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From The Fields: Happy Halloween!

By Steven Thomas, BMO Harris Bank, Onalaska

Playoff football, tournament volleyball, and cross country meets dominate the local sports scene. Like many, I am heavily invested in my own community’s success this year with an Onalaska football squad still undefeated and advancing to Level 3 of the playoffs for the first time in 20+ years. This past Saturday, I was fortunate to watch three of our runners compete in the WIAA State Cross Country meet in Wisconsin Rapids. Our hometown favorite, Manny Putz, an Onalaska sophomore, won the D1 WIAA Cross Country meet on a beautiful day posting a 0.2 second margin of victory after an all-out sprint in the last 200 meters to the finish of the 5,000 meters run. From the Braveheart like battle charge at the sound of the starting gun to watching the final sprints at the finish. It is a pleasure to watch these gifted athletes give their all.

Like these runners, farmers are on their annual race to the finish of the 2022 harvest season. Travels across the Midwest reveal steady progress in the corn and bean crop bringing in above average yields in areas that received adequate moisture, below average in areas where moisture was dryer conditions prevailed. Corn that is not drying down quickly coupled with higher drying costs are expected to eat into profit margins.

Dryer conditions this fall have made for good harvesting conditions with few weather delays experienced. The annual ritual of fall applied dairy-generated fertilizer is certainly noticeable around the countryside. Fall seeded cover crops and winter grains have mostly been planted.

During this harvest season, beyond the yields coming in, the biggest discussion with clients has been related to end of year planning. Despite all the inflationary pressures, supply chain disruptions and high costs, most clients are looking at solid returns this year. End of year tax strategies will certainly be implemented in the next 2 months as farmers look to mitigate anticipated tax obligations. Meet with the accounts early to develop the plans appropriate for each operation. Tax rates could be adjusted and paying some of the tax burden this year when cash is more readily available can be one consideration. We do anticipate supply chain issues and transportation challenges will continue which could impact chemicals and fertilizer availability that are likely to be prepaid.

Political ads are dominating the airwaves with every candidate trying to make their best case for themselves and make their opponent look as bad as possible. I have my own opinions on those I’ll be supporting with my vote. Fortunately, the election is only a few days away and the ads will stop, but the task of governing in a bipartisan manner with legislative solutions that find common ground and benefit the common good seem to be harder and harder to reach. Your vote is important. Local races, school boards, town boards, school funding referendums all matter. I encourage all to cast your ballot in this very important mid-term election.

Steven Thomas is vice president of agricultural banking with BMO Harris Bank in Onalaska. Thomas also serves on the WBA Agricultural Bankers Section Board of Directors.

 

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From The Fields: Expect Turbulence

By Nicholas Felder

“Ladies and gentlemen please make sure your seat belt is securely fastened and your seat backs and tray tables are in their full upright position.” As many of us know, these instructions are for the safety and soundness of all those aboard commercial aircraft during what might not be a perfect landing. Well, we might all want to heed that advice and reiterate that to all our customers as soon as possible.

As of the date of this article, the American grain producer is facing $6.60 corn (which oscillated from $4.85 to $7.60 down to $5.65 now $6.60) and $13.94 soybeans (same $12.50, then $15.85, then $12.85, then $14.75, now $13.94) which isn’t all bad! However, all the pilots (and the passengers alike) who are flying across the 2022 crop year aren’t exactly sure where the runway is located and in what condition it stands. As they peer down towards harvest and post-harvest, they must deal with a dense layer of fog comprised of inflation, a strengthening dollar, global unrest, weather, mid-cycle fall elections, and the USDA’s export sales reporting system that went down just as these markets couldn’t get any more volatile. Basis spreads between new and old crops are leading the charge to what looks like a pre-harvest rally. However, the Dow and S&P markets are falling precipitously, leading some experts to believe a demand drag on domestic use is the next big hurdle for the 2022 and 2023 crop marketing cycles. Sell now or later? And, if that wasn’t enough, producers and lenders looking at the 2023 growing/feeding/milking year are facing decisions on things like fertilizer and chemical pricing, even before the ’22 crop really starts to turn away from its summer green. Can we really achieve a “soft landing” of any fashion in this environment? It’s the question both farmers and politicians are struggling to answer.

