Promoting the business success of our customers and the rural community
Spring 2010
success along
Michigan’s
Pioneer WIne trail “
People are very interested in supporting local farmers and Michigan in general.
”
keys
Three to Marketing Success
watershed
POlicies impact on producers
Power
Wind and land ownership
Editor's
Note Spring 2010 Published by:
GreenStone Farm Credit Services
2 Comments from CEO Dave Armstrong CEO Dave Armstrong's spring letter discusses upcoming elections, the political environment and GreenStone’s future involvement within the
With the refreshing feel of spring upon us, we are reminded once again what makes the Midwest such a wonderful place to reside. The clearly defined seasons that we enjoy always seem to provide us an opportunity to look forward to the characteristics that are synonymous with the upcoming time of year…such as the birds chirping, temperatures rising, and the buds on the trees that we associate with spring. Of course, this time of year also signals the beginning of another planting season for many of our customers. We hope you’ll also find a few moments during this busy time of year to enjoy this latest issue of Partners, which includes a feature article on a local winery and some comments from our Board of Directors on potential climate change legislation. Happy reading…and as always, your comments and ideas are welcomed.
legislative arena.
5 Market Outlook Ag Economist Bob Utterback sheds light on three areas he feels producers must get right if they want to achieve longterm marketing success.
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8 Directors' Perspective Three GreenStone Directors share some thoughts on climate change legislation.
15 Guest Column Discover how the Environmental Protection Agency's watershed protection programs for the Great Lakes may effect your operation.
11 Young, Beginning and Small Farmer Feature John and Denise Burtka are putting a new face on the changes taking place in Michigan’s business arena —moving from a heavy emphasis on automotive to agriculture along the Pioneer Wine Trail.
14 Wind Power and Impact on Land Ownership
Spring Notes 3 News Update 7 New AgDirect Financing Available
After 12 years of experience with turbines, Terry Argotsinger shares important observations on wind-powered generators.
7 Candid Comments 18 GreenStone 2009 Sales Awards
This newsletter is published quarterly for the customers of GreenStone Farm Credit Services. Partners, P.O. Box 22067, Lansing, MI 48909 • 517-318-2290 • marketing@greenstonefcs.com
Comments
From CEO Dave Armstrong
Greetings from East Lansing! As I write this, the sun is shining and the calendar indicates spring is just around the corner. Of course, we all know this is just another one of Mother Nature’s ways of taunting us before warm weather comes to stay. She will undoubtedly bring us back to reality with the threat of more snow and cold through as late as the early part of May. But, with bright sunshine and temperatures in the mid-40s, it feels good to begin the annual anticipatory ritual of spring! Spring not only creates anticipation for brighter skies and warmer weather, but a sense of renewal and optimism as well. No one understands this better than those of us involved with agriculture. Last year is one many of us would like to forget. A severe financial crisis, poor growing season, and political turmoil are just a few of the events we hope are behind us, and yet we are not so naïve as to think we won’t have these and other challenges to face as this spring unfolds before us. However, our strong sense of faith and hope in brighter days ahead keeps us going. Seed is purchased, lines of credit renewed, machinery prepped, and all the other rituals of spring signal a new start for what is always anticipated to be the best year ever. We have another opportunity for renewal and change this year with state and congressional elections. Much has been written in the media about the government’s general lack of accountability and ability to adequately provide even the most basic of services in a fiscally responsible way. Plus, the political process has turned bitterly partisan and uncivilized. We ask ourselves, how did this happen? We look around for others to blame but, then, suddenly realize the only ones standing there are us! Our founding fathers intentionally created our system of government to be participatory. They had experienced nondemocratic forms of government for far too long and yearned for the freedoms our democracy provides. They also knew that this “system” was not the “least cost” alternative. An effective democratic government needs
informed involvement from those it governs and, from time to time, to even give their life for its survival. How can we point fingers at our elected representatives for ineffectiveness when we, collectively, choose to sit on the sidelines and criticize, or worse, become apathetic spectators? Getting involved doesn’t mean we must each run for public office, but it does mean we need to learn all we can about important issues from all sides and then support those candidates we believe will do the best job. Once in office, the “game” doesn’t end. We then need to stay engaged and make sure our elected officials are held accountable. Over the past several months, GreenStone has become more “politically active.” It is glaringly obvious to your board of directors that many of our local, and certainly our state and federal governments, are becoming dysfunctional primarily because we, as constituents, are disengaged from the political process. So, “we” get what “we” deserve! That’s why your board and management team believe it is now more important than ever to become more engaged in the political process. Plus, our system is based on majority rule and those of us in the agricultural industry continue to lose numbers, leaving us with a very small voice in government affairs as compared to other interests and industries. We posed the topic of GreenStone becoming more politically active to members who attended our Stockholder Advisory meetings last December and January. They told us they wanted us to do more on their behalf as their voices become more diluted by other interests, but cautioned that we proceed carefully so as not to bring unwanted attention or be perceived as taking “sides” on opposing views within the industry. So, with that input, your board and management team are becoming more involved and seeking ways to amplify the voice of our industry in the political process. Continues on page 4...
