Learn how to dig up money

From Financial Incentives Assistance Resource, Kate Niemeier

FamilyFarms Group members have benefited from USDA financial incentive (or agriculture grant) programs to the tune of millions of dollars. While the application process may seem daunting to you, FamilyFarms Group has a resource that members can use to help them through the process. I’m here to share some insider tips with you.

Right now, agriculture grants can help fund your conservation, energy efficiency, or renewable energy projects. Without a Farm Bill (which looks like it won’t be long), there isn’t a large amount of funds available now, but don’t wait to apply! USDA will fund those applications in the order they’ve been submitted.

One of the best programs is the Conservation Stewardship Program (CSP) because the conservation opportunities endless in this program. The great thing about this agriculture grant is the application process is much easier on you as a farmer, because a lot of it is completed by the NRCS office. Required enhancements are simply the practices you agree to complete on your farm. These could include  using drift reducing nozzles, installing variable drive electric motors, or renovating a windbreak for wildlife habitat.

Another great conservation program is the Environmental Quality Incentive Program (EQIP). This program is all about working with a conservationist to write a Conservation Activity Plan or CAP, and  EQIP dollars pay for writing the plan and a portion of the project costs. There are more than 16 CAPs available for funding under the EQIP program, including Nutrient Management Plans, Integrated Pest Management Plans, and Comprehensive Air Quality Management Plans. using drift reducing nozzles, installing variable drive electric motors, or renovating a windbreak for wildlife habitat.

The final program I’ll mention that has been gaining traction with FamilyFarms Group members is the Rural Energy for America Program (REAP). Unlike the two programs mentioned above, REAP is funded through the Rural Development office. The agriculture grant focuses on two areas: improving energy efficiency and installing renewable energy systems. Examples include updating grain dryers and improvements to an irrigation system.

If you are ready to get started with a grant, FamilyFarms Group offers help to all of our members. Interested in learning more?

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How is FamilyFarms Charities helping urban youth learn about ag?

FamilyFarms Charities is partnering with Jackie Joyner-Kersee Foundation’s Summer Camp and After-School Program for Urban Youth to provide opportunities for program participants to learn more about agriculture. The goal of the project is not just teaching kids about agriculture, but to make them more aware of where their food comes from.

FamilyFarms Group employees and members recently spent a day planting a garden as well as bushes and trees at the Jackie Joyner-Kersee Center in East St. Louis. FamilyFarms Charities provided the labor as well as plants and necessary upkeep tools to be used by the children. This garden project will help the youth involved in the center’s programs, both summer and after-school, to get hands-on experience gardening. The project includes fruit trees, berries, and a large vegetable garden. The bulk of the produce is planted just outside the center’s main building!

The children that participate in the summer program will help with the weeding and caring for the garden to help in teaching the kids about agriculture. Additionally, for summer of 2013, FamilyFarms Charities has prepared an educational program with information about ag, food, nutrition, and gardening. The kids will be able to gain valuable information about agriculture through classroom tools and hands-on gardening. FamilyFarms Charities will also be providing gardening and ag-related books for the center’s library.Participants in the center’s after-school program will also have the opportunity to harvest vegetables this fall.

Not only will we be teaching kids about agriculture, and they will be able to enjoy the fruits of their labor, literally. Some of the vegetables will be used in meals provided by the center to program participants. They can also make excess produce available to members of the community in an effort to get everyone involved in this garden project.

FamilyFarms Charities is committed to teaching kids about agriculture and to the long-term success of the Jackie Joyner-Kersee Center’s urban ag for youth program. The garden can easily be expanded to produce in future years more as the children’s skills grow. The ag education element will be expanded each year through gardening experiences and related curriculum; other ag-related topics will also be explored and there is the potential to teach business skills such as planning, budgeting,  and selling.

The Jackie Joyner-Kersee Center, located in East St. Louis, includes 37 acres surrounded by a fence and filled with a large, well-equipped building and several sports fields (football, soccer, two baseball, two softball). An 8-week summer program and an after-school program. provide learning and sports activities to many children from the community. The Center’s mission is to provide youth, adults, and families with the resources to improve their quality of life and to enhance communities worldwide, with special attention directed to East St. Louis, Illinois.

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Liquidity Ratios

 From Team Accounting Specialist, Gary Huggins

“What’s considered enough money? Just a little bit more.” — Will Rogers

“If you owe the bank $100, that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.”  – John Paul Getty

What are the key areas of farm financial performance and financial position that an operation should be focusing on and managing? Financial measures outlined by the Farm Financial Standards Council are grouped under five areas: liquidity, solvency, profitability, repayment capacity, and financial efficiency, all of which measure either financial position or financial performance. I wish to discuss the liquidity area.

