YOUR GUIDE TO POULTRY FINANCING
WELCOME TO THE FARM CREDIT POULTRY GUIDE
Whether you’re brand new to poultry farming or already have your boots on the ground, Farm Credit can be a dependable resource for you and your operation. No one knows the poultry industry, or has closer ties to it, than your friends at Farm Credit.
Table of Contents
We understand the hard work you put into your poultry operation, which is why we offer customized financing packages just right for your unique business. Farm Credit offers flexible rates and terms, a funds held account to store money from your integrator payments, a patronage program to return our profits to our borrowers, and close ties with the poultry and agriculture industries. Farm Credit is a financial cooperative, which means while traditional banks return their profits to their investors, we share our profits with our borrowing customers through our patronage program. We have returned millions of dollars in patronage to customers in your local area.
Perks of Farm Credit
3
How Patronage is Paid
4
Patronage Distribution History
5
Poultry Financing Checklist
6
Delmarva Resources
Taking advantage of this cooperative way of doing business, plus working with a local lender who understands the needs of the poultry industry, can be nothing less than a win-win situation. If you are interested in working with Farm Credit on your poultry project or any other needs, we encourage you to contact us to discuss our loan options and available resources. Please give us a call at 888.339.3334 to arrange an appointment at a time and location convenient for you. In the meantime, if you’d like to learn more about Farm Credit, please visit mafc.com.
Industry Resources
7
Five Things to Consider Before Starting a Poultry Operation
8
How to Manage Longer Layouts
10
Mortality Management
11
Pennsylvania Resources Industry Resources
12
New Poultry House Construction
13
Navigating the Poultry Permitting Process
14
Valley Resources
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Industry Resources
15
Additional Materials
16
THE PERKS OF FARM CREDIT
Customer Service Commitment Personal Service From Your Loan Officer • Meetings at your convenience to discuss and review financial results and business needs • A commitment to respond to phone calls within 8 business hours • Business conducted at a location convenient to you – whether it’s virtual, in our office, or on your farm! • A Funds Held Account for our poultry growers to park excess funds from your flocks that earn interest and can pay expenses as needed
Easy Access To Your Account Information • Toll free calls to 888.339.3334 to a customer service representative to pay your bill over the phone from 8 a.m. to 4:30 p.m., Monday through Friday • 24/7 access to your accounts from anywhere through AccountAccess, where you can: - Check loan balances and payment history - Draw funds from lines of credit - Make payments electronically - Take your account on the go with the MAFC Mobile App
Membership benefits As a Member of Farm Credit You Will Receive: • Our quarterly Leader magazine • The Stockholders’ Annual Report • The right to vote for the board of directors and nominating committee each year • The opportunity to be nominated and serve as a director of your cooperative association • Patronage distribution (if declared) • Use of our Member Assistance Program for counseling, financial and legal services • A discount on the QuickBooks finance program
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PATRONAGE CAN LOWER YOUR COST OF BORROWING
These numbers are an example and do not reflect current rates.
HOW PATRONAGE IS PAID Currently, your patronage distribution is based upon interest earned by the Association on your loan, as a percentage of total Association “patronage sourced” interest earned. Based on 2020 actual patronage distribution, we returned 100 percent in cash and retained 0 percent as allocated surplus, payable in a later year(s).