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News update
Horning Family from Manchester Named 2010 MSU Dairy Farmer of the Year For the Horning family of Manchester, Michigan, creating positive impressions about the dairy industry among consumers who aren’t familiar with farm life starts at home and continues right on through to national promotion programs. It is this family’s commitment to the Michigan dairy industry that earned them the distinction of being awarded the highest honor bestowed from the Michigan State University (MSU) Department of Animal Science, the MSU Dairy Farmer of the Year. Together with their son 3
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and daughter-in-law Jeff and Lynda, Earl and Diane Horning accepted the 2010 MSU Dairy Farmer of the Year Award during the fourth annual Michigan Dairy Industry Recognition Night held February 12 as part of the annual Great Lakes Regional Dairy Conference. The Horning family works together to operate the six-generation family dairy which began in 1877. Today, the farm consists of 360 milk cows, 410 head of young stock and 700 acres of cropland. In addition to maintaining a high-producing, healthy herd of dairy cows, the Horning family focuses its attention on helping consumers learn about
and understand the dairy industry. Earl serves on state and national dairy promotional boards and is a member of the Michigan Milk Producers Association (MMPA) board of directors. Diane is active with the Michigan Farm Bureau promotion and education programs and has served for many years as a dairy communicator for MMPA. Jeff and Lynda are also active in dairy industry groups.
Michigan Farmers Donate Eggs to Feed Haiti Victims Michigan’s family-owned egg farmers recently put their eggs—nearly a halfmillion of them—into one basket for a good cause: Feeding victims of the
January earthquake in Haiti that has killed tens of thousands of people and made millions homeless. Eight Michigan egg farmers from across the state donated 576,000 eggs, which were dried and flown to Haiti to feed tens of thousands of quake survivors as part of the Good Egg Project, America’s egg farmers’ effort to fight hunger. In total, America’s egg farmers will be donating more than 275,000 dozen eggs (that is more than 3 million eggs valued at more than $275,000) to Feed the Children’s Haitian Relief Efforts. Michigan farms contributing to the effort include Herbruck’s Poultry
News update
GreenStone receives award from MABA, January,
2010. Pictured left to right; Jim Nowak, Pete Lemmer, Jack Kelly, Dave Armstong and Travis Jones.
Ranch, Sunrise Acres Farms, Old Pike Farm, DeWeerdt Poultry Farm, Schipper Poultry Farm, Zoet Poultry, Konos Inc., and Farm Crest Foods.
GreenStone Receives Recognition GreenStone Farm Credit Services has recently been honored by two separate organizations for its success in serving its members. In November of last year, GreenStone was one of seven tri-county area businesses recognized by the Lansing Regional Chamber of Commerce at its annual Celebration of Regional Growth event. Each of the businesses honored during the luncheon was recognized for its success and leadership, with GreenStone specifically being acknowledged for its commitment to bringing new economic investment and job creation to the Greater Lansing region through the construction of its new corporate office in East Lansing. In January, GreenStone
received the Michigan Agri-Business Association’s Outstanding Supplier Award. The award, which was formally presented during MABA’s Annual Winter Conference in Lansing, recognized GreenStone for its position as the leading agricultural lender in Michigan and for its commitment to serving the financial needs of so many of Michigan’s farmers.
Case IH and Service Motor Company Partner with Fox Valley Technical College for High-Tech Ag Education Case IH, Service Motor Company and Fox Valley Technical College (FVTC) recently announced a new long-term partnership to provide the college’s Agriculture program with the latest agricultural equipment and precision farming technologies. “Our agreement supplies FVTC with a variety of new equipment every year for 10 years,” says Kevin Sommer, vice president of Service Motor Company.
“It means throughout the next decade, teachers will be educating students on the newest technologies available in the marketplace for agriculture. When FVTC graduates hit the job market, they’ll have the advanced skills they need to stay ahead of the technology curve.” FVTC’s Agriculture department, located in Appleton, Wisconsin, offers an umbrella of comprehensive training programs and opportunities, including Agri-Business/ Science Technology, Farm Operation, Outdoor Power
Equipment, Agriculture Power Equipment, and Horticulture Technician. Case IH equipment will be used in classes for agriculture production, natural resources, landscaping, material handling and small engine repair. New Case IH equipment for FVTC includes Case IH Magnum™ and Farmall® tractors; an Early Riser planter; an Axial-Flow combine with chopping corn head; tillage implements; hay and forage equipment; mowers; skid steers; and Case IH Scout utility vehicles.
...CEO Comments continued We are not only making visits to our congressional representatives in both Michigan and Wisconsin, but also to state legislators to inform them about the importance of agriculture to our state and national economies. We are also working with other state organizations to create unity and attention to the needs of agriculture and rural areas. Our political process is certainly not for the faint of heart or those who become easily frustrated. I know I have already “stubbed my toe” a time or two and will probably never get used to the time it takes to get anything in government done, but your organization is committed to representing your needs the very best it can and to stay the course. I want to wish you the very best this spring. Remember, the season brings hope and a sense of better times to come. There is no better time to begin anew, so resolve to yourself to get involved in our political process or you will have no one to blame for its outcome but you.
