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Ag Insights: Grain
by Kurt Beshore, Jennifer Coolidge, Paul Shipper, on behalf of the Grain Workgroup
A Review of 2023
Profits remained, grain prices lowering, and changing rate environment
Profitability for grain operations during the last three years has been extremely strong; some might say there was an unprecedented run of profits, which were gained mostly through higher-than-average commodity prices and significant government payments. While this allowed farmers to build cash reserves and pay down debt, a slowdown of profitability is expected in the near future.
Grain prices started 2023 on a high note and most of the prices carried for the first quarter, which was the highest quarter of the year. Throughout the year, prices steadily declined, with the exception of a brief high point at the end of June. The trend from the end of June through the end of 2023 was downward, and that trend continues into 2024.
Interest rates significantly impact grain operations due to operating lines, which tie directly to input costs and the decision of when to sell or hold grain. The Federal Reserve increased the Federal Funds Rate four times in 2023, with each increase totaling 25 basis points. Moving forward with lower grain prices and increased interest rates, grain farmers will need to put pen to paper to decide when, where, and how to market their grain for maximum profits.
Key Factors Influencing the Industry
Global market, production costs, US carryout
South America continues to be an important player in the grain markets, especially corn and soybeans. This spring, there are rumors of lower corn production in Brazil and delayed planting of the Safrinha, also known as second corn. Projections of a reduced South American crop are not currently large enough to offset the increased domestic carry out and likely will not help the sagging corn price. Wheat prices have also decreased as the world market has adjusted to the impact of the war in Ukraine. A new conflict in the Red Sea impacts freight and may increase grain and fuel cost temporarily in some localities. Extreme drought in Panama has reduced shipping through the Panama Canal because of the low water level, causing global disruptions and increasing costs for shipments now being rerouted to rail containers. Fertilizer prices have eased from 2022-23 levels, with nitrogen prices decreasing by 40%, tracking the softening corn contracts.
USDA estimates 3.6 million fewer corn acres will be planted for the current crop year. Lower corn price should spur domestic use in ethanol and feed, but projections still show a carryout of 360 million bushels higher than 2022-23, which will continue to limit price. Soybean acres are to increase for the current crop year, adding to the already large global supply. Even with increased crush capacity, higher exports and domestic use increases, projected carryout is 120 million bushels higher than the 2023-24 forecast.
Perspectives and Projections for the Year Ahead
Tightening margins, stabilizing interest rates, lower commodity prices
As we move into 2024, grain prices are expected to continue to trend downward, resulting in slimmer margins for grain operations than seen in 2021-22. Global supply levels are forecasted higher than demand for corn, soybeans, and wheat. Brazil continues to hold a significant portion of the world export market for corn and soybeans.
There are certainly variables in the forecasts that are uncontrollable and difficult to predict, which could impact supply and price levels. Weather is the biggest factor that could cause regional yield differences. As of publishing this report, weather forecasters suggest a wet spring in the Northeast and potential for a drought in a portion of the Midwest throughout summer.
With the Federal Reserve raising interest rates in 2023 and maintaining those levels into 2024, this has a direct impact on a farm’s operating line of credit rate. At the time this information was compiled, the Prime Rate is 8.5%, compared to 3.5% two years ago. The increase in interest expense is felt on operations that have historically relied on cheap operating capital. Some operations have been able to pay down or pay off operating lines over the last few years, but those that have not taken advantage of strong prices have been feeling the impact of the increased interest cost.
Crop prices vary for each operation due to various factors including local basis, forward contracting, hedging, and many other risk management tools. Looking ahead to 2024, we continue to see downward pressure in the grain markets. The below figures show USDA’s projections for production, usage, and prices for corn, soybeans, and wheat as outlined in the 2024 USDA Grain and Oilseeds Outlook.
Figure 1: Corn Supply, Demand, and Price, 2021/22-2024/25
Figure 2: Soybean Supply, Demand, and Price, 2021/22-2024/25
Figure 3: Wheat Supply, Demand, and Price, 2021/22-2024/25
Particularly in these markets, agricultural economist Dr. David Kohl has stated, “It’s not about the size, it’s about being a five percenter.” According to Kohl, these producers are generally five percent better in many areas of their business — such as production, operational efficiency, marketing, risk management, finance, and human resources — when compared to their peers.
