Summer 2015
yields
Summer 2015
Who we are: Northwest FCS is a customer-owned financial cooperative providing financing and related services to farmers, ranchers, agribusinesses, commercial fishermen, timber producers, rural homeowners and crop insurance customers in Montana, Idaho, Oregon, Washington and Alaska. Northwest FCS provides approximately $13 billion in loans and is a member of the Farm Credit System, a nationwide network of borrowerowned lending institutions that provide approximately $217 billion in loans to rural America.
Board of Directors Dave Hedlin, Chair, Mount Vernon, WA Jim Farmer, Vice Chair, Nyssa, OR Christy Burmeister-Smith, Newman Lake, WA Susan Doverspike, Burns, OR Duane (Skip) Gray, Albany, OR John Helle, Dillon, MT Greg Hirai, Wendell, ID Herb Karst, Billings, MT
FEATURE STORY > 3
Dave Nisbet, Bay Center, WA
The U.S. is the largest consumer of sugar globally. We’re also one of the largest sugar importers. Yet our country has the most highly developed industries in the world to process both sugar cane and sugar beets into white crystal sugar
Kevin Riel, Yakima, WA
On the cover: Cody Bingham, Jerome, ID.
Julie Shiflett, Spokane, WA
Nate Riggers, Nez Perce, ID Karen Schott, Broadview, MT
Shawn Walters, Newdale, ID
About Yields Yields is produced for stockholders of Northwest FCS, an Agricultural Credit Association. Comments and story ideas can be sent to the Marketing Department, c/o Northwest FCS, P.O. Box 2515, Spokane, Washington 99220-2515. website: northwestfcs.com
Northwest Farm Credit Services is an equal opportunity
Supporting Rural Communities > 9
employer and does not discriminate on the basis of race, color, religion, sex, national origin, marital status, age, disability,
College Scholarship Winners > 11
disabled veteran, Vietnam era or other eligible veteran status.
Global Economic Trends - Dave Kohl > 12
Article quotes have been edited for content and appropriateness.
Understanding the marketplace Phil DiPofi, President and CEO
We are fortunate to live and work in the Northwest, a region known for its diversity in agriculture. Our customers grow and process hundreds of different crops for domestic and global use. As a financial partner, serving this unique marketplace helps us diversify our portfolio and spread risk across multiple industries. While there are many benefits derived from this portfolio and customer diversity, serving a diverse marketplace also has its challenges. To be an effective financial partner we must deeply understand the various industries we serve. In the Northwest we export products to 157 countries. This means we need to understand not only the domestic marketplace but the dynamic, global markets as well. As you’ll see in this issue of Yields, this is particularly true for commodities like sugar beets, which are increasingly impacted by U.S. and global trade agreements. Our commitment to understanding the many industries and markets we serve sets us apart from other lenders. Our Knowledge Center teams focus on specific commodities, like row crops, dairy and timber. They gather and synthesize market information from many different sources including industry experts and successful Northwest producers. We use this information to educate the next generation of Northwest FCS employees and to help provide advice to our customers through industry cycles. These are exciting times for agriculture. We’re privileged to support our customers in the Northwest’s food and fiber industries who perform a vital role for consumers in the U.S. and around the world.
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Growing U.S. Sugar Sugar—nature’s natural sweetener. For centuries sugar has been used to make nutrient-rich foods more palatable. It’s a strategic food “stuff” that can add essential calories to the human diet quicker than virtually any other food source. Beyond enhancing flavor, sugar also acts as a tenderizer. It speeds the growth of yeast, coagulates egg proteins in custards, incorporates air into the creaming process and regulates gelling for fruit preserves. The U.S. is the largest consumer of sugar globally. We’re also one of the largest sugar importers. Yet our country has the most highly developed industries in the world to process both sugar cane and sugar beets into white crystal sugar. 3 | Nor thwest Farm Credit Ser vices
Worldwide, the U.S. typically ranks sixth in sugar production. Brazil is the world’s largest producer. Developing countries like Brazil, India and Thailand rely heavily on sugar production for jobs and a significant portion
by U.S. consumers each year. Eighty percent of this market is allotted to domestic production and the balance is open to approximately 40 other trading partners. Each country is given a certain amount of sugar they can import into the U.S. through a tariff rate quote system so demand and supply are balanced. Yet, it’s never quite that simple.
of their gross domestic product. It’s no wonder foreign governments highly subsidize their sugar industries. So, how do U.S. producers compete? First, they work together and speak with one voice. They embrace change and new technologies, like bio-tech, that have sharply increased yields. When it comes to making sugar, U.S. producers offer the finest quality in the world backed with the science to prove it.
The global dynamics for sugar The global sugar industry is vastly different from most commodities in agriculture. Essentially, the global industry is a managed market with an intricate mix of trade agreements, tariffs and quotas. In fact, U.S. sugar policy can be traced back to 1789 when the first Congress of the U.S. imposed a tariff on foreign sugar. Today, the U.S. buys more than three million tons of foreign sugar a year, mostly from developing countries. To help support U.S. production and to keep prices in check, the USDA estimates the amount of sugar that will be consumed
“The sugar beet market has really struggled the past three years,” says Duane Grant with Grant 4-D Farms in Rupert, Idaho. “We went from all-time highs back to historical lows, prices we were getting back in the ‘70s. It started when Hurricane Katrina wiped out most of the sugar cane in the U.S. Sugar prices went up significantly. Then global production ramped up. Mexico was very aggressive. The North American Free Trade Act had reached its 10-year phase-in, allowing sugar from Mexico to flow unrestricted into the United States. In a grab for market share Mexican sugar companies, many of which are owned by the Mexican government, were selling sugar here far below prices they were willing to sell for in their own country. It turns out that’s against the law. But, it went on for three years and really hurt our industry.” In 2014, the U.S. sugar industry joined hands and essentially sued Mexico in trade court. An out-of-court settlement is pending. If the trade case with Mexico stands, Mexico will be allowed to backfill any shortage that might develop if domestic producers or trade-partner countries fail to meet their production goals. Sugar production in the U.S. is purposely held below the 80 percent threshold; some years it may be 72 percent. If the industry produces more than 80 percent, and it has happened, they’re required to pay
Duane Grant and Kalvin Miller of Grant 4-D Farms
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As farmers and growers we’re okay with free markets too, but it needs to be fair. If we get rid of all our protections everyone else has to do the same. As sugar producers in the U.S. we know we can out-compete globally and we’re much more efficient.”
