Corp pegs total production at a smallish 12.978 billion bushels. I think it’s safe to say that even though there is disagreement among trade analysts, the old axiom of “a big crop gets bigger” likely holds true this year and we will eventually find better than expected yields once the combines roll. That is unless you are a resident of Michigan or Ohio. In those states, because of drought, they have seen a reduction from the previous year of their corn crops of about 25% and 10% respectively. Only the non-corn belt state of Virginia saw a more dramatic drop in corn yield this year than Michigan.

While analyzing corn supply and demand, final yield and carry-out, regardless of who is right about the final numbers,

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the fact of the matter is that the U.S. Ethanol industry is expected to add another 1.1 billion bushels of capacity in the next crop year. The resulting stocks-to-use ratio could possibly be history’s tightest. That being said, corn values are likely making a seasonal bottom. You should expect a similar price pattern to last year, where a low was made on September 15, and a subsequent contract high was in place in mid-February.

USDA’s soybean balance sheet looks like this: 64 million acres planted versus 74 million last year, yielding 41.5 bushels per acre compared to last year’s yield of 42.7, resulting in a production number of 2.625 billion bushels and a final carry-out number of 220 million bushel. Some private forecasters project even lower carry-out numbers. Such carry-out stock numbers would indicate that a seasonal low is in place for soybeans and call for a market rally to $9.50 to $10.50 by spring.

The explosive wheat market has been more subdued of late as we have seen more normal weather forecasts for both Australia and Argentina. We see continued interest from buyers like Morocco and Algeria indicating that demand still is not being rationed even at current record values. That being said, a major top will be forming in the wheat market if more regular rains begin to fall in the major wheat growing areas of the world.

Recent cattle markets have garnered around $92 in the cash market. South Korea recently banned imports from another U.S. beef packing plant after discovering rib bones during recent inspections. The long term view of the cattle market remains bullish...tightening supplies of fed cattle should produce a sustained rally to $99 to $102.

Cash hogs have been lower in all regions. Iowa and Minnesota hogs were down at $61.42. Cash prices continue to suffer amid the seasonal increase of producer offerings, while the shortened Labor Day work week added additional hogs to daily operations. Daily slaughter and production rates are now reaching multi-month highs. From a value standpoint, you should see neutral to slightly bearish hog futures. Producers are advised to wait for technical rallies to begin hedging fourth quarter production.

Ken Lake is the Origination Services Coordinator for Michigan Agricultural Commodities Inc., Lansing, Michigan, and a licensed commodities broker registered with the National Futures Association.

The opinions stated herein are not necessarily those of GreenStone FCS.

Farm Management

WHAT EMPLOYEES WANT

by Dr. David Kohl

You are the CEO of your farm or ranch business. You interact with a number of employees and you are wondering: “What do they want?” The following elaborates on a survey of workers and job seekers that asked: “What is important when your employer communicates with you?”

F

irst, employees want insight on how to be more effective, shown by 52 percent of survey respondents. If it’s the younger generation, they desire feedback often, since they are the generation that grew up with computer games that provided instantaneous feedback.

A grunt or grumble from the supervisor is not acceptable with this group.

• Many want to know how they fit into the company’s vision, purpose, or mission (47 percent). A CEO is a storyteller, constantly presenting views of where the company is going and how the workforce fits in. This becomes very critical in times of change in direction of the company or when unexpected circumstances occur.

• Many younger people seek advancement either through responsibilities or accountability on special projects that they can call their own, which move the business forward.

• Additionally, 45 percent of respondents want an explanation of the business’ vision and 41 percent want to be engaged on a personal level. They used to call this “management by walking around”.

Something I have learned from athletics is that every good head coach has good assistants who provide input and respond with feedback.

ACTION STEP Want to turn the younger generation off?

Bureaucracy, meetings, and a sense of not making a difference will suppress their motivation and productivity. Assess your business and make it a point to minimize these types of turn-offs.

