GreenStone FCS
Winter 2013
Promoting the business success of our customers and the rural community
Michigan's centennial farm program
Patronage payments
Well
grounded
in family & farming
Winter market Outlook Crop Insurance– it's more than coverage 2013 women in Agriculture events
Editor’s
Note Winter 2013 Published by:
GreenStone Farm Credit Services
2 Comments from CEO Dave Armstrong
It’s January…is your excitement mounting!? Yes, I realize we just ended 2012 with a bustling holiday season filled with endless celebrations, special gatherings, and joyous encounters; but now we get to do it all over again, to plant the seed, watch the evolution, reap the rewards, and end the year with another round of celebration equally fulfilling as 2012! As you launch into this year-long process, we hope you will find value in the content within this latest issue of Partners. From the story of two young farming brothers, to the latest view of what the market has in store for 2013, to the array of GreenStone news and information— including an announcement on your association’s forthcoming record patronage payment— you are sure to find something to help raise your excitement and drive into 2013.
CEO Dave Armstrong updates members on the state of the organization and shares thoughts on the potential of 2013.
Happy New Year, and happy reading!
3 Market Outlook
Collaborative work in 2012 created many political successes.
Agricultural economist, Bob Utterback, reviews lessons learned from 2012 and cautions producers on pressures the market will bear in 2013.
9 Crop Insurance Learn why risk management is more than a policy and how commitment from your GreenStone agent can make all the difference.
11 Patronage Payments Record performance provides a record payout for GreenStone members on March 19.
13 Feature Article Two brothers provide insight on how farming shaped their lives from a young age.
17 Legislative Update
13
19 Directors' Perspective Agriculture is an unpredictable business. GreenStone directors provide their thoughts on where the industry might be heading.
21 Guest Article Are you looking for opportunity? Learn how some well laid plans can position you to answer the door when there is a knock.
Winter Notes 5 Upcoming Events 7 News Update 8 Women In Agriculture 10 Centennial Farm Program
19
This newsletter is published quarterly for the customers of GreenStone Farm Credit Services. Partners, 3515 West Road, East Lansing, MI 48823 • 517-318-2290 • marketing@greenstonefcs.com
Comments From CEO Dave Armstrong
By now you have probably taken down the Christmas tree, finished off the eggnog, put away the New Year’s Eve party hats, and gotten back into your “normal” daily routines. Last year, with all of its ups and downs, is now in the history books and we hope and pray for better times in 2013. safety net which replaced income As I write this, there has been no
L
ast year presented a number of challenges from one of the worst freezes to ever hit the Michigan fruit industry to the most wide spread drought which impacted the broadest geographic area of the country since the 1940s. We also endured a bitterly fought presidential election that so far seems to have only deepened the divide between our two political parties.
breakthrough on the “fiscal cliff” facing the country with most leading economic indicators showing only modest signs of an economic recovery, at best. Europe also continues to struggle with its sovereign debt issues while the Chinese economy slows as a result of weak export demand from the rest of the world. And yet, there are many reasons to be optimistic, especially for those of us involved in agriculture.
and sustained many operations that would not have survived without it. These factors and others continue to produce the strongest overall financial performance that I have witnessed in 31 years of being an “ag lender.” Net incomes for many of our customers will also set records this year and it is pleasing to see so many who have worked and sacrificed so much over the years reap the bounty they deserve.
Despite the weather vagaries that hurt many producers last year, 2012 U.S. farm income is projected to reach another record due to increased prices for many commodities, thanks to continued strong demand and very tight crop inventory levels. In addition, the widespread use of crop insurance served as a critical
Yet, we must be sensitive to those (particularly in Michigan’s fruit industry) who were not as fortunate due to suffering losses from the freeze last April. Fortunately, many of those growers were prudent enough to have built the risk bearing capacity necessary to bridge them over this disastrous period. In fact, GreenStone Continues on Page 6...
Winter 2013
Partners 2
MArket outlook
This is exactly what happened last year. We saw an exceptionally early planting season; the crop was off to a great start and many advisors suggested selling inventory below $6. As we now know, exceptionally dry weather caused a major drop in yield potential which resulted in historic highs in corn and soybeans. Those that forward sold saw significant loss of profit opportunity. Those who bought calls against cash sales, or bought puts instead of futures, were winners. While I know last year’s early sales are a sore point with many producers right now, I bring it up because I believe it will affect their selling behavior for 2013 regardless of the fundamental outlook. Producers who placed expensive soybeans and corn in the bin at harvest are in no mood to sell it at a price that is lower than it was when it was put in the bin. They were burned on selling 2012 corn early, so I doubt they will be in any mood to sell 2013 early. And early basis bids at many Midwestern elevators had soybeans in excess of $1.20 under the 2013 November soybeans contract and 60 cents under the 2013 December corn contract. While it is difficult to come up with an exact cost of production figure, I assume many producers need close to $12 cash soybeans and $5.25 cash corn to simply meet all their production costs before profit is considered. While $13 November 2013 soybeans and $6.40 December 2013 corn do return some profit, it is a far cry from what was seen in 2012. Subsequently, limited selling is being seen. While producers do not like to hear it, the market does not really care about what it costs producers to make the crop; the market is only concerned with meeting current supply and demand requirements.
Market Outlook By: Bob Utterback It is the start of a New Year, when producers hope for great yields and good profit margins. The problem for sellers is the April to July time period when weather sometimes throws a monkey wrench into the best laid plans.