Liquidity ratios measure the ability of the operation to meet financial obligations as they come due. It’s probably the most critical area used by lenders to analyze the operation. Liquidity ratios are balance sheet measures. Liquidity problems occur when debt maturities are not matched with the rate at which the operation’s assets will be converted to cash.

The primary liquidity measure is working capital, which is calculated in this way: Working Capital = Current Assets – Current Liabilities. Determining adequate working capital has to be related to the size of the farm business. Therefore, working capital should ideally be greater than 20% of gross revenue or greater than 20% of gross income.

The second liquidity measure is the current ratio. It is calculated as: Current Ratio = Current Assets / Current Liabilities. The higher the ratio, the more liquid the business is considered to be. A ratio of 1.25 or higher is generally preferred in order to allow for adverse price changes, production shortfalls or input price increases during the upcoming year.

The desired ranges mentioned above are simply suggestions. Crop insurance or the use of other risk management tools may change what the lender considers adequate.

Highly leveraged operations that cash rent most of what they farm need to exercise special care. Strengthening and managing your liquidity ratios now will help you weather any future volatility.

A priest announced to his congregation: “I have good news and bad news. The good news is we have enough money to pay for our new building program. The bad news is it’s still out there in your pockets.”

If you need some help, there are expert consultants at FamilyFarms Group. Our goal is not to take over in any of these areas, but to help you get a better handle on how to implement management practices. Contact us to learn about ways you can strengthen your operation.

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Looking for the right employees for your operation

From HR Consultants, Whitney Fisher and Cheryl Brooks

Does this sound familiar? Your farm needs to fill a position today; you don’t have time to wait another week. If so, you may need to rethink your farm recruitment strategy. Hiring has become a huge challenge as agricultural producers need to hire outside their circle of friends and acquaintances. You have to start thinking out of the box to attract the “right” applicants for your positions.Think about the type of people you want to attract and consider what hobbies they might be interested in, how they communicate, and where they hang out. This will help you determine the best places to post the open position in order to target the “right” applicants.

How can you make the hiring process easier? Starting the hiring process earlier instead of later is the key to success. We recommend starting the process at least two months before you need to fill a farm laborer position. The more responsible the position, the more lead time you need to allow for hiring. One way you can start hiring earlier is by creating a pipeline of talent. If it’s a position that you fill several times throughout the year based on business volume, then you might consider keeping the position posted throughout the year.  This gives you time to ensure you are choosing the best applicant for the position not the first applicant who applies or walks in the door.

How else can you create a pipeline of talent? Start participating in career fairs, utilizing your local workforce development office, talking to someone at your local Farm Bureau office, networking through local clubs or organizations, using social media sites, employee referrals and hosting internships are just a few “free” ways you can start filling up your talent pipeline.

Remember it’s not about how quickly you fill the position it’s about finding the “right” person for the “right” position.  Hiring the wrong person can wreck your business culture; cost you money, decrease productivity, and cost you customers or even other employees. Think about those things before making your next hire.  Are they really the “right” fit for your farm operation?

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Is there more to the trend of growing row crop farms?

Last week we talked a lot about agriculture economies of scale and how the consolidation trend may impact the size of operations that we see in the future. But, FamilyFarms Group is always thinking about preparing for the future now. Our producers ask, how can we benefit of economies of scale today. The answer is working together with other producers, to the tune of 410,000 acres strong today.

• Strategic Participation: By working together, FamilyFarms Group members can achieve what an individual producer cannot. Together, we can accumulate enough acres, knowledge, technology and capital to successfully compete globally. An individual producer just cannot have access to the same things that a committed group of individual producers can.
• Premier Expertise: How many operations could afford two HR experts? How about a social media aficionado? A crop sales analyst? Technical writer? Grant writer? Accounting control systems expert? Not many. FamilyFarms Group members get access to all of these experts and more for as much or as little assistance as they need in each area. Talk about economies of scale!
• Reduced Costs: As you get bigger you get better deals. Right? We go to suppliers on behalf of all of our member operations to help get them cost reductions. Personal relationships only go so far in this industry without being accompanied by dollar signs.

These are just a few examples of how FamilyFarms Group helps our operations to capitalize on economies of scale in agriculture. Ready to learn more, contact us today!

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Is there more to the trend of growing row crop farms?

Top Producer recently published an article entitled How Big? Economies of Scale in which economists discuss the future anticipated growth for the average row crop farm. This has been a foundational motivating factor for FamilyFarms Group since our genesis in 2006.

Where are the Facts?

FamilyFarms Group was founded in response to consistent patterns of consolidation in row crop operations. This consolidation trend has been seen previously in agriculture; just look at pork farms over the past 20 years. In 1994, the “Top 20 Powerhouses” owned only 14.4% of sows. Compare that to 2006 when those same 20 operations owned 49% of all sows.

