spotlight FALL 2018
Increasing Sales One Relationship at a Time Central Coast Producer Bonipak Says Great Quality and Great Relationships Make the Difference PAGE 6
Water for the Future
PAG E 14
Investing in New Technology: When is the Right Decision for Your Operation? PAG E 16
Spotlight
President’s Message 3
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Increasing Sales One Relationship at a Time: Central Coast Producer Bonipak Says Great Quality and Great Relationships Make the Difference
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Claiming Your Place in a Competitive Market
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10 12 13 13
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Financial Highlights 2018 Election Results
Community Center
WHO WE ARE One of the West’s leading agricultural lenders, Farm Credit West and its wholly owned subsidiaries are cooperatively-owned lending institutions providing financial services to farmers, ranchers, and agribusinesses. Our offices are located in Arizona and California’s Central Coast, Imperial Valley, South San Joaquin Valley, and Sacramento Valley.
SPOTLIGHT is produced for the customers, employees and friends of Farm Credit West. Comments and story ideas can be submitted by email to the Marketing Department at marketing@farmcreditwest.com.
BOARD OF DIRECTORS Chairman of the Board Joey Airoso. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pixley, CA
Top Questions from the Road
Vice Chair of the Board Sureena B. Thiara. . . . . . . . . . . . . . . . . . . . Yuba City, CA
Explaining Interest Rate Products
Robert Amarel, Jr. . . . . . . . . . . . . . . . . . . . Yuba City, CA
2018 Renewal Scholarship Recipients
Teresa Castanias . . . . . . . . . . . . . . . . . . . . . . . . . Dixon, CA
Water for the Future
Mark A. Cook . . . . . . . . . . . . . . . . . . . . . . . . . . Willcox, AZ Catherine Fanucchi. . . . . . . . . . . . . . . . . Bakersfield, CA
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Farm Credit West Irrigation Stewardship Program
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Investing in New Technology: When is the Right Decision for Your Operation?
Craig C. Gnos . . . . . . . . . . . . . . . . . . . . . . . . . . . Davis, CA
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Brandied Peach Pork Chops
Robert N. Hansen. . . . . . . . . . . . . . . . . . . . . Hanford, CA
The Insider Threat is a Risk to Everyone
Blake Harlan. . . . . . . . . . . . . . . . . . . . . . . . . Woodland, CA
Territory and Office Locations
Tom Ikeda . . . . . . . . . . . . . . . . . . . . . . Arroyo Grande, CA
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Douglas C. Filipponi . . . . . . . . . . . . . . . . . . . Creston, CA
Colin Mellon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yuma, AZ Mark Osterkamp . . . . . . . . . . . . . . . . . . . . . . Brawley, CA
MISSION STATEMENT Farm Credit West will ensure THE CUSTOMER COMES FIRST
by providing superior service at competitive rates, in a timely,
professional, and ethical manner, and by delivering a meaningful return on equity through our patronage program.
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Barry Powell . . . . . . . . . . . . . . . . . . . . . . . . Sacramento, CA Brian Talley. . . . . . . . . . . . . . . . . . . . . Arroyo Grande, CA
PRESIDENT’S MESSAGE Mark Littlefield, CEO
Investing in Our Future Farm Credit West is leaning into technology as we continue providing you with excellent customer service. Every day, farmers and ranchers face new challenges and obstacles. Thus far in 2018, the agricultural community has faced strong headwinds in the form of ongoing trade disputes, water risks, rising interest rates, labor shortages, and political uncertainty. Despite ongoing ambiguity in the world around us, the agriculture community remains resilient, unified in our efforts to communicate the positive story of agriculture. Farm Credit West continues to carry out its mission because we have adopted your resilience. Your perseverance, marked by hard work day in and day out, is what inspires your Association staff to always offer the best possible service and value. We are actively positioning our Association to continue serving you well by providing the sustained value you deserve through robust patronage, competitive rates, and superior service — regardless of what lies on the horizon. In light of the challenges that agriculture faces, many of you are seeking to invest in new technologies to increase efficiency and productivity, as well as lower costs over time. Farm Credit West stands ready to provide the assistance you need and has taken steps to further embrace technology as we strive to meet our goal of sustaining and improving our excellent customer experience. Our Association is retooling several key internal technology platforms in an effort to better
coordinate departments, improve safety and security controls, and expedite the delivery of services to our customers. Our efforts will save you time and provide you with the peace of mind you need. This is crucial as the demographics of the agricultural sector continue to shift to a younger generation that mandates increased use of technology as they interact with their lender. Each of these actions are made with one focus in mind: promoting the health and growth of our customer-owners’ operations. That’s why Farm Credit West has paid nearly $600 million in patronage to our members since 2002. Ensuring that we achieve the results necessary to continue to provide this unique return to our members requires constant vigilance, adaptive flexibility, and shrewd risk management. Farm Credit West is dedicated to maintaining growth in a well-diversified portfolio that fully capitalizes on the widespread agricultural bounty of our territory to minimize risk and weather the storms. We recognize that none of this would be possible without visionary leadership. Our faith in the wisdom of our customers is justified by their careful choices of highly qualified directors, who work tirelessly to promote our mutual success. We congratulate and welcome our newly elected and re-elected Board Members, and are confident that their contributions will solidify the strength of Farm Credit West. Above all, we are thankful for the chance to serve you, our customer-owners, and look forward to continuing to grow together.
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Financial Highlights Farm Credit West reported net income of $123 million for the first six months of 2018. These year-to-date earnings are ahead of our business plan target. Also, during the first six months of 2018 our average earning assets and capital levels increased and we strengthened our allowance for loan losses.