The market appears to be saying it is expecting more soybean acres to be planted – I’m guessing someplace between 79 and 80 million acres. Because of harsh weather conditions the last two years, a lot of corn-on-corn acres have suffered
3
Partners Winter 2013
MArket outlook
in yield, while corn-after-soybeans has done better. Even with as bad of a drought as we saw last year, soybeans recovered nicely because of rains from August through October. Essentially, producers in areas that were stressed are simply not in a position to take more risk on another weather event year. When this is coupled with a projection for increased production coming out of South America, you can clearly see the supply side is on the rise in the soybean complex. Subsequently, I suggest the new crop soybeans [while barely above breakeven] suggests some type of action is necessary to protect prices from moving below the cost of production at harvest. Action Suggested: Because of exceptionally wide basis levels and expectations that carry will come back into the soybean market, a producer first must concentrate on locking up a floor via a put or futures contract rather than a cash sale. Plans should be made now to store soybeans forward to capture the expected carry and narrowing of the basis from the fall lows. I prefer being long in-themoney-puts from current prices to the July time period. Once we get past the July supply/demand report, roll puts into short futures. The eventual cash sale should be made in the early part of 2014. While there are more complicated strategies one can use to reduce premium and time value cost, they should be restricted to producers who are actively involved in managing their portfolio.
I see several factors exerting a lot of pressure on planted corn acres: any producers have seen two stressful M production years and are now ready to go back into a better crop rotation. At the same time, cash rents are on the rise in many parts of the central and northern Corn Belt that experienced close to normal yields. With higher operating costs, they are being forced to plant corn acres. Due to low water levels on the river system, it may be hard to get inputs in position next spring for corn. Spring weather conditions will help determine the final number.
Right now I’m working on the assumption of 96 to 98 million planted acres. If we have 158 or better yields, carryover should be well above 1 billion. If this is combined with the expectation that farmers will be holding a lot of unpriced grain into the fall and limited 2013 sales on the books, I’m very comfortable suggesting that by harvest we will see corn below the cost of production, forcing many producers into a long-term storage decision.
can get back close to $6.50. And when the market reaches target selling prices early in the planting season, producers need flexibility. I am a strong advocate of pricing via deep-in-the-money puts or selling cash and buying calls. The calls should have already been bought on last fall’s correction. Regardless of one’s short-term fundamental or technical opinion, flexibility is needed in order to react to a weather event if it would occur a third year in a row.
In regards to selling expected 2013 inventory, I have already recommended and assume those following that recommendation sold a significant amount last summer. I believe that producers need to have a floor under the market anytime December 2013 corn
The livestock story continues to be one of positive supply numbers with limited signs of any significant increase in breed herds in hogs or cow-calf retention in beef. In fact, with the harsh weather conditions experienced last summer, the overall cow numbers
" Producers who placed expensive soybeans and corn in the bin at harvest are in no mood to sell it at a price that is lower than it was when it was put in the bin. They were burned on selling 2012 corn early, so I doubt they will be in any mood to sell 2013 early."
Winter 2013
Partners 4
MArket outlook
should continue to drop for some time into the future. So the bull will be more excited about the supply side of the equation when it comes to the meats. The primary negative that the cattle and hogs complexes have to deal with is the squeeze that will be increasingly put on consumer pocketbooks. While the government does not see inflation, we see it everywhere. Everyone knows they are spending more and getting less and the paycheck in many cases is shrinking as businesses make more cutbacks. Seasonally, the February hog contract should run into a little trouble as 2013 starts. Buying in-the-money puts above 90 cents is strongly recommended. As for summer inventory, upside potential could exceed $115, so only disaster out-of-the-money put protection is suggested. Limited-to-no forward selling during this time period is suggested. The cattle season is strong into April and a retest of the highs is anticipated. I suggest only limited price protection, say a limited vertical put position bought at or slightly out-of-the-money. The main focus for the livestock producer should be on getting good quality feed supplies bought for the April to August time period. I would not be surprised to see very unpredictable basis patterns. Avoid this by having physical control of all feed stuffs for spring and summer needs. This material has been prepared by a sales or trading employee or agent of Utterback Marketing Services, Inc. And is, or is in the nature of a solicitation. This material is not a research report prepared by Utterback Marketing Services, Inc. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. Distribution in some jurisdictions may be prohibited or restricted by law. Persons in possession of this communication indirectly
5
Partners Winter 2013
should inform themselves about and observe any such prohibition or restrictions. To the extent that you have received this communication indirectly and solicitations are prohibited in your jurisdiction without registration, the market commentary in this communication should not be considered a solicitation.
accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.
The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Robert Utterback/Utterback Marketing Services, Inc. believes are reliable. We do not guarantee that such information is
ABOUT THE AUTHOR Bob Utterback is the Farm Journal Economist and President of Utterback Marketing in New Richmond, IN. Call Bob for strategy updates at 877-898-4324. Email comments on Outlook to utterback@utterbackmarketing.com. he opinions stated herein are not necessarily T those of GreenStone Farm Credit Services.