$14,000 After receipt of your distribution, patronage effectively lowers your total interest cost for the first year of your loan from:
$50,000 to $36,000 This effectively lowers your interest rate from:
5.00% to 3.60%
Borrower Name
John Smith
Borrower Loan Amount
$1,000,000
Borrower Interest Accrued
$50,000
Borrower Interest Rate
5.00%
Borrower’s Patronage Distribution
$14,000
Existing Farm Credit Liability
$0
Total Farm Credit Loans
$1,000,000
Stock Requirement
$1,000
100% Cash Distribution
$14,000
0% Qualifed Allocated Surplus Revolvement
$0
0% Non Qualifed Allocated Surplus Revolvement
$0
Total Refunds
$14,000
% of Total Interest Distributed – 2020 Projected
28.00%
Billing Rate
5.00%
Efective Rate to Borrower
3.60%
Savings from Patronage
1.40%
A savings of: 1.40%
Visit mafc.com/patronage to learn more and calculate your return. Important Notice: The patronage factor of 28 percent (percent of interest distributed) used in this statement is a projection based on the current estimate of earned interest for 2021 and may be higher or lower than actual amounts paid in preceding years. This projection assumes this same patronage factor of 28 percent for all future years. Actual patronage for the year 2021 and all future years will be based on the performance and proftability of MidAtlantic Farm Credit in those years. Actual patronage factors may be higher or lower or there may be no patronage in some years. No representations are being made to you regarding future interest rates, the amount of any future patronage distributions, or whether there will be any future patronage distributions.
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MAFC PATRONAGE DISTRIBUTION HISTORY
Year Ended
Paid in Cash
Qualified Allocated Surplus
Nonqualified Allocated Surplus
Total Allocated Surplus
Total Patronage Distributed
Percent Distributed
Interest Income
% of Cash to Total Patronage
2000
$3,597,569
$8,394,326
$8,394,326
$11,991,895
27.73%
$43,251,929
30%
2001
$5,263,363
$12,281,180
$12,281,180
$17,544,543
20.63 %
$85,040,897
30%
2002
$5,283,493
$12,098,430
$229,721
$12,328,151
$17,611,644
22.62 %
$77,858,202
30%
2003
$5,969,744
$6,854,316
$7,075,085
$13,929,401
$19,899,145
24.78 %
$80,318,175
30%
2004
$7,897,553
$4,033,133
$14,394,491
$18,427,624
$26,325,177
31.26 %
$84,218,172
30%
2005
$8,479,608
$2,547,324
$17,238,429
$19,785,753
$28,265,361
27.22 %
$103,843,314
30%
2006
$8,023,038
$3,654,318
$15,066,105
$18,720,423
$26,743,461
21.82 %
$122,547,128
30%
2007
$12,222,941
$15,816,022
$15,816,022
$28,038,963
20.84 %
$134,536,557
43%
2008
$13,400,000
$10,802,949
$10,802,949
$24,202,949
18.74 %
$129,156,553
55%
2009
$8,000,000
$4,110,431
$5,577,302
$9,687,733
$17,687,733
13.61 %
$129,939,802
45%
2010
$10,000,000
$2,260,933
$13,494,701
$15,755,634
$25,755,634
20.53 %
$125,446,071
38%
2011
$10,000,000
$15,598,926
$15,598,926
$25,598,926
21.21 %
$120,684,850
39%
2012
$10,500,000
$15,474,060
$18,023,430
$28,523,430
25.54 %
$111,691,768
36%
2013
$13,000,000
$25,135,627
$25,135,627
$38,135,627
35.34 %
$107,897,003
34%
2014
$15,000,000
$10,856,283
$10,856,283
$25,856,283
23.99 %
$107,781,442
58%
2015
$16,635,743
$16,635,743
15.24%
$109,151,874
100%
2016
$12,595,273
$12,595,273
10.79%
$116,728,474
100%
2017
$18,516,880
$18,516,880
14.63%
$126,527,436
100%
2018
$20,000,000
$20,000,000
14.60%
$136,981,724
100%
2019
$25,250,000
$25,250,000
17.34%
$145,626,214
100%
2020
$54,500,000
$54,500,000
40.14%
$135,776,579
100%
$509,678,667
21.83%
$ 2,335,004,164
$2,549,370
Total
The amounts displayed in each column for each year reflect the adjusted amounts subsequent to the determination of yearend financial results. Subsequent to the final year-end closing, certain adjustments may occur for items such as by-law related withholdings, minimum check amounts, etc. prior to actual distributions to the stockholders which would immediately impact the stated amounts.
