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From the Fields: WBA Ag Bankers Conference Recap

By Jeff Wilke

Another WBA Ag Bankers Conference is in the books.

It was very exciting to see such a strong contingent of nearly 150 conference attendees. As in past years, attendees were provided with a strong line up of ag industry and ag banking presenters. Ample time was also available to network with peers and 15 exhibitors.

Matt Reardon, Senior Atmospheric Scientist at Nutrien Ag Solutions, kicked off the conference with his forecast for the upcoming growing season. March was the windiest on record, greatly impacted by the large temperature contrasts experienced. A strong Bermuda High helped create the recent high moisture/severe storm events in the mid-south and central US. An active weather pattern throughout the Midwest is predicted to continue into early May, with temperatures a little cooler than normal. Over the summer, based on current data, Matt predicts the Midwest to have temperatures a little above normal and below normal moisture.  However, a lot will depend on what happens with sea surface temperatures in the Gulf of Alaska.

Ed Elfmann from the ABA provided the ABA’s ag banking priorities for this year, which included: Increasing FSA guaranteed loan limits; re-examining FSA interest assist; providing consistent funding for Rural Development programs; modernizing technology for USDA loan programs; providing resources that bankers and state associations can use to help lawmakers understand the value and benefits the ACRE Act will provide to rural America by making it easier for farmers, ranchers and rural homeowners to access low-cost credit; pushing for more oversight reform for the Farm Credit System.

Dr. Steven Johnson from the Iowa State Extension Outreach gave an in-depth presentation on the crop price outlook, with a prediction of corn prices averaging around $4.20/bushel and soybean prices averaging around $10/bushel. He wrapped up the presentation with strategies to manage crop insurance decisions and with a written marketing plan to capture higher futures prices.

Abdullah Hussaini from Equity Cooperative provided a beef market update. We are seeing record beef prices because of continued demand and limited supply. Rebuilding the beef herd will take time. Thus, prices are projected to remain elevated well into the future.

Leonard Polzin, UW-Madison Extension, provided a dairy outlook. The revised Federal Milk Marketing Orders will increase Make Allowances and Class I differentials, both predicted to put some downward price pressure on Class III milk. Key takeaways: $20/CWT projected average mailbox milk price, with price pressure in the second ½ of the year (mostly from Class III).

Bobbi Kubish and Joe Seubert from the The Food + Farm Exploration Center, gave a presentation on all that the Center has to offer to the public. The Center, located in Plover, WI, opened in December 2023.  Its mission is to educate current and future generations about agricultural innovation and sustainability for Wisconsin growing crops and vegetables through 60 interactive exhibits, four 1.2 acre demonstration fields and a kitchen lab.

Dr. David Kohl again provided an energetic presentation on agricultural and ag lending circa 2025, including Bell Bank’s Lynn Paulson and ag consultant/former banker Sam Miller in some Q&A. Both global and ag economies are “bifurcated”. The US is doing relatively well, while the global economy is struggling. The grain industry is struggling financially, while livestock and more diversified ag businesses are faring much better. Tariffs are/will continue to negatively impact commodity prices and have damaged long-term relationships with US allies. Areas ag bankers need to keep an eye on: Producer’s non-reporting of vendor credit; non-financial factors (divorce, death, disability) move the credit quality needle quickly; set proper customer expectations at closing;  customer willingness to understand and embrace their financials; “monitor, monitor, monitor”.

Jack Kasel from the Anthony Cole Training Group wrapped up the conference with an enlightened look at tailoring sales strategies for Boomer, Gen X, Millennial and Gen Z prospects by being able to speak each generation’s language and preferred communication type.

Wilke is vice president – ag banking officer at Nicolet National Bank in De Pere. Wilke also serves as Chair on the 2024–2025 WBA Agricultural Bankers Section Board of Directors.