Dave Armstrong
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MArket outlook
Critical Marketing Decisions By Bob Utterback
More than ever, marketing has become one of the more critical farming decisions with increasingly large annual trading ranges and market volatility. This article explores three areas I feel producers must get right if they want long-term marketing success.
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Production: Farmers must produce a superior quality product that buyers want and have high yields that allow an economy-ofscale advantage. I see three areas of improvement: 1) Disease control in highly populated areas of high-yield grain operations. 2) Effective use of water. 3) Annual revision of fertilization practices for optimum production in light of growing EPA water runoff regulations. The markets expect technology to continue increasing yields; the offset is government regulation in the name of environmental protection. Not only will farmers have to produce a high quality product, but they will be required to hold it
until the buyer wants it or face stiff discounts at harvest. This problem has been around several years, but it is increasing. Aging railway and water systems simply will not move inventory quick enough, resulting in wider basis levels at harvest, making it necessary to store. Two of the big storage issues in regard to risk management are: 1) Farmers using grain bins as a substitute for selling inventory early. 2) Quality control—last year many learned that just because there is storage capacity, does not mean the combines can keep running if there is not enough dryer capacity. Each year’s marketing practices must be evaluated and used as a learning tool to improve overall risk management. It is difficult to sell production if the cost to produce it is unknown. In the summer of 2008 we knew higher prices would ration usage and stimulate production; we just did not know how fast? I believe
MArket outlook
> Each year’s marketing practices must be evaluated and used as a learning tool to improve overall risk management. it depends on: 1) Aggressively locking up inputs when prices are low. 2) The banker understanding the long-term objectives and being a part of the overall risk management strategy. Input costs control Now is the time to focus on input costs more than ever! 1) Interest rate management: in my opinion, now is the time to focus on strategies to lock up long-term interest rates. The stage is being set for increasing rates to help offset big government debt [est. Late 2011 to early 2012]. Here are some suggestions: A) Switch from one-year variable rates to a longer-term. B) I f short-term debt must be maintained, know the interest rate instruments and consider selling them to offset future upside interest rate exposure. C) A good working relationship with your lender is a must; continue to communicate so he or she knows you know how to manage market risk should the decision to sell two years’ of expected production arises. Banks are not eager to loan money unless you have a good history and they are assured you are a hedger. 2) Fertilizer cost control: in 2008 when fertilizer prices exploded, it was very difficult to forward sell expected 2009 and out years’ production. Overall, I suggest buying cash to protect expected
2011 production, but believe 2012 and beyond crops will need to be protected on paper. A) Think out of the box on how to stabilize fertilizer costs without giving up yield or crop quality: I) Make a long-term relationship with livestock units to use their manure for fertilization. II) S tockpile P and K when prices are lower rather than price each year. B) Buy natural gas on seasonal weakness to protect expected 2011 and 2012 nitrogen price exposure. C) Buy crude oil and gasoline on seasonal corrections to protect expected 2011 and beyond gas and diesel needs. Most longterm forecasters agree that, when the current economic problems diminish, crude oil prices will revisit the 2008 highs. Is your operation ready for this type of cost pressure? 3) Land management: control of land is always a concern. One of the worst things that can happen to a farmer that has his equipment and storage facilities, and depends on cash rent for his land base, is to learn the property is sold. When working capital is tied up in land, managing risk is diminished. A) If possible, buying land is better than cash renting at this time because of low interest rates and expected inflationary influences that force prices up over time. Long-term, the rise in interest rates is negative to land values. I support long-term 30-year rates over 5-year variable rates.
B) If forced to cash rent, focus on negotiating a longer term; three years is the absolute tightest period to consider and 5 years is preferred. To get a longer term cash rent agreement, higher payments may be needed in exchange for a consistent cost that allows greater confidence in making multiple-year sales when opportunities develop. Price risk management Producers want the most for their production, but at what risk? Is it prudent to have $150/acre profit, but risk that gain for another $20 to $50? Weather has a significant impact on yield and costs. As difficult as it is, I believe in “taking advantage of market opportunities when they offer profit, and defend against unknown bullish price events.” There will be periods of high prices [like 2008 and 2009] when unexpected demand merges with tight stocks and aggressive fund buying by outside money. In the end, prices pushed too high resulting in increased production not only in the states but globally. World population is slated to increase as will the need for food. This is why I constantly urge producers to forward sell when they can lock up 30% to 40% over projected costs. Near-term expectations: focus on catch-up sales in Dec. 2010 Corn between $4.25 and $4.40, and Nov. Soybeans between $9.60, and $10 before May 15, preferably using deep-in-the-money puts equal to the maximum margin call desired for futures. I believe selling calls and cash Spring 2010
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should be avoided until the risk of summer weather scares is over. As for selling off the combine, since limited carry exists, I suggest concentrating on selling soybeans first and corn last. Big storage premium exists for corn, so storing and selling the carry could be a big money maker. Be prepared to sell expected 2011 production in June and July if weather concerns develop and allow the market to spike into the 50% to 75% return on investment target prices. Before trading, one should be aware that with potential profits there is also potential for losses that may be very large. Read the “risk/option disclosure statements” and understand the risks before trading. Commodity trading may not be suitable for recipients of this publication. Those acting on this information are responsible for their own actions. Although every reasonable attempt has been made to ensure the accuracy of the information provided, Robert Utterback and Utterback Marketing Services Inc. assumes no responsibility for any errors or omissions. ABOUT THE AUTHOR Bob Utterback is the Economist for Farm Journal magazine and President/CEO of Utterback Marketing Services, Inc., located in New Richmond, Indiana. He has over 27 years of experience analyzing ag commodity markets, with special emphasis on the corn and soybean markets. Contact him by phone 765-339-7704 or by email utterback@utterbackmarketing.com. he opinions stated herein are not necessarily T those of GreenStone FCS.