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POULTRY FINANCING CHECKLIST
Thanks for considering MidAtlantic Farm Credit! As the experts in rural lending, we understand the special needs of poultry farmers – we’ve been helping them achieve their goals for over 100 years! In order to provide you with prompt service and to begin processing your loan, please provide us with the following information:
❑ Current balance sheets (Individual, Partnership, Corporation and/or LLC) ❑ List of assets – savings and/or checking account statements, real estate, marketable securities, etc. ❑ List of debts – balances owed along with names and addresses of all creditors ❑ Partnership – copy of partnership agreement ❑ Limited Liability Corporation (LLC) – copy of operating agreement ❑ Corporation – copy of bylaws and certificate of incorporation ❑ Federal income taxes and W-2’s for the past three years ❑ Pay stubs from the last 30 days ❑ Copy of proposed construction contract with contractor’s disbursement schedule, as well as quotes on: ❑ Grade, fill, shell, stone, etc. – for roadways, culverts, pads for poultry houses, manure shed and/or composter/ freezer shed ❑ Outside wiring – including generator hook up, lighting protection, etc. ❑ Outside electric service – if new services are needed or current service needs to be upgraded ❑ Well and pump tank ❑ Generator, generator building and automatic transfer switch ❑ Manure shed and composter or mortality freezers ❑ Tractor and/or Bobcat ❑ Estimate for new dwelling, if necessary ❑ Permits ❑ Engineering/site work
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DELMARVA INDUSTRY RESOURCES
INTEGRATORS Allen Harim
allenharimllc.com
302.629.2608
Amick
amickfarms.com
410.943.3989
Coleman
colemannatural.com
800.442.8666
Mountaire
mountaire.com
302.934.1100
Perdue
corporate.perduefarmers.com
410.543.3789
Tyson
farmwithtyson.com
757.824.3471
REGIONAL RESOURCES
State Numbers
DE Department of Ag
agriculture.delaware.gov
302.698.4500
Delaware FSA
fsa.usda.gov
302.856.3990 ext. 2
Delmarva Chicken Association
dcachicken.com
302.856.9037
MARBIDCO
marbidco.org
410.267.6807
MD Department of Ag
mda.maryland.gov
410.841.5700
Maryland FSA
fsa.usda.gov
410.479.1202 ext. 2
NRCS
nrcs.usda.gov
University of Delaware Extension
udel.edu/canr/cooperative-extension
302.856.7303
University of Maryland Extension
extension.umd.edu
301.405.2907
VA Department of Ag
vdacs.virginia.gov
804.786.3501
Virginia FSA
fsa.usda.gov
804.287.1500
Virginia Tech Extension
ext.vt.edu
540.231.9347
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FIVE THINGS TO CONSIDER BEFORE STARTING A POULTRY OPERATION
While starting your own commercial poultry business is very exciting, sometimes the anticipation of raising that first flock can cause you to overlook important aspects of the industry. Not to worry though - we have compiled a list of things that you should consider when building an effective business plan. While there are many aspects that make a successful grower, here are five of the main practices you should become knowledgeable in before starting your journey. 1.
Biosecurity: It shouldn’t be surprising that this is at the top of our list. Taking measures to prevent disease exposure is really the first thing you should do to keep your birds healthy. In fact, preventing disease-causing organisms should be considered before any buildings are constructed on your farm. This is due to guidelines around the distance your houses need to be from the road, your shed, and from each other. Other factors include vaccinations, air quality, and traffic control sanitation. Biosecurity will influence the amount of labor and visitors you have on your farm and can even deter you from visiting a friend’s farm without going through safety protocols. A proactive health plan can be the cheapest procedure that you implement with the most significant impacts. It is worth spending a considerable amount of time researching best management practices to ensure the safety of your birds.
2. Litter Management: Litter is a widely discussed topic because of the numerous factors it can influence in your operation, and the information that it can tell you about your flock. Most integrators will want to see a well-practiced litter management plan that follows the correct strategies and standards. Any way you paint it, a poor litter plan will have painful consequences to your operation, including harmful emissions, disease caused by bacteria, and ammonia build up. Your revenue keeps your business afloat, and if your birds are constantly getting sick from their own litter, then your mortality rate will increase and cause you to miss out on flock premiums. Not to mention, selling your litter for fertilizer will be a lot more difficult if it does not retain the nutrients farmers need for their fields. Having a well-thought-out litter management plan for before, during and after birds are placed will keep your integrator happy and put more money in your pocket.
