GROW

AgCountry Farm Credit Services

JUNE 2021

G ROW

FLO U RI S H I N G

OPPORTUNITIES FEATURES: 2 4 6 7

CEO & Board Chair Messages Guidelines for Hedging Your Crops A Growing Employee Base Communication

10 Growing Agribusiness 11 Should I Buy Farmland?

12 Fellows Graduation 14 Appraisal Q&A 18 Scholarship Recipients

AgCountry Farm Credit Services / Grow / June 2021

A Letter From

The CEO

The summer months are a time of growth within our industry.

Whether it is the crops or livestock you produce, watching things grow and develop can lead to a sense of optimism among farmers and ranchers. I can’t help but feel the same here at AgCountry Farm Credit Services. We, too, are experiencing growth in different aspects of our business.

is to provide an exceptional customer experience and an exceptional work environment for staff. After evaluating the needs of our office locations, we determined that more help is needed. Over the past few months, we have posted over 25 jobs, many of which are new positions.

New team members are being added to further solidify our ability to better serve rural America. I am In the past, I have talked about the excited about the depth of skill and importance of having a growth knowledge that we’re adding. mindset. We all have room to grow. Embracing change and Our team expansion also shows expanding the way we think can a commitment to the local lead to personal transformation. communities we serve. Almost But changing the way we think and three-quarters of our current approach our lives each day can be 38 office locations are found in a challenge. There are times when communities of less than 10,000 we will want to revert back to what people. Each new job is an we know and are comfortable opportunity to either keep a family with. However, you can’t move in a rural setting or introduce forward by standing still. someone new. It is our hope that this leads to greater economic When it comes to our AgCountry benefits for local businesses. team, we are also experiencing tremendous growth. Our objective The ag industry has had a rough

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go of it for much of the last seven or so years. For some, commodity prices and current market conditions are lifting spirits once again. Hopefully soon we will find that equilibrium that supports both crop and livestock producers.

Now let’s keep our fingers crossed that we see adequate moisture throughout the summer and fall.

As always, thank you for your continued patronage of our cooperative.

Sincerely,

Marc Knisely, CEO

AgCountry.com

AgCountry Farm Credit Services / Grow / June 2021

A Letter From

The Board Chair

REMINDER! The 2021 Annual Meeting is Fast Approaching!

In the world of agriculture, opportunities often present themselves at different times. Like the farmers and ranchers we serve, cooperatives like ours also are met with opportunity. Recently, a memorandum of understanding to pursue a merger was agreed upon by the Boards of Directors of AgCountry Farm Credit Services and Farm Credit Services of North Dakota. Through initial conversations between the two boards, we have identified several areas in which we believe greater value can be delivered to our customer-owners if we come together.

These areas are currently being explored.

It is important to note that we are currently in the exploratory phase. If both boards complete their due diligence and find the conditions acceptable, and we receive approval from AgriBank and the Farm Credit Administration, customerowners will be able to vote on the proposed merger later this year. If approved, the merger would take effect no earlier than January 1, 2022.

The 2021 Annual Meeting will be a hybrid event to offer members the option of attending either in-person or virtually. Additional details, including a link to the virtual event, will be made available soon.

Marshfield, WI July 29, 2021 1:30 PM

Active communication and transparency are important to us. Be assured that we will further communicate all future decisions regarding this matter in a timely manner and will be provided to our customer-owners prior to a potential vote.

The Board understands the importance of the recommendations such as this and approach each opportunity with diligent consideration. Thank you for your continued patronage of AgCountry Farm Credit Services.

Sincerely,

Ed Hegland, AgCountry Board Chair A Member-Owned Cooperative

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AgCountry Farm Credit Services / Grow / June 2021

Guidelines For Hedging Your Crops Written by Katie Tangen, Marketing Education Specialist Over the past six to nine months, commodity markets have seen volatility the likes of which we have not seen for some time. While this is offering producers opportunities with pricing they haven’t seen in several years, it also creates some pressures and strains that can be difficult to deal with. This is especially true for producers utilizing hedging accounts to remove a portion of their revenue risk.

With that in mind, here are some reminders and guidelines to manage those hedge accounts:

• You shouldn’t hedge more than 25% of your production the

first time you hedge until you are familiar with the mechanics of hedging. In fact, hedging 5,000 bushels (one contract) is preferable for the first trade.

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• You shouldn’t sell more than the prevented plant maximum of any crop, including multiple years, until you can see it in the field.