Change and interruption are inevitable in a global and electronic economy. Too many hands in the pot waiting to grab their “fair share,” while people and animals across the globe fight to find their next meal. However, preparation and a good commodity marketing offense is the best defense for headwinds of the nature noted above. It really all begins with cash flows that are created well before final planting decisions made. Then, regularly updating the living, breathing document as itemized expenses change or planting and crop maintenance is completed so it can be an accurate tool to price whatever commodity being produced. These strategies don’t have to be complex; just planned and emotionless. Nickels saved through discipline and, many times, luck create opportunities to land as softly as anyone is able in today’s environment. A producer can’t farm next year if he doesn’t make it through this year.

We all know that equity may be the key to growth, but liquidity is the key to longevity. As we transition into the autumn harvest season, your fellow banking professionals ask that you be that trusted advisor who is slightly risk averse, but supportive of growth and profitable ventures. There is still money to be made and balance sheets will improve if producers are intentional in their actions and lenders the same. The sky can be prevented from falling if we work together!

Thank you all for your service to the industry, diligence and support of America’s producers, and presence within your local communities. Wishing all a safe harvest season!

Nicholas Felder is vice president, commercial and ag banking, with MidWestOne Bank in Lancaster. Felder currently serves on the WBA Ag Section Board of Directors.

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From The Fields: Tools to Assist with Price Risk Management

By Jeff Wilke, Bank First

The 2022 inflationary pressures on a milk producer’s costs to produce milk have made the need to manage milk price risk/volatility that much more important. Two relatively economical and user-friendly milk price risk management tools available to dairy producers are the USDA’s Dairy Margin Coverage (DMC) and Dairy Revenue Protection (DRP) programs.

DMC provides dairy operations with risk management coverage that will pay producers when the difference (the margin) between the national price of milk and the average cost of feed falls below a certain level selected by the program participants. The only cost for $4.00 margin “catastrophic” coverage is a $100 administrative fee. For coverage from the $4.00 margin to $9.50 margin levels (in $.50 increments), there is also a premium payment of only $.0025 to $.15 per hundredweight of milk, respectively, on up to 95% of a producer’s recent average of historical milk production (up to a maximum of five million pounds of milk at those premium costs). Coverage for milk production over five million pounds of milk is available at the $4.50 margin to $9.50 margin levels (in $.50 increments), with premiums from $.0025 to $1.813, respectively. Sign up for the program is through the USDA’s Farm Service Agency.

DRP is designed to insure against unexpected declines in the quarterly revenue from milk sales relative to a guaranteed coverage level (“price protection”). The expected revenue is based on futures prices for milk and dairy commodities, and the amount of covered milk production elected by the dairy producer.

DRP offers two revenue pricing options: The Class Pricing Option, which uses a combination of Class III (milk primarily used for cheese production) and Class IV (milk primarily used for butter and non-fat dry milk production) milk prices as a basis for determining coverage and indemnities. The Component Pricing Option, which uses the component milk prices for butterfat, protein and other solids as a basis for determining coverage and indemnities. Under this option the producer may select the butterfat test percentage and protein test percentage to establish their insured milk price.

Through DRP, 80-95% of expected quarterly milk revenue may be covered (in 5% increments). A premium subsidy of 44-55% is provided through the program, depending on the coverage level selected. DRP insurance is available through authorized crop insurance agents.

For more information on the DMC and DRP programs, visit usda.gov.

Jeff Wilke is vice president-business and ag banker with Bank First in Denmark. Wilke currently serves on the WBA Ag Section Board of Directors.

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From the Fields: Fun, Fantastic Fair Season!