Average Earning Assets* (in millions)
$9,206 $6,722
Dec. 31 2014
$9,379
$9,411 20.4%
$7,627
Dec. 31 2015
Members’ Equity as a % of Total Assets
Dec. 31 2016
Dec. 31 2017
June 30 2018
Average earning assets increased $32 million, or 0.34%, during the first six months of the year. Farm Credit West is experiencing modest levels of loan growth in 2018; this level of loan growth is expected to continue through the remainder of the year. At the end of the second quarter, average earning assets were in line with the second-quarter business plan target.
Nonearning Assets (in millions)
19.3%
Dec. 31 2015
Dec. 31 2016
20.3%
Dec. 31 2017
21.6%
June 30 2018
In the first six months of 2018, total members’ equity increased $118 million, primarily due to net income of $123 million. Partially offsetting net income during the six months were preferred stock dividends of $4 million.
Allowance for Loan Losses as a % of Loans
$146
$142 $120
Dec. 31 2014
18.8%
$117 0.53%
0.50%
Dec. 31 2014
Dec. 31 2015
0.58%
0.66%
0.74%
$72 Dec. 31 2014
Dec. 31 2015
Dec. 31 2016
Dec. 31 2017
June 30 2018
Nonearning assets (nonaccrual loans plus other property owned) increased by $29 million or 24.8% to $146 million at June 30, 2018. The increase was primarily due to a $30 million increase in nonaccrual loan volume as a result of $39 million in transfers to nonaccrual partially offset by net repayments of $9 million during the year. The other property owned balance decreased by $1 million.
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FALL 2018
Dec. 31 2017
June 30 2018
Our allowance for loan losses totaled $73 million (0.74% of loan principal and interest) at June 30, 2018, compared with 0.66% of loan principal and interest at December 31, 2017. The allowance is our best estimate of the amount of probable losses existing in our loan portfolio as of each balance sheet date. We determine the allowance based on a regular assessment of the loan portfolio, which generally considers recent historic charge-off experience, collateral evaluations and adjustments for other relevant economic factors.
* Average earning assets amount for 2017 was adjusted to exclude nonaccrual loan volume for comparison.
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Dec. 31 2016
B OA R D U P D AT E
2018 Director and Nominating Committee
Election Results Board of Directors Congratulations to Joey Airoso, Bob Amarel, and Mark Osterkamp, who were recently elected to serve on the Farm Credit West Board of Directors. Farm Credit West Board members are the governing voice of the Association, acting to represent the best interests of the Association’s shareholders.
2018 Nominating Committee Mike Blohm | Michael Dias | Kim Grizzle Matt Mariani | Nicholas Miller | Craig Reade Louis Pandol | Paul Squires
2018 Alternates for Nominating Committee Larry Cox | Rajeev Davit | Randy Diffenbaugh Jared Fernandes | Paul Hoover | Sam Nevis Larry Ott | Kent Stenderup
Joey Airoso Joey has been reelected to the Farm Credit West Board and is an active partner in Airoso Dairy. He operates a fourth-generation dairy farming partnership with his parents.
Retiring Director: Dick Eastman Dick retired from the Farm Credit West Board this year, having represented Farm Credit West stockholders with the utmost
Bob Amarel Bob has been reelected to the Farm Credit West Board. He is a managing partner of Reason Farms, which is a fourth-generation farming operation consisting of prunes, walnuts and almonds.
integrity. We thank him for his dedicated service and wish him well in all future endeavors. Dick began as a director on the Farm Credit Services Southwest Board in 2000.
Mark Osterkamp Mark is a new member to the Farm Credit West Board. He currently serves as president of Osterkamp Farms, a third-generation farm that grows alfalfa, sugar beets, carrots, sunflower seed, Bermuda, dehydrated onions, durum wheat, Kline grass and Sudan grass.
Thank you to those who participated in the election process. You play an important role in Farm Credit West’s success. We sincerely appreciate those who agreed to serve as Board of Director candidates, Nominating Committee members, Nominating Committee candidates and all stockholders who cast their ballots.
Seeking qualified candidates Directors serve on the boards of Farm Credit West, ACA and each of its subsidiaries. If you are interested in running for a board seat in the 2019 Farm Credit West director election, we would like to hear from you. The following regions will have one director seat available: Sacramento Valley | Central Coast If you are interested, please contact Chris Brumfield at 916.780.1166 no later than November 2, 2018.
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F E AT U R E S TO RY
Increasing Sales One Relationship at a Time
Central Coast Producer Bonipak Says Great Quality and Great Relationships Make the Difference By John Frith
E
xporting produce from California a nd Arizona can be a lucrative business and is an important market for a wide range of products. According to the Agricultural Issues Center at the University of California, Davis, California alone exported $20.04 billion in agriculture commodities during the 2016 crop year. That represents nearly 44 percent of all of the state’s agriculture commodities.