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FIVE THINGS TO CONSIDER BEFORE STARTING A POULTRY OPERATION
3. Air Quality and Airflow Management: Air quality is important in and out of your houses. Poultry litter contains high levels of ammonia which are toxic and have started influencing government monitoring. With changing regulations, the cost of house upgrades demanded by integrators can be unexpected and very costly. On the inside of the house however, air quality should be measured to keep birds healthy and breathing happy. You should consider chickens to be little heaters inside your poultry house. One may not make a difference, but a few thousand can impact the environment inside a house. In summer months, cooling the house will take a combined effort from cooling pads at one end and large fans at the other. Without this airflow, temperatures could get dangerously high and ammonia levels can build up to toxic levels. 4. Downtime between flocks: Just because your birds went out does not mean the work is done; layout periods are just as important as a full flock being placed in your house. This period will be important for preventing disease transmission and correcting any problems the houses may have. Having a checklist of tasks to complete will lead to an efficient transmission period that covers all needed areas of interest. These should include litter quality, ventilation, drinkers, feeders, humidity probes, and heaters. 5. Water Management: Water is extremely important for your birds (and every other living thing on this earth). Whereas organic contracts will require you to test your water every year, it’s also best practice to test your water for its cleanliness, pH levels, and minerals on an annual basis. Poultry will consume more water than feed throughout their lives, making its quality crucial for a healthy flock. Efficient water practices can also affect the equipment and litter inside your houses. Wet litter can be a huge problem, but litter that is too dry can also suggest your birds are not drinking the amount of water they should be. You may need to test different heights of your drinkers and check for blockages in your water lines. Water that is high in calcium and iron can also do heavy corrosive damage to pumps and cooling pads. Although there are many other things to consider before starting a poultry operation, these five practices are the most important to growing healthy flocks and running an environmentally friendly farm. Feel free to reach out to a Farm Credit loan officer with any questions or for more resources on starting a poultry operation.
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FIVE WAYS TO FINANCIALLY MANAGE LONG POULTRY LAYOUTS
Here are a few quick tips that can help keep you on the right track: 1.
Talk to your lender. Your lender is a partner in your business; we’re on your side and want you to succeed. Don’t fear letting us know you are facing difficult times – the sooner we can get ahead of the situation, the better we can serve your account. Lenders can help you evaluate current and future debt, provide additional financing, or even consider restructuring options. Providing accurate and up to date financial statements, tax returns, profit and loss statements, and flock settlement sheets will be important to your lender in order to evaluate your entire financial situation and determine how they can help.
2. Prioritize needs versus wants. As income becomes tighter, there comes a time when it may be necessary to reevaluate your lifestyle. Creating a monthly budget will help you visualize how much money is coming in and where it is going. With this, you’ll be able to prioritize things that you need, versus what could be cut back on. Budgeting allows you to evaluate your spending and find ways to save on necessities such as groceries and gas, but also luxuries like recreational vehicles or equipment that could be sold to reduce monthly payments. 3. Be proactive in your houses. With long layouts, unfortunately there is downtime between flocks, but you can capitalize on this as an opportunity to be proactive in your poultry houses. Utilize this time to make repairs and replacements, as well as clean fans, reflector shields on radiant heaters, or other areas to improve efficiency. Ask your flock supervisor about things you could do in the downtime to make sure your houses are ready to go when birds are available to be placed. 4. Evaluate your business plan. Every operation should have a business plan full of past results, current statistics, market opportunities, and long and short term goals. If you don’t have a business plan, we have a template we can provide to get you started. Consider your options: Can you diversify your operation or increase profits/production in other areas? Is there anyone involved in your operation who could pick up part-time or full-time employment off the farm that doesn’t take away from the success of the operation? Are there any areas of your operation where your expenses are outweighing your profits and you should cut back? The list could go on and on, but it’s crucial to have these difficult conversations with your family or business partners. 5. Take care of yourself. Financial struggles can be the cause of many arguments, stress, and even depression. Do you ever find yourself so focused on taking care of others and your operation, that you don’t make taking care of yourself a priority? It’s important to step back and take time for yourself. You could relax and de-stress by taking a walk, reading a book, enjoying a hobby, or anything else that can help clear your mind for a bit. If you are feeling stressed or need someone to talk to, there are many free resources that your lender can help direct you to. While most growers won’t have to face this situation, it’s good to know that your lender is on your side. Our team is dedicated to guiding you through your flock schedules and payments, no matter what unprecedented times you may face. We value our partnerships with the local integrators and provide unique programs, like our Funds Held Account, to make managing longer layouts easier on you and your family. These five steps aren’t the full solution, but they will help guide you in the right direction.