Grain farm operators should focus on being a little better in many of these components. Looking at monthly/quarterly statements and maintaining strong working capital reserves will be beneficial to positioning the business for long-term profitability.
Interested in reading our other 2024 Ag Insights? Check out our other articles on:
The information in this article is a summary of select economic conditions and agricultural industries prepared by Horizon Farm Credit staff. This material is for informational purposes only and cannot be relied on to replace your own judgment or that of the professionals you work with in assessing the accuracy or relevance of the information to your own operations. The information provided in this report is not intended to be investment, tax or legal advice and should not be relied upon by recipients for such purposes. As with any economic analysis, the information is based upon assumptions, personal views and experiences of those who provided the source material as well as those who prepared this summary. These assumptions, conclusions and opinions may prove to be incomplete or incorrect. Economic conditions may also change at any time based on unforeseeable events. Horizon Farm Credit assumes no liability for the accuracy or completeness of the summary or of any of the source material upon which it is based. No commitment to lend, or provide any financial service, express or implied, is made by posting this information. In no event will Horizon Farm Credit be liable for any decision made or actions taken by any person or persons relying on the information contained in this report.
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Ag Insights: Poultry
by Deanna Husfelt, on behalf of the Poultry Workgroup
A Review of 2023
Poultry is a significant part of agriculture across Horizon Farm Credit’s territory, from the Delmarva peninsula to the Shenandoah Valley of Virginia, to central and eastern Pennsylvania. The industry experienced another strong year in 2023. Placement of flocks were on relatively normal schedules, and there were no major disruptions in the industry reported, with the exception of a plant expansion in Virginia.
Growers continued to feel the impacts of Highly Pathogenic Avian Influenza (HPAI) outbreaks in 2023. There was some flock depopulation across the Horizon Farm Credit territory in the early and later part of the year. However, on a positive note, the number of outbreaks throughout the territory was down from 46 confirmed cases in 2022 to 33 confirmed cases in 2023, as reported by USDA APHIS.
As felt across many industries, the poultry industry was impacted by rising inflation and continued interest rate hikes. These factors negatively impacted input costs, which has been a growing concern for the poultry industry in recent years. For example, poultry growers within the Delmarva region in 2022 reflected an average expense ratio at 41%, an approximate 25% increase from 2020. Couple rising rates with increased cost of production and producers feel the pinch of less money for discretionary spending and expansion.
USDA Economic Research Service (ERS) reported that broiler production increased by 0.4% from 2022, although broiler exports were down, as key export players had less demand from the U.S. Broiler prices were lower than 2022 but remained above the four-year average from 2018-2022 as shown in the graph.
Egg exports increased from the previous year and egg prices were down, even with the threat of HPAI outbreaks threatening production levels. Turkey production was up 7% from previous year, as well as turkey exports, however turkey wholesale prices realized a decline in price. (Source: Livestock, Dairy, and Poultry Outlook: December 2023 (usda.gov))
Key Factors Influencing the Industry
To keep up with demand and replace aging houses, integrators are looking to increase square footage under contract. Given the high cost of construction, many integrators have implemented additional new house bonus programs paid out over five years, in addition to the typical new house bonus offered at time of flock placement. Expansions continue to be hampered by high interest rates in addition to increased material costs.
Input costs remain high for poultry growers, and several integrators implemented a base pay increase in 2023, recognizing these challenges. As inflation cools, cost increases should level out, and with the increase in base pay, profit margins should remain stable or improve slightly. Some growers have turned to alternative energy sources as a way to reduce costs. Growers who installed solar panels on farms in order to help curtail increased utility costs will reap the tax benefits of solar energy. However, until loans associated with the installation of the panels are paid in full, growers will not experience the full benefit of this investment.
HPAI continues to remain a major concern for the industry throughout the nation, with outbreaks impacting farms across Horizon Farm Credit’s territory. Some integrators have been expanding outside their historic geographic footprint for grower locations to mitigate the risk associated with outbreaks. Also, due to HPAI, with flock depopulation in layer operations, egg production has felt the greatest impact. Although egg production has remained high, as hens age, egg production is expected to decrease, which will influence table egg production moving through 2024.