Sugar co-ops take the reins
Cody Bingham and Northwest FCS Relationship Manager Bill Lickley
the price to store it and reduce production the following year. In the agreement, other countries will import about 15 percent of U.S. consumption. The remaining 5 percent will be sourced from Mexico. “While we don’t want to increase sugar coming into the U.S. through more free trade agreements, whatever we allow into the country can hurt Mexico.” says Cody Bingham, a young sugar beet grower in Jerome, Idaho. “Mexico has agreed to a fair price now. It benefits them as well. Some people might say governments shouldn’t protect their sugar industries. In the U.S. we want free markets.
Duane Grant’s family has been growing sugar beets in Idaho for more than 50 years. His dad started farming with just six acres and borrowed equipment in 1961 with help from the G.I. Bill. The family grew whatever they could to make a living back then. His parents raised six kids on only 140 acres of farm ground. Back in the day you didn’t get rich being a sugar beet farmer. But, you could always count on beets to pay the bills. When Duane officially joined the family partnership in 1981, the sugar refining companies in the U.S. were privately owned. Sugar companies controlled beet production capacity for the factories’ needs based on government quotas. They contracted with growers for a certain amount of acres. The government was still involved in managing the price of sugar, but growers always felt the sugar companies were between them and the marketplace.
Duane Grant and Northwest FCS Relationship Manager Rich Fehringer
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Everything changed, about 20 years ago, when growerowned cooperatives began taking ownership of the beet refining industry. Today, four main cooperatives in the country process and sell the majority of sugar to U.S. food and beverage companies. Amalgamated Sugar Company,
business and technology with a Masters in international business. He still loves to grow sugar beets. He’s now chairman of the Snake River Sugar Beet Research & Seed Alliance, responsible for overseeing research funding and seed approval for Snake River Sugar’s growing regions. Duane’s family also bought initial shares in the cooperative back in 1996. He borrowed money from Northwest FCS to buy 1,000 shares and nearly tripled annual production in one year. Duane admits in the beginning they struggled to handle the growth. But, this was a turning point in the family business and their lender stood by them. Slowly, over the years the family acquired more shares. Today Grant 4-D Farms grows 7,200 acres of sugar beets and Duane is chair of the Snake River Sugar Company Board.
“Snake River Sugar,” is the largest Northwest sugar beet processor, serving growers across Southern Idaho, Eastern Oregon and Washington.
Proven science transforms the industry
Taking ownership of the company hasn’t always been easy for growers. Sugar markets weakened significantly in 1997, the first crop year they took over, and prices stayed low for years. The young company was saddled with debt. In the early years, owner returns weren’t meeting expectations. But, sugar beet growers like Duane Grant and Cody
try when Roundup Ready™ seed was officially introduced
Bingham could still see the opportunities of buying-in on the ground level of something big.
Grower strong
Science completely transformed the U.S. sugar beet indusin 2008. Grower-owned cooperatives across the country started testing the seed in 2002. Both Duane and Cody supported early trials on their farms. Duane says from 1996 to 2008 the year-on-year yield for sugar beets only increased about half-ton per acre. Slow and steady. But with Roundup Ready™ seed, the year-on-year yield increases doubled! Sugar content in the healthier beets has improved too, while labor and input costs decreased.
“Before planting Roundup Ready™ seed, the industry put Cody bought shares in the new cooperative when he was together an informal council to talk about how the marketjust 15 years old. Bill Lickley at Northwest Farm Credit loaned him the money. Cody grew up watching his place would receive bio-tech sugar beets,” “Refined sugar dad grow sugar beets and the two bought says Duane. “We wanted to make sure we their first shares in the co-op together. To be has no protein really understood how the transition to GMO a member, growers buy common stock. Then would affect the market. We gathered sugar or DNA, so they’re entitled to grow one acre of beets samples from around the world, Russia, Japan there’s no per one acre of additional stock purchased. and every factory in the United States. We difference based initiated a third party, blind study using an inThe initial offering in the co-op was $400 a share per acre with 200,000 shares per acre on the source dependent lab in Paris. The results came back. available. They said, ‘we can’t tell you where this sugar of the sugar. Since then, Cody has pursued his passion for farming. He has degrees in agricultural
Sugar is sugar.”
came from, whether it’s bio-tech, organic or conventional. It’s all sugar.’ Refined sugar has
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All of Snake River Sugar Company’s members plant GMO seed varieties, so all the sugar produced is derived from biotech beets. But several years ago, Snake River Sugar formed a marketing venture with one of the world’s largest sugar traders. The French company has refining capacity in Russia, but they also buy and sell sugar globally. Despite the fact that the sugar is the same, if customers ask, Snake River Sugar can source and find some of the best prices for nonGMO certified sugar as well.
Looking to the future
no protein or DNA, so there’s no difference based on the source of the sugar. Sugar is sugar.” So, how does GMO seed help sugar beets? Simply put, it just helps fight the bullies. Weeds are like playground bullies. They grow faster and beat up the plants. Roundup™ controls weeds. Genetically modified seed simply protects plants from Roundup™ applications. Without weeds sugar beets get more sunlight. They stay healthier when they’re not stressed and they grow like crazy. “The industry knew the value of the technology offered and that the marketplace would accept the sugar,” says Cody. “Based on that knowledge, the entire industry, both U.S. and Canada, independently decided to move forward with rapid commercialization the year regulatory approvals were in place.”