Lisa HigginsWritten by Lisa Higgins, State Bank of Cross Plains

Last month we heard from Craig Rogan of Nicolet National Bank on celebrating June dairy month. This month, we are knee deep into fair season. Most of us have a connection to our county fairs, whether we were involved in 4-H or take our families to enjoy the animals, projects, entertainment, rides, games and let’s not forget the fair food!

This time of year, we are lucky to have the opportunity to get out from behind our desks to support our Ag Community at our county fairs. I’m not sure about you, but it seems like I spend more time on fair grounds during the summer than at the office or on farm calls. One of my favorite things to do is to walk through the barns and see the kids resting with their animals, cleaning up, or sitting in a circle on lawn chairs or coolers and shooting the breeze or playing cards with each other. Showing up and making a day of it is an easy way to support the hard work that the kids put into their animals and projects (and the parents behind them) to make sure they succeed.

Another way to enjoy the fair is by bidding and buying at the meat animal sales. Even though it is highly competitive, when it comes to being there for one another, there is nothing like it. Neighbors bid on neighbor’s animals and local businesses come to see what they can buy. At State Bank, we do the best to spread the wealth, so we are represented at each fair-bidding on customers and prospects and the friendly competition between banks-it is for a great cause! It is an electric atmosphere and sometimes highly emotional.

Once the fair is over, we go through and share the thank you cards that we receive from the kids that we bought from with the full bank staff. They are a sweet reminder of how much we impact our youth.

I am thankful that we can support and enjoy our community in such a fun way. I hope each of you has a chance to visit your county fair this year!

 

Lisa Higgins is vice president, ag and commercial lender with State Bank of Cross Plains in Janesville, and also serves on the WBA Agricultural Bankers Section Board.

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From the Fields: Taking the Scenic Route

A historic bank in Coffeyville, Kansas.

By Darla Sikora, Citizens State Bank of Loyal

Here’s to hoping that this month’s From the Fields finds your customers finally able to be out in their fields after what seems like a particularly long winter and slow-to-arrive spring! How can it be that in just one more month, the year will already be half over?

With June Dairy Month quickly approaching, complete with its many June Dairy Breakfasts and the appreciation it brings for our ag producers, I am reminded of the words of well-known WGN Farm Broadcaster Orion Samuelson. At the 2013 ABA National Ag Banker Conference in Minneapolis, he told us that he ends each day with this prayer: “Thank you God, for America’s farmers and ranchers: the people who put the food on my table, clothes on my back, a roof over my head and energy in my tank.” There is no doubt our customers have strong work ethics as they strive to provide the food and fiber for the rest of us, but we too all work hard, day-in and day-out, year-in and year-out. For us, the work entails providing an array of ag banking products, programs, and services along with a great deal of guidance, analysis, and direction for the ag producers of the fine state of Wisconsin. With summer (finally!) around the corner, I just want to remind everyone to make sure to carve some time out this year, and every year, for yourselves.

It’s important to take time away from the job to get “out of our heads,” out of our “normal” and to step out into something else. Recently I enjoyed a family road trip to the state of Texas, via some interesting byways. Taking the “scenic route” we also saw much of small town America. It is always interesting to see the agriculture in other parts of the country; from massive farm fields, to rows and rows of grain bins, to longhorn cattle right on the outskirts of town, to the Southwest Dairy Museum, and to “Rancho” proudly displayed in the titles on overhead signs leading to Texas ranches.

Tying just a bit of banking into the vacation, on a quiet, cloudy Sunday morning we drove through rural Coffeyville, Kansas where 130 years ago on October 5, 1892, the Dalton Gang rode into town attempting to make outlaw history by robbing not one, but two banks simultaneously. They were unsuccessful and after a 12-minute gunfight, four of the six members lay dead. The storied shoot-out also claimed the lives of four of Coffeyville’s courageous townspeople who defended against the Dalton’s last raid. (Interesting note: In 1876 John W. Cubine helped put Coffeyville on the map by creating a cowboy boot that fit the left and right foot individually. Before this, all boots were constructed exactly the same and didn’t have a specific fit for each foot. Think of that the next time you pull on your Ariats! John’s nephew, George Cubine, and another employee of the boot shop, Charles Brown, were both killed defending Coffeyville on the day of the Dalton Raid.)