Dr. David M. Kohl is Professor Emeritus of Agricultural Finance and Small Business Management and Entrepreneurship in the Department of Agricultural and Applied Economics at Virginia Polytechnic Institute and State University (Virginia Tech), Blacksburg, Virginia. He has conducted more than 3,000 workshops and seminars for agricultural groups such as bankers, Farm Credit, FmHA, and regulators, as well as producer and agribusiness groups. He has published four books and over 400 articles on financial and business-related topics in journals, extension, and other popular publications.

The opinions stated herein are not necessarily those of GreenStone FCS. Fall 2007 PARTNERS

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Guest Column

LESSONS FROM A CLEAN CLOSET

By Barbara Dartt

T

he work was long overdue—my bedroom closet shelves were dripping with unfolded, haphazard clothes. Shoved onto the racks were things I hadn’t worn for years. The excuses finally ran out and I spent the better part of a day unclogging, sorting, bagging and hauling out clothing.

Once it began, the process was actually satisfying . . . and the results have been surprising. I hadn’t realized how the messy closet had been “infecting” the rest of my bedroom. I was inspired to pare down the stack of books by my bed and uncover the chair. I also find myself promptly putting away folded clothes and encouraging (in the most supportive tones, of course) family members to put their stuffed animals and toys in their own rooms.

I now enjoy a clean closet and can easily find clothes each morning.

As a bonus, because I invested in the process and did the work, I am also motivated to maintain the feeling of tidiness and order. Someday I’m sure my self-contained cycle will hit a bump and I’ll again find myself with a cluttered closet. Meanwhile, I am enjoying the fruits of my labor.

The Closet’s Lessons Every process needs periodic review—sorting, comparing and eradicating the outdated.

Sometimes, outside forces compel us to examine our processes. By January 1, 2008, any Michigan dairy producer not signing an affidavit ensuring they have stopped using bST will receive less for their milk.

Michigan dairymen are closely examining their processes—reproduction, feeding, culling—to determine how to preserve as much milk as possible when this technology goes away.

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When no outside force prompts us to “tidy up,” though, the gradual creep of messy shelves can build until what used to be cluttered and unacceptable becomes the new standard. On one cropping operation we work with, fertilizer, chemicals, fuel and freight costs combined have gone up 44% since 2004. At the same time, revenue per acre has gone up about 13%. Total acres have not increased. As we discussed these trends, we talked about how much these expenses increased due to escalating costs and how much they had inflated due to differing production practices. In today’s climate, input prices can be an easy excuse—too easy. Do we really know that our cost structure has increased simply due to prices? If they have, are there ways we can shift practices like fertilizer timing, spray products or tillage techniques to reduce usage? If the expense and revenue trends noted above continue, this crop producer will cease to be competitive some time soon.

Complacency in one area can easily spill over into other parts of your business.

Imagine a situation where Jeff, the skid steer driving barn cleaner, consistently beats up freestall loops without any consequences. Scott, the mechanic/welder, repairs them—on a weekly basis. When Scott goes back to the shop to change the oil or fix a chain, is he going to be conscientious with the parts and supplies? It would be pretty logical for him to think that if Jeff is allowed to abuse equipment and facilities, he doesn’t need to be careful with wrenches, oil or belts. Soon, a culture of carelessness has permeated the business. Just like my messy closet “infected” my bedroom.

“EMPLOYEES WHO ARE ASKED TO PERFORM AT A HIGH LEVEL AND SUPPORTED IN THAT PERFORMANCE CAN TAKE PRIDE IN THEIR WORK. INVOLVING EMPLOYEES, HOLDING THEM ACCOUNTABLE AND PROVIDING “ATTABOYS” FOR GOOD WORK REQUIRE LEADERSHIP FROM FARM MANAGERS AND OWNERS.” Today’s price for most agricultural commodities is very high.