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• Avoid more than 25% of your crop at any one time unless you are anxious to pass risk away fast and achieve some specific management objective.

• Spread your sales out. Try to avoid selling more than half of your

crop during one quarter of the year, unless you have a very strong reason and market objective for doing so.

• Never hedge 100% of a growing crop regardless of how sure

you are that you will get it to harvest. Producers should stay underneath their crop insurance guaranteed bushels until they have harvested.

Keep in mind, these are generalizations. Each operation is different and the points above are where discussions should begin on your farm and with your lender.

Another question we get asked lately is, “How much money should I have available to hedge?” During initial establishment of a hedge line, we would recommend planning for a $2-$3 move in corn and wheat, $2-$4 move for soybeans, and $10-$15 move in cattle and hogs.

For illustration purposes, we will assume a farm with 1,000 acres of corn & soybeans in a 50/50 rotation would like to set up a hedge line to market 25% of their projected corn production. Actual Production History (APH) of the operation is 200 bpa and they carry 85% coverage.

STEP ONE Initial set-up of the hedge loan In order to provide the recommended liquidity needed to support the hedging needs, first determine how many contracts worth of production you are looking to hedge. Remember – one contract equals 5,000 bushels of corn. So,

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Serving Agriculture and Rural America

AgCountry Farm Credit Services / Grow / June 2021

on 1,000 acres in a 50/50 rotation, hedging 25% of ensure adequate liquidity? This will need to be broken down the anticipated corn production at 200 bpa would into two steps. First – how much more do we need to add to require five contracts: maintain margin requirements? Second, how much more do we need to stay with the positions if the market continues to rise?

1,000 A x 50% rotation x 200 bpa x 25% of production

The additional margin will be $2,500 minus $500 additional per contract ($2,000 - $1,500) times the five contracts we figured earlier.

25,000 bushels/5,000 contracts= 5 contracts

For each contract, you need liquidity for the initial margin. Let’s assume initial margin at the time you evaluate is $1,500 per contract. You also need to allocate for moves in the market. Since markets had not been very volatile at the time, you likely chose to go on the low side at $2 per bushel.

Based on current market forecasts at the time of evaluation, there could be up to another $1 of potential upside in the market.

If that occurs, it would require another $25,000 of available liquidity minus $1/bu x 25,000 bu.

To provide for the current margin requirement increase and potential future market moves, add an additional $27,500 ($500 per contract + $25,000 in additional room) to the hedging line, So, our overall needs for the hedging line amount to: bringing it to $85,000.

(5 contracts x $15,000 margin per contract) (25,000 bushels x $2 per bushel)

Using $85,000 for 25,000 bushels of production equals $3.40/ bu of liquidity we are providing to hold these positions, or $170 per acre of corn planted. Remember, this example takes into $7,500+$50,000=$57,500 account marketing only 25% of the anticipated corn production.

Please remember margin amounts are for If the remaining 75% is unpriced, it is also increasing in value. example purposes only. Speak with your broker to determine exact margin requirements as they are This may sound like a lot, but remember, if you are hedging when subject to change. you make the cash sale, everything will offset. That brings us to our last, and possibly most important point: Once the cash sale is made, the hedge must be lifted. Continuing to hold the position STEP TWO after that point is speculation and puts you at risk of incurring Market runs with increased volatility substantial loss. Hedging in these conditions is probably one of the most psychologically challenging management duties.

At this point, the market has made a significant run It requires significant discipline and control, but it is ultimately since you first hedged the allocated bushels and rewarding as you continue the practice of pricing ahead. is closing in on the $2 per bushel estimate initially used. The CME has also provided notice it will be For additional info, contact Katie Tangen or Rob Fronning: increasing margin requirements on corn contracts katie.tangen@agcountry.com by $500 per contract due to the increased volatility. robert.fronning@agcountry.com How much more needs to be added to the line to +

IMPORTANT CROP INSURANCE DATES! (Spring Crops Only)

JUL

Acreage Reporting

15

AUG

15

Premium Billing

SEP

30

Premium Due to Avoid Interest Charges

Please submit your acres as soon as possible so we can process them. This will allow you enough time to verify the acres on the schedule of insurance by July 15th.