Calendar of Events January [21]
ffices Closed O In Honor of Martin Luther King Day
[24-27] H untin’ Time Expo Delta Plex Arena, Grand Rapids, Michigan
February [14]
[18]
L adies Day Out Radisson Hotel & Conference Center, Green Bay, Wisconsin ffices Closed O In Honor of Presidents Day
[21-24] Outdoorama Suburban Collection Showplace, Novi, Michigan
[22-24] Michigan Farm Bureau Young Farmer Conference The Henry, Dearborn, Michigan [22-24] Michigan Deer & Turkey Spectacular The Summit, Dimondale, Michigan
March [6-8] Farm Women’s Symposium Bavarian Inn Lodge & Conference Center, Frankenmuth, Michigan [15] Crop Insurance Spring Crop Sales Close Day
[15-16] Wiconsin Ag Women’s Summit Madison Marriott West, Madison, Wisconsin [19] GreenStone’s Patronage Day & National Ag Day [26-28] Wisconsin Public Service Farm Show EAA Grounds, Oshkosh, Wisconsin
April [29] GreenStone Annual Meeting GreenStone Corporate Office, East Lansing, Michigan
CEO Comments
...CEO Comments continued took a lead role in the Michigan banking community and worked with the Michigan Farm Bureau and the State of Michigan to provide a low interest loan program to fruit producers adversely impacted by last year’s unusual spring freeze. As many of you have likely heard, the program provides up to $400,000 per producer or up to $1.0 million to eligible processors at 1 percent interest fixed for five years. The State of Michigan agreed to reimburse any participating lender 1 percent of the original loan balance each year over the five year period to help defray the cost of delivering the program. In exchange, lenders (including GreenStone) agreed to reduce their profit margins on loans made through the program to assist growers. GreenStone estimates that its contribution over the life of the program could be as high as $6 million, depending on the amount of volume disbursed. In spite of 2012’s roller coaster ride, GreenStone continued to perform at an exceptional level, which is directly related to the overall financial health of its customers. Loan growth ended the year strong at approximately 5.8 percent (on an average daily balance basis). Earnings set another record at more than $120 million due to better than projected provisions for loan losses, strong fee income, patronage income from AgriBank, and some one-time unexpected income from a Farm Credit System Insurance Corporation premium refund. The quality of the loan portfolio also continued to improve with an adverse asset ratio of less than 5 percent and non-accrual volume of less than 2 percent. And to top it off, you rated your association’s service to you at an all-time record high of 97 percent satisfied or very satisfied! As a result of this performance, GreenStone’s Board of Directors is once again pleased to announce that it has authorized a record amount of patronage
" None of us know what the year ahead holds, but you can rest assured that your association will continue to carry out its mission of ‘promoting the business success of our customers and the rural community by being the best at providing credit and financial services’." to be paid to GreenStone members in March of 21 percent of net income, which will equate to more than $25 million. This brings the total amount of cash patronage paid to GreenStone members since the program began in 2005 to more than $133 million. This year’s payment represents an average interest savings of about 0.5 percent to members. GreenStone is proud to be able to distribute these kinds of savings back to the members who make it such a great organization to do business with! More details about the 2012 patronage payment can be read on page 11 of this issue.
its mission of “promoting the business success of our customers and the rural community by being the best at providing credit and financial services.” With more than $1 billion in capital, more than $6.3 billion in owned and managed assets, 37 locations, and more than 470 highly engaged and competent team members, GreenStone will continue to strive to be “…rural America’s first choice for financial services” not only in 2013, but for decades to come! We are here to serve YOU, our member/owners, and truly value the trust and faith you place in us every day to be your financial services provider of choice.
Despite many of the economic clouds on the horizon, the agricultural industry is projected to have another good year in 2013. With a relatively weak dollar, tight stocks of feed grains, low interest rates, and reduced numbers of breeding livestock for beef, broilers, and swine, the broader industry should once again be profitable —maybe not at record levels, but still very good. Volatility will continue to persist and require operators to manage margins with a laser like focus to succeed. Land values, as well as rents, and all other input costs will likely continue to climb as long as margins will allow. Whether or not there is a “bubble” in land values remains to be seen, and no one will know if one exists unless it bursts.
I hope you enjoy this issue of Partners. As you will see, there are many exciting things taking place not only at GreenStone, but within our industry at large. While we may very likely look back on these times at some point in the future as the “good old days,” let’s continue to do all we can to make sure our brightest days are yet ahead!
None of us know what the year ahead holds, but you can rest assured that your association will continue to carry out
Feel free to contact me at dave.armstrong@greenstonefcs.com or 517-318-4105 if I can ever be of service. Best wishes for another successful year!
Dave Armstrong Winter 2013
Partners 6
news update
news update winter 2013 GreenStone Visits Detroit Urban Agriculture Sites Members from GreenStone’s executive team, including CEO, Dave Armstrong, along with leaders from the Michigan Farm Bureau, recently visited Michigan’s 3rd House District with Rep. Alberta Tinsley-Talabi (D-Detroit). The visit included stops at several urban agriculture operations on the eastside of Michigan’s largest city.
GreenStone Named to National List of 101 Best and Brightest Companies to Work For For the second consecutive year, GreenStone was recognized as one of the 101 Best and Brightest Companies to Work For in the nation by the National Association for Business Resources. This honor comes after GreenStone was recently named as one of west Michigan’s 101 Best and Brightest Companies to Work For by the Michigan Business and Professional Association.
GreenStone's “Room To Grow” TV Ad Wins Gold Pixie Award In the fourth annual Pixie Awards, an animated television spot for GreenStone Farm Credit Services produced by MessageMakers walked away with the gold. Representatives from GreenStone and Michigan Farm Bureau recently visited Detroit where they spent time with a group of urban agriculture pioneers.
“It was with great pleasure that I welcomed staff from GreenStone Farm Credit Services and the Michigan Farm Bureau to House District 3,” said Rep. Tinsley-Talabi. “As a member of the state house agriculture committee, our meeting provided greater insight into how our two communities, rural and urban, can work more closely together. This visit represents an important step towards future collaboration that will yield opportunities for both of our communities.”
“Room to Grow” won a Gold Pixie Award in the motion graphics category. The Pixie Awards recognize outstanding work in animation, motion Partners Winter 2013
Watch the winning ad at http://youtu.be/_0Zci8GLP3c
GreenStone Takes Home Corp! Magazine Food and Agriculture Award GreenStone was recently named a 2012 winner of the Corp! Magazine Food and Agriculture Award. GreenStone received the award for the large role the organization plays in promoting the agriculture industry within Michigan. Award winners were recognized at a ceremony in the Detroit area in November 2012. Other award winners included: Faygo, Better Made, Bell’s Brewery, Zoup!, Gordon’s Food Service, Eastern Market Corp., Dearborn Sausage Co., and Frankenmuth Bavarian Inn Restaurant, among others.