There is so much out there to learn, to see, to experience. Life is short. Moments are fleeting. Time is precious. Remember to set the busy-ness and the demands of the daily routine aside every now and again to take a break and to spend time with those who mean the most to you. Years ago, on another road trip, I saw a sign outside of a church near Escanaba, Michigan that read, “families go on vacation to become families again”. Take the road less traveled, step outside the usual, make the connections, laugh more, and embrace those you love with all your might.

Darla Sikora is senior vice president of agricultural banking with Citizens State Bank of Loyal, and currently serves as the Past Chair on the WBA Agricultural Bankers Section Board of Directors.

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From the Fields: Recapping Our Annual Ag Conference

By Chris Schneider, Nicolet National Bank

How nice it was to finally get together again as a group after two years of modified delivery of our annual WBA Agricultural Bankers Conference. The long-awaited return of the fully in-person conference was marked with great attendance, over 160 attendees including 130 bankers from across the state.

Always a highly-rated presenter, Eric Snodgrass, Science Fellow from Nutrien Ag Solutions, provided a detailed presentation on weather patterns and his prediction for this year’s weather forecast and the impact on crops in certain regions of the country. His long range predictions have been very accurate in past years. One of his topics that I found particularly of interest was the impact of Hurricane Ida on the supply chain.

Next up, Dr. Chad Hart, Iowa State University, took the stage and discussed marketing and risk management. He addressed many topics including the overall production of corn, beans, and wheat, and how the shifting of acres planted is impacted by certain factors; the Ukraine crisis and how that will affect global markets and shift exporting countries with commodities that come from them; and higher priced corn and the effects on exports. He also outlined how input cost and availability issues have increased cost dramatically and how that impacts if/when farmers can get products.

Wilson Law Group’s Daniel Purtell presented on estate planning brought out a lot of questions from conference attendees. Plan, Plan & Plan was the theme. We all know how most farmers like to plan, most are “reactive” folks. Don’t leave Ralph, the farmer’s son who was an underachiever his whole life, the farm because he will lose it. It’s never too early to plan for the next
generation.

Mike North from Ever.Ag was up next with marketing ideas for all commodities. He discussed marketing protection products and how they use these different types of items to protect milk, feed, and other items, sharing that less fluid milk and more cheese is what drives Wisconsin dairy plants. Cheese use increases on a yearly basis and is consumed in a variety of foods. The effects of European markets reducing production will help our country with driving more exports.

Ed Elfmann updated attendees on ABA’s priorities in Washington; from covering all the seats that are changing to policy updates. CFPB 1071 Rule, Farm debt declines at the end of 2020 somewhat due to additional government money, net farm income increasing, payments to farmers decline in 2021. The farm size has also changed; 9% of farms account for 33% of assets and 89% of farms are small but hold 60% of assets. Issues that should be top of mind for ag bankers include the Farm Bill hearings, as the current bill will expire in 2023; ECORA legislation; Farm Credit issues and the leveling of the playing field for banks vs Farm Credit; and RNG and Carbon credits and how this is getting driven into new income opportunities for farmers.

WBA’s John Cronin provided the Wisconsin update, covering the state budget and future policy discussions; shared what seats are up in the Wisconsin state assembly; and shared the budget and rule making process going forward.

AMPI was represented by their CEO and Co-President Sheryl Meshke. She talked about their markets and different facilities. AMPI is Co-op owned by farmers in multiple states and highlighted 50 plus years in business, producing award-winning products. Sheryl highlighted products including Dinner Bell Creamery, Co-op Crafted Promise, and Crystal Farm cheese. She expanded on how AMPI monitors the markets to stabilize and build business with their products.