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From the Fields: “Bomb Cyclone”

By Nicholas Felder

“Bomb Cyclone”

When you read this phrase, I am guessing many of you are waffling between thinking: “I agree, this weather is absolutely nuts! Summer one day and winter the next!” or possibly “President Trump is at it again… Grain markets go up; grain markets go down. It has been nothing but a whirlwind since he took office!”

I would be lying if I did not agree with both of those sentiments in reference to the term “Bomb Cyclone.” Frederick Sanders assisted in coining the term about an intense storm that loses 24mb pressure over a given 24-hour period. A storm with rapid, intense pressure change causing immense winds and weather. Pretty apropos for the current economic environment and its uncertainty, isn’t it?

Looking forward, we can only use the past as a barometer or guidebook to what is to come. No guarantees that history will repeat itself. That is why guys like Eric Snodgrass and Matt Reardon at Nutrien Ag Solutions are not living on islands they purchased through their wealth created by knowing exactly when and where rain might fall, or winds might blow.

The WBA Agricultural Bankers Conference will be held April 10-11 at the Kalahari Convention Center in Wisconsin Dells. I, personally, use this conference to lay a foundation of historical facts and perspective to guide me in my day-to-day occupation as a facilitator of production agriculture in conversations with producers, approval of funding requests, and partnering with other lenders in knowledge or expertise within or outside of my organization. All require resources and knowledge that are gained at this conference.

After a day and a half of listening to legends like Dr. David Kohl, Ed Elfmann, and Sam Miller as well as the camaraderie of seeing and talking with more than a hundred other bankers and industry personnel, I walk out feeling invigorated and recharged (and ready to take a nap…). Talks about market outlooks from Dr. Leonard Polzin, Dr. Steve Johnson, and a representative from Equity Livestock will give perspective that maybe I did not have or reinforce one that I already did. The ability to ask questions to these experts live, or pull them aside to discuss topics that are puzzling or intriguing to something in your role. And generally, a final speaker to give us insight on life or something that is part and parcel to what we do, but we’ve not thought about it in that way.

I would encourage each one of you to look at the value that this conference brings for the dollars and time contributed. You will be hard pressed to find a better lineup of speakers year-in and year-out with many of them familiar faces but rarely assembled in the same fashion. And I can guarantee for those of us returning attendees, that all of us have some contacts we only see at this event and that alone is worth the entire price of attendance. Please join us at the Kalahari on April 10-11 for a great couple of days to learn and reconnect. Just go to wisbank.com/ag to register and to learn more about the conference.

Thank you to the entire WBA staff for all the hard work and dedication it takes to put on this conference.

I look forward to seeing you all in April!

Felder is vice president – commercial and agricultural banking at MidWestOne Bank in Lancaster. Felder also serves as Vice Chair on the 2024–2025 WBA Agricultural Bankers Section Board of Directors.

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From The Fields: Have a Plan

By Jenny Jereczek, Security Financial Bank, Durand

“If you fail to plan, you plan to fail.” A saying I am sure we are all familiar with and one that has come to mind frequently over the last few years. Planning is crucial to success. Think about the days we don’t plan, what happens? Often time is wasted as we spend time trying to decide what to do or we are easily distracted from the task at hand as we are not sure of our direction or purpose. An important part of the planning process is being intentional by defining the when and how. This will help to drive the action steps within the plan.

As the ag industry continues to experience volatile commodity prices and tight margins, it will be important for producers to have a plan. Each producer is likely to have a different plan with a different purpose whether it be marketing their grain, succession planning, transitioning from an enterprise, or maybe an exit strategy. No matter what the plan is, we as bankers have a role to play in the plan. We have the ability and tools to help the producer understand the financial implications of the plan and help them make decisions that will ensure success. By being a part of the planning process, we strengthen the relationship between the bank and our clients which serves to cement our position as trusted advisors.

Having a plan will help take the guess work out of emotional decisions, will help the team stay focused while increasing productivity and will drive execution. And probably one of the greatest benefits of having a plan is to reduce the stress load as having action plans clearly defined can help minimize uncertainty and prevent feelings of being overwhelmed.

