Transcript RME_Conference_4-12-11.pptx

A Comprehensive Financial and Risk
Management Solution for Beginning Farmers
and Ranchers – A Farm Level Approach
Dr. Lori Wilcox
Peter Zimmel
Karisha Devlin
Overview
Background on beginning farmer and
rancher grant – Dr. Lori Wilcox
Discussion of panel farm development and
risk management tools – Peter Zimmel
Critical role of extension and outreach in
farm development and outcome
dissemination – Karisha Devlin
USDA/NIFA Grants
The 2002 & 2008 Farm Bills established a
grant program focused on U.S. beginning
farmers and ranchers
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Competitive
Provide education, outreach, training and
technical assistance
18 need assessment areas identified
First RFA in FY2009 for BFRDP grants
29 grants awarded in FY2009 for $17 million
 40 grants for $18 million awarded in FY2010
Input costs will rise again
WTI Crude Oil ~$110/barrel
450
Index, 1990-92=100
400
350
300
250
200
150
100
2004
2006
2008
Fuels
Source: IHS Global Insight
2010
2012
Fertilizer
2014
2016
2018
All production items
2020
Land Prices
Potential Barriers to Entry
Capital intensive
Land prices
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Access to land
Volatility (Good and Bad)
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Input costs and Receipts
Inability to communicate long-range plan
to lender
A Comprehensive Financial and Risk Management Solution for
Beginning Farmers and Ranchers –
A Farm Level Approach
FAPRI-MU awarded a 3 yr. BFRDP grant
from FY2009 cycle
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Advisory Council
 11 members
 Develop 4 panel farms
 Provide 5 year whole-farm analysis
 Scenario analysis
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Individual analysis for panel participants
 Provide 5 year financial outlook
 Scenario analysis
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Web-based decision support tools
Goals of grant funded project
Short-term
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Provide tools and educational materials to help
Missouri’s beginning farmers and ranchers
achieve financial stability
Long-term
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Make the tools and information available to any
beginning farmer or rancher via the World Wide
Web
Three year Project
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October 2009 – September 2012
Funding from USDA/CSREES/NIFA
Objectives
Representative beginning farmer or
rancher farm panels
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Develop 4 representative farms
Consisting of panels of beginning farmers or
ranchers
Using extension staff as facilitators
Provide 5 year financial outlook
Update farms yearly
Run what-if scenarios to look at changes to
the operation size, structure, etc
Advisory Council
Establish an 11 person (give or take)
advisory council
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Consisting of:
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Extension staff (facilitators)
Commercial lenders
FCS Financial
Missouri Department of Agriculture
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MASBDA
 USDA/FSA
 Established producers
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Provide input and feedback to help guide the
project to a successful completion
BFRDP Grant cont.
Beginning = Farming or ranching < 10 yrs.
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Created changes to one panel focused on
Annie’s Project participants
“What-if” scenarios developed
independently by each panel farm
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Focus on production and structure, not policy
Trusting relationship with University
Extension facilitator and FAPRI-MU staff
crucial
BFRDP Grant cont.
Year 1 – October 2009 to September 2010
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Fourteen Workshops Held
 Two with advisory council
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11 members
 Twelve with four panels
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21 participants on four panels
Four Panel Farms
 Average years farming – 3 to 6 years
 100% are currently engaged in farming
 100% plan to continue farming in the current year
Missouri Beginning Farmer
Panels
Northeast Crop/Beef
600 crop acres & 60 cows
North Central Crop/Beef
500 crop acres & 15 cows
West Central Crop
500 crop acres
Southwest Beef
180 cows
BFRDP Grant cont.
Year 2 – October 2010 to September 2011
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Five Workshops Held
 One with advisory council
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11 members
 Four with panels
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21 participants on four panels
Individual farm analysis with interested panel
participants
Beginning Farmer and Rancher survey
 Available in hard-copy and online
 First disseminated to AFBF YF&R participants in
Feb. 2011
BFRDP Grant cont.