Annual Report Notice
“Visiting these urban agriculture pioneers and witnessing the determination and commitment they have to their local community was truly an inspiration,” said Armstrong.
7
graphics and special effects, the fastest-growing area in the world of video and television production. The Pixie Awards are sponsored by the American Pixel Academy, a coalition of professionals and educators in the field of electronic moving pixels.
This is an official notice that the 2012 GreenStone Farm Credit Services annual report will be mailed to all stockholders within 90 days of year-end. In addition, the Annual Report will be available for viewing online at www.greenstonefcs.com by Friday, March 15, 2013.
women in agriculture
Women in Agriculture There are several upcoming events tailored to women who work in agriculture. Take note of the events and dates below, we hope to see you there! Ladies Day Out Feb. 14, 2013 at the Radisson Hotel and Conference Center in Green Bay, Wisconsin Join fellow women for an opportunity to laugh, learn, and be inspired. Enjoy breakfast and keynote speaker Damian Mason as he presents Humor for the Heart of Agriculture. He shares hilarious stories and ag-themed comedy with an optimistic message for people of agriculture. GreenStone’s Wisconsin customers recently received an invitation in the mail with necessary details to RVSP for the event. Farm Women’s Symposium March 6-8, 2013 at the Bavarian Inn Lodge and Conference Center in Frankenmuth, Michigan The purpose of the Farm Women’s Symposium is to strengthen agriculture by addressing the ever-changing needs of farm families. It will provide opportunities for leadership and professional development; enhance communication and management skills; build effective family and family teams; and develop a network of supportive friendships. This year, David Specht will be speaking on transitioning the family farm and the role that women play. For more information visit: www.farmwomenssymposium.com or ask for registration information at your local GreenStone branch. Annie’s Project Annie's Project is an educational program dedicated to strengthening women's roles in the modern farm enterprise. The program’s mission is to empower farm women to be better business partners through networks and by managing and organizing critical information. Find a date and location near you by visiting: www.extension.iastate.edu/annie/upcomingclasses. Wisconsin AG Women’s Summit March 15-16, 2013 at the Madison Marriott West in Madison, Wisconsin Women from the Wisconsin agriculture community are encouraged to attend the third annual Wisconsin Ag Women’s Summit. Early registration is open now until Feb. 15, where you can save $25 to attend the two-day summit. Early bird registration is $115. After the Feb. 15 deadline, registration will be $140. For more information, visit: http://wfbf.com/programs-event/womens-program
McGonigal Promoted to Regional Vice President of Sales and Customer Relations Ian McGonigal has been promoted to regional vice president of sales and customer relations and will oversee five of the cooperative’s branches in west Michigan. Ian was selected following the retirement announcement of longtime GreenStone employee Bert Sheridan who will retire at the end of January after more than 35 years of service. In this role, Ian will lead the financial services officers, crop insurance agents and financial services staff in the Charlotte, Grand Rapids, Hart, Hastings, and Ionia offices. He will be responsible for the guidance and development of this sales team. “Ian has been an integral part of the GreenStone team for more than 12 years, and during that time he has shown that he has the skills needed to be a leader of our diverse and talented sales team on the west side of Michigan,” said Randy Stec, senior vice president of sales and customer relations for GreenStone. “Having the ability to promote talented individuals–like Ian–from within GreenStone’s workforce into leadership roles is one of the many things that help our organization maintain a high level of satisfaction with our customers.”
in west Michigan,” said McGonigal. “Having been a part of this team for many years has allowed me to gain great relationships with staff and customers in the region, while learning firsthand the challenges facing our members every day. That perspective will be a valuable asset in my new role.”
" Ian has been an integral part of the GreenStone team for more than 12 years, and during that time he has shown that he has the skills needed to be a leader of our diverse and talented sales team on the west side of Michigan" Ian began his career with GreenStone as a financial services officer in the organization’s Lapeer, Michigan, location in 2000. He later transferred to GreenStone’s Grand Rapids, Michigan, office in 2007.
“I am excited to have the opportunity to lead the outstanding team of GreenStone professionals
Winter 2013
Partners 8
Crop Insurance
producers experienced first-hand in 2012, crop insurance can be the difference that helps an operation weather unexpected circumstances beyond control. “Crop insurance is almost a necessity for any producer in today’s marketplace,” said Brandon Walters, GreenStone’s crop insurance product manager. “The different products offered to producers today allow for a variety of coverage to fit any budget and protection need.”
More than Insurance At GreenStone, we have built a reputation as a customerfocused lender specializing in financing agricultural operations. But we are more than financing…we are the one-stop-shop for nearly 23,000 customers who are not only looking for a lender, but a resource to aid in their risk management needs. GreenStone offers a wide variety of products and services to assist you with running a successful operation, and we are also there to help you when you need it with tools and advice gained from our experience in agriculture. One such tool GreenStone offers is a variety of crop insurance products to help mitigate your operation’s risk. As many
9
Partners Winter 2013
Though the products may be the same, choosing GreenStone as your crop insurance agent has several advantages compared to other providers. GreenStone is one of the largest and most experienced crop insurance agents in our territory, insuring, on average, 1.5 million acres per year. Add to that a lineup of 33 fulltime team members dedicated to crop insurance with more than 100 years of combined experience. Most importantly, because the team is spread between each of our branch
" When you choose GreenStone as your agent, you get much more than what other agents can offer. Our team’s knowledge and industry experience is second to none, and provides producers with peace of mind.” offices, we are close by when you need us! “Because crop insurance is a program subsidized by the federal government, the cost of the products remains the same from provider to provider,” said Walters. “When you choose GreenStone as your agent, you get much more than what other agents can offer. Our team’s knowledge and industry experience is second to none, and provides producers with peace of mind.” With the spring sales close date of March 15 just around the corner for corn, soybeans, sugar beets, potatoes, oats, dry beans, processing beans, and forage seeding, now is a great time to contact your local GreenStone branch to schedule an appointment with our experienced crop insurance specialist.