It could be easy to rest on those laurels and accept some complacency in our businesses. In Michigan, however, we don’t have to look far for examples of businesses that allowed complacency to sneak in and take up residence. If GM had cleaned their closet, maybe they would not be in such a pickle today.

Barbara is a Planning Coach with Salisbury Management Services, a company with offices in Michigan, Idaho, Minnesota and Wisconsin. SMS was founded in 1979 to provide high quality management consulting services to agriculturally related family businesses. Dartt assists business owners with financial analysis, business succession, operational and long-term planning as well as other challenges unique to family-owned businesses. Barbara can be reached at bdartt@salisbury-management.com or at 269-382-0539.

“IN TODAY’S CLIMATE, INPUT PRICES CAN BE AN EASY EXCUSE – TOO EASY.” Getting people involved invests them in maintaining the new system.

If Jeff and Scott assist a manager in developing a new system that provides accountability and consequences, it is much more likely that loops will stay repaired AND that shop supply costs will be controlled. Employees who are asked to perform at a high level and supported in that performance can take pride in their work. Involving employees, holding them accountable and providing “atta-boys” for good work require leadership from farm managers and owners.

Fall 2007 PARTNERS

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Director’s Corner

MEET DAVE MCCONNACHIE Your Region II Director

Dave McConnachie, in partnership with his father and younger brother, operates a 3,300 acre cash crop farm near Deckerville, in Michigan’s Sanilac County. The farm, which Dave has been involved with for more than 30 years, produces a combination of sugar beets, dry beans, soybeans, wheat and corn. Dave began farming with his father when he was 18, at which time the farm was actually a dairy. Some ten years later, the group transitioned into cash crop farming. Dave and his wife Sally, who have been married 27 years, have two children, Andrea and Shelley. While their daughters have moved away from home and are not involved in the operation, Dave has three nephews who do work fulltime on the farm and who are being included in transitional plans. Dave, who was just re-elected this past summer to a three-year term on the GreenStone FCS Board, has been a Farm Credit Board of Director for nine years, originally starting with Farm Credit Services of East Central Michigan.

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What do you enjoy most about being a director of GreenStone FCS? More than anything, I really like the opportunity to be involved with the other directors and management in helping establish direction and make decisions on issues that impact the Association. Just a couple of examples are the recent mergers we’ve completed…first with the four associations in Michigan and then with northeast Wisconsin. The key reasons we followed through with those mergers were really to benefit the members of our entire Association. Being involved in those types of decisions is what I truly enjoy about being on the Board.

Of course, I’ve also enjoyed the opportunity to meet and interact with the other board members, as well as the management and staff…GreenStone just has a lot of really good people associated with it, and that makes being a Board member enjoyable.

What would you say is the most important issue facing farmers today?

Well, I like to look a little further out on the horizon than some do, so my answer is really going to come from looking some 10 to 15 years into the future. I think the biggest issue is finding an answer to the question of who is going to take over for today’s aging farmers. In my particular area, I can look around and see that more than 50 percent of the farm families have children who will not be involved in the future of those farms. Take my own two daughters for instance…they have left and are not coming back to the farm. In my opinion, our farms

“I THINK THE BIGGEST ISSUE IS FINDING AN ANSWER TO THE QUESTION OF WHO IS GOING TO TAKE OVER FOR TODAY’S AGING FARMERS. IN MY PARTICULAR AREA, I CAN LOOK AROUND AND SEE THAT MORE THAN

50 PERCENT OF THE FARM FAMILIES HAVE

ready to retire, many will most likely need to sell or rent their ground to another already existing farmer. I just really see that as a problem…the lack of people in the younger generation with the desire or the ability to get involved in farming.

How would you describe the value GreenStone FCS brings to its customers?

Well, Farm Credit has been around for a long, long time.

While we’ve seen a lot of mergers and name changes in the banking industry, the Farm Credit name has remained consistent and reliable. I can also say in general that our loan officers are typically more tenured and knowledgeable about agriculture than those at the competition. So for me, having a name and a loan officer that consistently remains the same is a plus and really helps set Farm Credit apart from the others.