AgDirect Equipment Financing Coming to Michigan and Wisconsin Effective April 12, farmers and equipment dealers throughout Michigan and Wisconsin will now have a new financing option from a source already familiar to many western Corn Belt producers. Through a partnership created with GreenStone Farm Credit Services, AgDirect has expanded its services to dealers and their farmer-customers in Michigan and Wisconsin as an alternative to manufacturers’ captive financing and local lending sources. AgDirect is known for its competitive rates, fast decisions and flexible terms. A product of Farm Credit Services of America (FCSAmerica), AgDirect has provided dealer-originated customer financing in Iowa, Nebraska, South Dakota and Wyoming since 1998. This is the first extension of the service beyond the original four-state territory. Farmers and their dealers will find that the simplicity and flexibility of
AgDirect will make the financing of equipment sales easier for customers and dealership staff. Financing applications can be done online or by fax right from the dealership, and most credit decisions will take two hours or less. AgDirect offers financing and leases starting at $10,000 with up to seven-year financing terms. Options include fixed or variable rates, as low as zero down, and delayed first payments of up to a year. There are no origination fees or manufacturer rebate restrictions.
For more information about AgDirect, either visit your local equipment dealership or GreenStone Farm Credit Services office, or call 1-888-525-9805.
Candid Comments... Dear GreenStone, Thank you for your sponsorship of the Young Farmer Leaders Conference. Your generosity for this event is greatly appreciated and benefits many Michigan Farm Bureau members. Thank you, MFB 2010 State Young Farmer Committee
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DIRECTORS PERSPECTIVE
Directors' Perspective:
CLIMATE CHANGE Whether you were sitting at the dinner table, in the tractor cab, or behind the computer screen, you have undoubtedly considered income and expenses and have made decisions for the year ahead. Regardless of the amount of planning and predictions, there are a variety of issues that can impact even the best plans. Among these is climate change legislation and the numerous unknowns surrounding it—what will be its impact on energy costs, agriculture’s global competitiveness, productive cropland, and operating input costs? Though the U.S. House of Representatives passed their version of a climate bill, which includes capand-trade regulation, there are varying opinions on whether the Senate will reach a vote in 2010. Nevertheless, the issue remains under the microscope due to its potential impact on not only the agricultural industry, but on consumers in general. Supporters highlight the long-term benefits, including new job creation in areas such as “green” technologies. Farmers could also see added profits from companies paying them to practice no-till farming and other carbon-storing practices in order to offset the company’s emissions. Opponents speak to the negative implications the offset regulation could have, including the possibility of converting needed farmland to trees. Further opposition focuses on rising energy costs that would be
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DIRECTORS PERSPECTIVE
" I believe farmers must be allowed a reasonable return on investment so as to provide America with a safe and secure food supply, and to preserve the open spaces rural America enjoys."
–Ed Reed
" It's undoubtedly more important for farmers to have a healthy environment to grow crops than any other occupation in the country, but you can't succeed in agriculture without using energy."