Market acceptance for GMOs Since the introduction of GMO beet seed, the bulk of U.S. food and beverage manufacturers understand that sugar is simply sugar. They know this isn’t a science-based issue. It’s not a health-driven issue. It’s a social media issue. But, some are beginning to ask if Snake River Sugar can source nonGMO too. Brand managers for example, could be getting calls from moms wondering where the sugar in their kids’ cereal comes from. Is it non-GMO? The non-GMO movement has certainly found momentum. “Some customers are curious,” says Duane. “They wonder if we can source non-GMO sugar if they ever need it. Of course we say, ‘Yes, we can provide you with non-GMO.’ The next question is at what cost. That’s the real kicker. There is a small group of customers who are willing to pay for non-GMO certification and consumers who are willing to pay the price.” 7 | Nor thwest Farm Credit Ser vices
Global human consumption for sugar is expected to increase by 1.6 percent for 2015-16, continuing the steady upward trend that has taken place for more than a decade. Global production has naturally been more volatile. While worldwide production has declined the past three years consumption has been catching up. Northwest sugar beet producers like Duane and Cody are optimistic about the industry’s future. Cody says more than 65 different seed varieties are now being tested for approval. The seed alliance has reworked the mathematical side of the formulas, with entry and exit criteria for approval, to get the best possible seed for growers. If USDA can administer the U.S. sugar program the way Congress intended and the trade case with Mexico sticks, the future is very predictable for the U.S. industry, Duane says. “We’ll be able to grow strong, healthy plants, pay our bills and sell our sugar. When the day is done, we’re farmers.”
The High Risk of Hotel Wi-Fi Just because you’re staying at a nice hotel doesn’t mean hackers aren’t around the corner. Identity thieves may be more interested in what’s going over your hotel Wi-Fi connection than what’s in your wallet. Beware of computer attacks via unsecured hotel hotspots. Travelers are targeted through pop-up windows while establishing an Internet connection in their hotel room. A pop-up window prompts users to update a widely-used software product, such as Microsoft, Adobe Flash, Google Toolbar, or other recognizable software. In an attack scenario, however, the “update,” is really a virus or malware that enables the hacker to take control of the victim’s computer. In fact, always assume you’re not alone on any public Wi-Fi network. Disable file sharing, turn on your computer’s personal firewall, and never send Social Security numbers, passwords or financial information when using an unencrypted wireless connection.
5 Tips to Block Hotel Wi-Fi Malware 1. Update Before Leaving Install the latest application and operating system security updates onto your laptop, smartphone, and tablet before heading out. Also, ensure that updated antivirus software is running on the device and is also fully updated. While surfing the Web via hotel Wi-Fi, ignore all unsolicited software-update offers. If updates are necessary, update software directly from the vendor’s Web site. 2. Block Pop-Ups Never, ever click on a pop-up window. No major, reputable site requires a pop-up to work or function. Configure your browser to block all pop-ups. 3. Handle Free Wi-Fi with Caution The FBI advises users to treat all free hotspots with caution. 4. Read Hotel Wi-Fi Directions Fake Wi-Fi access points are designed to look just like real hotel Wi-Fi networks. These “Evil Twins” may even contain a variation of your hotel’s name. Avoid connecting to fake hotspots by verifying which network actually belongs to the hotel. If you do connect to the wrong hotspot, the hacker could see all of your Internet activities, including your log-in information and passwords. A great option is using your phone via 3G/4G as the connection point rather than Wi-Fi. 5. Don’t Be Afraid to Hibernate If your computer has signs of infection, put it in hibernate or sleep mode until you can get expert help in repairing or restoring the system. Take the system offline as fast as possible to prevent further data exfiltration and damage.
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Farm Credit: Helping to Power the Northwest’s Rural Communities The Farm Credit System’s mission to support rural America
Some of those dams are 75 years old or more. Much of
means more than simply providing reliable, consistent credit
the financing that Clearwater receives goes into regular
and financial services to farmers and ranchers. Agriculture
maintenance to keep its customer-members consistently
relies on infrastructure to be globally competitive –
supplied with power. In particular, CoBank has helped
including dependable and affordable power, water and
refinance some of the co-op’s debt, saving hundreds of
communications services. Farm Credit is a longtime source
thousands of dollars in interest costs, and freeing up money
of financing for these vital industries, providing the financial
for capital improvements.
resources they need in order to thrive. One of Northwest Farm Credit Services’ partner institutions, CoBank, has a rural infrastructure portfolio totaling over $16 billion. In addition to acting as the funding bank for Northwest FCS, CoBank serves rural electric co-ops, communications providers and water systems in all 50 states. CoBank is also a major agricultural lender to farmerowned cooperatives and other agribusiness companies. Many of CoBank’s infrastructure customers operate in Northwest FCS’ five-state territory. Take Clearwater Power Company, in Lewiston, Idaho, which has been providing
Cordova, Alaska
power to northern Idaho, western Washington and northwest Oregon since 1937. Clearwater gets most of its
CoBank began working with Clearwater in 2010, when the
power from hydroelectric dams on the Snake and Columbia
bank helped the co-op secure a $5 million line of credit. That
rivers, operated by the Bonneville Power Administration.
has meant upgrades to poles, lines and basic infrastructure.