The export market continues to play a vital role in the poultry industry. While exports to some countries have increased, lower exports to other major players such as China, Taiwan, and Cuba overshadowed the increases experienced. Export demand from other countries is expected to remain low for 2024, and USDA ERS has projected 2024 exports to be 50 million pounds less than 2023. (Source: Livestock, Dairy, and Poultry Outlook: February 2024 (usda.gov)
Consumer habits continue to spark demand for animal protein, particularly chicken, but given the current economic conditions, growth of this sector is expected to be limited. In addition, inflation has affected the discretionary spending consumers have available, and they are trending towards purchasing lower priced meat cuts with borrowers opting for deboned thigh meat, tenders, and wings, over breast, as well cooking at home as opposed to eating out.
Perspectives and Projections for the Year Ahead
Demand for increased square footage, coupled with rates starting to slowly decrease and leveling of material cost, may result in new construction of poultry houses across the Horizon Farm Credit territory. Recent projects show the cost of new house builds at $17.00 - $18.50 per square foot, which is approximately double the cost of construction from nine years prior.
HPAI will remain a threat to the industry, but the industry has become better prepared to prevent and handle outbreaks. Animal welfare and environmental issues continue to be a player in the industry as integrators look for ways to satisfy consumer and regulatory demands.
Nationally, exports have a major role in the industry with the USDA ERS outlook projecting broiler exports to be below 2023 levels, while turkey exports may increase slightly. While overall broiler production is expected to reflect a decline, average broiler weights are expected to continue an upward trend. Table egg production is projected to be down for 2024, a result of the HPAI outbreaks resulting in the loss of hens, but egg production may see an increase as production per bird has seen an increase. Egg prices are expected to be down as egg supply remained above prior year. (Source: Livestock, Dairy, and Poultry Outlook: February 2024 (usda.gov))
(Source: USDA ERS - Market Outlook)
A new player in the industry is the Transparency in Poultry Grower Contracting and Tournaments final rule published and effective February 2024. The final rule requires greater transparency within poultry grower contracts, with the overall intent of the changes to provide transparency between the integrators and growers. Executed contracts between integrators and contract growers should specify the minimum number of birds to be placed annually, and the minimum stocking density to be placed for each flock under the agreement. Given these factors, growers should be able to better determine their financial outcomes from the contracted flocks, which leads to better and more informed financial decisions being made.
While all industries may see challenges for the new year with the pending Farm Bill, export and weather challenges, and high interest rates and input costs, 2024 looks to be another strong year for the many areas of the poultry industry across Horizon Farm Credit’s territory.
Interested in reading our other 2024 Ag Insights? Check out our other articles on:
The information in this article is a summary of select economic conditions and agricultural industries prepared by Horizon Farm Credit staff. This material is for informational purposes only and cannot be relied on to replace your own judgment or that of the professionals you work with in assessing the accuracy or relevance of the information to your own operations. The information provided in this report is not intended to be investment, tax or legal advice and should not be relied upon by recipients for such purposes. As with any economic analysis, the information is based upon assumptions, personal views and experiences of those who provided the source material as well as those who prepared this summary. These assumptions, conclusions and opinions may prove to be incomplete or incorrect. Economic conditions may also change at any time based on unforeseeable events. Horizon Farm Credit assumes no liability for the accuracy or completeness of the summary or of any of the source material upon which it is based. No commitment to lend, or provide any financial service, express or implied, is made by posting this information. In no event will Horizon Farm Credit be liable for any decision made or actions taken by any person or persons relying on the information contained in this report.
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Ag Insights: Dairy
by Rob Goodling, on behalf of the Dairy Workgroup
A Review of 2023
2023 was a year of weakening margins for the dairy sector. Milk prices trended downward faster than key input costs, causing margins to return to breakeven range. Horizon Farm Credit’s territory spans five states, each with unique opportunities for income in the dairy industry.