GreenStone always has been, and remains today, dedicated to loaning money to farmers…it’s what we’re about and helps drive everything we do.

The overall economy at least in Michigan is obviously struggling. Do you feel the state can use the agricultural industry to improve our economic outlook?

I’m not sure there’s a perfect answer for what we can do other than to have agriculture continue to do what we’re doing. We’re doing a good job in agriculture here in this state…and that helps in some way, because the more money we make the more taxes we pay. Also, the many ethanol plants and other renewable energy projects in our state could also turn out to be a positive.

I happen to be a real fan of ethanol and other renewable energy sources…yet, I think it’s still undetermined how this is all going to shake out.

I think our second and third industries in this state— agriculture and tourism—are doing really well. However, our number one industry—manufacturing—is still struggling and I’m not sure how we can go about turning that around.

We simply need to continue to be successful in what we do in agriculture and hope that our elected officials make good decisions and spend our money wisely.

CHILDREN WHO WILL NOT BE INVOLVED IN THE FUTURE OF THOSE FARMS. ” today are only going to get bigger and bigger, and that is mostly because in many cases the next generation under the current farmers is not going to farm. Therefore, when today’s farmer is Fall 2007 PARTNERS

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A big dream & ten acres of wine grapes...

Young, Beginning, and Small Farmer Focus

By Dick Lehnert

A

merican wine and wineries have been on the rise since the 1970s, in all states but especially Michigan, which has plenty of fruit credentials upon which to build.

From a handful of wineries in 1970, Michigan’s industry has grown to about 50—each with its own special ambiance that seems to go with wine and its sophisticated image of crystal glasses, oak barrels and splendid scenic views.

Rockie Rick would like to own a winery someday, and he made a start last year. He bought 10 acres of land and planted wine grapes.

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Quite a few people in Michigan are doing that. In 2004, the Michigan Grape and Wine Council, which promotes Michigan wine, set a goal for growth, suggesting acreage could grow eightfold to 10,000 acres by 2024 and have a billion dollar impact on the state’s economy in wine sales and tourism.

Rockie, age 29, and his wife Allison are not starry-eyed neophytes, however.

He grew up on his family’s 300-acre farm near Baroda in southwest Michigan, where his parents, Dave and Judy, grow apples, peaches and cherries, just as Rockie’s grandfather

Growing wine grapes takes labor, and planting year, a trunk is established up had done before them. The area has Rockie says he spends about 20 hours a to the lowest trellis wire, about 30 inchexcellent fruit sites, slopes with good week in the vineyards. He wants to es above the sun exposure and air drainage, and 10 years ago the family tore out some peach ground, he said.

Then each year, acreage—prime fruit sites—to plant 30 four shoots are acres of wine grapes. selected and fasRockie decided to buy prime sites and tened to the lowest continue on that path. Moreover, he wire. Shoots grow planted the hardest-to-grow, highest upward from those quality grapes, the cold-tender vinifera canes. Fruit will varieties that make the most desirable wines. So far, he has planted five acres of be borne in a zone just above the Gewurztraminer and Riesling and is wire. planning to plant the other half to Each year, old Merlot. horizontal canes “These grapes take the very, very best are pruned out in sites,” he said.