Centennial Farm program
Michigan Centennial Farm Program The roots of Michigan’s agriculture community run deep. For many families around the state, farming operations have been passed down for several generations. To help recognize these long-tenured family farms, the Historical Society of Michigan, the state’s official historical society and its oldest cultural organization founded in 1828, established the Centennial Farm Program. GreenStone proudly became an official partner of the program in 2012. The Centennial Farm Program recognizes farms that have remained in the same family for 100 years or more and highlights the family farm’s contributions to Michigan’s development. To be designated as a Centennial Farm, a property must be a working farm of 10 or more acres that has been continuously owned by the same family for at least 100 years.
Michigan Centennial Farm owners receive a certificate from the Historical Society of Michigan and a display marker for their farm. All Centennial Farm families are provided a one-year membership in the Historical Society of Michigan which includes publications, access to historical conferences, a highlight section on awarded farms in the society’s quarterly magazine, the Chronicle, and much more.
The Historical Society of Michigan also offers a Sesquicentennial Farm Program to recognize, upon request, certified Centennial Farms that have been owned by the same family for 150 years or longer.
To learn more about the Centennial or Sesquicentennial Programs and how you can submit an application for your family farm, visit: www.hsmichigan.org.
Centennial Farm families are also eligible for membership in the Michigan Centennial Farm Association, an affinity group of farmers who have obtained Centennial and/or Sesquicentennial farm status. The association was established in 1955.
Winter 2013
Partners 10
patronage
Record year is in the books for GreenStone! The cooperative experienced another successful year in 2012 and that means good news for our members, as the cooperative will pay more patronage back to our customers than ever before! GreenStone’s board of directors recently approved a cash patronage payment of 21 percent of the cooperative’s net earnings, meaning more than $25 million will be distributed to qualified members on Patronage Day – March 19. GreenStone did not choose to celebrate Patronage Day in mid-March by happenstance. March 19 has also been designated as National Ag Day by the Agriculture Council of America. National Ag Day commemorates America’s agricultural industry and the producers who make it one of the country’s most diverse and vital trades. Distributing patronage payments to our members is certainly one great way to celebrate such a day.
11
Partners Winter 2013
patronage
“Everyone at GreenStone is incredibly thankful to our members who, because of their hard work, made 2012 a recordbreaking year for our cooperative,” said Dave Armstrong, President and CEO of GreenStone. “Many of our producers faced great challenges beyond their control over the last year, and to overcome such adversity in the way they did is truly a testament to the hard work and dedication of today’s farmers and ranchers.” Patronage Day at GreenStone is just one example of how the memberowned cooperative is different from other lenders. Patronage payments are appreciated by members, and allow them to re-invest the money into their business, pay down a loan, or make a difference in their local community by supporting a school, church or charitable initiative. Each year since 2005, GreenStone’s board of directors has declared a patronage
" Many of our producers faced great challenges beyond their control over the last year, and to overcome such adversity in the way they did is truly a testament to the hard work and dedication of today’s farmers and ranchers." payment for customers with qualified products. With a record payout of more than $25 million for 2012, GreenStone’s total amount of patronage payments to customers will be more than $133 million since the inception of the program.
Checks will be made available for pick up during normal business hours; all checks not picked up by close of business will be mailed the following day. The cash patronage paid to each customer will be based on the proportion of net interest income earned during 2012 on his or her loan to the total patronage based net interest income earned by the association. GreenStone will not only distribute a qualified cash payment to customers, but will also use non-qualified allocations to reinvest in the association to capitalize future growth. Customers eligible to receive the patronage payments include anyone holding stock or participation certificates with GreenStone, which include rural residential home loan customers.
GreenStone invites customers to visit with staff at their local branch and celebrate Patronage Day on March 19.
patronage paid to customers (in millions) YEAR 2005
$12.5 $13.8
2006
$15.0
2007 $13.5
2008 2009
$12.0
2010
$18.2
2011
$23.3
2012
$25+
Winter 2013
Partners 12
[ 13
Since he was seven, Tom Stuart has been selling sweet corn. His older brother, Tim, was always close on his
]
father’s heels, admittedly wanting to be wherever he was.
Partners Winter 2013
YBSF feature
two Brothers well Grounded By: Jennifer Vincent The Stuart brothers, Tom and Tim, had seen their family struggle at times, just as many farm families did when commodity prices were hard to pencil out. It might have discouraged some.
and wheat and was in the dairy industry for 40 years. He started in the seed business for DeKalb in 1982. A decade later he left the dairy business. He also carried on a 135-yearold tradition and business of collecting maple sap for syrup.
“Through the hard times we were taught to work together as a family,” says Tom, who is now 25; Tim is 29. “We were never told farming was what we had to pursue; we had the option to do whatever we wanted.”
Both brothers were very active on the farm growing up. After graduating from high school, Tim obtained an associate’s degree from Grand Rapids Community College in automotive technologies. “I figured I’d have this to fall back on, but it would also be of value on the farm,” he says.
There was little doubt, though, that the brothers wanted to farm. “Both our parents were influential,” Tom explains. “Mom was a big influence for us while in 4-H. She was an avid horticulturist and really peaked our interests in how things grow.”