AgCountry.com

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AgCountry Farm Credit Services / Grow / June 2021

A GROWING EMPLOYEE BASE Written by Jeni Strand, EVP Human Resources

AgCountry is growing! As an organization that employs around 600, AgCountry is proud of its culture that focuses on making the employment lifecycle engaging, meaningful, purposeful and personal. We are responsible to each other and for our cooperative; we care for agriculture and rural America; and we advocate for our customers. That means we hire people that are committed to these same values.

Being a part of the engine that feeds the world is an incredible feeling. To serve our customer-owners in their endeavors is a privilege – and we want people that believe in that to be a part of our team. In return, you’ll be supported, rewarded, and part of an organization like no other. Come and grow with us!

We provide a total rewards strategy that consists of compensation that meets or exceeds the market; a benefit package that rates at 108% of the market; development opportunities to prepare you for the next level in your career path; and a flexible work environment that offers many different options to help meet you where you are at today in your life.

DID YOU KNOW?

AgCountry recognizes it is our responsibility to help enrich employee’s lives and the lives of others through involvement in volunteer efforts that positively impact the quality of life within our communities.

Each employee is allowed 8 hours of paid time each year to spend on personal volunteer activities.

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Every team member is eligible to direct a $600 donation to a cause of their choice through the AgCountry Giving and Growing program.

The Giving and Growing program gives team members a voice in where our benevolence funds are directed.

AgCountry.com

AgCountry Farm Credit Services / Grow / June 2021

COMMUNICATION An Essential Part of Your Farm’s Long-Range Plan Written by Russ Tweiten,

VP Succession & Retirement Planning

Last winter, I was working with a couple looking to transition their farm to their sons. During the meeting we shared a lot of ideas and filled many pages of the flip-chart. As they mulled over their options they finally sat back in their chairs and asked me what is the most important aspect of a farm’s transition plan. Expecting a financially-oriented answer I think I may have surprised them when I said “communication.” Yes, for most farms the most important ingredient to a successful and comfortable transition is good communication. Not only does this apply to transition planning, but it applies to retirement and estate planning as well. Communication can be the glue that keeps the farm together, or it can be the dynamite that blows it apart.

Let’s start with a basic precept respect. For both the parents and the farming children, having a safe place to talk is important. By safe I don’t mean avoiding discussions when you are on top of the bin. More so, making sure that both parents and farming child allow each person to share ideas without harsh criticism or with disrespectful responses. Yes, I realize we all get worked up in the heat of the moment, but allowing each person to be heard and have a voice is important to ensure everyone feels okay sharing, regardless of where you are (the shop, the tractor, the combine, etc.). Keep it calm and keep it respectful.

Your Best Total Solution

How about a plan to formalize communication? In most businesses, there is a mandatory staff meeting that all department personnel must attend on a regular basis. I have a farm I work with that meets each Monday. Their mantra is that you are allowed to miss the meeting if you have to go to a funeral-and that funeral better be yours! As you may surmise, they keep it fun, but they are serious about their Monday meeting. Having a regular meeting helps to avoid winging it when it comes to communication. Think about having a fixed agenda where the same items are on the agenda each meeting and allow for seasonal differences. An organized meeting of this nature puts everyone on the same page. It helps avoid the surprise factor and it gives you a place to share ideas and move things along in an organized, methodical fashion.

Be sure to write important things down. We have a saying in our department that “If it is not in writing, it does not exist.” This is especially important with estate planning documents like your will or trust, as well as disability planning documents like a durable power of attorney and a health care directive. If you own assets or have a business entity with other family members or perhaps a neighbor, a clearly worded buy-sell agreement is especially important. We could write an entire article on the importance of a written plan. In summary, your will or trust needs to be clear about land, machinery and other farm assets-especially if a farming child has a right to buy assets from non-farming siblings. And, a buy-sell agreement for an entity or co-owned assets needs to be clear about who can own the entity (or the asset), how things are valued and have a viable buy-out formula that does not bankrupt the farm.

Some time ago, I worked with two brothers and their spouses on their partnership buy-sell agreement. During each meeting I noticed there was some resentment on the part of one of the spouses toward her brother-inlaw who we will simply call Partner A. During corn harvest, Partner A wanted to attend what was most likely his son’s last high school football game. The other brother, who we will call Partner B, was fine with it but forgot to tell

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AgCountry Farm Credit Services / Grow / June 2021

his wife, who also happened to be at the same game watching their son play. That did it. Partner B’s wife called their AgCountry consultant (yours truly) the next Monday and let loose with years of complaints over an unfair workload, stating her husband is always there and never takes time off so why did he have to stay “out there” and his “lazy” brother got to go to the game? There are a lot of potential issues here, but what are we really dealing with? Answer: Unresolved conflicts and maybe a lack of communication between spouses. The message here is to deal with issues right away. Don’t let them fester and grow. If there is a conflict, be it at home or at the farm, do your best to deal with it right away.