And while tree nuts, wine, and dairy products lead the list of exports, opportunities have existed for growers of other commodities as well. A case in point is Bonipak Produce, a Santa Maria-based sales company specializing in broccoli, celery, cauliflower and other row crops. Mitch Ardantz, the third-generation managing partner of the company owned by three founding families, said Bonipak still exports to Canada but has sharply reduced exports to Asia and the Pacific as the company has evolved from a wholesale operation to direct to retail. In a recent interview, Ardantz noted that there are opportunities and risks involved with exporting perishable crops but that growers can make it work if they keep two things in mind: quality and relationships. “If you’re shipping a quality product, importers will find you nine times out of 10,” Ardantz said. “And it’s all about relationships. We hired an end-user’s representative (who inspects operations in the U.S. for the importer) named Max Matsuada, who was a karate ‘sensei’ — a highly skilled Japanese martial arts instructor. He had
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Spotlight
FALL 2018
If you’re shipping a quality product, importers will find you nine times out of 10. And it’s all about relationships.
relationships with people around the world through karate and through them we were able to connect to a lot of different people.” Bonipak got into the export market about 15 years ago when a farm manager realized that because of Santa Maria’s climate, the company could grow asparagus during a two-month window in between harvest seasons in the Stockton area and the southern San Joaquin Valley. “We could command our own market, and that’s something you relish as a produce supplier. So we started to make relationships with importers and export brokers out of Los Angeles. The marketing wasn’t that difficult. The Asian market found us because they needed supply year-round,” he said. The asparagus window closed after four or five years as other Central Coast producers began growing the commodity as well, but Bonipak had already begun learning how to export other
Ralph Sanchez, Bonipak’s facilities operations manager, explains the packing and cooling process of their brussel sprout line.
crops such as broccoli, celery, and lettuces. At its peak, Bonipak was exporting 30 truckloads a week to Canada, Japan, China, and Singapore — and even to Mexico, which exports large quantities of produce to the U.S., because these crops won’t grow there in hot summer months. Ardantz said problems like fumigation, coupled with the company’s evolution into focusing mainly on selling labeled produce directly to consumers in stores, have caused it to largely withdraw from exporting to Asia, although the company still trucks large quantities of its product to stores in Canada. He expressed relief that Bonipak has reduced its export capacity given the current international climate over tariffs that is causing so much upheaval for American farmers. Regardless of where the produce is sold, however, its quality is equally important. Ralph Sanchez, Bonipak’s facilities operations manager, said exported produce is usually the cream of the crop because foreign consumers are willing to pay top dollar for outstanding product. And skimping on quality control can lead to huge financial losses once the produce arrives after 10-15 days at sea. “When it comes to veggies, they are looking for cleanliness and no insects,” Ardantz said. “If a load of broccoli arrives to port in Japan,
Workers at Bonipak’s packing operation sort brussel sprouts for size and quality.
Continued on next page
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for example, this team of guys all dressed
Farm Credit West — and the result
into the system, and barcoded to allow
in white like they were in a lab comes in,
is a modern system of cooling tubes
for each to be tracked from individual
opens some boxes, and hits the broccoli
and chambers and cold storage rooms
fields to market, then the chilling process
crowns together over sheets of white paper.
designed to quickly cool the produce
gets underway.
If there are any bugs at all, the entire load
to just above freezing.
goes through fumigation,” which drastically reduces the value of the produce. The key to ensuring top quality produce is the cold chain, Sanchez said. The company has invested heavily in recent years in expanding its cold storage facilities — thanks to several loans from
“The product arrives at about 55 degrees,
Broccoli is a great example of how the
and we need to cool it quickly to about 35.
system works.
That’s very important because for every
Sanchez said the crop is harvested, cut, and packaged in the fields — most within 15 – 20 miles of the sprawling processing facility. The boxes arrive, are scanned
hour we don’t cool a commodity, it loses one day of shelf life. So our goal is to cool it right away to keep the product from aging. We have a two-hour goal to cool it after it comes in,” Sanchez said.
Claiming Your Place in a Competitive Market
How to Use the Customer Experience Methodology to be a step ahead
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ou can grow the highest-quality commodity possible, but unless you are able to move your product quickly to market, your business will suffer. That’s where marketing comes in. While commodities vary and there are big differences between marketing value-added products such as flavored almonds and those with a limited shelf life (for example, strawberries), there are some basic marketing tips that apply to all growers, large and small.
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By Michelle Paul, VP – Marketing
It all starts with the customer experience. Let’s consider a reallife example of two businesses: Blockbuster and Netflix. Once the leader in the video rental industry, Blockbuster turned down the opportunity to partner with Netflix in 2000. Ten years later, they declared bankruptcy while Netflix’s profits soared. What was Blockbuster’s fatal error? They failed to consider the customer’s experience when determining how they delivered their product at market. Simply put, a movie that streams on demand via a subscription is a more effective delivery platform than driving to a brick-and-mortar store where a customer will likely be charged late fees for not returning their rental videos on time. While the scenario above is not agriculture-related, a lesson remains. To be successful in this highly competitive world, growers must consider the customer’s experience prior to introducing their product at market. The following are a few steps to consider as you define your marketing approach.
The incoming produce is cooled by a variety of means, depending on the crop. About two-thirds of the produce is cooled in containers in which cold air is pulled through by pressurized vacuum tubes, allowing for different pressures to be applied to each load to ensure more delicate crops aren’t damaged. For example, a load of cabbage would require about two hours because the plant is hard and compact, while leaf lettuce would only need 45 minutes or so to chill properly. Another 25 percent is cooled in one of 24 pressure tunnels inside the cold storage facility, and other commodities are cooled in ice. Because malfunctioning refrigerator trucks can cause the cold chain to break, Bonipak also inspects all of the 180 trucks a day that come in to haul away its produce to ensure they are clean and the refrigeration systems are working properly. Sanchez said there is one or two trucks a week that they refuse to load until the hauler has taken care of problems. Bonipak’s commitment to high quality standards is perhaps best illustrated in its new strawberry operations. This is just the third year the company has grown berries, and to market the product — and more importantly, to learn how to ensure the crop is top-quality — Bonipak is initially growing them for Driscoll. “They’re very picky about what they’ll accept. That is making us better growers,” Sanchez said.