March and April What good are wine grapes without a and four new winery? Rockie has a contract to sell the shoots from last grapes to Tabor Hill, one of Michigan’s year’s growth are pioneering wineries. Demand for grapes positioned and is growing as Michigan wine sales trained. These increase by about 15 percent a year, he Rockie standing among his now two-year old vines. are the fruiting said, so selling good quality wine grapes canes. Some isn’t a problem. pruning is also needed in August, mostly There is quite a lot of work involved to remove foliage that shades the fruit. in wine grapes, and so far Rockie and expand acreage in the future and will It’s important to have enough leaves to Allison have done most of it themselves, need to hire more help. produce sugars but not so many it but they do hire some help during peak Currently, farm labor and immigration work times, espeare key issues tied together, and the cially harvest. future supply of orchard workers is in INE GRAPES DON T YIELD AS MUCH It costs about doubt. $5,000 an acre for “With our trellis system, we can AS ONCORD JUICE GRAPES BUT THEY the vines and the mechanize,” Rockie said. “We can go trellis system on ARE HIGHER VALUE THEY YIELD THREE that way if we need to.” which they grow, Mechanical harvesters are routinely Rockie said. The used for juice grapes now, and mechanical TO FIVE TONS PER ACRE AND SELL vines are planted pruning systems are being developed.

5.5 feet apart in Wine grapes don’t yield as much as TO A TON FOR rows 9 feet apart, Concord juice grapes but they are higher DEPENDING UPON THE VARIETY and they grow on a value. Rockie said they yield three to five post and tons per acre and sell for $500 to $2,000 wire trellis. a ton, depending upon the variety. covers the fruit, he said. Sometimes, the He uses a growing system called The other half of Rockie and Allison’s rising shoots need to be controlled by vertical shoot positioning. In the time is spent on another business they hedging as harvest nears.

“W C

’

...

$500

$2,000

, .”

Story continued on pg. 11...

Fall 2007 PARTNERS

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started a year ago, a winery tour business called Fruitful Vine Tours. It’s described on their Web site, www.fruitfulvinetours.com.

They operate two 14-passenger “limo coaches.” Customers, either in groups that hire a limousine or individuals who “hop on,” take a wine tasting tour of wineries in southwest Michigan.

“This is more than just transportation,” Rockie said. Those who take the tours get an introduction to wine growing and wine making as well.

To start the wine grape business, Rockie turned to GreenStone Farm Credit Services and Financial Services Officer Karl Kincade.

“I was a new grower without much collateral or capital,” Rockie said. “It probably didn’t hurt that he had financed both my father and my grandfather.”

Rockie was not totally without capital, however. While GreenStone lent him the mortgage money to buy the land, Rockie put 20 percent down and has selffinanced the vineyard—so he’s built plenty of collateral. He’d like to buy more land, plant more grapes, build a house on the property—and, of course, there’s the dream of the winery.

Chances are, this young grower will be seeing more of Karl Kincade in the years ahead.

Featured right are some snapshots of Rockie’s winery tour business—Fruitful Vine Tours. More information can be found on their Web site, www.fruitfulvinetours.com.

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Annual Scholarships

GreenStone Awards

Scholarships GreenStone Farm Credit Services recently awarded $2,000 scholarships to four students from Michigan, who were chosen by the College of Agriculture and Natural Resources at Michigan State University; and two students in Wisconsin, chosen by a committee of GreenStone FCS representatives.

This year’s scholarship recipients are:

Nicole DeFere

Cody Kurzer

The daughter of Darin and Shelly DeFere of Sturgeon Bay, Wisconsin, is studying Animal Science with a pre-veterinary emphasis at the University of Wisconsin-River Falls.

The son of Ray and Candra Kurzer of Sebewaing, Michigan, is studying Biosystems Engineering at Michigan State University.

Molly Gilbert

Kayla Lehman

The daughter of Ronn and Mary Gilbert of Sturgeon Bay, Wisconsin, is studying Horticulture at the University of Wisconsin-River Falls.

The daughter of Mark and Cindy Lehman of West Branch, Michigan, is studying Agribusiness Management at Michigan State University.

Eric Carson

Ryan Rademacher

The son of Tom and Shirley Carson of Hesperia, Michigan, is studying Dairy Management at Michigan State University.

The son of Thomas and Ann Rademacher of Eagle, Michigan, is studying Agribusiness Management at Michigan State University.

These students were chosen to receive the scholarships based on their academic performance, demonstrated leadership skills, and community involvement through various organizations. GreenStone Farm Credit Services congratulates these fine students and wishes all of them well in their future studies.