Conflicts can take on a life of their own and when left unresolved, become permanent and difficult to resolve.

They may become a part of the farm’s culture, creating unnecessary hard feelings that cut into the efficiency, and at times, the profitability of the farm. Deal with issues right away or at some point the issues will take over and deal with you.

How about moving too slow or moving too fast? Here, we might find that 30-year-old producer who is gung-ho and ready to take over.

He/she is farming with their 58-yearold dad who is still gung-ho himself and sees farming for another six to eight more years. I can’t think of a situation where communication is more important than when you have two highly motivated and capable producers on the same farm. The key here is balance, communication, and respect. I admire younger producers who show drive and ambition. At the same time, I love to see that senior producer with an ongoing passion and the same level of drive to do a great job with their life’s work.

Sharing workloads (balance) is vital along with clear, open and respectful communication. Dad needs to tell his son or daughter his long-range game plan and son or daughter needs to share what they expect (more on this later). Our message to the sons and daughters out there who are taking over is to be patient and place yourself in your parent’s shoes for a while. Understand the farm is their way of life – it’s not a job - and is often what defines and gives them purpose. Our message to the senior producers is to be a mentor. Let your children grow and co-manage the farm with you. Let that passion that you and your farming child share grow. Give that passion a chance to thrive – maybe in the same way that your parents did for you.

Lastly, my favorite-uncommunicated expectations. This may show up in the form of an assumption. Call it what you want, it can create major problems. If you expect something and don’t share the expectation, is the other person part of a problem that may spring out from the uncommunicated expectation?

Maybe, to some degree, but not sharing what you expect and then either getting angry or hurt can’t be 100% put back on the other person.

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If you expect something that is part of a transition, estate, or retirement plan, be sure to talk about it! Assumptions have a life of their own and can create huge inefficiencies at your farm. A possible cure could be that darn regular meeting. If there is a longrange plan, we strive to get everyone on the same page and write it down. If you expect something, don’t assume it is known. Share it and let others know what you are expecting.

We know you are busy, and in the heat of the moment, it is hard to stop and talk. So, think about a more formalized process that encourages a place to discuss ideas and plans.

Keep conversations respectful and write down the important things especially the long-range plans. Make sure your will and trust are up-to-date, and if there is a transition plan, be sure the will or trust is consistent with your plan. If you expect something, make it known at the regular meeting. Make sure your expectations are stated in a clear and respectful manner. Finally, enjoy your farm or ranch. It’s not a job-it’s a way of life!

Experts in Every Field

AgCountry Farm Credit Services / Grow / June 2021

UPCOMING FARM SHOWS FARM TECHNOLOGY DAYS JUL 20-22, 2021 Eau Claire, WI

FARMFEST AUG 3-5, 2021 Morgan, MN

Wisconsin’s largest farm show will be taking place at Huntsinger Farms near Eau Claire, Wisconsin. Farm Tech Days will be showcasing the latest improvements & innovations in production agriculture. The event hosts more than 500 exhibitors and includes activities for every interest with a family living tent, a youth tent, innovation square, heritage tractor and machinery display, displays for home, yard, and garden, daily entertainment and a wonderful selection of farm-to-table menu options to snack on.

Please stop by the AgDirect tent! We will be located at R019.

The premiere farm show in Minnesota will once again take place in-person on the grounds of the Gilfillan Estate. Farmfest spans 50 acres of land to showcase products, services and technologies from over 500 exhibitors and vendors.

Through careful planning and organization, the show will provide live product demonstrations, host smart and insightful educational sessions and organize fun family activities to not only help farmers grow their family businesses but also to celebrate farming and the rural lifestyle.

Be sure to stop by the AgCountry tent located in the middle of the grounds next to the Wicks Building Farmfest Center!

BIG IRON

SEP 14-16, 2021 West Fargo, ND

With 900+ exhibit booths, training sessions, demonstrations and countless opportunities to connect with your peers, there is little doubt that Big Iron is the event for agribusiness. The Big Iron Farm Show is the largest farm show in the upper Midwest. This show is held annually in September at the Red River Valley Fairgrounds, in West Fargo, North Dakota.