1 Discover who your customer is. Clearly define your target customer’s persona and write down their decision journey. For example, what do they think and feel when at the grocery store? Define opportunities available to improve their experience. 2 Design a campaign. Now that you know who your customer is, design how you will reach them. Write a Business Plan or a Marketing Plan. Research your competition, understand distribution paths, and describe opportunities available to you. 3 Test your assumptions. Before launching your campaign, test your approach with a group of your target customers. This could be as informal as starting conversations with shoppers at your local grocery store or contracting with a third party company to host a focus group. Once the feedback is available, adjust your personas and campaign to reflect what you’ve learned about your customer.
Derek Smith monitors the cooling status of Bonipak’s pressure tunnels in the computer control room.
4 Develop your product. Now that you know who your customer is and have a plan for how to reach them, begin developing your marketing program. This could include building a website, hiring a graphic designer, building a prototype (such as a value added consumer product), or building relationships with wholesalers, brokers, or retailers. 5 Deliver. Launch your product. Start small and keep your process simple to test consumer reception. If it is a success, invest additional resources. Seek out and listen to your customer’s feedback while you constantly work to refine your process, keeping your product relevant.
Not sure where to
START?
Try asking your Farm Credit lender.
As experts in the agriculture industry,
they may surprise you with what resources they have
available to you.
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C OMMU NI T Y CEN TER
Farm Finance Expo Earlier this year, Farm Credit West joined with other California based Farm Credit Associations to sponsor FarmLink, a unique event for farmers and ranchers to gather, discuss, and learn about options for financing. In 2018, the Expo brought together 62 farmers and 10 lenders along with several partners and speakers. The event was a rare opportunity for farmers and ranchers to discuss financing with a variety of lenders. Specifically, the event included a hands-on financial activity focused on budgeting for success. With a clear picture of annual budgets, farmers and ranchers are better able to anticipate areas for business investment and how they might impact seasonal cash flow. Participating in the Farm Finance Expo were representatives from American AgCredit, Farm Credit West, and Golden State Farm Credit.
New Hanford Ag School Farm / Learning Lab Open to Students Farm Credit West recently joined with Golden State Farm Credit, CoBank, and other local businesses to support the development of a new Ag School Farm and Learning lab at the Hanford Joint Unified High School District (HJUHSD). The new state-of-the-art educational campus will include animal units, acres for crop farming, and possible future growth for classrooms and ag mechanics facilities—bringing incredible value not only to students, but to the community as a whole.
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C OM M U NI T Y C E N T E R
My Job Depends on Ag Thousands of yard signs were given away and a similar number of stickers sold at a noontime event this summer in Tulare, California. This event was held in response to derogatory comments the town’s mayor made about agriculture on social media. Farm Credit West joined with Gar Tootelian of Reedley to host the lunch at the Garton Tractor in Tulare. As a result of these efforts, 3,000 “My Job Depends on Ag� yard signs were given away, 800 window decals were sold, and 960 BBQ sandwiches were served. The event was a huge success for the Tulare Ag Community.
FARM SMART Farm Credit West and Farm Credit Services Southwest are proud to support in part the FARM SMART program, an outreach component of the University of California Desert Research and Extension Center in Holtville, CA. The curriculum taught during this program targets elementary aged children and is aligned with the content standards for California public schools covering topics including health and nutrition, bees and pollination, and natural and renewable natural resources. Designed to be fun as well as informative, the program emphasizes hands-on activities, from harvesting and eating winter crops to milking an artificial cow and making butter. The program is widely recognized in the community for its K-12 programs as well as the Winter Visitor adult program. Over 135,000 people have been reached through on-center visits and programs as well as off-site school visits since the program began in 2001. The staff of the Imperial Valley Branch have volunteered at various Community events hosted by FARM SMART, acted as tour guides and made career presentations to summer interns.
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D R . KO H L’ S C O R N E R
Top Questions from the Road By Dr. David M. Kohl
ONE BENEFIT OF CONDUCTING over 100 days of speeches, schools, and seminars annually is engaging with people from all stations in life. Many have questions that challenge me to adapt my research, program development, and delivery. Let’s examine some of the most common questions from my lecture circuit this past year.
What advice do you have for young entrepreneurs?
What is the most significant change in the past and future?
Many individuals, including new entrants that are returning to the agriculture industry, are outside-the-box thinkers that bring new energy to the industry. To these aspiring business people, a major piece of advice is to invest time into developing a business plan. Business plans should include written goals and a projected cash flow with financial sensitivity analysis of production, price, and cost. The plan should also include alternatives and an exit strategy. Success will be impacted by an individual’s ability to align land, labor, capital, and information resources to the demands of the marketplace utilizing talented people.
The most significant change in the last four decades has been in technology such as engineering, biotech, and information. The ability of these innovations to not only increase yields but also bring consistency, uniformity, and efficiency has truly been amazing.
What are two keys to success? An FFA group asked this well-thought-out question that pertains to both operating a business and establishing a professional career. First, invest in productive resources. In farming and ranching, that could mean productive livestock, land, machinery, and equipment. However, do not forget about the most important asset: yourself! Education and knowledge, also known as intellectual capital, will be the competitive advantage of the future. Next, surround yourself with good people. Your net worth and self-worth in life will be equated to the people with whom you network, engage, and conduct business.