Fall 2007 PARTNERS

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Recreational Land Financing

HUNTING FOR RECREATIONAL LAND?

By Larry Johnson

I

magine for a moment that hunting season is nearing and you learn that the land you’ve always been able to use has been sold and you are in need of a new place to hunt. One of your options is to buy your own piece of heaven and eliminate the worry of having a good place for your hunting activities. But, how do you do this?

What do you look for? How do you finance the purchase? These are all good questions that need to be answered before buying your own piece of property.

There are several factors that any purchaser of recreational land should look at before they sign on the dotted line. Among these are the features of the property, your intended use, management, legal issues and financing. Let’s take a closer look at each of these issues.

When looking for recreational property, one of the more important factors is to determine just what you intend to do on the property. Do you plan to use it just for deer hunting or for multiple uses, such as snowmobiling, off-road vehicle riding, bird watching or just enjoying the great outdoors? Ask yourself what you plan to do, and whether the property meets these goals.

The features of the property also need to be considered. Some of the features you need to consider include the diversity of the wildlife that inhabits the property. Take some time to walk the property thoroughly, taking note of the wildlife that is there. Are there signs of deer, bear, upland game or small game? Once you’ve done this, consider if the diversity matches what you expected. Also, you should determine if the property has any of the conveniences you consider important. Does it have access to any utilities?

Does it have a cabin, existing deer stands or camping areas? What are the land uses for neighboring properties? These all can affect your usage of the property in the future.

Maintaining recreational property can be very time consuming, depending on your planned usage. Many deer hunters are becoming more involved in Quality Deer Management (QDM) efforts. These efforts may require time to plant food plots and investment in equipment and inputs, such as seed and fertilizer. If the property is located in an area where many other land

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owners are involved in QDM practices, you may need to be involved as well.

Another area of management that should be considered is timber management. If the property has a substantial amount of timber, forestry management may need to be considered to properly maintain the forest for the future. Working with a qualified forester will help the landowner determine if and when timber harvesting may take place to sustain the forest and potentially provide some additional income from the property.

It is important that you consider any legal issues that may be presented with the purchase of recreational land. Some of the things to consider are whether a clear title will be conveyed upon transfer of the property, will you have legal access to the property, are there any rights being retained by the current or previous owners that you need to know about, and how do you plan to hold title to the property. Title in real estate is important, as any unpaid liens will allow someone else to claim an interest in the property and may cause you additional expense in clearing the title. Most lenders require that a clear title be conveyed at closing, and they generally work closely with the borrower and a title company to be certain that the title is properly conveyed.

Access to property can be an issue. If there are not any public right of ways that join the property, it is necessary for you to obtain easements from adjoining property owners allowing you to travel over their property to yours. In some cases, landowners have sold to a third party the rights to mine minerals, harvest timber or to use the land for other uses. The purchaser needs to know if these rights have been transferred to a third party as they may affect the future usage of the property. Lastly, the purchaser should determine how title to the property will be held. Are you going to own this as an individual? Do you have a couple of friends who are joining you in the purchase of the property? Or, are you planning to start an entity such as an LLC or Partnership to own the property? Also, do you plan to have your spouse as part of the ownership? Answers to these questions depend on your situation and it is recommended that you consult with your attorney to determine the best approach.

One of the most important aspects of purchasing recreational property revolves around financing. Some people have been able to purchase recreational property from their savings, but many of us are not in that position. So, how do you finance recreational land? There are several options available depending on the situation. There have been many parcels of recreational

land sold by the use of land contracts. A land contract is an agreement between a buyer and seller outlining the terms of transfer of the property once the contract has been fulfilled.