Please visit AgCountry in the Foltz Building on the north side of the fairgrounds!

AgCountry.com

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AgCountry Farm Credit Services / Grow / June 2021

GROWING AGRIBUSINESS AT AGCOUNTRY Written by Randy Aberle, Agribusiness and Capital Markets As our producer members go to the fields this spring in hopes of “growing” a bountiful crop, our AgCountry Agribusiness segments have been “on the grow” for several years, consistently growing our contributions to our association’s success.

Our Agribusiness department was formed as a separate department at Farm Credit Services of Fargo in 1995. Our visionary Board of Directors at the time wanted to serve more customers and diversify both our risk and income sources for the member-owned cooperative.

We started with one staff member to determine if we could attract eligible agribusinesses in our marketplace territory under our Farm Credit association lending authorities. Word of mouth advertising along with the support of our producer members’ connections with local agribusinesses supported our efforts. Looking back, that was a long time ago with pretty meager results compared to today.

Today, after several association mergers, our association territory has expanded; offering more financing opportunities for agribusiness. We have expanded our specialized Agribusiness and Capital Markets team to over 25 direct team members.

This team is further supported by our AgCountry Credit and Finance teams.

We finance producers looking to move up the value added chain through further processing and marketing of their farm production as well as the companies providing

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farm inputs and purchasing farm products from producers. We act as a Lead Lender on large shared credit facilities to agribusinesses, selling portions of these large credits to other lenders and Farm Credit associations for risk management.

We have also joined with other farm credit associations and lenders across the country to provide lending capacity to finance large borrowers by purchasing portions of their shared credits. In 2020, we served over 400 different agribusinesses in meeting their financing needs. One recent event was expanding credit lines for agribusinesses purchasing commodities from farmers with the rapidly rising commodity prices. We were there when our customers called seeking help managing their rapidly growing credit needs.

We have joined Farm Credit collaborations in developing technology and delivery channels to provide financing solutions for point of purchase machinery financing under the “AgDirect” label; point of purchase crop input financing under the “ProPartners Financial” label; and partnered with Farm Credit Leasing to provide leasing solutions to our customers.

AgCountry’s Agribusiness and Capital Markets Lending objectives remain similar to our early objectives and are fully supported by our elected Board of Directors:

• Support loan portfolio diversification • Quality/Safety with adequate risk/return • Retain and grow market share through various delivery channels • Assist strategic partners in serving large customers • Align with system partners to serve the agribusiness and capital markets marketplace • Discipline credit and marketplace delivery • Industry specialization/knowledge Our AgCountry association will always have a primary focus on serving the farmer producer members of our cooperative. The AgCountry Agribusiness segments support our producers’ agribusinesses and have become an integral part of our association’s growth and success.

The revenue and risk diversification of these segments allows our association to provide more services and risk-bearing capital to serve both our producers and agribusiness member-owners in the changing world of agriculture. This ensures we are well positioned to continue our mission of “serving agriculture and rural America.” Thank you for your support of your local cooperative.

AgCountry.com

AgCountry Farm Credit Services / Grow / June 2021

Should I buy Farmland?

Loan officers are often asked by farmers and nonfarmers, “How can someone afford to pay that much for land?” or “Is it possible to pay $X,XXX per acre for land?” And often our answer back to them is, “It depends.” With recent land values on the rise, these questions are on the forefront of many people’s minds.

Every operation or borrower we work with is different. Yes, they have many similarities, but each are unique in some way. Financial position, off-farm income, and long-term goals are all examples of differences we see amongst our members. These differences are key factors used to evaluate the feasibility of purchasing land. Below are a few items we often discuss and review with our members during a land purchase.

Written by Ross Hebrink, VP Loan Officer

as security depends on the appraised value of the property as well as the size and length of the loan.

Last, but most certainly not least, the borrower needs to show the ability to repay the loan. An analysis is completed using the borrower’s financial information. This analysis includes a realistic projection to determine if the borrower has the repayment capacity to service all debt obligations both existing plus new. A borrower needs to know and understand the impact to one’s overall land costs and break-evens.

History has shown that purchasing farmland has been a good long-term investment. Like the stock market, there will be ups and downs in values along the way. However, over a long period of time, farmland is an asset that has consistently First, we need to decide how much the borrower appreciated in value while also offering the owner is willing to spend to own a piece of property. the ability to generate income.