–Dennis Muchmore
passed to the American consumer and the influence it would have on international trade when the U.S. enforces regulations which increase production costs while other countries, and their product cost, stand idle. While it is recognized there are countless opinions on this subject, particularly when there is so much uncertainty, representatives of the GreenStone Board of Directors have gathered some thoughts to ponder. Brent Wilson, Region V Director Recent technology has made modern agriculture much more efficient and sustainable than it was in past generations. Today, in the area of crop production and harvest, we are using less fuel per acre. We are also using less energy to produce more milk because of greater cow productivity. I believe it is in our best interest to continue to put more effort into discovering new environmentally safe ways to use our cheapest sources of energy, such as coal and natural gas. Trading carbon credits doesn’t really make sense, it does nothing to reduce energy use or sequester carbon from the environment. 9
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I also question the theory of global warming. For instance, in the 2009 growing season we only had 2,100 heat units as compared to a historical average of 2,400 heat units. Ed Reed, Region IV Director Climate change legislation is a big topic in the news today. Many people don’t understand the changes that are proposed and many more don’t recognize the impact it could have at the dinner table. Government statistics indicate the bill passed by the U.S. House of Representatives would benefit farmers in the long run. The fine print tells us why: the bill contains provisions that would give farmers incentives to plant trees on their farms, converting as much as 59 million acres into forest over the next 40 years. 59 million acres! However, taking this land out of production would directly result in higher food prices in America and would also increase dependency on foreign countries—not the responsible thing to do. Washington Post columnist Edward Felker said many corporate companies that grow food are
not in the business to grow food, but are in business to make as much money as possible. Therefore, these companies would quickly figure out that it would be more profitable to plant trees than to plant food. Simply stated, they don’t want to short the world of food, but the government is making it almost impossible to be profitable in doing it. The current legislation would also increase the cost of producing normal food crops. USDA Chief Economist Joe Glauber said, “As the carbon caps become smaller, prices of needed goods and services, such as electricity, natural gas, propane, and petroleum will continue to increase.” I believe farmers must be allowed a reasonable return on investment so as to provide America with a safe and secure food supply, and to preserve the open spaces rural America enjoys. Dennis Muchmore, Appointed Director This is a difficult subject to discuss intelligently since I’m not a climate scientist. Though, after spending a year and a half on the state’s Climate Action Council, I’ve certainly been exposed to the debate. Anytime we have cleaner air, it’s a
DIRECTORS PERSPECTIVE
" I believe it is in our best interest to continue to put more effort into discovering new environmentally safe ways to use our cheapest sources of energy, such as coal and natural gas."
–Brent Wilson
positive for our citizens; but there are trade offs for industrial, agricultural and commercial expansion. Families in need of sustenance and in search of the jobs that allow them to build and buy houses, cars and other products would ask the most relevant questions: “How much will it cost our people to attempt to cure a climate issue in which costs are limitless? Even if we launch into an attempt at a cure, can we succeed? Is Cap and Trade really workable? Since it doesn’t take a genius to understand that car plants can’t run on windmill energy, and energy from coal is still the only real answer to this job producing business, how can we turn our backs on this real energy generator?” It’s undoubtedly more important for farmers to have a healthy environment to grow crops than any other occupation in the country, but you can’t succeed in agriculture without using energy. Does making it more expensive to produce energy beg the question: Can our members afford the cost, and/or are there ways we can improve emissions by using more nuclear power, cleaner burning coal and sustainable agricultural practices?
Farm equipment financing just got simple, fast and flexible! AgDirect® offers one of the best farm equipment financing options in the business – quick approvals, flexible terms and highly competitive rates. Ask about AgDirect for your farm equipment financing. • Purchase, lease or refinance • Variable or fixed rates • Flexible terms • Easy application & quick turnaround
When you’re in the market to buy, lease or refinance equipment, be sure to ask your dealer for AgDirect financing. Learn more by calling 800-444-FARM. greenstonefcs.com
We know the questions, we just can’t say with certainty how much the answers will cost or whether they will work.
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From factory floor to the vineyard:
One family’s transition from automotive to agriculture By Laura Moser
John and Denise Burtka are putting a new face on the changes taking place in Michigan’s business arena — moving from a heavy emphasis on automotive to agriculture. John, an automotive engineer by trade, is now the owner of three wineries/tasting rooms and three vineyards in southern Michigan. For the Burtkas, the transition from the factory floor to the farm field was driven partly by a lifelong passion and partly by necessity.
Young, beginning and small farmer feature
Winemaking and the Burtka family go back several generations. The family has made wine to share with family and friends for over 100 years, but not as a business enterprise. Seven years ago John and Denise broke from the hobby level to the business level with their winemaking talents, purchasing a location in Parma to begin their new winemaking venture. “Our family has always made wine; I am just the first one to mortgage my house to do it,” John says. Winning gold medals two years in a row at the Michigan State Fair with their De Chaunac and Honey Meade, spurred the Burtka’s desire to take their winemaking to the next level. Changes in John’s employment due to his employer closing their doors in Michigan, gave John the time to pursue the winemaking business. “We used my severance pay to purchase most of the start-up equipment,” John says. “GreenStone Farm Credit Services helped us purchase the land and buildings. This is a very capital intensive business—from growing the grapes to the winemaking, we have a lot invested.”
located outside Brooklyn, along US 12 in the Irish Hills area, is a popular agritourism destination. The land around the schoolhouse boasts 2,000 vines along the roadside. Inside the schoolhouse, the shelves are stocked with special Michigan products and their award-winning Cherry Creek Wines. The Burtkas line of vintages now includes 15 different boutique wines, all made in Michigan with Michigan grapes using old world handcrafting. The Cherry Creek wine is made at both the Parma and Brooklyn locations. “We don’t raise all the different varieties of grapes that we need, but we buy only Michigan grown grapes for our wines,” John says.
“ We have an excellent growing season here. The winters are harder and we risk some winter kill but the ripening season is actually better here than along the lake.”