Changes in the future will involve aligning productive output to a splintering domestic and global consumer marketplace, whether you are producing a commodity or a value-added product. The beer marketplace is a classic example, along with disruptors such as Google and the consumer habits of the younger generational groups.
How can we manage volatility? Economic volatility will create opportunity or failure. This economic terminology will place a premium on the management of intellectual capital. The future of agriculture will not be onesize-fits all. There will be opportunity for small and midsized farms and ranches. Terms such as financial working capital, sensitivity analysis, and drive toward efficiency will be the attributes of success for the business person.
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Family living costs are a critical component of cash flow planning, particularly given tight economic margins with more volatility. Agricultural lenders are indicating that many are refinancing operating loans as result of family living cost overruns. In projecting family living costs, estimate your needs on a monthly basis. Add 25 percent to this projection for potential overruns. Healthcare costs for farm and ranch families have skyrocketed in recent years and make up much of the cost overruns. Another consideration in family living costs is the number of people or families taking a withdrawal from the business and whether the operation’s size and scope is adequate to accommodate these needs. Remember, family living budgets parallel the cost of a new Corvette. In the 1960s, that little red Corvette cost $4,500 and family living cost was approximately $4,000. Today, that new Corvette is about $80,000 and many farm family living budgets are in the $80,000 to $90,000 range annually.
I hope you were able to get a taste of a few gems from the road. People that engage
and have the right mindset and attitude will achieve altitude in business and in life.
Dr. David Kohl energizes agricultural lenders, producers, and business professionals with his keen insight into the agricultural industry through extensive travel, research, and networking around the globe. He is a Professor Emeritus of Agricultural Finance and Small Business Management and Entrepreneurship at Virginia Tech, Blacksburg, VA.
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How do you project family living costs?
Dr. Kohl has traveled over 9 million miles in his career and conducted over 6,000 workshops and seminars for a variety of agricultural audiences. Additionally, Dr. Kohl’s personal involvement with agriculture provides a unique perspective into the future trends of the agricultural industry and economy.
Explaining Interest Rate Products At Farm Credit West we offer superior service at competitive rates. Not sure which rate product is best for you? Below is a brief summary of what we have to offer. Your loan officer can help you find the best fit for your operation.
Fixed Interest Rates
Variable Interest Rates
These products allow you to fix the interest rate on your loan for a specific period of time. Should you make a change to your fixed rate prior to its expiration, it could result in additional fees.
Variable rates are subject to change at the beginning of any month. While influenced by the financial markets, Farm Credit West variable rates are set internally by management and do not follow a published index. They don’t include rate caps or floors, and are fully pre-payable without fees or penalties. Customers have the option of converting from a variable rate to a fixed rate at no charge.
Types of Fixed Rates Fixed-to-Conversion — Fixed for only a portion of the loan’s life and subject to repricing when the fixed rate period expires. Fixed-to-Maturity — Fixed through the maturity of the loan.
Prepayment Options Pre-payable — After an initial six month lockout period, these fixed rates products are fully pre-payable without fees or penalties.
Stockholder Dividend Program Don’t forget about Patronage! Interest rates quoted on each of these rate products are before considering Farm Credit West patronage refunds. We have paid patronage each year since 2002 at a rate of .75% of eligible loan balances.
Lockout — Offering slightly lower fixed rates, these products combine qualities of both Pre-payable and Make Whole. Lockout loans require a fee if pre-paid or converted during the lockout period. After the lockout period expires, the loan is fully pre-payable.
2018 RENEWAL SCHOLARSHIP RECIPIENTS
Make Whole — Offering the lowest fixed rates, Make Whole products are subject to a 0.50% breakage fee if principal is prepaid, or the rate is changed (converted) before its term expires. Additional fees are charged if rates are lower at the time of prepayment/conversion relative to when the rate was set. These additional fees can be significant, depending on how much interest rates have changed during that time. Unlike other lenders, we do not include “lost profits” in our breakage fees.
Still have questions? Phone your local office for more information.
Equal Credit Opportunity Lender Equal Housing Lender This summary is not intended to constitute a loan contract between Farm Credit West and any customer. Each customer’s legal contract with Farm Credit West is defined by the formal legal documents supporting each customer’s loan commitment, as executed by the customer.
CONGRATULATIONS to all of our 2018 renewal scholarship recipients! These students continue to maintain academic excellence in an agricultural related major. Scholarship recipients are eligible to renew their scholarship for up to three years after their initial award. This year’s students renewing their scholarship will each receive $1,500 towards their education. Amairan Chohan Yuba City, CA
Macy Hill Live Oak, CA
Ryan Montemagni St. Paul, NE
Arvin Sihota Selma, CA
Joshua Cramer Lemoore, CA
Anna Hinrichs San Miguel, CA
Simrit Pamma Live Oak, CA
Stephanie Stewart Waterford, CA
Lauren Danna Browns Valley, CA
Cory Kasbergen Woodland,CA
Matt Pandol Delano, CA
Kelsey Swall Tulare, CA
Sarah Dreyer Exeter, CA
Katie Lacey Lone Pine, CA
Stephanie Pandol Delano, CA
Logan Taylor Yuba City, CA
Angelica Fernandes Tipton, CA
Maggie Madden Paso Robles, CA
Colby Pantaleoni Gridley, CA
Caroline Van Ruiten Robbins, CA
Nitin Gupta Tulare, CA
Madison Mellon Yuma, AZ
Chloe Richardson Fillmore, CA
Grace Guthrie Porterville, CA
Elena Montemagni St. Paul, NE
Harleen Sandhu Yuba City, CA FALL 2018
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G U E S T A RT I C L E
W AT E R F O R T H E
Future By Don A. Wright
W
hen considering water supplies in the past, farmers used to spend most of their time worrying about the weather. Now, with the vast majority of Californians no longer connected to the land, many people don’t understand the farm’s place in the food chain. This dearth of knowledge has in turn led to regulatory droughts just as devastating as any lack of rain or snow. BY SOME ESTIMATES, more than 7.75 million acre feet
but prevent as much fallowing and land retirement as possible.