Some lenders are able to provide mortgage financing for the purchase of the property, but terms can vary widely. Most lenders offer repayment terms of up to 30 years, with interest rate lock periods ranging from one to five years. These are adjustable rate mortgages allowing the lender to change the interest rate at the end of the fixed-rate period. GreenStone Farm Credit Services, which specializes in the financing of these types of properties, has fixed-rate loans of up to 30 years available for the purchase of recreational land.

Other things that should be considered when financing recreational land include closing costs and other fees, how much down payment is required by the lender, what are the payment frequencies available, what can you afford, and the quality of your credit. Down payments required by lenders can vary from 15 to 50 percent, depending on the lender’s credit parameters. Obviously, the lower the down payment the less cash the buyer needs to have at closing. Conversely, this creates a larger mortgage with larger payments. Closing costs can increase the amount of cash the borrower needs to have at closing. Most lenders require that the borrower pay for the cost of the appraisal, application fees, processing fees, and filing fees. Talk to your lender about what these costs will be at the time you apply for the loan and again a few days before closing. This will relieve some stress along the way. Many purchasers of recreational property are wage earners with monthly incomes. Many lenders will structure payments to be monthly to match the flow of income to the borrower. Other payment options may be available such as quarterly, semiannual or annual payments. Talk to your lender about those options that fit your situation. The last consideration is the quality of your credit. The stronger your credit score, the more likely you are to receive the loan to purchase the property.

The purchase of that little piece of heaven can be rewarding for the buyer who looks at the situation as a business decision versus an emotional decision. Hopefully this information will help make your purchasing decision more of a business decision.

Larry Johnson is the Manager of AgriConsumer Lending, Leasing and Trade Credit at GreenStone Farm Credit Services. A graduate of the University of Nebraska, Johnson has spent eight years with Farm Credit and 35 years in the financial services industry. You may e-mail him at larry.johnson@greenstonefcs.com, or for more information on GreenStone Farm Credit Services, visit www.greenstonefcs.com.

Fall 2007 PARTNERS

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News Update

News Update They’re more than lucky! 2007 Board Tour GreenStone customers Bob and Terry Beagle of Clayton, Michigan, have become avid horseshoe pitchers and world class competitors in the sport.

They both have won state championships in Michigan. Terry defeated the number one women's player in the world at the Michigan/ Ontario Friendship Tournament back on June 23 in Kalamazoo, Michigan. She ranks sixth in

As part of the annual GreenStone Board of Directors strategic planning session held this past August, GreenStone FCS directors and senior management had the opportunity to tour four agricultural facilities in western Michigan.

GreenStone Farm Credit Services would like to thank Michigan Turkey Producers in Wyoming; Hogquest, LLC in Martin; Cornerstone Ag Enterprises in Grand Junction; and Scenic View Dairy, LLC in Fennville, for their hospitality and willingness to showcase their operations.

GreenStone FCS Holiday Card Coloring Contest

Bob and Terry Beagle with two of their many horse shoe pitching trophies.

Michigan among all men and women pitchers.

Bob took third place in his class at the National Horseshoe Pitchers Association of America World Tournament on July 23 in Ardmore, Oklahoma.

The competitive classes are determined by average ringer percentages from cumulative tournaments. Bob averages 29 and Terry averages 62 ringers out of every 100 pitches.

They started competing in professional tournaments just five years ago. They also farm 700 acres of soybeans and wheat in Michigan's Lenawee County. Congratulations to Bob and Terry!

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PARTNERS Fall 2007

The time has come to announce the annual Holiday Card Coloring Contest at GreenStone FCS. Children 12 and under who are related to a GreenStone FCS customer may enter their artwork for a chance to win a $150, $100, or $50 U.S. Savings Bond.

In addition to receiving the $150 U.S. Savings Bond, the first place winners will have their artwork reproduced as the cover on their respective branch’s Holiday Greeting cards. Entry forms are now available at your local GreenStone FCS branch and are due back by Wednesday, October 31, 2007. See your local branch for more details or visit www.greenstonefcs.com to get your entry form today.

News Update

Want Peace of Mind?