Embarking on a winemaking business took as much investment in knowledge as equipment. The Burtkas are learning the farming side as well as the marketing side of wineries. Other growers in their area are helpful to them as they learn the ropes of farming and winemaking. John also does a lot of research and takes courses to help bolster his knowledge. He has gone so far as to learn graphic design programs to create labels and advertisements for the wines. “I learn something new every day,” John says.
The Burtka’s two children; Johnny, a student at Hillsdale College, and Jessica, a high school student, are also learning the details of the family business helping wherever needed from the fields to the stores. Shortly after opening their doors, they hired a business consultant, Al Herman. Al tracks sales and customer information. His background in business analysis has added another dimension to the Burtka’s business planning. “Al handles the statistics and retail information. He gives us good feedback so we can handle problems if we need to. He also has a great understanding of wine,” John says.
Cherry Creek Cellars Old Schoolhouse Since embarking on their wine business in 2002, the Burtkas have marked a string of successes that have encouraged them to continue growing their business. In 2005, they opened their second winery, the Cherry Creek Cellars Old Schoolhouse. The charming renovated 1800's schoolhouse
John believes the success of his business and other agricultural-related business is the “added-value” created in the marketing Michigan products. The schoolhouse store is stocked with unique items including 18-year-old Balsamic vinegar from Italy, Michigan cherry preserves and seven kinds of homemade butter fudge made on site. Fresh made French Baguettes and special coffees are served on weekend mornings. “We want it to be a fun experience to come here,” John says. “You can buy wine at a grocery store—so we have to offer more than that.” John and Denise work to make a visit to the schoolhouse a fun, family experience. They have snacks out for tasting and
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Young, beginning and small farmer feature
John and Denise Burtka (right) have placed in numerous wine judging competitions since they opened their first vineyard in 2002.
allow kids to enjoy themselves. “We encourage kids to ring the old school bell, just once, before the parents are served,” he adds. “It is unusual that the old bell was still in the building after all these years, usually somebody has removed them by now.” Aside from the special snacks and the school bell, the schoolhouse winery also hosts small group functions and offers live music on summer weekends.
Sleeping Bear Winery The latest challenge the Burtkas are embracing is the opening of a third winery/tasting room, Sleeping Bear Winery, located near their first winery in Parma. The recently opened tasting room features a new line of wines and a different atmosphere than the schoolhouse location.
“There is a ready market in this area for wine,” John says. “We have an excellent growing season here. The winters are harder and we risk some winter kill but the ripening season is actually better here than along the lake.” Cherry Creek and Sleeping Bear Wineries are two of the stops along the “Pioneer Wine Trail” through southeast Michigan. The wineries along the trail offer different experiences but all feature locally made wines and tasting areas. “We are all competitors but we encourage and support each other,” John says of the other wineries along the trail. “We jointly host four events a year to attract people to the area. There are a lot of attractions in this area that we can tie into.” Cherry Creek wines can be found at over 170 stores throughout Michigan. For more information visit their web page at www.cherrycreekwine.com.
“The Sleeping Bear store is more progressive than the schoolhouse,” John says. “We feel we attract a different type of customer at the Parma location than the Brooklyn one. The schoolhouse is the destination for most of our customers, whereas at the locations off 1-94 most people are passing through on their way somewhere else.” The new location also includes a “Taste of Michigan” store, where only Michigan products are offered. John and Denise have spent months traveling to other shops looking for Michigan products to offer at the winery. “People are very interested in supporting local farmers and Michigan in general,” John says.
Pioneer Wine Trail The Burtkas are not the only people staking claim to the Michigan wine industry in southern Michigan, other vineyards are sprouting up along the 1-94 corridor and the Irish Hills area. John attributes the increasing interest to the success seen in northern Michigan.
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The schoolhouse store, located outside Brooklyn, is stocked with unique items including 18-year-old Balsamic vinegar from Italy and Michigan cherry preserves.
Wind power
Wind Powered Generators
and Impact on Land Ownership By Terry A. Argotsinger, AFM, ARA Stalcup Agricultural Service, Inc. For some parts of the United States the wind energy industry is now 12 years old. Larger more sophisticated turbines are now capturing lower wind speeds and spreading to other areas. After 12 years of experience with the turbines on our landscape, several things have been learned. Here is a list of some observations: • Turbines are getting larger and further apart so there are fewer per farm • Lease income is increasing, some are fixed rates and some are royalties • Besides the actual turbine site, there are service roads, buried cable routes and crane paths (the equipment is very heavy) Wind park easements are usually a blanket easement across your entire farm which allows the developer to travel and construct anywhere on your farm legally allowed by the county. Setbacks from dwellings and roads are mandated by county zoning officials and are usually 1,000 to 1,500 feet. County and FAA regulations also control height restrictions. FAA becomes involved with anything over 200 feet high.
•N ot all farms with a lease get a turbine •A ctivity during construction is intense •T he developers in most cases deal fairly in crop and tile damages •T urbine income will impact your estate; tax planning is needed
Most states allow air rights be separated from the land. Some states do not. This can become an issue when trying to balance an estate between several heirs. If you own your farm out right and received $20,000 per year from a wind park easement, for example, your estate could be increased by as much as $300,000. You should visit with your attorney about how a wind park easement will impact your estate before signing.