" Mom was a big influence for However, to allow the next generation to us while in 4-H. come on board while the previous was She was an avid still living off the land would take careful horticulturist planning, a designation of duties, and the ability to change and adapt management and really strategies, while adding a level of peaked our diversification. In the brothers’ early years, their father, Brian interests in how Stuart, farmed about 300 acres of corn, alfalfa things grow.”
With corn at under $2 a bushel and not a lot of money to be made with row crops, Tim returned and following his father’s fundamentals and philosophies, he also went to work in the seed business. Around that time, the family turned to offering custom work as a way to supplement income. “We were doing some round baling and really starting to focus on harvesting hay,” Tim says. Tom was now known for his gourmet sweet corn and he honed in on building not only that market, but also expanding into everything from apples to zucchini. Every Winter 2013
Partners 14
YBSF feature
Careful planning and working as a family has allowed the Stuart brothers to remain on the farm with their wives. Pictured from left are, Elizabeth and Tom Stuart, and Tim and Allison Stuart.
week he brings his offerings to the Portland Farmers’ Market. “You have to be consistent, rain or shine,” Tom says. He grows about six acres of all hand-picked, fresh market produce. That includes about four acres of his famous sweet corn that buyers will travel up to 40 miles to purchase either at the market or the stand in
front of the farm. “I have a pretty loyal following,” he says. “They look for the signs when Big Tom’s famous sweet corn is available. I pride myself on quality and treating my customers the very best I can, and that includes offering them a little something extra—maybe an extra ear or two. Treat your customers right and they’ll be back and hopefully they’ll bring friends. Word does travel fast.” Tim has worked to build the seed business, more than doubling it since 2005 with about 110 customers
buying upwards of 13,000 bags of corn and soybean seed annually. “Building our row crop acreage and the seed business has really been where I’ve been concentrating,” Tim says. “I work to increase the business by taking really good care of my existing customers, rather than trying to find new customers. I don’t wake up and think about how much money I can make. I look at what I can do for my customers and I believe they will spread the word for me.” GreenStone financial services officer, Luke Bakker, has helped the family secure operating loans, real estate loans, and equipment loans. “Both Tim and Tom are well respected at such a young age,” Bakker says. “They are rather conservative by not borrowing more than then can absolutely pay back. They are already successful and will continue to be successful based on their way of doing business.” Today the farm includes 425 acres and the family custom harvests about 600 to 700 acres of hay. They put in 1,300 taps for sap on 60 acres that generate about 220 gallons of maple syrup on average.
The Stuart brothers, pictured with their father, have been influenced and guided in the farm business greatly by their parents, Brian and Susan Stuart. Pictured from left are: Tom, Brian and Tim. 15
Partners Winter 2013
“Everyone has their own pieces of ground—we work that way rather than percentages,” says Tom, who has scaled back his produce offerings a bit. And since the 2008 recession, hay demand for horses has declined. The custom harvesting business has tapered off and is now more directed at fulfilling dairy needs.
YBSF feature
The brothers have a goal of 10 percent growth a year. “But it has to be healthy and balanced,” Tom says. Tim wants to grow his seed business, while picking up more ground for row crops. “We’re not looking at fast growth that will get us into trouble,” Tim says. “We want to grow with a steady pace and have realistic goals—ones that are achievable.” Bakker says he frequently works with the brothers on their financials and looking at surrounding land prices. “They are always striving to put themselves in a position where if land they desire becomes available, they are able to act. At GreenStone, we value and treasure our young farmers. Through the Young Beginning Small Farmer program, we’re able to get qualified farmers financed 50 percent through GreenStone and 45 percent through the U.S. Farm Service Agency, leaving them with only a 5 percent cash obligation at closing.”
" We’re not looking at fast growth that will get us into trouble,” Tim says. “We want to grow with a steady pace and have realistic goals— ones that are achievable." Both brothers live off the farm, but are there to work every day but one. Sunday is strictly reserved as a non-work day, which requires a great deal of planning and discipline, particularly when rain clouds part to produce an ideal sunny Sunday. “We love the Lord, our families and the soil— in that order,” Tom says. “We work plenty of hours in six days. We need that time with our families.” His new bride of about a year, Elizabeth, nods and calls it emotionally regrouping. Tom and Elizabeth live in Ionia, Michigan. Tim and his wife, Allison, call Lake Odessa, Michigan home and are raising the next generation, an eleven-month old Hannah. Tim says he’s excited about the next 30 years and what technologies may come into play. “We already have guys running grain dryers with their iPhones,” Tim says.
Straight talk Q:
hen you were eight, what did you want to be W when you grew up? “ I always wanted to be a farmer; it was like second nature. It’s just what you do.”
Tim:
Q: Tim:
hen did you first realize that you wanted to W farm for a living? “ It’s a passion you’re almost born with. I was riding in a car seat while chopping hay.”
Q:
hat is the biggest challenge for young, W beginning, or small farmers today? Tim: “ Land availability. Large growers are able to pay more for the land than beginning farmers can afford or even get financing for.”
Q:
hat advice would you give to young, beginning, W or small farmers getting started today? Tim: “ Get alongside someone that might not have children or anyone that’s interested in continuing to farm and see if there might be an apprentice possibility.”
Q: Tom:
hen you were eight, what did you want to be W when you grew up? “ A pumpkin grower. I loved watching things grow; and being a foodie, I liked growing things you could eat. I sold pumpkins from a stand when I was four.”
Q: Tom:
hen did you first realize that you wanted to W farm for a living? “ Late teens. But, during my teenage years there was some tough going with hard work. I wasn’t sure if I could do it the rest of my life. It wasn’t until I started acquiring some land for myself.”