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MORTALITY MANAGEMENT IS EVERY DAY
STILL COMPOSTING?
Farm Freezer Benefits:
Try Thinking Inside the Box
Operational Savings Time and labor drastically less than with composting
Farm Credit and Greener Solutions are dedicated to providing you with innovative products and services that improve farming operations, such as on-farm freezer units for storing routine mortality.
Better Biosecurity Sealed containers lock pathogens in and lock scavengers out
This new best management practice (BMP) is now eligible for cost-share programs in Maryland, Delaware and Virginia—and Farm Credit will customize a financing package for you so you’ll have no upfront out-of-pocket expenses while waiting for your money. Once the cost-shared funds are received that portion of the loan is repaid— and the balance can be amortized at a term matched to your individual needs.
Simplicity Much easier to manage, greatly reducing your regulatory risk Improved Quality of Life Eliminate the smells, flies and scavengers that come with composting
For more than 20 years growers in other regions of the country have been enjoying on-farm storage and collection services. Thanks to Farm Credit and Greener Solutions, now growers in Delaware, Maryland and Virginia can too.
On-Farm Freezer Units 888.339.3334 | mafc.com |
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PENNSYLVANIA INDUSTRY RESOURCES
INTEGRATORS Alderfer Poultry
alderfereggs.com
215.723.9578
Bell & Evans
bellandevans.com
717.865.6626
BJE Poultry
bjepoultry.com
800.767.4537
Charles Brothers Poultry
717.872.7621
Dutchland Farms (The Wenger Group)
1.800.692.6008
dutchlandfarms.com
Embrovac
570.386.8401
Esbenshade Farms
esbenshadefarmmill.com
717.653.9027
FreeBird
freebirdchicken.com
717.865.2136
Heritage Poultry Management Hillandale Farms
hillandalefarms.com
Joe Jurgielewicz & Son
tastyduck.com
Longnecker’s Hatchery
lh-inc.com
717.867.8366 610.562.3825
Maple Lawn Associates
717.463.2342
Martin’s Quality Eggs
martinseggs.com
717.733.1235
Nature’s Yoke
naturesyoke.com
717.925.0171
Pete and Gerry’s
peteandgerrys.com
800.210.6657
Plainville Farms
plainvillefarms.com
800.742.0206
Risser’s Poultry
risserspoultry.com
717.626.5466
Sauder’s Eggs
sauderseggs.com
717.626.2074
Tyson
farmwithtyson.com
757.824.3471
REGIONAL RESOURCES Center for Poultry & Livestock Excellence
poultryandlivestockexcellence.org
717.651.5920
Farmer Boy Ag (builder)
farmerboyag.com
1.800.845.3374
PA Department of Ag
agriculture.pa.gov
717.787.4737
Penn State Extension
extension.psu.edu
1.877.345.0691
Pine Tree Builders (builder)
717.725.2530
Red Barn (engineers/consultants)
717.393.2176
redbarnag.com
SK Construction
717.365.3070
Team Ag (engineers/consultants)
teamaginc.com
717.721.6795
Zeiset Equipment (builder)
zeisetequip.com
717.665.4056
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NEW POULTRY HOUSE CONTRUCTION
Permits & Plans Required: • Local township - consult for specific requirements needed to proceed with construction project • Sediment & Erosion Control Plan – stamp on plans • Storm Water Management Plan – stamp on plans • Building Permit (Zoning Permit) • Comprehensive Nutrient Management Plan (CNMP) • Odor Management Plan (OMP) • Confined Animal Feeding Operation (CAO/CAFO) permit • Farm Credit is able to provide Letters of Credit if required for construction
Beginning of Construction: • SITE PLAN MUST BE FOLLOWED • Builders risk policy to be provided • Invoices needed to support disbursement • Inspections will be conducted to verify work has been completed per invoice & site survey
End of Construction: • Documentation of permanent insurance in place • Township Write Off • Retain log book per integrator requirements