9 | Nor thwest Farm Credit Ser vices
“We even started financing some bucket trucks with vehicle
diesel fuel for its power, began searching for cleaner forms
loans in 2014,” observes John Donner, CoBank’s relationship
of energy.
manager with Clearwater. CoBank helped Cordova Electric finance two hydroelectric Having access to those improvements is a big deal in
dams, the Humpback Creek and Power Creek projects.
northern Idaho, where the Great Recession lingered much
Humpback Creek became operational in 1991 and was
longer than it had in the rest of the nation. “I would say
refinanced in 1999. Power Creek, with nearly five times the
that 2014 was the first year since the recession that our
capacity of Humpback Creek, joined it in 2001. Together, the two hydro plants now supply 70 percent of
area saw new construction turn around and increase from the prior year,” says Dave Hagen, Clearwater’s general manager. In that sort of environment, Clearwater is eager to help support its local community any way it can. The co-op supports such organizations as the Clearwater County Economic Development Association, the Latah County Economic Development Council, and the Northwest Intermountain Manufacturers Council. As a good corporate citizen, the coop takes pride in not just providing electricity
Agriculture relies on infrastructure to be globally competitive – including dependable and affordable power, water and communications services.
to its customer-members, but in the overall
the power to the city of Cordova. Both plants were built with sustainability in mind, minimizing the impact on the environment – especially the salmon that spawn in the creeks – and taking into account the needs of Cordova’s residents now and in the future. “Alaskans have a very independent spirit,” said Clay Koplin, CEO of Cordova Electric. “Energy security and independence are important to us, and we wanted to harness
economic growth of the area. “We’re finally seeing some
our local resources to provide that. We are able to protect
positive movement,” says Hagen.
and preserve this beautiful place and still support a strong local economy and the standard of living our members want and deserve – made possible by locally powered and delivered energy.” Without financial support from Farm Credit, these organizations would be less able to serve their communities, and the agricultural occupations they support would be in serious trouble. Life in a rural area relies on more than just the ranching or farming or fishing, and these infrastructure projects help sustain a way of life throughout the rural areas of the Pacific Northwest. “Good infrastructure is critically important to the U.S. rural
Cordova Electrics’ Humpback Creek Dam project
economy and the overall quality of life in rural America,” says Tom Halverson, CoBank’s chief banking officer.
There’s a similar story up in Alaska, where Cordova Electric
“Our customers make a huge difference in their local
supports its namesake fishing community, a town of 2,316
communities, and we’re proud to serve them and support
located at the southeastern end of Prince William Sound.
their borrowing needs.”
After the area was decimated by the Exxon Valdez oil spill in 1989, the community, which had historically relied on
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Northwest FCS Awards 64 Scholarships Totaling $128,000 Sixty-four scholarships were awarded to sons and daughters of Northwest FCS customers and employees; eight high school students and four college students from each state received scholarships. In addition, eleven college scholarships open to all students were awarded, including eight scholarships for students at land grant universities and three students were chosen as Minority Scholarship winners. All scholarships are $2,000.
College Winners
Oregon
Idaho
Montana
Jaimee Brentano
Dillan Henslee
Morgan Beckett
St. Paul, OR John and K’Lyn Brentano Oregon State University
Hagerman, ID Mark and Brenda Henslee University of Idaho
Broadview, MT Glenn and Colleen Beckett Montana State University
Samantha Brentano
Ryan Luttmer
Dallas Briese
Corvallis, OR Thomas and Janis Brentano Oregon State University
Hagerman, ID Scott and Sandi Luttmer Brigham Young University-Idaho
Loma, MT Kim Briese Montana Tech
Garrett Kitamura
Kevin Permann
Dan Johnson
Ontario, OR Grant and Carole Kitamura Oregon State University
Rockland, ID Alan and Donna Permann Brigham Young University-Idaho
Dillon, MT Jeff and Tami Johnson Kansas State University
Katelyn Michaels
Nicole Wemhoff
Brittney Steele
Days Creek, OR Troy and Holly Michaels University of Northern Colorado
Grangeville, ID Roger and Annette Wemhoff University of Great Falls
Valier, MT Glenn and Stacey Steele Sheridan College
Washington
Emily Beebe Pullman, WA David and Denise Beebe Washington State University
Grace den Hoed Grandview, WA Archie and Mari den Hoed Dordt College
Alyxandria Hanson Elk, WA Travis and Lori Hanson Oklahoma State University
Joel McClure Walla Walla, WA Daniel and Sarah McClure University of Washington
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High School Winners Washington
Benjamin Azevedo Othello, WA Lisuarte and Guiomar Azevedo University of Washington
Nolan Henry
Alena Zurcher
Quincy Pendergrass
Camas, WA Darin and Monica Henry University of Notre Dame
Mesa, WA Edward and Heather Zurcher University of Washington
Adrian, OR Michael and Elisa Pendergrass Blue Mountain Community College
Oregon
Maria Thompson
Hanna Peters Melody Davidson Othello, WA Michael and Dana Davidson Brigham Young University
Prosser, WA Robert and Frances Peters Brigham Young University
Jake Fessler Woodburn, OR Richard and Melanie Fessler Oregon State University
Jordan Sherfey Dylan Day Cashmere, WA Daniel and Deborah Day University of Washington
Elizabeth DeReu Greenacres, WA Bill and Michelle DeReu University of Montana-Missoula
Emma Franklin Seattle, WA Dave Franklin and Ruth Solnit Northwestern University
Diamond, OR David and Ramonda Thompson Berklee College of Music
Idaho
Lee McElligott
Ashlyn Aardema
North Powder, OR Matt and LaDonn McElligott Utah State University
Kimberly, ID Michael and Sarah Aardema University of San Diego
Meagan McKinney
Madison Behrend
Wasco, OR Bryan and Kimberly McKinney Oregon State University
Aberdeen, ID Nicholas and Kristin Behrend Idaho State University-Pocatello
Matthew Warren
Jillian Nielson
Hank De Vries
Dayton, WA Bill and Kristine Warren University of South Carolina
Adrian, OR Bret and Jennifer Nielson Brigham Young University-Idaho
Buhl, ID Gregory and Julie De Vries California Polytechnic St. University
Chehalis, WA Justin and Debrah Sherfey Pacific Lutheran University
Riley VanderVeen Sedro Woolley, WA Larry and Beth VanderVeen Wayne State College
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High School Winners
Land Grant
Washington
Whitney Fredrickson Troy, ID James and Wendy Fredrickson Blue Mountain Community College
Cierra Lamey
Grace Wilkins
Wise River, MT Cory and Kari Lamey Montana State University-Billings
Great Falls, MT Dan and Diane Wilkins Carroll College
Graduate