Q: What is the biggest challenge for young,
beginning, or small farmers today? Tom: “ The land battle and start-up costs. You really need someone to work under.”
Q: Tom:
hat advice would you give to young, beginning, W or small farmers getting started today? “ If you give up, you’re done.”
Winter 2013
Partners 16
Government Relations update
2012 Legislative Recap GreenStone has worked hard with time and resources during the course of 2012 to stay engaged in legislative and public policy matters which have an effect on the interests of its membership. These activities have, at times, involved collaborative work with the Farm Credit Council on a national level, and diverse agricultural associations at the Michigan and Wisconsin state levels. Cooperatively with the Farm Credit Council, GreenStone has targeted congressional representatives that have supported or are in a position to impact agriculture and rural issues important to our stockholders. Throughout the AgriBank District, more than 1,100 directors, officers 17
Partners Winter 2013
and employees have provided financial and other resources to lead communication and educational efforts. Financial contributions are coordinated with the Farm Credit Council PAC. During this election cycle, $25,822 was provided through
this fund to eight key members of the Michigan and Wisconsin congressional delegation that were identified to be important for communication purposes on important Farm Credit System issues. Regular and consistent communication efforts are made with the entire delegation which has served to increase the awareness and importance of the System. Similar efforts are made to increase the awareness and importance of GreenStone within its Michigan and Wisconsin territory. Financial resources and time has been utilized to educate the state legislature about its role as the cooperatively organized financial partner in this marketplace. In Michigan, the MI GreenStone PAC has disbursed more than $14,000 to key legislative representatives as part of the communications effort. This state PAC has partnered with other agriculture and rural interests when common
Government Relations update
“ GreenStone will remain active in these communication efforts as it can significantly impact a wide array of issues in the agriculture and rural communities we serve.” interests are identified to assure the loudest voice possible is heard in the legislative halls. This has served to make a significant impact on critical issues important to the GreenStone membership. This effort is made
through collaborative measures in Wisconsin with the Wisconsin Farm Credit legislative committee. GreenStone will remain active in these communication efforts as it can significantly impact a wide
array of issues in the agriculture and rural communities we serve. We are looking forward to finding ways to increase stockholder engagement in 2013 and subsequent years to assist in these efforts; you, GreenStone’s general membership, are always the focus as the beneficiary of these efforts. We encourage you to stay engaged in this legislative process and connect with your GreenStone financial services officer or specialist on legislative issues of agriculture that are important to you!
Providing tools to take on each growing season...
Confidence more than insurance– GreenStone insures, on average, more than 1.5 million acres of farmland each year, providing peace of mind to thousands of producers throughout Michigan and northeast Wisconsin. Experience the difference; get your crop insurance today! 800-444-FARM
www.greenstonefcs.com
GreenStone FCS is an equal opportunity provider and employer.
Winter 2013
Partners 18
Directors' Perspective
Minimizing Risk in an Unpredictable Industry Despite last year’s devastating weather related issues experienced by many local producers, the nation is looking back at what will likely be a year of record net farm income. At the same time, we continue to see record setting land auctions where values have more than doubled recently. As a producer, what is your view for both the short-term and long-term; do you consider the party just getting started or is the end in sight? How do you know? What are you doing different today as compared to your actions in the 1980s to prepare for the “rainy day” and to manage your risks?
Edward Reed As a producer in the modern era, risk management is at the forefront of every decision I make. Proper risk management means taking the appropriate measures to guard yourself against the inevitable ebbs and flows of the commodity markets. For me, this means extensive hedging in every commodity that I buy, as well as sell. This enables me to know most, if not all, of my 19
Partners Winter 2013
input costs as well the profit I expect to make from my pigs. Before hedging, farmers were the definition of the boom and bust. This was evident in the crash of 1980s where many farmers were forced into insolvency. Although I was working as an engineer in the paper industry at the time, I know that history has a tendency to repeat itself and have strived to not over leverage myself with respect to the current land price. As one that is always looking to expand, it’s important to remember the foundations from which I run my business.
This entails always striving to stay in the middle of the road. As a smaller producer, buying land at the top price is not economically feasible. On the other hand, we are not out buying land that is undervalued. We want our purchases, as well as our decisions to sell, to be in the middle of the road; one that doesn’t make it imperative to hit a homerun every year. Remember, when you abandon the principles that propelled you to success, the reverse can, and will, bring you crashing back to reality.
Directors' Perspective
Gilbert Ritter We seem to be in an economic environment where we have an inelastic supply and demand relationship. Small shortages cause large price increases and small surpluses cause larger price decreases in the commodity markets. In the past we had a commodity surplus which hung over the farm sector for years, holding down land values and profit margins. Short periods of increased demand in the 70s caused a boom and a spiral of inflation followed by government policy that limited exports in an unprecedented high interest rate environment. This lead to a collapse of the agriculture economy and land values dropped below the levels they were at in the 60s and 70s. I think we are in position to at least have a correction if not a wholesale decrease in land values. Values went up too quickly when commodities hit record highs. Normal weather around the world would increase the supply side of the equation quickly and profit margins would shrink dramatically. On the other hand, if you are buying with profits and a high equity position, you may have land paid down to an affordable level by the time this would happen.
At my age, I don’t have a high appetite for risk. If you are young, you have the chance of inflation bailing you out if you pay more than normal pricing levels would warrant. I saw an inflation chart recently that showed $3,000 in 1969 would buy $18,900 worth of goods and services today. That makes me think—I graduated in 1969. My advice to anyone would be to be very cautious with your optimism. A cure to high prices, is high prices.