One watch out is if you have a life use estate, the Remainderman interest is required to sign the easement but the life use tenant must receive the income and pay tax on it. Just like the farm income, the life use tenant cannot pass the easement income to the next generation. The various types of easements create different levels of risk. A fixed cash payment per turbine is the lowest level risk. Easements with royalty payments for the turbine erected on your farm are the highest risk. There are many hybrids. One popular arrangement which minimizes your risk is for a shared payment with everyone in the foot print. You receive payments regardless of whether you have a turbine or not. This helps in case lightning strikes or a tornado takes out your turbine. Watch out for easement offers that are low overhead at the front end. The developer could be more speculative in nature. Look into the pedigree of the company or the “mother ship” behind the name. If you are approached to sign a wind park easement, learn how the efficiency of the turbine is calculated. Continues on page 17... Spring 2010
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Guest column
EPA employees. This memorandum included seven priorities for the EPA’s future including “Protecting America’s Waters.” Ms. Jackson states that stormwater runoff and nutrient loading are two of the complex challenges the EPA is addressing, that the EPA will continue watershed protection programs for the Great Lakes, and the agency will “revamp enforcement strategies to achieve greater compliance across the board” (http://blog.epa. gov/administrator/2010/01/12/sevenpriorities-for-epas-future/). Additionally, the EPA published its National Enforcement Initiatives for Fiscal Years 2011-2013.
By Christopher Paré Keeping abreast of environmental and Amy Owen
regulatory activity is important for agriculture. Certainly, it has become increasingly important to monitor the priorities of the federal regulators. Environmental Protection Agency (EPA) Administrator Lisa Jackson recently provided a glimpse into EPA’s priorities in her memorandum to
In this publication, two of the six initiatives, “Keeping Raw Sewage and Contaminated Stormwater Out of our Nation’s Waters” and “Preventing Animal Waste from Contaminating Surface and Ground Waters,” concern agricultural runoff management (www.epa.gov/compliance/data/planning/ initiatives/initiatives.html#cafos). Both EPA declarations include federal (and state) regulatory focus toward preventing contaminated stormwater and animal wastes from impacting the nation’s waters. This will bring attention to all potential sources of pollution, including farms. Are you prepared?
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guest column
Stormwater Runoff Management Spring, the season of snowmelt and runoff, is an important time to consider the EPA’s first initiative by evaluating the agricultural runoff management or stormwater runoff management practices on your farm. Stormwater runoff management becomes an issue as stormwater moves across impermeable surfaces such as driveways, barnyards, and hard-packed feedlots, and picks up debris, chemicals, sediment, and other pollutants. If not properly managed, stormwater runoff can carry these pollutants into ditches, streams, rivers, lakes, and/or wetlands. The following simple steps can be taken to help you practice good stormwater runoff management: • Do not dump used motor oil, old paint cans and pesticide containers, and other materials onto the ground. • Pump your septic tank every one to three years. Do not flush grease, caustics, and non-biodegradable materials into your septic tank or manure storage facilities. • Erosion and Sediment Control: – Use engineering controls to reduce sediment runoff to water bodies and conserve soil. – Vegetate riparian areas along water bodies. – Rotate animal grazing to prevent pasture soil erosion. – Use conservation tillage techniques whenever possible. Also keep in mind, for new construction projects where more than one acre will be disturbed, you need to obtain a National Pollutant Discharge Elimination System (NPDES) permit. New NPDES rules are being phased in over the next 18 months to four years with significant new provisions for construction sites that disturb 10 or more acres.
Both EPA declarations include federal (and state) regulatory focus toward preventing contaminated stormwater and animal wastes from impacting the nation’s waters. Waste Runoff Management Spring is also an important time to consider the EPA’s second enforcement initiative in evaluating your farm. This initiative addresses discharges of manure from storage facilities or runoff from fields, which can carry pathogens, nutrients, and other contaminants into nearby surface waters, or can seep into groundwater. Note that the Clean Water Act prohibits the discharge of these pollutants into surface waters. Also, the EPA will focus on existing large and medium CAFOs that may be discharging without a permit. Therefore, it is very important for you to evaluate your farm’s manure management systems, understand how a release of manure related pollutants could potentially move off the farm or into groundwater, and determine how to prevent releases, if the potential exists. Methods that can be utilized to help you minimize the potential for releases of manure related pollutants include:
• Perform preventative maintenance activities on all waste storage facilities. • Follow state restrictions for nutrient application (manure and commercial fertilizers) and setbacks to ensure nutrients are not applied in excess. • Operators of Concentrated Animal Feeding Operations (CAFOs) need to obtain CAFO general discharge permits (as per the NPDES system). We encourage farmers to evaluate the stormwater runoff management and manure management controls and practices. You may have specific regulatory permitting requirements depending on the activities on your farm. It is better to be proactive than to risk being forced into compliance through regulatory action! ABOUT THE AUTHORS Christopher Paré
• Divert clean water, such as roof runoff, around rather than into manure storage ponds or structures. • Keep livestock away from stream banks, and provide a water source away from water bodies. • Use conservation buffers. Store and apply manure away from water bodies and tile inlets. • Design or redesign your farm to minimize impacts of accidental spills and waste discharges through improved runoff controls, stormwater detention, and waste storage.