Travis Chase New Plymouth, ID Mike and Donna Chase University of Idaho
Tylynn Rettig Jonathan Isham Howe, ID Jeffery and Kelly Isham Idaho State University-Pocatello
Rudyard, MT Shawn and Tiffany Rettig Carroll College
Hannah Mamer Caldwell, ID Marc and Diana Mamer University of Idaho
Stephanie George Pullman, WA Steve and Ann George Washington State University
Minority
Amy Riley Caleb Johnson Blackfoot, ID Robert and Dana Johnson Brigham Young University-Idaho
Volborg, MT Mike and Margie Riley University of Montana-Missoula
Jenica Hagler Maria Navarro Toppenish, WA Clemente and Maria Navarro Washington State University
Kourtney Simonson Travis Field Pendroy, MT Patrick and Diane Field Montana State University-Northern
Loring, MT Matthew and Heather Simonson Rocky Mountain College
Sidney Hathaway
Kendra Starkel
Denton, MT Kraig and Jodi Hathaway Montana State University
Ronan, MT Roger and Kathy Starkel Arizona State University
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Pullman, WA Rod Nettinga and Patty Hagler Washington State University
Heidi Jamison Andrew Roluffs Tigard, OR Mark and Sue Roluffs Oregon State University
Garfield, WA Rusty and Sandy Jamison University of Idaho
Veronnaka Klamert Karen Montes Hermiston, OR Miguel Montes and Maria Del Carmen Oregon State University
Billings, MT Gene and Ronna Klamert Montana State University
Land Grant
Newly Elected Board Members Jim Farmer, Susan Doverspike and Duane (Skip) Gray were newly elected to the Northwest FCS Board of Directors in March. Each will serve a five-year term.
Theresa O’Leary Paisley, OR Mike and Mary O’Leary Oregon State University
Jim Farmer was re-elected to the Northwest FCS board and now serves as vice chair. Jim and his brother operate a 2,000 acre irrigated row crop farm with operations in Idaho and Oregon. Together they produce onions, wheat, field corn and dry edible beans for seed. They also operate a fresh onion packing shed that markets approximately 1,000 onions annually. Jim has been a Northwest FCS customer for 33 years. He is
Riane Towery Salem, OR Scott and Julie Towery Oregon State University
a member of the American Institute of Certified Public Accountants, the Idaho-Oregon Fruit & Vegetable Association and the National Onion Association.
Susan Doverspike owns and operates a cattle ranch together with her husband in the high desert near Burns, Oregon. They own about 30,000 acres and manage another 100,000 acres of federal grazing Marni Wade
permits. The cow/calf/yearling operation markets
Volborg, MT Gary and Linda Wade Montana State University
natural, non-hormone treated, age source verified, GAP 4, non-GMO cattle. She has been a Northwest FCS customer since 1994 and served on the Redmond Local Advisory Committee. Susan serves on the board of Harney District Hospital, the Oregon Beef Council and is a member of the Oregon Cattlemen’s Association.
Duane (Skip) Gray is CEO and President of a diversified crop production business in Oregon that produces vegetable and flower seeds, processed vegetables, peppermint, hazelnuts and grass seed. In a typical year, the operation grows 50 to 60 different crops on approximately 1,350 irrigated acres. Skip has been a Northwest FCS customer for 34 years and served 14 years on the Salem Local Advisory Committee. He is treasurer for the Specialty Seed Growers of Western Oregon and serves on the Government Affairs Committee of the Albany Area Chamber of Commerce.
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Global Economic Trends: Think Globally & Act Locally Dr. David Kohl Professor Emeritus, Virginia Tech
One of the enjoyments of my relationship with Northwest Farm Credit Services is working with local farmers, ranchers and team members at various educational venues. I have observed the rural, northwestern region of the U.S. as unique because of the general awareness of global trends and how they impact economic well-being, a direct result of this region’s dependence on exports and global markets. Similarly, producers outside the U.S. exhibit the same understanding of consumer trends, value of currency, geopolitical risk and how each of these impact businesses and personal lives. In my travels across the country, I often encounter producers who believe world trends and economics revolve around domestic agricultural production. With 95 percent of global consumers living outside the U.S., we must make ourselves as marketable as possible. By 2050, world demand for food, fiber and fuel will increase by 70 percent beyond current needs, so the ability to think on a global scale and then adjust your operation accordingly has never been as important. How do global economic trends impact your business? First, examine the central banks abroad and the U.S. Federal Reserve. As a result of the great recession in 2009, the U.S. Federal Reserve developed a very accommodative, easy money policy. This in turn lowered the value of the dollar which encouraged agricultural exports and lowered interest rates. Some economists estimate up to 40 percent of the increase in commodity prices and land values was the result of Federal Reserve action. Today, central banks in Europe, Japan and even China are embarking on an easy money strategy to boost their export potential and assist in increasing equity values. This global change has challenged industries exporting goods and services abroad because of
15 | Nor thwest Farm Credit Ser vices
the strong dollar. These worldwide central bank short and long-term strategies are creating a strong “king� dollar. The duration of the strong dollar will be a global headwind to many in the agricultural industry. Another global trend is geopolitical risk. Mr. Putin decided that Russia needed to invade Ukraine. In response, Western nations placed economic sanctions on Russia. In retaliation, Russia limited agricultural imports which impacted commodities ranging from wheat to dairy. Because of the basic need for food, fiber and fuel, agricultural exports are historically the first political tool of persuasion in foreign policy. Thus, agriculture is one of the first industries to feel the impact of risk associated with political and military actions. Recently, I moderated a panel that included dairymen from Ireland and Germany. Elimination of milk quotas in the European region, a significant milk-producing area, is one of the factors currently impacting dairy profits. Today, one in seven days of milk production in the U.S. is exported. This is a significant increase from past years. If the European region expands production and the Irish meet their mandate to increase production by 50 percent by the year 2020, there will be an increase in supply. This can influence prices as well as profits for the dairy industry in the Northwest and throughout the United States. The West Coast port strike had a devastating impact on the bottom line of those producers that depend on exports. One producer that exports hay to Asia found prices down 50 percent as a result of the strike because his alternative market was the California dairy and beef cattle herds.