“ I think we are in position to at least have a correction if not a wholesale decrease in land values. Values went up too quickly when commodities hit record highs.”
and real estate values! As commodity prices rise, expenses follow, but when prices decline, there seems to be stubbornness for expenses to go back to the level they were prior to the price rise; consequently, margins get squeezed. William Stutzman As a cash crop producer, my “short term” and “long term” view are opposite of each other. In the short term, I look for the steep climb in land values to flatten out or decline in the near future, maybe as soon as next year. I think that $7.50-$8.50 corn prices are not sustainable long term, and if we don’t have another widespread dry year in 2013, I look for corn prices to slowly work their way down to possibly as low as $4.50$5.00 by next fall. That would get the attention of those bidding up rents
My “long term” outlook is not nearly as pessimistic as it is short term. I think longer term, land will continue to work its way to even higher levels than it is today, but not before some setback. It will take a bit of time to just get back to today’s levels. Most farmers today are positioned much better than during the 80s when land prices plunged, leaving many in a highly leveraged position and no way out! Today, crop insurance offers options to manage risks that were not even available during the 80s. As a
producer, I invest a lot of money in the crops I am trying to raise. Given the opportunity, why wouldn’t I want to protect that investment with some level of crop insurance? I wouldn’t think of trying to raise a good crop of corn without fertilizing it to keep it healthy and growing to its full potential, or applying a herbicide to protect it from being smothered with weeds. So, why wouldn’t I also invest some money in a crop insurance policy that will guarantee me a specific level of revenue, regardless of the weather? Seems like an easy choice to me. One last comment about our agricultural economy, and land prices in particular. As a young man, my Dad told me to “walk when others run, and run when others walk.” If I heed that advice today, I should be “walking."
Winter 2013
Partners 20
Guest column
Opportunities abound in agriculture today By: Barbara Dartt, DVM, MS Many opportunities involve growth. The 80 acres right across the road, the one you have rented for years, comes up for sale. A neighboring dairyman wants to retire and wonders if you would like to buy his barns and 40 acres to raise heifers. Adding more grain storage or putting center pivots on the next two fields.
21
Partners Winter 2013
More often than not, two or three of these “opportunities” seem to land in your lap at the same time. Other opportunities involve moderating risk. Hog margins in every month of 2013 provide a healthy profit margin. Should you lock them? How important is it to diminish frost risk by investing in wind machines or irrigation? What about diversification? Further opportunities involve people. You might have a very productive employee who regularly creates “drama” with
their discouraging attitude. Do they belong on the team? Perhaps you have a conflict with a family member who also works in your business—one that has been there a long time and impacts your day-to-day satisfaction. Should you figure out how to tackle the disagreement? Actually, these opportunities exist every day in every business, in up- and down-cycles, regardless of industry. The number of decisions we each face are staggering. Some days they get downright paralyzing.
Guest column
In the businesses I work with, the majority of these decisions are made quickly and without much fuss. And that is a testament to the competitive advantage of family-owned businesses. Because folks who lead these businesses are related or even grew up in the same house, they share the same values and approach to the world. Sometimes their preferred pace differs—pace of analysis and pace of decision-making. Sometimes their appetite for risk differs. But their core
values are aligned. And these shared values are the “lube” that makes most decision-making smooth and quiet. But…what happens when the business adds non-family in key management team positions? Or when the business is led by a brother and sister that are seven years apart in age and really did not grow up in the same household? Or a spouse gets sick and someone’s former workaholic priorities change? Those underlying (and often unexpressed) shared values might
STRATEGIC PLANNING OUTCOMES— ELEMENT
DEFINITION EXAMPLE Demonstrate business culture and provide foundation for behaviors.
Passion, Collaboration Growth and Fun.
Vision
Where we are going. Should inspire and excite.
Southwest Airlines will provide the chance for everyone in America to go and see and do things they’ve never dreamed of.
Mission
How we are going to get there. Provides some of that decision-making “filter.”
We will democratize the skies by keeping our fares low and spirits high.
Values
DISCOVERY QUESTIONS—
1. Reflecting over the past 3-5 years, what are you most pleased with, proud of, or satisfied with? Answer for: your life overall, your family, the business. 2. As you look toward the horizon, in 3-5 years, what else are you hoping or looking for in each of the following areas: your life overall, your family, the business? 3. With respect to the family business, how would you like your customers, key advisors and employees to describe you? 4. What are the three most important shifts or changes that need to occur for you to realize what you have described?
not be aligned anymore. And the “lube” for smooth and efficient decision making is absent. Facing an “opportunity” becomes a huge challenge—it might even lead to a fight. Expressing or uncovering those shared values that guide your business and your decision making is also known as strategic or long-term planning. Knowing yourself and your business clearly is really important. But as the business grows, it is even more important to be deliberate about communicating who you are. Long-term planning does not have to be painful. Start with the foundations outlined below. These are generally uncovered, not discovered. They are in use already in your business—you just need to write them down and share them. On the left are a few questions you, or you and your team, can answer in prep for uncovering your values, vision and mission. This is just the foundation of strategic planning. Translating these guiding principles into day-to-day action takes a few more steps. But taking on this process of “knowing thyself” is a big risk mitigator all on its own. Done well, it can rule out opportunities that do not fit for your family or your business, and make that decisionmaking process smooth and efficient.
ABOUT THE AUTHOR Barb is a family business consultant, working with farm families and management teams to help them keep their business healthy and the people happy. Barb can be reached at 800-663-5608. The opinions stated herein are not necessarily those of GreenStone Farm Credit Services.
Winter 2013
Partners 22
3515 West Road East Lansing, MI 48823
More than $25 million back to customers...
bonus! more than money–
When a lender gives back more than 25 million dollars to customers in one year, that is remarkable. When they do it with a 97 percent customer satisfaction rating, that’s GreenStone. Pick up your patronage payment March 19!
800-444-FARM www.greenstonefcs.com