Amy Owen
The authors work for The Dragun Corporation, a multidiscipline environmental consulting firm located in southeast Michigan, serving agribusiness and commercial clients across the nation and world. They can be reached by phone at 248-932-0228. he opinions stated herein T are not necessarily those of GreenStone FCS.
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Wind Power from page 14... It is called the “net capacity factor” (NCF). It could range from 25% to 45%, but each percentage point is very important in the production from the turbine. Find out what the wholesale price of electricity is for your area. It will give you an idea of what the wind park owner will be selling electricity for. They are not likely to tell you because it is proprietary information. Don’t let a bureaucratic wall be built between your farm and its wind energy potential. It is like knowing what your yield potential is for your crops. Decommissioning clauses are usually weak. Be sure there is a bond or some financial instrument that covers the cost of removal plus a penalty. Remember, with the length of these easements your children or grandchildren are the ones likely to have to deal with removal. Setbacks and enjoyment of your property are critical. Be sure you know where you might build a house some day. Noise, shadows and flicker could be an issue.
No junk.
Just a $50 reward and our thanks. Call your local GreenStone branch for details on our Pass-It-On referral program today!
ABOUT THE AUTHOR Terry A. Argotsinger, AFM, ARA Terry is a partner at Stalcup Agricultural Service, Inc. of Storm Lake, Iowa. He is a licensed real estate broker and state certified appraiser. Terry also is an active member of the American Society of Farm Managers and Rural Appraisers (ASFMRA) and holds the Accredited Farm Manager and Accredited Rural Appraiser titles. He assists landowners, attorneys, financial planners and appraisers with issues that impact landownership, including his work with landowners with negotiations of terms for wind park easements. He can be contacted at targotsinger@stalcupag.com. The opinions stated herein are not necessarily those of GreenStone FCS
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800-444-FARM • greenstonefcs.com
Circle of Excellence Awards
GreenStone Recognizes Top Sales Staff of 2009 GreenStone Farm Credit Services recently recognized its “best of the best” in sales performance for 2009 with Circle of Excellence Awards.
Various criteria including loan and revenue growth and number of new customers are used to measure individuals overall performance.
The Circle of Excellence Program is a way to recognize and reward those lending and financial services staff members who are the top performers within the Association.
Platinum Awards were presented to the top 10 percent of GreenStone’s entire lending staff. While Gold Awards were given to the next 10 percent of lending staff, as well as
Platinum Award Winners Traditional FSOs David Meyering, Cadillac, MI Ian McGonigal, Grand Rapids, MI Tony Barcroft, Hastings, MI Pat Koester, Mt. Pleasant, MI Mike Rasmussen, De Pere, WI David Ballman, Lapeer, MI
AgriConsumer FSOs Jay Van Laanen, De Pere, WI Cynthia Cole, Ionia, MI Andy Kudwa, Ann Arbor, MI
the top two performers in each of the financial services areas. Each of the winners, along with the support staff for all Platinum Award recipients, was recognized at the 4th Annual GreenStone FCS Circle of Excellence Awards Banquet on February 19 in East Lansing, Michigan. The following GreenStone FCS staff members represent the 2009 Circle of Excellence Platinum and Gold Award winners. Congratulations to all of the winners of the 2009 Circle of Excellence Awards!
Commercial FSO Tom Wilson, De Pere, WI
Gold Award Winners Traditional FSOs Lee Rodgers, Schoolcraft, MI Karl Kincade, Berrien Springs, MI Scott Welden, Hillsdale, MI Laurie Schetter, Manitowoc, WI Duane Paturalski, Berrien Springs, MI Dave Messing, Sandusky, MI AgriConsumer FSOs Brent Voss, Traverse City, MI David McKenny, Mt. Pleasant, MI Sandra Arnold, Lapeer, MI Commercial FSO Gayle Olson, Appleton, WI
Accountants
Life Insurance Staff
Cyna Trudeau, Escanaba, MI Mary Sokol, Coleman, WI Tax Accountants Carrie Drexler, Clintonville, WI Barbara Martell, Sturgeon Bay, WI
Diane Prior, Schoolcraft, MI Sherry Lange, De Pere, WI Also, two additional awards were presented during the Awards Banquet. Rookie of the Year Award Brent Voss, Traverse City, MI
Appraisers Dennis Makula, Adrian, MI Bill Maddix, Grand Rapids, MI
Most Improved Award Cyna Trudeau, Escanaba, MI
Crop Insurance Specialists Gerrit deGlee, Adrian, MI Jessica Godley, St. Johns, MI
Spring 2010
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wITh a new ConsTrucTION lOan. Whether it’s at the farm or on the home site, GreenStone can help design a simple loan to fit your unique construction needs. Call a branch near you to begin building your dreams.
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