The long-term viability of a market can also be hindered because of an interruption in the supply or supply chain of that product, impacting overall trust in the marketplace. In summary, whether it is a Russian invasion, European market changes, or a Washington state worker strike, each of these events impact agriculture as well as producers’ ability to move their products. In my educational venues I suggest that producers follow consumer and regulatory trends in the European region because they will likely emerge in the U.S. within a decade. Close observation of Asia is also prudent because this region is so close in proximity to the Northwestern region. Whether it is banking, regulation, food issues, or other challenges, watching both Europe and Asia will be imperative to one’s success. There is no doubt that the economic growth of the emerging nations, also known as the BRICS and KIMT nations (Brazil, Russia, India, China, South Africa and South Korea, Indonesia, Mexico and Turkey), helped create the recent commodity super cycle which resulted in high profits and asset appreciation for many in the agricultural industry. Subsequently, the slowdown or moderation of growth in the emerging nations is causing economic stress in some agricultural industries. No matter where, once an economic event happens, it can trigger a dominolike effect worldwide. Demographics is also another major global trend. For example, Japan, Europe and, to some extent, China have aging populations. Contrast this to Mexico where people under 25 years of age number are 45 percent of their population. The agriculture industry and producers in general need to have a keen understanding of demographics, specifically the impact of the millennial generation (18 to 34 years of age). It is this generation that will move consumer, economic, political and social trends worldwide. Recently, I asked a number of Mexican bankers to name their biggest challenge. The response was dysfunctional government. Does this sound familiar? Almost any professional will list government under their top points of frustration. The message here is to make an effort to understand the challenges and concerns other countries face. You may know how to grow three hundred bushels
of corn per acre, but if you do not understand Indonesia’s increased need for feed and infrastructure, you may miss the opportunity to participate in that market. Today’s producers must stay apprised of global economic events because, as demonstrated, they will likely impact producers’ operations and profits. Perhaps, there once was a time when everything a producer needed to know to grow and sell a crop was within a few miles from his home. Today, the United States and all its production is only a piece of the multi-faceted and intricate system through which the world is fed and fueled. The agriculture industry is an amazing demonstration of continued progress and production. However, no matter how much we improve technology or production practices, global factors will always impact agriculture’s success. In order to excel in today’s agricultural environment, one must think globally and act locally.
How can you prepare your business for global impact? • First, educate yourself on global cultures and issues. Encourage young people in your life to work or study abroad. Experiencing a foreign culture is just as important as understanding a foreign language. • Second, read international publications. The Economist and the Financial Times are good publications to start with. Both publications discuss world trends and issues from an international perspective. • Third, do not rely solely on one international market in business planning. Market availability can change rapidly as a result of political, military or regulatory actions. Scenario planning which includes an alternative market is critical in your ability to take advantage of global trends and opportunities. • Next, participate in an agriculture group that promotes an international business environment. State leadership groups, educational programs and student exchanges can often be valuable in developing a connection or understanding of global components of the economy. • Finally, acceptance of new paradigms will be critical for success in global markets. New technology, ideas building upon past practices, and connecting with people inside and outside your business as important resources will be imperative in the wild world of global economic trends.
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Marijuana Financing
The state-level industries of marijuana production
necessary to comply with federal law to extend credit to
have created a new challenge for lenders. The crop is
the industry and the application of forfeiture laws.”
federally illegal and the budding industry is unproven. Three of the four states who have voted to legalize
From a lending standpoint, marijuana production creates
production are within Northwest FCS territory. Lending
a whole host of risk management concerns beyond the
for marijuana production or marketing, under current
fact the plant is federally illegal to grow. Flood or crop
law, could create risks for Northwest FCS.
insurance is not available to marijuana producers. Since marijuana lacks specific farm product status and licenses
“We’re a federally chartered entity regulated by the Farm Credit Administration, an agency of the federal government,” explained Craig Crider, Northwest FCS Senior Vice President of Customer Solutions. “Involvement in financing marijuana businesses could result in negative actions against Northwest FCS and impair our ability to effectively serve customers.” Northwest FCS loan documents, for example, contain provisions stating the borrower must comply with all present
do not transfer freely, there is no guarantee a lender could collect in the event of a loan default.
“From a credit standpoint, this is a new and unproven industry lacking production history, marketing channel performance and price history.“
“From a credit standpoint, this is a new and unproven industry lacking production history, marketing channel performance and price history, “said Crider. “If you step into a new agricultural business where you don’t have a track record, industry performance records provide a level of confidence until the grower can establish his or her own production and profitability performance.”
and future laws. Operating a marijuanarelated business would cause the borrower to be out of
Financing marijuana is a substantial risk both legally and
compliance with these provisions on the federal level.
as an unproven business. If marijuana were legalized at
While marijuana laws may have changed on the state
the federal level, Northwest FCS would re-evaluate this
level, they remain subject to enforcement under the
position. Currently, the best choice is to refrain from
federal Controlled Substances Act.
financing marijuana production on any level.