Year 3 – October 2011 to September 2012
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Survey results will be incorporated into online
tools
Panel farms and FAPRI-MU 10 year baseline will
provide basis
 Individuals accessing the online tools will be able to
adjust for their operation, explore their own “what-if”
scenarios
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Financial statements and cash flow analysis will
be available in addition to educational resources
linking to other BFRDP grants and advisory
council and other stakeholder online resources
Panel Farm Development
Panels facilitated by local extension
specialist
Panels met 3 times in first year
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Initial data gathering
Baseline validation & identify alternatives
Alternative validation
86% attendance of panel members
Simulation begins in 2007, 3 years of
history
Farm size held constant for baseline
Southwest Missouri – Lawrence
County
Representative Farm
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Started in 2003 (7 years old)
Owned land: 150 acres purchased in 2003
 $1,600 acre in 2009
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Rented land: 560 acres cash rented
180 cow/calf pairs
 Calves backgrounded for 60 days
 Sale weights: Steers – 680 lbs, Heifers – 620 lbs
 Purchasing all replacement heifers
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Hay: 200 acres
 Own their own hay equipment
Southwest Missouri – Lawrence
County
Representative Farm
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Simulation started in 2007
Debt in 2007
 Land – 70% of current value
 Machinery – 50% of current value
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Three years of historical data simulated
 2007-2009
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Farm size is kept constant for the projection
period (2010-2014)
Southwest Missouri – Lawrence
County
Baseline Results
Net Return per Cow
$900
$800
$124
$98
$700
$600
$500
$400
$300
2010
2011
Receipts
2012
Operating expenses
2013
Total costs no operator draw
FINANCIALS (2010-14)
Operator assets
Total cash receipts
Net cash farm income
Return to family living
2014
2010-11 2012-14
$511,000
$139,000
$46,100
$21,700
Cash risk score
Prob. Of
Deficit*
Under 25
25 to 50
50 to 75
Over 75
Color
Score
Risk
Score
Low
Moderate
High
Severe
* Probability of cash flow deficit in any year of the
projection period.
Southwest Missouri – Lawrence
County
Alternative 1 – Background purchased
calves
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Cash risk score
Alternative 2 – Add cows through the use
of management intensive grazing
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Cash risk score
Northeast Missouri – Marion,
Knox, & Shelby Counties
Representative Farm
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Started in 2003 (7 years old)
600 tillable acres, 210 acres of pasture/hay
 250 acres of corn (145 bu. 5 yr. avg. yld.)
 350 acres of soybeans (45 bu. 5 yr. avg. yld.)
 120 acres of pasture
 90 acres of hay
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60 cow/calf pairs
 Calves backgrounded for 120 days
 Sale weights: Steers – 750 lbs; Heifers – 700 lbs
 Raising their own replacements
Northeast Missouri – Marion,
Knox, & Shelby Counties
Representative Farm
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Owned land: 170 acres purchased in 2003
 $2,800/acre in 2009
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Rented land:
 Cash: 400 acres ($120/acre)
 Share: 80 acres (50/50 share)
 Pasture/Hay: 180 acres ($30/acre)
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Farm is associated with a larger farming
operation
 Multi-family operation
 Perks
Northeast Missouri – Marion,
Knox, & Shelby Counties
Representative Farm
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Simulation started in 2007
Debt in 2007
 Land – 80% of current value
 Machinery – 50% of current value
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Three years of historical data simulated
 2007-2009
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Farm size is kept constant for the projection
period (2010-2014)
Northeast Missouri – Marion,
Knox, & Shelby Counties
Baseline Results
$400
$49
Net Return per Acre
$450
$51
$350
$300
$250
$200
2010
2011
Receipts
2012
Operating expenses
2013
2014
Total costs no operator draw
FINANCIALS (2010-14)
Operator assets
Total cash receipts
Net cash farm income
Return to family living
$802,000
$336,900
$77,400
$38,500
Cash risk score
Prob. Of
Deficit*
Under 25
25 to 50
50 to 75
Over 75
Color
Score
Risk
Score
Low
Moderate
High
Severe
* Probability of cash flow deficit in any year of the
projection period.
Northeast Missouri – Marion,
Knox, & Shelby Counties
Alternative 1 – Increase the cow herd and
plant cover crop (add 16 cows over 4 yrs)
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Cash risk score
Alternative 2 – Add 400 acres of cash
rented crop acres
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Cash risk score
North Central Missouri – Carroll
& Saline Counties
Representative Farm
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Started in 2006 (4 years old)
500 tillable acres, 45 acres of pasture
 250 acres of corn (170 bu. 5 yr. avg. yld.)
 250 acres of soybeans (45 bu. 5 yr. avg. yld.)