A Horizon Farm Credit Indexed Milk Price was established to evaluate the weighted average milk price based on the PA All Milk Price, Federal Milk Marketing Order 1 Statistical Uniform Price with relevant location adjustments, and the annual production percentage by state. Individual producers may have realized a gross milk price outside of this range given their unique milk composition and market. Figure 1 depicts the 2023 Horizon Farm Credit Index Milk Price and range, as well as the five-year average. 2023 prices were similar to the five-year average or slightly below, reducing producer revenues. Most producers took advantage of prepaids and reserves from the prior year’s profits to help mitigate reduced revenue in 2023.
Figure 1: 2023 Horizon Farm Credit Index Milk Price vs. 5-Year Average
Sources: United States Department of Agriculture, National Agricultural Statistics Service, http://www.nass.usda.gov
United States Department of Agriculture, Economic Research Service, http://www.ers.usda.gov
Northeast Milk Marketing Area Administrator, Uniform Price and Producer Price Differential, http://www.fmmone.com
The rising cost of key inputs — feed, labor, fertilizer, fuel, etc. — plateaued in 2023, with some declines toward the end of the year. Feed costs remained well above the five-year average for all of 2023. The drop in feed cost realized in Q4 of 2023 continues into 2024 and should help margins weakened by lower projected milk prices. Labor costs and availability continue to be pressing expenses for dairies in 2023. From milkers to managers, tight job markets and elevated inflation saw wage increases continue across the dairy workforce.
Key Factors Influencing the Industry
Dairy operations within the Horizon Farm Credit territory continue to be relevant to the national industry. According to the 2022 USDA Census of Agriculture, the decline in regional farm numbers mimics the national trend of consolidation and expansion. Regional investment into expanded processing capacity and adjusting to the ever-changing consumer demands will strengthen the demand for milk and milk components, providing much needed market opportunity to producers.
Producer margins have been strengthened through calf, heifer, and cull cow sales. Tight supplies of beef cattle continue to bolster the value of dairy calves and cull cows from dairy operations. In 2022, reported non-milk income, including items like calf sales, cull sales, crop sales, government payments as well as other non-milk income for the dairy, averaged $4.03/cwt within the Horizon Farm Credit Dairy Success and Profitability Review. It accounted for 13% of the income generated by the average operation that year. This was down from the previous two years — which realized higher than usual government payments — but was 27% above 2018 and 2019 values. Values in 2023 should realize or surpass those from 2022, and continue that trend into 2024. While cull cow, extra replacement heifer, and bull calf revenue will continue to be higher than the five-year average, extra crop sales and government payments will likely be lower in 2024. This increased revenue offsets some revenue loss due to weak milk prices and relieves pressure from higher-than-average expenses.
A key factor to monitor in 2024 is the performance of dairy exports throughout the year. Currently, the national milk supply has held steady, primarily due to the slight reduction in the national dairy cow herd in 2023. Again, bolstered by strong beef prices and tight heifer inventories, adding milk cows in the short term has been limited. This contributes to stabilizing milk prices given the reduction in dairy exports in 2023 (Figure 2). USDA Foreign Agricultural Service is predicting all four quarters of 2024 will see dairy exports slightly below the previous year, and well below the highs of 2022. If exports trend lower than predicted, that will add further downward pressure on already weakened milk prices.
Figure 2: 2018-2024 Annual Dairy Export Values by Quarter
Source: USDA Foregin Agricultural Service, December 2023. “Dairy: World Markets and Trade”. dairy.pdf (usda.gov)
Perspective and Projections for the Year Ahead
Milk price values, though stabilized, currently sit within the five-year average, suggesting 2024 milk income will only be slightly better than 2023. Several factors — like the spread between Class III and IV prices, weakening export demand, and outdated make allowances — have processors and cooperatives passing some of their losses back to the producer through changes in premiums and basis deductions. This will weaken overall milk revenues for the time being. Razor thin margins will reward those producers that continue to focus on two key factors: controlling costs and engaging with risk management options.
The current outlook indicates margins driven by weakening feed costs should rise from 5-year averages in Q1 2024 and stabilize in the $11/cwt range for most of the year, as shown in Figure 3. Given the variability in milk price across farms throughout the region, some farms will see margins reaching into the average range or below. Producers should implement risk management options, such as Dairy Margin Coverage and Dairy Revenue Protection, to help mitigate these challenges.