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NAVIGATING THE POULTRY PERMITTING PROCESS IN PENNSYLVANIA
The poultry permitting process can seem daunting and a bit overwhelming, especially if this is your first time going through the process. Multiple approvals are required from various levels of government, and the process involves numerous professionals working together, such as attorneys and engineers. Below are some tips to make navigating this process a bit easier.
Permits/plans to obtain and have approved: 1.
National Pollutant Discharge Elimination Systems permit (NPDES)
2. Erosion and Sedimentation (E&S) control plan 3. Nutrient Management Plan (NMP) 4. Storm Water Management plans 5. Building permit In order to obtain a building permit approval, plans must be presented, revised, and then re-presented. These presentations take place at township planning and supervisor meetings, which sometimes only occur monthly. If you do not have everything together or if there are multiple revisions, the process may be delayed an additional 30 days, at minimum. Hiring and working with a reputable engineer puts your best foot forward and increases your ability to achieve an approval in a timely manner. The engineer will attend the local government meetings on your behalf to present your plan. They’ll also work with the local engineer and attorney hired by your township. For a poultry project, a nutrient management plan will also be required. (Hiring a local consulting outfit with Nutrient Management Planning Certification is required, but may also be available through the engineers working on your specific project. We recommend asking them up front their credentials to make the whole process simple and streamline.) Typically, to acquire a building permit, a local township or county will require a bond (sometimes called a Letter of Credit) with the owner or business looking to move forward with a construction project. A Letter of Credit (LOC) guarantees the beneficiary (typically the township or county in this case) payment from the borrower. An engineer will develop an Opinion of Probable Cost, which is a dollar value for the E&S control and storm water management plans for a specific project. If an owner or business would be unable to complete the project, these promised funds (LOC) would allow the beneficiary to complete the needed storm water basin, piping, and other material to complete the land development plan, regardless if the end project ever gets completed. This would all be at the owner’s expense. Working with a reputable consulting team, engineer and lender experienced in the construction process in your county and township will greatly improve the success of your project. Farm Credit has valuable relationships with multiple local consultants, engineers and lawyers in the industry – we’re happy to recommend some options and work with them during the lending process. Reach out to us today with any permitting questions, or to get started on your poultry loan.
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VALLEY INDUSTRY RESOURCES
INTEGRATORS George’s
georgesinc.com
800.800.2449
Farmer Focus
farmerfocus.com
540.433.8400
Virginia Poultry Growers Cooperative
vapoultrygrowers.com
540.867.4000
Pilgrim’s Pride
pilgrimsusa.com/contact-us
Cargill
cargill.com
REGIONAL RESOURCES Virginia Poultry Federation
vapoultry.com
540.433.2451
VA Department of Ag
vdacs.virginia.gov
804.786.3501
Virginia FSA
fsa.usda.gov/state-offices/Virginia
804.287.1500
Virginia Tech Extension
ext.vt.edu
540.231.9347
West Virginia Department of Ag
agriculture.wv.gov
304.558.3550
West Virginia FSA
fsa.usda.gov/state-offices/West-Virginia
304.284.4800
West Virginia Extension
extension.wvu.edu
304.293.6131
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