The 2007 USDA statistics show that only 2.5% of operations (or 5,541 to be exact) make almost 28% of the revenue generated by farm operations. So…what does that mean? Farm operations are getting bigger and and more successful. Why? Economies of scale in agriculture.

Why are we Growing?

The article quotes University of Illinois ag economist Gary Schnitkey saying “Eventually, the average Illinois farm could be closer to 10,000 acres.” Compare that to the current size of about 1,500 acres. How is such growth possible? New technology allows for more efficiency. Producers can farm more acres with less equipment. Farmers are capitalizing on agriculture economies of scale.

Additionally, farming is an occupation that is extremely family-oriented. But, to bring additional members of the family into the operation, the operation has to grow to support more people.

What about Competition?

What the article doesn’t talk about is the idea that, of every 6 or 7 farmers in Illinois who farm an average of 1,500 acres, only one may survive to farm that 10,000-acre farm. And what about the operator who is already farming 5,000 or 7,000 acres? He has a leg up on those 1,500-acre farms. How could they ever catch up?

The thing is…they can’t.

Is there Hope?

Of course! FamilyFarms Group helps producers work through the growing pains of becoming a business-oriented operation. That really is what it takes to survive long-term. The article talks about hiring non-family employees as being a hurdle many producers don’t want to face. The good news we offer is that you don’t have to do it alone; that’s why we’re here. (Next week’s article will focus on how to hire the right people.) And we don’t just have experts in HR, but 11 other business areas as well.

FamilyFarms Group is focused on “Keeping Families on the Farm;” that’s our singular purpose. We make it our goal that our member families will still be farming 30 years from now – when we see these consolidation predictions fulfilled and those farmers who couldn’t visualize the change coming to the industry will be gone.

Stay tuned for part 2 next week when we’ll talk about the economies of scale you can expect with 410,000 acres!

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Different Types of Investors are looking for Different Things

From Dave Bryden, Manager of Business Development

There are a variety of types of landowners that a farm operation may encounter.  One of the more intriguing segments is farming for investors.  There are different types of investors, including the local guy who buys land, high net worth individuals who usually have hired someone to purchase and manage the land purchased, accredited investors, and institutional investors that typically have large funds (pension funds is one example) behind them providing the capital.  Investors are obviously different from individual landowners that an operator may be accustomed to dealing with.  Investors have different needs and goals from individual landowners; hence, the questions to ask them when determining if you are a good fit for each other must be different as well.

 Here are some of the key differences:

•  Investors generally are concerned with return and risk mitigation – other criteria are a distant third

• There is less emotion involved than when dealing with individual landowners; it is more of a business decision.

• Some may not be open to sharing certain information with you.  Operators need to put investors at ease by telling them up front to not hesitate to tell you that they cannot discuss something or that they are not comfortable divulging specific information.

• There are several ways of calculating return, so be sure to learn the preferred method of each particular investor.

• Some investors have unrealistic expectations for returns – one thought he could get a 20% return.  Most, however, are looking for 4 ½ – 5% or better, again, depending on how calculated.

• Most are not interested in listed properties nor tracts going to auction; they prefer private sales.

• Some don’t want to see land that has less than 95% tillable acres to total acres.

Farming for investors may require some additional paperwork. Some more sophisticated investors will ask for the FSA Form 156 (government payment) and the Form 578 (yield info) so don’t be surprised by this request if you bring a piece of land for sale to an investor.  Simply be prepared and be willing to provide that information if requested.

 The best way to start a relationship with an investor is to bring a piece of land for them to buy.  Most investors will honor the “if you bring me land to buy, you can farm it” approach; however, this is by no means definite or guaranteed.  It may be understood that you will be the operator for the first year or two.  Beyond that, you still need to deliver on your service promise, take good care of the land, and communicate regularly and openly with the investor.  There is never a substitute for good performance and customer care.

 Know of land for sale?  Want more details on working with investors and specifically what to ask them?  Contact FamilyFarms at 1.877.221.FARM.

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Managing money is hard for any business. But farmers typically have a hard time letting any money go! So, how can you keep a better handle on your farm financials with a few easy tips? Let’s talk about it.

1. Additional Revenue/Reduced Cost – If an opportunity exists to either make more money or spend less money, do it! If you aren’t exploring new opportunities in this area, you really should be. Sometimes just a little extra here and a little reduction there make a big difference on the bottom line.

2. Monitor and Analyze Your Financials – This seems like it should go without saying, but it’s a step easy to overlook. Take your projected financials (and yes, you should be doing projections) and compare them to your actual financials – and not just at the end of the year. It’s important to take a look at things throughout the year so that you can adjust if necessary. It’s easier to fix a problem before it escalates out of control.