Figure 3: 2024 Projected HFC Indexed Milk and DMC Feed Cost Margin vs. 5-Year Average
Sources: United States Department of Agriculture, National Agricultural Statistics Service, http://www.nass.usda.gov
United States Department of Agriculture, Agricultural Marketing Service, http://www.ams.usda.gov
CME Group, Agricultural Futures and Options, https://www.cmegroup.com/markets/agriculture.html
Program on Dairy Markets, http://dairymarkets.org
In conclusion, dairy farms in Horizon Farm Credit’s territory have unique opportunities to remain relevant to the dairy industry. Farms that monitor costs, evaluate long term opportunities, and have contingency plans are poised to thrive and grow their operations. Business transitions continue to be a growing topic of interest and will dictate the growth or contraction of the industry for the next several years.
Interested in reading our other 2024 Ag Insights? Check out our other articles on:
The information in this article is a summary of select economic conditions and agricultural industries prepared by Horizon Farm Credit staff. This material is for informational purposes only and cannot be relied on to replace your own judgment or that of the professionals you work with in assessing the accuracy or relevance of the information to your own operations. The information provided in this report is not intended to be investment, tax or legal advice and should not be relied upon by recipients for such purposes. As with any economic analysis, the information is based upon assumptions, personal views and experiences of those who provided the source material as well as those who prepared this summary. These assumptions, conclusions and opinions may prove to be incomplete or incorrect. Economic conditions may also change at any time based on unforeseeable events. Horizon Farm Credit assumes no liability for the accuracy or completeness of the summary or of any of the source material upon which it is based. No commitment to lend, or provide any financial service, express or implied, is made by posting this information. In no event will Horizon Farm Credit be liable for any decision made or actions taken by any person or persons relying on the information contained in this report.
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First Time Home Buyer's Guide
by Sharon Piccioni, Horizon Farm Credit Loan Officer
Ready to establish your own roots, but don’t know where to start? We know that the home buying process can be overwhelming, so we’ve put together this helpful guide to help you prepare to buy a home and set the stage for what the process looks like when you work with Farm Credit. We know that coming up with a down payment can be difficult and is often the reason it takes buyers so long to start the process. Farm Credit is helping first-time rural property owners by offering financing for up to 85% of the purchase price or appraised value with no mortgage insurance*. Contact our team of experts to learn more about this special opportunity and get connected with a loan officer!
How to Prepare to Buy a Home
You have heard this your whole life, but it really is one of the most important things: start saving as soon and as much as you can! When you have a good amount of money saved, it presents more options for you and will allow you to have enough for the down payment and closing costs.
Another number to be conscious of is your credit score. You can build credit in a variety of ways, one of which is to open a credit card with a low spending limit and a low amount of permitted hard credit pulls. By paying it off every month, you will steadily increase your credit score.
When looking into loan products, research various banks and lenders and call around to see what they offer. First time home buyers can often take advantage of specialized loans, so it’s best to familiarize yourself with these options.
Another piece of advice as you embark on your home buying journey - decide what type of property you are looking to purchase. Whether you are looking for a large acreage property with a small house, a smaller lot with a bigger house, or looking for a lot to build on in the future, the loan options for each situation can be a bit different so it is helpful to have an idea on the property you are looking for when looking at options. Learn about the differences between a land mortgage and a home mortgage here.
The Process of Home Buying
We know this can be a daunting idea, but let us break the home buying process down into a few key steps:
Step 1
Get prequalified! There is nothing worse than finding the home of your dreams and then learning that it won’t fit your budget. Knowing how much you can afford from the beginning will help you focus on the right properties and make the process a lot easier. Most lenders will do this step for free for you to get started.
Step 2
Connect with a lender you trust to learn about the options that fit your scenario. There are a ton of loan products such as SMM (secondary mortgage market), in-house fixed rates, adjustable rates, and all of them have pros and cons. It is essential to work with your lender to make sure you select the product that best suits you.
Step 3
Explore the housing options available. There are real estate platforms such as Redfin or Zillow to search for homes or land in your ideal location, or you can work with a local realtor to find a property for you. Sometimes the best opportunities are ones not yet on the market, so consider trying to find properties through word of mouth by talking to neighbors, friends, or family members.