With many land purchases in the seven figures, borrowers need to be comfortable adding this Just remember there is never a standard “right” amount of debt to their operation. A land purchase or “good” price for farmland. What’s “right” or may often limit one’s ability to make any significant “good” for you may be different for someone capital purchases in the near future, which needs to else. Of course, everyone wants to pay as little as be taken into consideration. possible for land; however, paying more per acre for farmland of similar quality than someone else Second, a loan structure needs to be established. doesn’t mean you overpaid. If one can afford the The length of a loan is determined based on purchase and it makes sense for their situation, they affordable payment amounts. The payment paid the “right” amount. There are many items to timing is then set to match when income will be consider when purchasing land and many factors received. In addition, we may explore financing that contribute to the final price. In many cases, options through partnering entities such as joint these factors carry an inherent value that cannot loans through the Farm Service Agency (FSA), be calculated on paper.

Rural Finance Authority (RFA), Bank of North Dakota or the Wisconsin Housing and Economic If the opportunity arises and you’re looking at Development Authority, if applicable. buying land, be sure to contact your AgCountry loan officer to help in this important decision that Third, collateral for the loan will be required. is unique to each operation.

Determining which parcel(s) of land will be pledged

$64 Million Paid out in Patronage in 2020

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AgCountry Farm Credit Services / Grow / June 2021

FARM CREDIT FELLOWS PROGRAM GRADUATION Fifteen Students from North Dakota State University graduated from the Farm Credit Fellows Program this year at an event held at the NDSU Alumni Center on May 10th.

The Fellows program is a special undergraduate program in agriculture finance conducted by the NDSU Department of Agribusiness and Applied Economics and AgCountry Farm Credit Services. Participating partners also include: Farm Credit Services of Mandan and Farm Credit Services of North Dakota.

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The Fellows program provides real world experience for those who have a strong interest in farm management and ag finance. Through the program, participants gain a better understanding of the agriculture credit system. To be accepted into the program, students must fulfill certain course requirements and exhibit strong academic performance.

Once accepted, students participate in multiple sessions during the fall semester at AgCountry learning about lending, credit, insurance, agribusiness, and many other facets

of the Farm Credit System. Come spring semester, students complete a full three credit course on Advanced Agriculture Lending at NDSU. All students who are accepted into the program receive a $1,000 grant.

The program is currently offered to qualifying students at NDSU and University of Minnesota Crookston.

To learn more, go to:

agcountry.com/fellows

Sydney Balstad

Jack Beyer

Cade Blickensderfer

Miranda Breth

Fosston, MN

Kent, MN

Mott, ND

Albany, MN

Carter Brown

Kali Johnson

Billie Lentz

Jack McCrory

Walhalla, ND

Evansville, MN

Rolla, ND

Linton, ND

A Member-Owned Cooperative

AgCountry Farm Credit Services / Grow / June 2021

Ryann Nendick

Matthew Rausch

Prior Lake, MN

Watertown, SD

Devin Schatz

Jacob Scheresky

Horace, ND

Des Lacs, ND

Lucas Simmer

Isaac Steinke

Rothsay, MN

Hope, ND

Teresa Wald

Jean Johnson, AgCountry employee and Fellows liaison addressing the graduating class.

Left & Bottom: Robin Smith-Masog, AgCountry VP Org Development & Communications, making introductions of the team of Farm Credit executives.

Photos from the Graduation event on the NDSU campus

Napoleon, ND

AgCountry.com

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AgCountry Farm Credit Services / Grow / June 2021

Appraisal Q&A

with Tim Kreft, AgCountry Chief Appraiser Q

What is an appraisal?

A

A real estate appraisal is the process of developing an opinion of value, typically of fair market value, through the analysis of comparable sales data in comparison to a particular property by a trained and competent individual.

Q

What is the financial significance of an appraisal?

A

The financial significance varies depending on the purpose of the appraisal. Appraisals are typically prepared in terms of fair market value as of a specific effective date of value. An appraisal may be prepared for establishing a fair market value for the purpose of negotiating a sale of the property whereby the buyer and/or sellers desire to be informed of current market conditions.

determine the condition, age, and quality of the building improvements; or the quality, condition, and productivity of the land, which may include quality of the drainage, ease of farming, as well as the market location of the property. The appraiser would then compare the property to recent sales that have occurred within a given timeframe that is sufficient to value that property.