Lastly Penn Vieau, a leadership expert, provided how to positively look at day to day activities. Have a positive mindset, positive thoughts, practice gratitude with purpose. Control, Influence, Accept. Attendees were encouraged to create goals that create new drive and energy, and importantly, goals that are achievable.

If you were unable to join us for this year’s annual conference, I hope that you will consider joining us in 2023. Watch for the 2023 conference dates to be announced soon to the Ag Section membership.

 

Chris Schneider is the current chair of the WBA Agricultural Bankers Section Board of Directors and is the vice president, agricultural banking with Nicolet National Bank in Appleton.

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From the Fields: Traditions and Transitions

By Amber Keller, Town Bank

I am looking forward to seeing many of you next week at the WBA Ag Bankers Conference. It will be great to reconnect, share stories and experiences, and learn about the latest trends and tips for navigating this agricultural super-cycle and these tenuous times in our world today. Whether you are new to farm lending or have been around the block a few times, there is still much to learn. Yet, some things do not change all that much- sound credit analysis and risk identification, assessment of farm management competencies, optimum use of technology and labor mix, as well as strategic planning for long-term success.

One of the strategic planning topics to be featured at our conference is farm succession and estate planning. Many of us are familiar with estate planning, as it relates to making plans for the business and assets when one passes on. However, farm succession planning also includes what happens to the business and our assets while one is still living. That’s just as important and even more so.

Think of farm succession planning as a way to build a road map for operations and enterprise growth, better defined job roles, knowledge and management transfer, and business decisions to be made by delegation, empowerment, or consensus as a team. Attorneys, accountants, lenders, and others can help farm families view their farms as dynamic businesses, respecting those long-standing traditions and embracing innovations with open minds. Indeed, that’s some powerful planning with purpose.

The legal professionals at Wilson Law Group will share with us some important concepts to consider when referring our clients for farm succession and estate planning services. They help farmers, business owners, and farm land owners plan and protect the assets and legacies they have built and transition them to the next generation and beyond. Hope you can join us next week! I’ll see you in the Dells!

Amber Keller is the current vice chair of the WBA Agricultural Bankers Section Board of Directors and is the senior vice president, director of ag banking with Town Bank in Clinton.

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From the Fields: Caring Beyond “Financial” Health

By Nicholas Felder, MidWestOne Bank, Lancaster

As the 2021 year wraps up and the 2022 year jets off to a roaring start, we, as bankers, prepare ourselves to renew partnerships with customers and prospects alike. Tasks we as bankers regularly undertake are innumerable. We look to assist with financial statement review & projection evaluation, and to challenge producers to look introspectively at their operations in both a macro– and micro-sense. We encourage them to work with their advisory groups more closely or, in some extreme cases, make changes to long-term partnerships that have gotten stale and now lack the drive for symbiotic gains. We assist in capital planning and the rationalization of purchases with 50% to 200% increases in cost if the item being acquired is available within 500 miles. We inquire about the stability of their internal labor force or challenges being faced by suppliers. We also tiptoe around the highly politicized COVID-19 discussion and hope the visit ends without it being brought up. All of this while making sure that family remains a priority in each of their lives. These interactions occur irregularly a few times a year to as often as weekly updates.

Commodity prices, weather and natural disasters, supply chain management, labor, interest rates, inflation (or sometimes hyperinflation), and on– and off-farm accidents all lead to increases in stress and anxiety for ag producers across this country. Farming is a lifestyle, a business, a legacy. Something that each will give every last breath to retain. One item that I believe is missing from our regular interactions with customers and prospects is a review of their mental health. The quality and future successes of both short– and long-term decisions are highly correlated to the mental well-being of the person making the decisions at that point in time. What can we do to assist in this aspect of our value-added services and increase the likelihood of success?