“There is no established law that says whether or not
“To do otherwise would put ourselves at risk and
marijuana is a crop,” said Terry Schmidt, Northwest FCS
our customers at risk, as stockholders/owners of the
Assistant General Counsel. “The marijuana industry has
association” said Crider.
little legal or regulatory history. Lenders are concerned about the effect of tax laws, the level of due diligence 17 | Nor thwest Farm Credit Ser vices
local
advisors and locations
IDAHO Robert Ball Jeff Bartschi Cody Bingham Jeff Blanksma, Jr. Adrian Boer Ray Carlson Connie Christensen Craig Corbett Cade Crapo Ron Elkin Carl Ellsworth Bruce Foster David Funk LeRoy Funk Brent Griffin Jackie Hillman Brian Huettig Joshua Jones Brent Lott Karen Lustig Marty Lux Dan Mader Ray Matsuura Kyle Meyer Ron Mio Greg Moss Lisa Patterson Greg Payne Erick Peterson Royce Schwenkfelder Kirt Schwieder Scott Searle Todd Simmons Robert Swainston Ryan Telford Bernie Teunissen Dale Thomas Camellia Thurgood Justin Tindall Ritchey Toevs Steven Toone James Udy Todd Webb Shane Webster Pete Wittman Matt Wolff
MONTANA Hamer Montpelier Jerome Hammett Jerome Blackfoot Blackfoot Grace St. Anthony Buhl Leadore Aberdeen Hansen Burley Rupert Hamer Hazelton Troy Idaho Falls Cottonwood Nezperce Genesee Blackfoot Rathdrum Fruitland Ketchum Heyburn Caldwell Moscow Cambridge Idaho Falls Shelley Terreton Preston Richfield Caldwell Gooding Nampa Bruneau Aberdeen Grace American Falls Declo Rexburg Lapwai Boise
73 Fort Hall Avenue, Suite A American Falls, Idaho 83211 (208) 226-1340 370 North Meridian Street, Suite A Blackfoot, Idaho 83221 (208) 782-3800 1408 Pomerelle Avenue, Suite B Burley, Idaho 83318 (208) 678-6650
Les Arthun David Bell Bill Bergin Mark Bergstrom Adam Billmayer Bart Bitz Ryan Bogar Jonathan Bolstad Keven Bradley Sandy Carey Calvin Danreuther Nels DeBruycker Vicki Eggebrecht Warren Flynn Conni French Joe Fretheim Scott Glasscock Beth Granger Greg Grove Chad Hansen Craig Henke Courtney Herzog Dale Hirsch Alan Klempel Steve Lackman Tim Lake Bryan Mussard Corie Mydland Ken Olson Jon Owen Miles Passmore Tracey Pearce Robert Peterson Trudi Peterson Shawn Rettig Dave Sattoriva Nancy Schlepp Kim Skinner Carmie Steffes Steve Swank Kurt Swanson Duane Talcott Dale Tarum Bob Taylor Kelly Toavs Mark Tombre Miles Torske Brian Tutvedt Larry Tveit, Jr. Bruce Udelhoven Mike Wallewein Steve Wood
P.O. Box 2515, 1700 S. Assembly St. Spokane, Washington 99220-2515 509.340.5300 | northwestfcs.com
OREGON Wilsall Great Falls Melstone Brady Hogeland Big Sandy Vida Homestead Cut Bank Boulder Loma Choteau Malta Townsend Malta Shelby Angela Great Falls Moccasin Dillon Chester Rapelje Kinsey Bloomfield Forsyth Polson Dillon Joliet Richey Geraldine Somers Sheridan Hobson Judith Gap Rudyard Hingham Ringling Hall Plevna Chinook Valier Hammond Richland Denton Wolf Point Savage Hardin Kalispell Fairview Winifred Conrad Sheridan
Tech Plaza, Building 1, Suite 300 3490 Gabel Road Billings, Montana 59108 (406) 651-1670
501 King Street Cottonwood, Idaho 83522 (208) 962-2280
1001 West Oak Street Farm Credit Building, Suite 200 Bozeman, Montana 59715 (406) 556-7300
1215 Pier View Dr. Idaho Falls, Idaho 83402 (208) 552-2300
519 South Main Street Conrad, Montana 59425 (406) 278-4600
2631 Nez Perce Drive, Suite 201 Lewiston, Idaho 83501 (208) 799-4800
134 East Reeder Street Dillon, Montana 59725 (406) 683-1200
16034 Equine Drive Nampa, Idaho 83687 (208) 468-1600
501 1st Avenue South Glasgow, Montana 59230 (406) 228-3900
102 North State St., Suite 2 Preston, Idaho 83263 (208) 852-2145
700 River Drive South Great Falls, Montana 59405 (406) 268-2200
1036 Erikson Drive Rexburg, Idaho 83440 (208) 656-2100
1705 US Highway 2 Northwest, Suite A Havre, Montana 59501 (406) 265-7878
815 North College Road Twin Falls, Idaho 83301 (208) 732-1000
120 Wunderlin Street, Suite 6 Lewistown, Montana 59457 (406) 538-7737 502 South Haynes Avenue Miles City, Montana 59301 (406) 233-3100
Headquarters
Monet Allen Reed Anderson Roben Arnoldus Glenn Barrett Alex Blosser John Boyer Greg Brink Ron Brown George Bussmann Warren Chamberlain Jason Chapman Tim Dahle Dan Dawson Paul Denfeld Karl Dettwyler Mike DeWall Rod Fessler Tom Fessler Joe Finegan Bruce Ford Javier Goirigolzarri Dennis Harmon Matt Insko Kenneth Jensen Kyle Kenagy Alan Keudell Diane Kunkel Leland Lage Sharon Livingston Bill Martin Scott McClaran Ron Meyer Greg Myers David Neal Larry Parker Alan Parks Amy Doerfler Phelan John Reerslev Stephen Roth Shannon Rust Marc Staunton Anna Sullivan Steve Walker Eric White