Simple steps for creating a plan:

  • Define your goal in writing
  • Divide the goal into milestones
  • Identify the resources needed
  • Prioritize and assign tasks
  • Review and refine

Jenny Jereczek is market president and director of ag and commercial banking with Security Financial Bank in Durand. Jereczek currently serves on the WBA Ag Section Board of Directors.

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From the Fields: Join Us at the 2023 WBA Agricultural Bankers Conference

By Craig Rogan

Spring is here, meaning the Wisconsin Bankers Association’s (WBA) Agricultural Bankers Conference is just around the corner on April 13–14 at the Kalahari Convention Center, Wisconsin Dells. These days are spent reconnecting with fellow ag bankers, sharing experiences from throughout the last year, and acquiring new and updated knowledge to propel our industry into the future. We will welcome many new ag lending professionals to our industry at this conference as well.

Whether you are new to the Ag Banking Conference or a seasoned pro, there’s always something to be learned; however, some things never change; making sound credit and risk decisions should still be at the forefront of your day-to-day analysis, assessing farm’s management practices today to ensure viability and long-term success remains a crucial piece of the puzzle.

We again welcome Dr. David Kohl, a professor emeritus at Virginia Tech who holds a Ph.D. in Agricultural Economics from Cornell University. Dr. Kohl’s solid agricultural knowledge, paired with his ongoing research and experience, makes him a true ag expert.

The months of April and May leave many farmers focused on when the fields will be dry enough to plant. Eric R. Snodgrass is the Director of Undergraduate Studies for the Department of Atmospheric Sciences at the University of Illinois at Urbana-Champaign. As an educator and engaging speaker, he will discuss if current and projected weather conditions may allow for a rapid jumpstart on this year’s growing season. With his guidance, we will examine the global weather outlook and what this could mean for potential yields outside of the U.S. as well as what role weather plays in affecting grain commodity prices.

Wisconsin is going strong in the dairy industry with nearly 1.27 million cows and 6116 dairy farms across the state. UW-Madison Dairy Markets and Policy Outreach Specialist Leonard Polzin will be speaking and updating us on all things dairy in Wisconsin.

This highlights just a few of the highly esteemed speakers that we are honored to host at this year’s Agricultural Banking Conference. I look forward to seeing you in the Dells! If you haven’t registered but would still like to attend please visit wisbank.com/ag to register today.

Rogan is vice president – ag banking officer at Nicolet National Bank, Stevens Point, and vice chair of the 2022–2023 WBA Agricultural Bankers Section.

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Crop duster airplane spraying chemicals on cornfield
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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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Corn sprouting in field
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From The Fields: Remaining Proactive

By Jenny Jereczek, Security Financial Bank, Durand

ESG. . . yet another acronym to add to the ag lender’s vocabulary! Environmental, social, and governance (ESG) reporting requirements have been a topic of discussion for several years now, and these discussions continue to gain headwind. Rather than regulatory reporting requirements focusing strictly on financial considerations, investors and regulatory agencies are now considering a broader set of decision-making criteria, which includes ESG ratings. Most recently, bond investors have begun to question ESG ratings for producers who received financing with the bonds the investors are purchasing.

While regulators have not yet standardized ESG reporting, these ratings may have significant impacts on ag banks and their clients. A few things to keep in mind when discussing ESG ratings within your institutions or with your ag clients:

  • Currently some ESG frameworks only mandate reporting of emissions and energy consumption. Going forward, financial performance and ESG ratings may also be impacted by the following:
    • Changes in water availability, sourcing, and quality
    • Tillage practices and their impact on soil health
    • Use of chemicals, fertilizers, and solid waste disposal
  • Consumer groups continue to use ESG ratings to pressure companies along with lenders to be “green” even though metrics to determine what “green” really means have not be identified or standardized.
  • Often the focus of agriculture’s environmental impact is negative, focusing on things such as risks from deforestation, pesticide usage, fertilization application rates, animal welfare, and manure disposal. Yet the agricultural sector can also have a positive environmental impact, such as the creation of alternative fuels — as we have seen with ethanol and biodiesel production as a means reduce the total consumption of fossil fuels. Education and communication with the consumer should be a primary focus for producers, lenders, and all that partner with the agricultural community. The American public cannot support what it does not understand.
  • Most producers are already deeply committed to improving sustainability as well as using technology to reduce inputs and costs. With fertile land availability outpacing demand and freshwater needs exceeding supply, the importance of sustainability should not be driven solely by reactions to investor attitudes, but more so from a place of improving efficiency and profitability to ensure longevity of the operation.
  • ESG ratings are driven by governmental entities — therefore without clear objective standards — and ESG regulations within the looming 2023 farm bill or federal financial regulations could be of concern and could affect farm bill and federal crop insurance payments.

While the impacts of ESG ratings are not totally known today, we can be certain that there will be impacts to our producers and our institutions. As lenders, we need to keep up with developments regarding potential legislation surrounding ESG ratings. We also need to encourage education amongst not only consumer groups but our producers to be proactive in our approach to dealing with future ESG requirements.

Jenny Jereczek is market president and director – ag banking with Security Financial Bank in Durand. Jereczek currently serves on the WBA Ag Section Board of Directors.

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Calf resting in field
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From The Fields: Change Happens

By Darla Sikora, Citizens State Bank of Loyal

Greetings fellow Ag Bankers! As another year sprints to a close, it’s only natural to reflect on the changes of the past few years. In our line of work, we don’t have to look back very far to see the monumental changes in the world of agriculture. Take farm numbers for example. Focusing on dairy agriculture, as we tend to do here in Wisconsin, according to the National Agricultural Statistics Service we had about 25,000 dairy farms in 1995, with 9,304 as of January 2017. As of September 2022, the Wisconsin Agricultural Statistics Service data indicates we now have about 6,300 dairy farms or a decrease by nearly a third in the past five years. Coupled with Wisconsin’s continued dairy productivity, our farming landscape changes in a myriad of ways.

Photo provided by Darla Sikora. A new life, a new year on the horizon.

Honing in on 2022, in addition to our customers dealing with significant increases in farm operating costs, interest rates began to rise at a rapid pace. Before March, the last Fed Funds Rate increases were in 2017 and 2018 and those were 25 basis point increases, nothing like the four 75 basis point surges (among others) in 2022. Perhaps this is why our jobs never get boring! Every year and every new season we have different circumstances to deal with because our customers have different circumstances to deal with. I recall listening to Dr. David Kohl at an ag banking seminar a number of years ago as he told us that in order to be good at our jobs, we not only need to know our jobs, but we also need to know what our customers face in their farm businesses. That relationship between us and the farms we serve is what makes Ag Banking a rather unique career. Our customers need to know that we understand their situations and challenges so that we can work with them to find the banking products and programs that best fit their farming styles, needs, goals, and objectives.

In part, to continue to be successful, in some ways, farms are changing. Those that are flexible, open to new opportunities, technologies, and practices, and in general are adaptable perhaps stand a better chance for future success. This doesn’t mean that everything on the farm, or elsewhere, should change. From the banking perspective for example, analyzing credits using the old 5 or 6 C’s of credit still makes a ton of sense. Also not wavering too far outside important and useful farm financial numbers and ratios remains sensible for both bank and farm.

The year is nearly finished and a new one is on the horizon. More hours of sunlight will be welcomed and nearly everyone I know eagerly anticipates springtime with new ideas and possibilities. As you gather with family and friends throughout the holiday season, be sure to include plenty of Wisconsin agriculture’s finest in your celebrations! From cheese to egg nog, from cranberries to beef, and hot cocoa made with whole milk, what’s not to love about Wisconsin’s agricultural products! We bid a fond farewell to 2022 and cheers to us all in the New Year!

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

 

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Cows feeding
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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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