Step 4
Once you’ve narrowed in on the property you would like to move forward with, reach out to your lender to start the loan process. You will want to prepare for the closing and other costs that come with buying a property. Many of these fees will not vary much from lender to lender such as transfer tax, title insurance, and recording fees, however, loan origination fees can be quite different. We recommend discussing these at the beginning of the process, as well as the other fees to consider, like Private Mortgage Insurance, which is needed if you do not have 20% down payment.
Additionally, there are real estate taxes and homeowners’ insurance, which you will need to know if they will be included in your loan or a separate expense out of pocket. One last thing to remember is your appraisal which is often required when purchasing real estate. This fee can vary depending on the type of appraisal and who will be completing it.
Working with Farm Credit
We know there are plenty of options when searching for a lender to help you purchase your first home, but Farm Credit offers a number of loan products designed to fit your needs. From prequalification to closing, we strive to make your home buying experience as stress free as possible.
Farm Credit also offers the ability to complete a note modification when interest rates fluctuate. A note modification costs much less than a full refinance, reduces your interest rate, and is done for a flat rate, via email from the comfort of your home. A member of our lending team can give you all of the details on note modifications when discussing our loan options.
We know that this is a transformative time of your life and while it is exciting, you want to be prepared for any road bumps through the process. Contact us today to get connected with your local lending expert and get started on your home buying dream!
*Certain restrictions apply. This offer is subject to credit approval.
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The Nuts and Bolts of Bolstering Ag Tech Adoption
by Joe Waddell, Horizon Farm Credit’s Director of Market Innovation
This blog is part two in an ag technology spotlight. Click here to read the first blog.
In the world of ag tech innovation, we can get caught up chasing the new shiny object and often overlook solutions that are proven in the marketplace. Efficiency gains that can be made by implementing current technology solutions lift the entire industry and make a significant difference in economic viability and sustainability.
At the same time, it’s vitally important we continue investing in startups and developing novel solutions for the future advancement of the industry. However, we need to make sure those developments have applicable use cases.
As mentioned in my earlier blog, communication among all stakeholders is key to finding solutions for future success. Sharing knowledge and ideas within the agriculture community fosters healthy collaboration around innovative solutions. There is still a time and place for competition — which ultimately drives innovation — but communication is vital to addressing challenges with solutions that work for farmers and producers.
So, how do we achieve this? Through building a robust support system, understanding the marketplace, and creating a sandbox for ag tech innovators to play in, among other things.
Build a Robust Support System
Using high-tech equipment provides wonderful upsides when it’s properly functioning, but it is incredibly frustrating when it’s down and you’re left without a viable support network. A robust support platform is another key to adoption and long-term success.
Entering this space is no easy feat and it’s incredibly important to understand the landscape and on-the-ground issues that can present themselves. Farmers often rely on neighbors’ experiences with tech and best management practices to help drive decision-making. If you put a bad taste in someone’s mouth because of poor technology support, it doesn’t take long to make the community’s discussion board. Even if you have the best product on the market, if you offer poor support to customers, you will lack adoption.
Understand the Marketplace
While seemingly obvious, little time is often spent understanding the problem and those facing the challenges. Within the startup space, it’s not surprising to find numerous novel solutions looking for a problem to solve — the classic case of the hammer in search of a nail. This is where collaboration comes into play.
There are lessons to be learned from the major ag players who develop products with lifecycles meant for the ag environment, which is no easy task, but an incredibly important one to creating a robust end product. The tried-and-true companies in the ag space have refined their processes over decades to develop products that have a place in the market. By investing time researching the problem being solved — like using in-field trials throughout the entire product lifecycle — solutions are tailored to a diverse set of operating environments.
When developing solutions, engaging larger groups of end-users falls toward the end of the pipeline, making it nearly impossible to successfully pivot when problems present themselves in the field. But what if we had a national database of potential pilot farms willing and able to test solutions to allow entrepreneurs to ground truth in their ideas?
This could include farmers and producers, or as far back as cooperatives that serve large swaths of agriculture communities with diverse testing grounds within their footprints. AgLaunch — a non-profit connecting entrepreneurs with growers — is an example of an accelerator working to implement this type of model.