November 20 is the sign up deadline for purchasing a new fruit crop insurance policy or for making changes to your existing policy.

Protect your investment with Crop Insurance There’s no doubt that farming is a risky business. That’s why for years, GreenStone FCS has been helping producers manage their risk with Crop

Insurance. Our experienced Crop Insurance specialists can help tailor a policy that meets your individual needs and will protect your financial future.

Make the decision today that will protect you for tomorrow!

Visit your local GreenStone FCS branch or call EOE

1-800-444-FARM • www.greenstonefcs.com

GreenStone FCS Board Appoints Officers and Committee Members The GreenStone Farm Credit Services Board of Directors has recently announced its new officer and committee appointments. Those holding officer positions are Lyn Uphaus, Washtenaw County, from Region III, Board chairperson and Executive Committee; Darl Evers, Allegan County, from Region IV, Board vice chairperson and Executive Committee; and Frank Engler, Isabella County, from Region V, Executive Committee.

Appointed to the Asset/Liability Committee were Dave Rakowski, Oconto County, from Region VII; and Gil Ritter,

Saginaw County, from Region I. Four Board members were also appointed to the Audit/Review Committee—they are Larry Bodtke, Van Buren County, from Region IV; Dave McConnachie, Sanilac County, from Region II; Bill Oemichen, appointed director; and Brian Haskin, Eaton County, from Region VI. Also, Brent Wilson, Gratiot County, from Region V, was appointed as the District Farm Credit Council Representative.

Fall 2007 PARTNERS

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News Update

GreenStone’s Referral Program Offers Customer Rewards!

Now, current customers can share the benefits of GreenStone with others and earn rewards.

That's right, as a customer, if you refer your friend, co-worker, family member or anyone else to GreenStone for new business, along with our thanks you’ll receive a $50 gift card!

Contact your local branch for more information. Some restrictions apply.

Fall into a career with GreenStone!

If you are a soon-to-be college graduate or you know one, GreenStone is looking for high caliber professionals to join the team.

Consider a future with GreenStone FCS in one of the following fields: • Agricultural Lending • Consumer & Rural Residence Lending • Credit Analysis • Appraisal Services • Insurance • Tax / Accounting Services • Corporate Accounting • Marketing • Human Resources • Information Technology

For more information or to view current career opportunities go to www.greenstonefcs.com/about/jobs.cfm

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PARTNERS Fall 2007

GREENSTONE AND MI FFA MAKE A SPLASH AT THIS YEAR’S AG EXPO GreenStone FCS and the Michigan Future Farmers of America Foundation teamed up at the 2007 Ag Expo in July to raise $1,830 for the MI FFA Foundation. GreenStone featured a dunk tank where GreenStone staff members were dunked and $5.00 was donated to the Foundation each time a GreenStone employee went into the water. Miss Michigan 2007 Kirsten Haglund threw the honorary first pitch of the event and many adults and children enjoyed the wet fun during the Expo.

Fall 2007 PARTNERS

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Because...

the benefits of leasing can

keep more cash in your pocket!

With year-end approaching, now is the perfect time to compare the benefits of leasing to traditional financing.

At GreenStone Farm Credit Services, our lease programs can deliver improved cash flow, increased financial flexibility and tax advantages. Whether it’s for equipment, vehicles or facilities, a lease with GreenStone FCS could provide both short- and long-term benefits. Contact your local GreenStone office today to find out if leasing is right for you‌be sure to ask about our popular Tax Payer Special Lease and Sale/Lease Back programs.

800-444-FARM www.greenstonefcs.com

This newsletter is published quarterly for the customers of GreenStone Farm Credit Services.

PARTNERS PO Box 22067 Lansing, MI 48909 517-318-2290 jim.nowak@greenstonefcs.com aaron.classens@greenstonefcs.com bill.eva@greenstonefcs.com Melissa.Rogers@greenstonefcs.com

1760 Abbey Road East Lansing, MI 48823