CEO Comments

CEO Comments:

Hello Summer!

The 2021 planting season got off to a fast start with widely fluctuating temperatures and little rainfall across much of our association’s territory…but that changed recently! Stands of most commodities are reported to be in decent condition (although apples, cherries, and grapes were significantly impacted from freezing temperatures in May) with corn in Michigan rated 86% good to fair and Wisconsin at 78%, as I write this. Soybean plantings are running ahead of the five-year average in both states with similar conditions for those that have emerged with 81% of the stand in Wisconsin at good to fair versus 85% in Michigan.

The higher percentage of good to excellent ratings in Wisconsin reflects the difference in rainfall each state had received. For awhile, things looked grim with a larger proportion of Michigan’s crop land in moderate to severe drought as of the second week of June. Now, as of the printing of this publication, rainfall appears to be in abundant supply over the next several days. Thinking about the adage that “a dry year will scare you to death, but in a wet year you will starve to death,” I’m hopeful things balance out and no experiences either. These conditions serve as a good reminder for our members that it’s not too early to start thinking about next year’s crop insurance coverage. GreenStone offers several different crop insurance policies that can be purchased yet this year for 2022.

Customized Service Options

By now most of the Covid pandemic restrictions have been lifted in both Michigan and Wisconsin. Warmer weather coupled with many people being vaccinated and/or developing natural immunity to the virus through exposure has allowed many of us to return to the greatest level of pre-pandemic “normalcy” we have enjoyed since March of 2020. Our staff have enjoyed seeing the friendly faces of our customers walking into the branches, and customers and staff alike are enjoying the opportunity to “catch up” with each other face to face. Thanks to the many service options we have available to customers, our staff members are connecting with customers the way they want to interact, meaning customer visits at the farm or home, via the phone or video, and in the office. With even greater flexibility, don’t be surprised if you stop into a branch and there are a limited number of team members there on any given day. So, I encourage you to make an appointment with the person you’re looking to meet with before driving to the branch.

Paycheck Protection Program

We are finally on the “downhill side” of processing forgiveness applications on the 1,493 Small Business Association (SBA) Paycheck Protection Program (PPP) loans GreenStone originated for eligible members during 2020. Just like the chaotic rollout and process associated with originating these new loans over a year ago, the forgiveness phase has been slow with conflicting information and limited communication from the SBA, which seems to have resulted in some slow turnaround times in processing many of the applications we submitted on behalf of our customers. With that said, we have submitted 93% of these 2020 loans to SBA for forgiveness and urge any customers who have not sent in their forgiveness application to do so just as soon as possible. As we wrap up the forgiveness phase for the 2020 PPP loans, we are now beginning to process forgiveness applications for PPP loans originated in 2021. GreenStone wrote more than 3,300 PPP loans under the 2021 program for just over $85 million. The good news is many of these loans were approved through a much more streamlined process, and we're hopeful that carries into the forgiveness process as well. Altogether, through both stimulus programs in 2020 and 2021, GreenStone provided 4,800 PPP loans to its customers for just over $230 million, which represented 10% of the total volume and number of loans written by all Farm Credit System institutions across the country.

Cooperative Financial Strength

Loan growth year-to-date is about half of what it was last year. While interest rates remain historically low, many of our full-time farm members appear to be cautious about capital spending even though we are experiencing strong commodity prices for many crops. And, while protein commodity prices are also up, the increase in feed costs will challenge margins for those buying most of their feed supply over at least the next 12 to 18 months. This, coupled with uncertainly over possible tax law changes and the 2023 Farm Bill is creating anxiety among many of our members about future profitability. Outside of farming, sky-high residential home prices driven by a lack of housing inventory, record lumber prices, and a shortage of skilled labor are sending many potential home buyers to the sidelines hoping that prices will become more affordable in the future.

While loan growth has slowed from the record setting pace in 2020, I’m pleased to report the quality of our loan portfolio remains strong with very limited loan volume exhibiting significant credit weaknesses at just under 3% of the $11 billion portfolio, and loans with delinquencies of greater than 30 days late are at a record setting low pace of only .19% (yes, you read that right!). Earnings year-to-date are also ahead of budget and slightly better than last year. Of course, we have about half of 2021 to go, but our current view of the horizon indicates overall strong earnings for the year and will allow us to continue the trend of solid Patronage payments to our members. Given all of the challenges GreenStone and you, our members, have faced over the past year and a half, it’s nice to start to settle back into some sense of normalcy again, even if in this industry normal means constant volatility and change!

Governance

Finally, I would like to recognize Hank Choate for his eight years of service as a Director on the GreenStone board representing Region 3. Hank has been a very active and engaged board member who always has had his fellow stockholders' best interests at heart. He served on our Legislative and Public Policy Committee for much of his tenure and was an effective voice at the state and federal level for both the Farm Credit System and agriculture industry at large. He was never afraid to outwardly share his beliefs and thoughts even if he knew his view may be in the minority. Hank also practiced one of GreenStone’s Core Four Values that calls on us to “Get Involved” by serving on at least a half dozen boards at the state and local level to give back to his community and the industry that he loves so much. GreenStone is truly blessed to have loyal, committed, and thoughtful members like Hank who are willing to give of their time to help others. Please join me in thanking Hank for his years of service to GreenStone and wishing him the best in his future endeavors. Hank will be replaced by Michael Feight from Tecumseh, MI in Lenawee County. Michael has been a member of GreenStone and one of its predecessor associations for 36 years. He operates a partnership with his father and brother which includes 2500 acres of corn, soybeans, and wheat along with 75 acres of carrots for Campbell’s Soup. Please join me in welcoming Michael to the GreenStone Board of Directors. I will close by thanking you for your business and working with us to serve you better through some very rough times over the past 18 plus, months. Together we truly are better! Feel free to reach out to me if I can ever be of assistance. Have a safe and productive summer!

Dave Armstrong

517-318-4105 dave.armstrong@greenstonefcs.com