Play in an Ag Tech Innovation Sandbox
I am encouraged by the growth of regionalized centers — like Grand Farm in North Dakota — that are fostering innovation and competitive collaboration. Centers like Grand Farm promote testing across a multitude of technologies and cropping environments and invite multiple stakeholders to the table. Major industry players, startups, and most importantly, the local ag community implement use cases on the ground to understand real life implementation in their area.
Creating a sandbox for ag tech innovators and end-users alike can also be used as an educational tool to get a new generation engrained back into rural communities. The agriculture community is eager to add enthusiastic folks to the ranks, and a key to success in this area is to have multiple regions showcasing different solutions across a multitude of locations, highlighting the viability of products. This will go a long way toward generating excitement around efficiencies and advancements in the industry.
To get true adoption and foster growth within the industry, we must strive to create a complementary agricultural innovation ecosystem and refrain from a one-size-fits-all system.
Is your community making strides in this space? I’d love to hear about it! Please send me an email at jwaddell@horizonfc.com to connect.
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Construction - Planning, Process, and Pitfalls
by Meagan Walters, Horizon Farm Credit Loan Officer
Ready to start building your dream home, but overwhelmed on where to start? Farm Credit is here to help! Our lending team are the experts in construction loans, and are ready to help you build your dreams.
The construction process can be extremely lengthy, from perc tests to final inspections, and we want you to feel supported at every step along the way. Read below to learn more about construction planning, the process, and pitfalls to avoid while on your journey
Got Land? Get Financing.
Once you’ve landed your ideal piece of land for your future build, how do you get started on your construction project? Throughout the entire process, you will need to work closely with both your lender and a builder. We recommend starting with your lender to ensure there is a good loan option for the type of home you want to build. Connect with a trusted lender up front to determine a pre-qualification amount so you can budget accordingly for your project. Your lender can put together some initial numbers to give you a better idea of how much you can afford, if there is usable equity in the property, and how much you may need up front for down payment, closing costs, and cost overruns.
Partner with a Builder You Trust
After a conversation with your lender, it’s time to seek out a reputable builder. Start by asking them for their portfolio or references from previous customers. Ideally, you will want to meet with your builder in person to discuss your project in detail. Make sure they communicate well with you and can answer any questions you have. Your builder can help with decisions on the type of home to build, the placement of the home on the property, utilities that will be needed, required tests and permits, and overall cost of the project.
Once you’ve selected your builder, consider the contract, scope of work, and timeline for both the builder and your lender. Some builders offer turnkey contracts that cover every aspect of the build, while other contracts may leave you responsible for things like foundation/excavation, septic, or the well. Contracts that do not address all aspects of construction can create issues down the line and add additional costs to the project. It’s important to understand your contractor’s timeline and project pipeline to ensure your build can be completed in a timely manner that aligns with the lender’s requirements and your expectations.
After ensuring your builder can meet your timeline, your lender is going to need a signed builder’s contract, proposed disbursement schedule, plans, and specifications of the home, as well as any estimates for work outside of the main contract. You will need to work with your builder on these items before applying for the construction loan. Your lender can provide the needed application and list of required financial documents, as well. We recommend applying for the loan at least 60 days prior to when all parties want to start construction.
We know that building is a big step and an exciting process for you and your future. We are here to help you every step of the way and be a resource for you. Click the link below to get in contact with your local loan officer and get started on your prequalification today!
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Each event will include a meal, ride passes, and networking opportunities with other members of your cooperative. Choose an event that is convenient for you!
To register and find details about each event, including time and address, select one of the events listed below. You can also register by calling 888.339.3334.
One event per family. HURRY! The deadline to RSVP is June 6.
Questions? Give us a call at 888.339.3334.
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Understanding Your Crop Insurance Coverage Quote
by Joel Alsdorf, Crop Insurance Agent
“As days lengthen, the cold strengthens,” my grandfather often said, contrasting it with his other favorite saying, "make hay while the sun shines." As farmers, we use this time to manage crucial details, from maintenance and repairs to pre-ordering seeds and chemicals, all setting the stage for the year ahead. Amidst these decisions, reviewing your crop insurance program's value is essential. Though overwhelming at times, your policy should provide peace of mind, allowing you to focus on field work during sunny days.