WASHINGTON Montague, CA Brownsville Cove Bonanza Dundee Haines Joseph Milton-Freewater Sixes Vale Klamath Falls The Dalles Roseburg Hillsboro Silverton Harrisburg Madras Mt. Angel Cornelius Hermiston Roseburg Grants Pass LaGrande Vale Roseburg Aumsville Portland Hood River Mt. Vernon Rufus Joseph Talent Tillamook Tangent Helix Silver Lake Aumsville Junction City Brothers Echo Merrill Hereford Stanfield Nyssa
3370 10th Street, Suite B Baker City, Oregon 97814 (541) 524-2920 2345 Northwest Amberbrook Drive, Suite 100 Beaverton, Oregon 97006 (503) 844-7920 650 East Pine Street, Suite 106A Central Point, Oregon 97502 (541) 665-6100 2911 Tennyson Avenue, Suite 301 Eugene, Oregon 97408 (541) 685-6140 300 Klamath Avenue, Suite 200 Klamath Falls, Oregon 97601 (541) 850-7500 308 Southeast 10th Street Ontario, Oregon 97914 (541) 823-2660 12 Southwest Nye Avenue Pendleton, Oregon 97801 (541) 278-3300 3113 South Highway 97, Suite 100 Redmond, Oregon 97756 (541) 504-3500 2222 Northwest Kline Street Roseburg, Oregon 97471 (541) 464-6700 650 Hawthorne Ave. S.E., Suite 210 Salem, Oregon 97301 (503) 373-3000 3591 Klindt Drive, Suite 110 The Dalles, Oregon 97058 (541) 298-3400
Dave Allan Loren Beale Jeff Bosma Russ Byerley Roger Canfield Bill Clark Mike Cobb Bill denHoed Richard DeRuwe Frank DeVries Scott Eschbach Patrick Escure Kevin Filbrun Steve Fish Stacy Gilmore Alan Groff Lori Hayles Ian Jefferds Cris Kincaid Jim Klaustermeyer, Jr. Tristan Klesick Chris Kontos Steve Krupke David Lange Josh Lawrence Poppie Mantone Dan McKay John Miller Pat Murphy Jerry Nelson Brian O’Leary Eric Olson Jeff Raap Sara Rolfs Jason Salvo Derek Schafer Jeff Schilter Danielle Scrupps Ben Smith Jerry Smith Jim Stone Lori Stonecipher Mark Tudor Jake Wardenaar Andy Werkhoven
Wapato Pomeroy Outlook Touchet Olympia Chelan Ephrata Grandview Dayton Lynden Yakima Quincy Pasco Sitka, AK Pasco Wenatchee Pasco Coupeville Pullman Othello Stanwood Walla Walla Reardan Colfax Royal City Bingen Almira Toledo Chehalis Burlington Kodiak, AK Anchorage, AK Ellensburg Wenatchee Seattle Ritzville Olympia Ritzville Sequim Benton City Lakewood Walla Walla Grandview Royal City Monroe
265 East George Hopper Road Burlington, Washington 98233 (360) 707-2353 629 South Market Boulevard Chehalis, Washington 98532 (360) 767-1100 224 North Main Street Colfax, Washington 99111 (509) 397-2840 1501 East Yonezawa Boulevard Moses Lake, Washington 98837 (509) 764-2700 9530 Bedford Street Pasco, Washington 99301 (509) 542-3720 2157 North Northlake Way, Suite 120 Seattle, Washington 98103 (206) 691-2000 1515 South Technology Boulevard, Suite B Spokane, Washington 99224 (509) 340-5600 2735 Allen Road Sunnyside, Washington 98944 (509) 836-3080 1 West Pine Street Walla Walla, Washington 99362 (509) 525-2400 667 Grant Road, Suite 1 East Wenatchee, Washington 98802 (509) 665-2160 1360 North 16th Avenue Yakima, Washington 98902 (509) 225-3200
3021 Palmer Street, Suite B Missoula, Montana 59808 (406) 532-4900 123 North Central Avenue Sidney, Montana 59270 (406) 433-3920
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| 18
P.O. Box 2515 Spokane, Washington 99220-2515 New address? Please notify your local Northwest FCS office.
Take Your Best Shot Win $100 2016 Photo Calendar Contest Help us fill our 2016 Photo Calendar with agricultural imagery that illustrates Northwest Farm Credit Services’ purpose: To serve the people of Northwest farming, ranching, forestry and the commercial fishing industries. If your photo submission appears in the 2016 Calendar you earn a $100 cash prize!
Contest Entries All entries must include a Northwest FCS customer with their family or a customer with a staff member. Customers can be photographed eyes to camera or in a candid presentation. Photos should capture an authentic image of the operation: • Planting, timber, irrigation, livestock or harvest scenes. • Industry shots of vineyards, commercial fishing, dairy farms, orchards, vegetable operations, nurseries, greenhouses, etc. • Action shots in fields, forests, barns or docks. • Seasonal photos, such as holiday decorations, 4th of July events, pumpkins, winter scenes, etc. • County fairs, roadside markets or farmers markets.
For rules and submission instructions visit: northwestfcs.com/photocontest
Submit Your Winning Photo Today The deadline for photos is September 30, 2015.
This institution is an equal opportunity provider and employer.