3. Benchmark – Take your farm financials and compare them with other similar operations. Sometimes it can be hard to believe, but there might be somebody out there doing better than you! If you aren’t comparing, you can’t know where you can easily improve. Sharing financials can be scary, and it can be hard to fight the urge to keep them hermetically sealed! But, if you benchmark through a trusted group like FamilyFarms Group, it can be done without stress.

   

And always remember that it’s really hard to go broke if you aren’t losing money!

If you need some help, there are expert consultants at FamilyFarms Group. Our goal is not to take over in any of these areas, but to help you get a better handle on how to implement some of these practices. Contact us to learn about other ways to improve your operation.

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No matter how optimistically rosy the USDA wants to paint yield outlooks

From Manager, Strategic Marketing, Diane Hanekamp

Although the moisture profile in many areas of the Eastern Corn Belt has certainly improved in the upper 18” of soil, there are still 509 counties in 13 states that remain categorized as disaster areas, as of February, 2013. Meteorologists are predicting those east of the Mississippi River will begin the year with adequate, short-term moisture reserves. However, despite the recent snows, widespread areas of the Western Corn Belt have not recovered from the record-setting drought that culminated in 2012.

Besides topsoil and subsoil deficits evident in the Western Belt, deep soil reserves remain depleted across much of the US. In a February 27 press release, University of Missouri Associate Professor of Soil Science, Dr. Randall Miles, reiterates that replenishing severely dry soils will take time. It may take as much as two years for the soils in the Midwest to recover from the drought. Miles says a significant amount of Midwestern soil is dry down to as deep as five feet and it will take time for moisture to move deeply into the soil where the driest conditions exist. Miles says one foot of soil typically holds two inches of water, and to completely recharge the soil profile would require about 16 inches of water above normal precipitation amounts.

Although the devastating “La Nina” weather phenomenon has officially ended, and the Southern Oscillation Index is currently at a neutral measurement, it has not moved towards the beneficial “El Nino” weather pattern as scientists predicted. In fact, the NOAA (National Oceanic and Atmospheric Administration) expects drought to persist throughout May for much of the western half of the US, in addition to North and South Carolina, Florida, and parts of Virginia and Georgia. Furthermore, expectations are for above-average temperatures to surge across the US beginning in May. The complex composite of US weather models and NASA’s satellite data indicate extremely dry conditions across the Corn Belt in 2013 into the summer.

For a graphical representation of the last 116 years, please check out the NY Times Drought Footprint.
The points are that the crop is not in the ground yet, and it takes years to recover from a drought with the magnitude of 2012. Predicting rosy, previous-trendline yields and benign weather resulting in major price declines may be a lovely, yet unrealistic dream for grain users, for 2013 in particular.  The livestock sector would be well advised to lock in supply needs while the market has removed the weather premium from current values.  We sit in the middle of expected price ranges for 2013, which makes it more difficult for Buyers and Sellers to take definitive marketing actions. Yet it would seem to me that current markets are trading in the lower third of the 2013-crop price range than the mid to upper price points.  It will get hot this summer as it does every year.  One difference this year is that much of the US is beginning with inadequate moisture reserves, which will make even average yields fully dependent on timely precipitation.  A few of us may enjoy rains exactly when we need them, but it is unrealistic to expect weather perfection in 2013 or any year across the grain belt.

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Surely you have seen all the hype about producer peer groups. As an advanced peer group, we are pretty excited about all the buzz. But, how you do you decide what peer group is right for you? The answer is the best ones!

You want to soar with the eagles, not scratch with the turkeys.

Think about your peer advisory group as a reciprocal board. They are a member of your advisory board just as your are a member of theirs. But picking board members is no easy task. You want people that you trust, people that are experts, people that can contribute valuable information for your business. How do you find these people?

In the ag industry, there is a 5% rule. (This applies in any industry really – think about professional baseball players!) The top 25% of producers are 5% better than the average producer. The bottom 25% of producers are 5% worse than the average producer. That’s not a lot of room for error. You want someone that is at least 5% better than average. How do you find these people?

Also, you don’t just want a group of farmers that gets together and has coffee. You need a facilitator, an agenda and a purpose. You also need trust and a common vision. A successful producer peer group has structure and guidelines. You need someone to put all that together. How do you find these people?

We are those people. FamilyFarms Group has been doing the peer group thing for over six years, but we don’t call ourselves a peer group because we are so much more than that. However, we have the producers you want to be in your “reciprocal board” and we have the structure in place to be sure that you and the rest of your peer group can succeed.

If you’ve been looking for a great peer group, look no further. Contact FamilyFarms Group.

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