Your relationship with your crop insurance agent should ensure confidence in your decisions. Your Farm Credit agent uses their expert training to help you understand available options, often expressed through quotes. Quotes may seem complex, however they simply compile numerical values for easy comparison. Your agent will tailor a quote to fit your operation, considering factors like risk management, profitability, and budget.
Developing a strong relationship with your agent is key. Let's unpack the basics of quote analysis and define what information is included in your crop insurance quote:
- Plan type: Abbreviations like RP (Revenue Protection) or YP (Yield Protection)
- Unit Structure: BU (basic unit), EU (enterprise unit), OU (optional unit)
- Coverage Level: Typically 50-85% indicating deductible percentage
- Acres: Total or easily calculable number
- Average Yield: Your own or county average
- Total Coverage: Dollar value guaranteed per acre
- Total Subsidy: Government-subsidized amount per acre
- Producer Premium: Cost per acre after subsidy
- Fees: Premium and processing fees
Crop insurance quotes can feel overwhelming, but your agent can help. Understanding your operational goals ensures quotes meet your needs. Reach out to your agent as you plan for the year ahead.
When you’re ready to review your policy, or learn more about how crop insurance can benefit you and your business, give us a call to speak with a member of our crop insurance team today at 888.339.3334 or click here to learn more.
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Farmers’ Integral Role in Shaping Ag Tech Innovation
by Joe Waddell, Horizon Farm Credit’s Director of Market Innovation
After spending more than a year wading through the ag tech scene and orienting myself to the advancements in that space, I find myself reflecting on the value and usability of new and emerging ag tech innovations. I often wonder what farmers have to gain from these proposed solutions, and if we’re truly addressing and understanding the daily challenges farmers face at the ground level.
Within the agriculture industry, there is no cookie-cutter approach to solving shared complex issues across the same segment, let alone multiple segments. While outside viewpoints often bring fresh perspectives to potential solutions, there seems to be a key element missing in much of the early discussions around creating said solutions — involvement from those in the trenches, our farmers.
Communication and Innovation
Like many issues that pop up in our daily lives, there is usually a common theme that either causes or helps solve the problem at hand — communication, or lack thereof. Too little communication brings about innovations that either don’t address the issue at hand or are too costly to implement.
We must then ask ourselves how we change the culture of communication within the ag innovation space to foster a more robust pathway to success. No matter how well-intentioned, solutions that require a heavy upfront investment and long road to tangibly see payoff often face a much lower success rate.
There’s something to be said for a direct investment approach in current ag tech solutions at the farmgate. Could we stretch dollars to have an immediate impact on farm level sustainability? And, how do we get a better grasp directly addressing solutions on-farm? A solid communication pathway between those developing ag technology and end-users is vital to bringing about solutions that are viable in the marketplace and sustainable long-term.
The Role of Perspective in Decision-Making
Choosing a solution that makes the most sense for an operation typically revolves around personal perspective. For example, sustainability holds a different meaning for each person, and deciding which solution is most sustainable for an operation is subjective. From examining what can be done to impact the bottom line to make a business viable in the future, to exploring approaches that incrementally lead to greater efficiency, developing a one-size-fits-all solution is nearly impossible.
Beyond that, farming budgets are often on a razors edge of profitability. When thinking about the return on investment, solutions don’t always need to provide a strict monetary outcome — although, those do see the highest adoption rates. Often, the decision to adopt different practices or technologies is impacted by time gained because of efficiency, which allows an indirect monetary gain. Time is money, as they say.
What works for one operation may not work for another, and that’s the beauty of innovation. Whether old technology or new, many factors influence producers’ decisions, with perspective playing a major role in the adoption — or lack thereof — of innovations.
The Farmer’s Voice
When the experiences, challenges, and feedback of farmers is sought out during the innovation process, those solutions often see the highest rate of adoption. Success hinges on gathering the perspectives of farmers to ensure new innovations and technologies truly address root problems, while also keeping cost efficiency in mind. It’s vital ag tech innovators work hand-in-hand with farmers to develop solutions that work for farmers and enhance the success and profitability of their operations.
Interested in keeping up-to-date with the latest trends in ag? Reach out to me at jwaddell@horizonfc.com to talk shop.
This blog is part one in a two-part ag technology spotlight. Check back next week for part two.