The Centers for Disease Control and Prevention notes that rural communities have nearly double the suicide rates of urban areas. It’s pretty obvious what are the two major contributors: 1) daily life and the stressors indicated above and 2) fewer mental health resources due to the rural nature of the communities where they reside. Bankers are often relied upon to act as sounding boards for all sorts of decisions and thought processes. Sometimes even dispute resolution between family or spouses. Successes and failures are not necessarily evidence of the current state of mental well-being and should not be assumed.

With COVID-19 and its resulting isolations from family, friends, and outlets for celebration or consolation, these noted stressors will have been layered upon one another over the past two years. If not appropriately mastered by the individual, this resulting onion will need to be delicately peeled away layer by layer by trained professionals. Newly funded (2021) partnerships of UW-Platteville & DATCP as well as a grant received by SWCAP and UW-Madison are looking to address the mental health needs of Wisconsin farmers and workers. These projects “seek to engage farmers, family members, workers, and the wide range of individuals that provide products, services, technical information and support to those in the industry who produce the food and farm products that keep us healthy and safe during these challenging times.” Farmers are the key to the economic health & success of the entire country as well as the health and success of everyone therein.

These resources can be found at:  https://farms.extension.wisc.edu/farmstress

I challenge each of you to be an advocate for mental health this spring not only for each of your customers or prospects, but also for yourself. Make a point to review how people are feeling and connect those who may need additional assistance with the resources needed to be a productive, successful member of each one’s community.

Felder is vice president, commercial and ag banking, with MidWestOne Bank in Lancaster and currently serves on the WBA Agricultural Bankers Section Board of Directors.

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From the Fields: How Would You Rate Your Ag Customers as Business Managers?

By Jeff Wilke, Denmark State Bank

As the calendar turns to 2022, there is no shortage of old and new challenges facing the ag customers we work with — continued high feed prices, escalating crop input costs, supply chain delays, labor shortages, etc. In order to weather the storm of this next round of challenges and future storms, it has never been more important for farmers to be good business managers.

That being said, the question I pose is — How would you rate the farmers you work with as business managers? This may be a subjective process in many ways. However, there are objective standards to consider when rating a farmer’s management skills or Business IQ, as Dr. David M. Kohl, Professor Emeritus, Ag & Applied Economics at Virginia Tech, calls it.

Per Dr. Kohl, Business IQ contains for cornerstones — Planning, Strategizing, Executing & Monitoring. From Dr. Kohl’s findings, ag producers with high management skills have plans for all areas of their farm operation, using those plans to prioritize their strategies; then executing those strategies using sound data, objectivity and intuition; and finally, and just as importantly, periodically monitoring the results.

From these cornerstones, Dr. Kohl has developed a Score Card that analyzes 15 management factors specific to ag producers. The Score Card can be found by doing a search for “Dr. David Kohl Business IQ”.

The factor getting the most attention is “Knows Cost of Production”. Other factors include creating goals, keeping a solid internal record keeping system, maintaining a modest lifestyle, continuously attending agricultural seminars/courses, and maintaining certain attitudes. Farmers who have many of the factors addressed in writing score much higher than those who have nothing documented.

In order to continue to build on their management skills, Dr. Kohl recommends that a farmer reexamine/re-score their Business IQ annually to see where progress has been made and where progress still needs to be made.

The bottom line is that a farmer that has strong management skills/Business IQ can navigate through challenging times (“weather the storms”) by keeping a close watch on their ability to plan, strategize, execute, and monitor the various aspects of their farm business.

Coming up on January 4, 2022, ag bankers have the opportunity to hear directly from Dr. Kohl as he shares his outlook for 2022 and beyond. Be sure to check out the Midwest Economic Forecast Forum, and you can even invite your ag customers to join your group to hear directly from Dr. Kohl as well. The session will be recorded and available for two weeks, so even in January 4 doesn’t work for you or your clients, check it out online.

Happy Holidays.

Wilke is Vice President, Agribusiness Lender at Denmark State Bank and serves on the WBA Agricultural Bankers Section Board.

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