 45 acres of cash rented pasture
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15 cow/calf pairs
 Selling calves at weening
 Sale weights: Steers – 500 lbs; Heifers – 450 lbs
 Raising there own replacements
North Central Missouri – Carroll
& Saline Counties
Representative Farm
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Owned land: 85 acres purchased in 2006
 $5,000/acre in 2009
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Rented land:
 Cash: 210 acres ($150/acre)
 Share: 210 acres (50/50 share)
 Pasture: 45 acres ($30/acre)
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Farm is associated with a larger farming
operation
 Multi-family operation
 Perks
North Central Missouri – Carroll
& Saline Counties
Representative Farm
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Simulation started in 2007
Debt in 2007
 Land – 89% of current value
 Machinery – 50% of current value
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Three years of historical data simulated
 2007-2009
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Farm size is kept constant for the projection
period (2010-2014)
North Central Missouri – Carroll
& Saline Counties
Baseline Results
Net Return per Acre
$550
$500
$107
$106
$450
$400
$350
$300
$250
$200
2010
2011
Receipts
2012
Operating expenses
2013
Total costs no operator draw
FINANCIALS (2010-14)
Operator assets
Total cash receipts
Net cash farm income
Return to family living
2014
2010-11 2012-14
$587,000
$256,900
$81,500
$57,800
Cash risk score
Prob. Of
Deficit*
Under 25
25 to 50
50 to 75
Over 75
Color
Score
Risk
Score
Low
Moderate
High
Severe
* Probability of cash flow deficit in any year of the
projection period.
North Central Missouri – Carroll
& Saline Counties
Alternative 1 – Add 200 acres of cash
rented crop acres in 2010 and 2012
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Cash risk score
Alternative 2 – Add grain bins in 2010 &
2012 and 400 acres of cash rented crop
acres in 2012
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Cash risk score
Alternative 3 – Purchase 90 calves and
background for 120 days
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Cash risk score
West Central Missouri –
Lafayette County
Representative Farm
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Started in 2003 (7 years old)
400 tillable acres
 200 acres of corn (150 bu. 5 yr. avg. yld.)
 180 acres of soybeans (46 bu. 5 yr. avg. yld.)
 20 acres of wheat/dc beans (55 bu./25 bu. 5 yr. avg. yld.)
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No cattle
West Central Missouri –
Lafayette County
Representative Farm
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Owned land: 88 acres purchased in 2002
 $3,200/acre in 2009
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Rented land:
 Cash: 320 acres ($145/acre)
 Share: 0 acres
 Pasture: 0 acres
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Farm is associated with a larger farming
operation
 Multi-family operation
 Perks
West Central Missouri –
Lafayette County
Representative Farm
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Simulation started in 2007
Debt in 2007
 Land – 67% of current value
 Machinery – 50% of current value
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Three years of historical data simulated
 2007-2009
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Farm size is kept constant for the projection
period (2010-2014)
West Central Missouri –
Lafayette County
Baseline Results
$800
$700
-$60
Net Return per Acre
$93
$600
$500
$400
$300
$200
$100
$0
2010
2011
Receipts
2012
Operating expenses
2013
Total costs no operator draw
FINANCIALS (2010-14)
Operator assets
Total cash receipts
Net cash farm income
Return to family living
2014
2010-11 2012-14
$759,000
$237,400
$49,800
$14,700
Cash risk score
Prob. Of
Deficit*
Under 25
25 to 50
50 to 75
Over 75
Color
Score
Risk
Score
Low
Moderate
High
Severe
* Probability of cash flow deficit in any year of the
projection period.
West Central Missouri –
Lafayette County
Alternative 1 – Add 40 acres of cash
rented crop acres in 2010, 2012, & 2014
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Cash risk score
Alternative 2 – Purchase 80 acres of
cropland (70 acres tillable) in 2011
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Cash risk score
Alternative 3 – Add 140 tillable acres of
cash leased cropland in 2011
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Cash risk score
Risk Management Tools
Beginning farmer and rancher section on
FAPRI web site
Representative Farms section detailing
farms and alternatives
Online and downloadable tools for
beginning farmers and ranchers
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FAPRI Baseline data drives the tools
How is Extension Involved?
Identify beginning farmers in area
Initiate communication with selected
farmers
Serve as contact person for beginning
farmer panel
Facilitate meetings
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Four Extension facilitators
Characteristics of Beginning Farmer
Late 20s, early 30s
Passionate about farming
Usually linked to a family operation
Involved in a variety of activities
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Off farm work
Custom farming
Value added agriculture
Share arrangements
Benefits of Program
Extension
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Increased beginning farmers’ awareness of
Extension
Involvement in other programs
Interest in serving on Extension council and
other community organizations
Benefits of Program
Beginning Farmer
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Education
Assistance with alternative scenarios for farm
Decision-making tools
Networking with other young farmers
Leadership opportunities
Questions
Contacts:
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Dr. Lori Wilcox
 [email protected]

Peter Zimmel
 [email protected]

Karisha Devlin
 [email protected]