of irrigation supplies has been annually sent out to sea since 1992
As a result, growers are going to have to search out new and
when the Central Valley Improvement Act was passed. The loss
inventive ways to conserve water. If you are a grower in a location
of these supplies has caused growers to pump more groundwater.
with limited surface water the challenge will be to keep 75 percent
In 2014, the Sustainable Groundwater Management Act (SGMA)
of your land in operation rather than only 50 percent if possible.
was passed giving government control over groundwater pumping. SGMA prioritized groundwater basins and sub basins throughout the state based on how critically they are experiencing overdraft. Most of the Central Valley has been designated as a high priority area. SGMA requires each sub basin to form a Groundwater Sustainability Agency (GSA) tasked with developing a Groundwater Sustainability Plan (GSP) by 2020. The GSP determines how much
However, there is good news. Technological improvements in irrigation systems and practices can help farmers squeeze every drop of water available to put towards crops. Improving and updating irrigation systems requires funding. Farm Credit West has the Irrigation Stewardship Program to help with servicing existing wells, drilling new wells and improving irrigation delivery systems.
water can be pumped without causing a variety of undesirable
Kevin Layne is Vice President, Key Relationship Manager, and
results such as subsidence, drifting of underground pollution plumes
Business Development Officer at the Farm Credit West office in Tulare.
and depletion of interconnected surface waters. The amount
Layne said, “We are so committed to helping our customers obtain
of groundwater that can be pumped is known as the safe yield.
the most efficient water supply possible, we have reduced our
This safe yield will be allocated across the acreage that makes
interest rates and eliminated loan fees under this program.”
up the GSA. For many of the most critically over-drafted areas the amount of safe yield won’t be enough to continue farming all the land in production.
Farm Credit West members interested in help with irrigation matters need to contact their Farm Credit West office immediately. “Call your loan officer,” said Layne, “and let them know what needs
It looks as though for many parts of the Central Valley the goal
to be done.” This loan could be for a wide variety of projects. “If it’s
of growers impacted by SGMA won’t be to protect the aquifer;
for water, we can qualify it,” said Layne.
Technological improvements in irrigation systems and practices can help farmers squeeze every drop of water available to put towards crops.
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Farm Credit West Irrigation Stewardship Program As a farmer-owned cooperative, Farm Credit West is committed to helping our customers maintain a sustainable and environmentally sound operation. Through the Irrigation Stewardship program, which Farm Credit West launched in 2014, financing is available to help provide reliable irrigation and water supplies. A great example of how the program can benefit growers and the environment is Plantel Nurseries in Santa Maria, which specializes in growing and selling seedlings that can be planted directly into the ground. By utilizing this method, Plantel can produce up to 200 seedlings per square foot, as opposed to a traditional one plantper-square-foot metric used by farmers who seed their fields directly. Plantel’s business model saves the farmer a month of growing time, while also dramatically lowering the water and fertilizer requirements for the farmer. To better achieve Plantel’s core philosophy of sustainable, low-impact agriculture, the company obtained
a loan from the Irrigation Stewardship Program in 2015 that allowed it to drill a more secure well and install a new energy-efficient pump that allowed it to upgrade its water recycling program. Irrigation runoff water from the seedlings is directed to the water recycling system, which features a threestage filtration process that sterilizes the water and pumps it into large storage tanks for reuse after it’s tested to ensure it meets quality standards. The system allows Plantel to recycle fully 40 percent of its water. Other Central Coast growers have used the program to drill deeper wells, ensuring a more dependable water supply and also including more energy-efficient pumps that require less electricity to be used. Applications for the Irrigation Stewardship Program are being accepted through December 31.
There is a host of new technology designed to improve irrigation efficiency on the market that qualifies for the Irrigation Stewardship Program. In addition to saving water, improved micro-irrigation can lower energy and plant nutrient costs. There is a very competitive group of vendors offering products that can measure pump efficiency, soil moisture, salinity and improvements in telemetry allowing growers to keep track of their current situation through applications interfacing with laptops and cell phones. There are new products and procedures for treating the nitrates in dairy and feedlot waste. A good source for emerging products is the Water Energy Technology (WET) Center at CSU Fresno. One method for dealing with SGMA is on-farm recharge. Even in relatively dry years there are windows of opportunity for spreading inexpensive flood control releases to percolate under farmland during the peak snow melt that usually occurs in the late spring. Studies show many of the most common permanent crops can handle large volumes of flood irrigation. More recharge to the local aquifer can raise the safe yield. Existing conveyance doesn’t always move the optimal amount of water to the best area for recharge. The Irrigation Stewardship Program can finance new ditches, turnouts and excavation of ponding basins so growers can get the larger volume of recharge water to the better percolation areas. A graduate of California State University, Fresno, Don A. Wright is an award-winning freelance journalist and publisher of waterwrights.net: the premier agricultural irrigation reporting service in California. Based near Clovis in the heart of the San Joaquin Valley, Wright’s work has appeared in numerous publications including the Los Angeles Times, Range Magazine and the Business Journal. Wright and his wife Deborah have culled the herd down from nine horses and five cows to one dog and two cats.
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C A N D I D C O N V E R S AT I O N S
Investing in New Technology: When is the Right Decision for Your Operation? By Brandon Bagley
Agriculture presents farmers with new risks and challenges each day. As California and Arizona farmers grapple with high labor costs, a changing regulatory environment, as well as growing uncertainty surrounding access to water, the agriculture community is embracing technology in an effort to mitigate risks. In 2017, ag-tech investment across the U.S. grew to an impressive $2.6 billion through various investments by venture capital groups and acquisitions companies.
The new technologies emerging from
new technology (which can be expensive),
an informed decision on if the new
the growing agricultural sector covers
our customers are analyzing that next
technology is right for your operation.
a wide variety of categories, including
step.” One of the areas where Fricke
biochemical engineering cloud based
has seen the greatest interest in technology
data analytics, supply chain management,
among customers is custom harvesting
marketing, indoor farming, and even
and transplanting equipment.
robotics. With innovative solutions such as an organic peel-like coating to reduce oxidation and spoilage in citrus and remote monitoring software to track and respond to specific needs per field, it’s easy to get excited about the future of ag tech.
in your own operation, or invest in new equipment, look closely at how the purchase will reduce your current expenses
Many commodities, for example wine
or generate income. We, your loan officers,
grapes, require immediate harvesting
want to understand how the investment
once a desired characteristic of quality
will impact your bottom line. For example,
is achieved, such as optimal sugar content.
if there’s a new technology available that
Dependence upon custom labor and
will cost you $1,000/ acre to install, but will
equipment may limit the grower’s ability
increase yields by 20%, run the numbers
Anna Fricke, Vice President, Credit at
to plant, manage and harvest their crop
to identify the total income that would
Farm Credit West’s Woodland Branch,
at the optimal time. Fricke explains,
generate for your operation. From these
says that customers are enthusiastic
“The purchase of specialized equipment
calculations, we can identify what year
about the growing trend. “The majority
or technological upgrades can provide
the investment will have paid for itself
of our customers are very receptive
growers with the ability to better control
and start generating additional profits.”
to new technology. Some growers need
their costs and manage the needs of their
a bit more assistance to take the next
crops to produce a higher quality product.”
step — and this is where Farm Credit West
The decision between financing a new piece of technology or pay with cash on
However, while new technology can
hand also has significant effects on future
be exciting and potentially improve the
financial results. While farmers may want
quality of the end product, it is important
to save on interest expenses and taxes,
to look at the net returns and overall
using cash will impact your capital position.
Responding to a key problem such as high
return on your capital investment. Any
This is particularly true when the asset
input costs or the need to gain operational
equipment purchases should improve
has a development phase before generating
efficiency is often is the impetus that
overall profitability of an operation. To
income. Fricke stresses that “If you’re using
encourages farmers to look to technology.
avoid purchasing non-productive assets,
cash to pay for the asset, you’re reducing
As Fricke suggests, “I think it boils down
Fricke suggests conducting an informed
your rainy day fund for challenging years.
to profitability. Before making the plunge into
cost-benefit analysis as a way to make
It depends on the operation’s overall
can help. Once growers understand the benefits of new technology, they’re eager to learn more,” explained Fricke.
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“If you’re looking to expand technology
Spotlight
FALL 2018
cash position, but we usually recommend
individually to determine profitability,” Fricke
If you’re ready to take the next step with
customers finance the asset over its
said. “Having this information available
technology in your operation, reach out
productive life.”
helps growers manage their operation from
to your loan officer to find the best financing
a holistic viewpoint. It’s also a great tool
options for you.
While most growers immediately look to solar, drip irrigation systems, and custom harvesting equipment when considering
for your lender, as the detail reporting allows us to understand the operation better.” Furthermore, investment in enhanced
investments in technology, the most
security measures is an increasing need
transformative innovations can often
for many operations. As everything moves
be found in simple financial data analysis software. “We really love to see customers implementing a cost accounting program
toward technology and online access, it becomes critical for customers to update and maintain the security that protects
that allows for each crop to be evaluated
those systems.
Brandon Bagley is a senior at California State University, Sacramento and is majoring in economics. Prior to working as an intern at Farm Credit West, Brandon was employed as a teller at Schools Credit Union. While at Farm Credit West, Brandon worked with our Enterprise Risk Department to analyze current economic trends as they related to agriculture and our Marketing Department in drafting communications to customers.
F RO M T H E FA R M E R ’ S K I TC H E N
Brandied Peach Pork Chops By Angelo Micheli, Chef / Owner of Pasquini’s Fine Italian Food in Live Oak, CA Serves 4 INGREDIENTS 4 (1-inch thick) center-cut pork loin chops Salt and pepper, to taste 1 tablespoon canola or grapeseed oil 2 freestone peaches, cut into eighths ½ cup brandy 4 sprigs fresh thyme P R E PA R AT I O N Season both sides of pork chops with salt and pepper. Heat oil in a sauté pan over medium-high heat. Brown chops 7 minutes per side and remove from pan. Drain excess oil. Remove pan from flame and add peaches and turn heat to low. Allow the peaches to soften and release their juice, about 7 minutes. Turn heat to medium, carefully add brandy and thyme to deglaze pan. Reduce sauce to sauce-like consistency. Add chops to pan along with any juices that have accumulated. Cook for an additional 1 – 2 minutes in sauce. Plate chops with warmed
ABOUT ANGELO
peach slices on top. Spoon sauce over chops.
IN 2007, Angelo Micheli decided to turn his dream into reality and take the reins of his family restaurant business, Pasquini’s Fine Italian Food of Live Oak, CA. The restaurant was previously owned by the Pasquini family, farming in Live Oak since 1930. The restaurant was sold to Micheli’s family in 1984. Interested in
cooking from a young age, Micheli perfected his talents under the teaching of his grandmother. He later attended at the California Culinary Academy in San Francisco. Micheli’s dedication to tradition and creativity preserves Pasquini’s success today.
T E C H WATC H
The Insider Threat is a Risk to Everyone By Michael Levin, CEO/Founder of the Center for Information Security Awareness | cfisa.com
O
ne of the biggest risk for losses associated to cybercrime is an internal security breach by seemingly trustworthy
employees who can attack from inside the workplace — probably
the last suspects you’d expect. An insider threat is generally defined as a current or former employee, contractor, or other business partner who has or had authorized access to an organization’s network, system, or data and intentionally misused that access to negatively affect the confidentiality, integrity, or availability of the organization’s information or information systems.1 We often worry about external hackers, but an insider threat can be more common and can present greater risk to an organization. However, not all security breaches by employees are deliberate crimes. Security is often compromised due to innocent mistakes made by employees, or by a failure to follow security guidelines and policies. Whether deliberate or accidental, security breaches created by employees from within the workplace are a constant risk, which is why it’s so important for you to be aware of this risk and to bolster your defenses from the inside and outside. There are numerous types of offenders who want to target your workplace via different motives and methods. It’s important to understand that hackers, identity thieves, virus authors, spammers and disgruntled or dishonest employees are the main culprits behind cybercrime. All of them depend on exploiting your behavior in some way. There are plenty of IT tools and software solutions including things like encryption, analytics, logging and device management that can be used to look for insider threats within the workplace. These solutions will be handled by the IT department but consider that
Physical Security Considerations ww Do not write your password down and leave it at your desk. A colleague could easily search your desk and login to the system posing as you.
ww Do not leave important sensitive documents unsecured at your desk. When you go home at night make sure you secure all sensitive data.
ww Treat customer data as you would want your data to be protected. ww Lock your computer when you walk away.
See Something — Say Something We all are familiar with the concept “see something — say something” but what would you do if you saw your colleague breaking a policy or committing a crime that could adversely affect the business? Could the colleague be committing a crime right before your eyes because they are counting on you to do nothing? Will you be the weak link that gives a disgruntled insider the tools to steal data or commit a crime? We all need to address these questions and have a mental plan in place to protect the business and our personal data.
Security Awareness Training is Important Most organizations now recognize the importance of ongoing security awareness training as a best practice to help reduce the insider threat risk. You should learn all you can about cyber security and what you can do to protect company and personal data. Cybercrime is present every day and your daily awareness is the key for everyone’s safety and security!
the human side of the equation is everyone’s responsibility.
Follow All Workplace Policies and Procedures
1 https://www.cert.org/insider-threat/
Workplace policies are designed and put into place to help reduce company risk and will directly help to combat the insider threat. Take the time to understand and learn about the policies you need to put into place and follow daily. Recognizing workplace policy and procedure violations will help reduce the risk of insider threat.
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Michael Levin is a nationally known cyber security professional who spent over twenty-two years in the U.S. Secret Service protecting Presidents and Heads of State. Michael retired from the U.S. Department of Homeland Security — as the Deputy Director of the National Cyber Security Division in Washington DC. He enjoyed a distinguished thirty-year career in public service and law enforcement.
Territory and Office Locations ADMINISTRATIVE OFFICE 3755 Atherton Road Rocklin, CA 95765 916.780.1166 PASO ROBLES 1446 Spring Street Suite 201 Paso Robles, CA 93446 805.237.0998
Yuba City Woodland
« Rocklin
Farm Credit West Administrative Office
DINUBA 940 W. El Monte Way Dinuba, CA 93618 559.591.9378
Hanford
Dinuba
Tulare Paso Robles Templeton Kern County Santa Maria
HANFORD 1111 W. Lacey Boulevard Hanford, CA 93230 559.584.2681
Ventura
IMPERIAL VALLEY 485 Business Park Way Imperial, CA 92251 760.355.0291
Tempe Imperial Valley Yuma
Rural Arizona/ Safford
KERN COUNTY
TEMPE
19628 Industry Parkway Drive Bakersfield, CA 93308 661.399.7360
3003 S. Fair Lane Tempe, AZ 85282 602.431.4100
RURAL ARIZONA / SAFFORD
TEMPLETON
VENTURA
YUBA CITY
1120 S. 20th Avenue Safford, AZ 85546 928.348.9571
175 Cow Meadow Place Paso Robles, CA 93446 805.434.3665
2031 Knoll Drive Ventura, CA 93003 805.477.1020
1800 Lassen Boulevard Yuba City, CA 95993 530.671.1420
SANTA MARIA
TULARE
WOODLAND
YUMA
1178 Tama Lane Santa Maria, CA 93455 805.922.7991
200 E. Cartmill Avenue Tulare, CA 93274 559.684.1478
440 Pioneer Avenue Woodland, CA 95776 530.666.3333
2490 S. 5th Avenue Yuma, AZ 85364 928.344.3200
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3755 Atherton Road Rocklin, CA 95677
Experience from the ground up Our business is agriculture. In fact, many of our staff have direct experience in farming or ranching: living – and working – testaments to our timeless commitment to the future of agriculture.
FarmCreditWest.com 800.909.5050
Committed. Experienced. Trusted.