For purposes of lending, the appraised value can directly impact the amount a prospective borrower could receive as a loan from their lender. The appraisal helps to ensure that the lender is within its credit standards and would enable the lender to offer the best interest rates to its customers.

If the purpose of the appraisal is for the settling of an estate, the appraised value would help to establish a new or step-up cost basis for the property that is being valued. This same appraisal could also impact the amount of capital gains that the heirs may need to Q pay in taxes if the estate is over the federal or state tax exemptions.

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Q

What goes into an appraisal/How do they work?

A

An appraiser will provide their opinion of value based on the visual inspection of the property to

A

The appraiser utilizes numerous tools when analyzing both the sale and subject property such as websites that may provide real estate taxes, assessed value and acreage information through county GIS sites or USDA data that would include aerial photos of the land along with soil survey data that were previously completed by the Natural Resources Conservation Service (NRCS). Other websites include historical plats of the townships through county courthouse data or Google Earth, which provides an extremely clear aerial view of improvements and land. In the case of building improvements, cost estimator services, such as Marshall and Swift, are utilized in conjunction with data from local building contractors and suppliers to develop Replacement Cost New (RCN) estimates. However, the largest resource for market data analysis and verification is derived from conversations with market participants who have recently sold, purchased or brokered real estate.

If there are no recent land/building sales, how far back do you go when making comparisons?

As appraisers, we would prefer to utilize the most recent data that is available to us. We typically use sales data that has occurred within the last 12 to 18 months. However, in those market areas where limited sales have occurred, we may have to use sales as far back in time as three years for agricultural

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AgCountry Farm Credit Services / Grow / June 2021

and rural residential properties. Alternatively, more current comparable sales data from similarly behaved market areas in the region may also be considered.

make a market as that sale could be considered to have sold above or below the typical market range due to atypical sales conditions.

Q

Are there different kinds of appraisals?

Q

A

Yes, there are different types of appraisals. At AgCountry, we focus mainly on real estate property; however, other types of valuations would be for personal property appraisals such as valuations for machinery, livestock, and crops; business valuation appraisals or mass appraisals (typically relevant for real estate taxation).

Given the impact of COVID-19 on the production of building materials, is it more difficult right now to evaluate a market that appears to be extremely inflated?

A

Absolutely. Even during a stable market, our sales data is lagging due to sales not closing for 60 to 90 days, or even longer. In addition, the sales may have closed two to three months prior to our gathering, verifying, and analyzing the sales information to use for a particular appraisal assignment. The pandemic has created shortages in construction materials and increased the cost of constructing new improvements; however, it is unknown if this will result in temporary or permanent inflation of construction costs. As we continue to see fluctuations in the price of building materials and labor, appraisers have the challenge of maintaining up to date RCN data as analysis and data collection may be lagging current market trends.

Q

How long is an appraisal good for?

A

The length of time that an appraisal report will be good for depends on the intended user. The actual value of the report is only valid for a specific date in time, which is known as the effective date of the appraisal. However, for the purposes of lending through AgCountry, we may use an appraisal or evaluation up to a 12-month period from the effective date of the appraisal.

Q

Does someone have to be an existing customer in order to have an appraisal completed by your team?

A

Appraisers for AgCountry will complete assignments for external clients as the appraiser’s time allows. The purpose of the appraisal may range from estate planning, for settlement of estates, to establish a sales price between two parties or for lending with other financial institutions such as Farm Service Agency, Bank of North Dakota, Minnesota Rural Finance Authority, Wisconsin Housing and Economic Development Authority, etc.; however, our priority focus is for fulfilling the needs of our customers.

There are also different definitions of value. Market value is commonly used for lending purposes, basically meaning “the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.”

Other value definitions may include Going Concern Value, Liquidation Value, Investment Value, Assessed Value, and Insurable Value.

Q

What can a seller do to really increase the amount of an appraisal value?

A

Making general enhancements to the buildings and site such as updating the interior of the house or general maintenance that would extend the life of the agricultural improvements, may increase the value of the property. Examples of improvements made to land could include removing depreciated structures or debris; installing drain tile on cropland to improve the drainage; updating or improving water sources for livestock; or potentially improving ease of management by removing dying tree rows and breaking the land for additional cropland to square up the field lines. However, it is important to keep in mind that there may not be a dollar-for-dollar increase in the value versus the cost of completing the improvements.

Q

What can be done if you feel the appraiser does not have an accurate valuation?

A

If an owner or lender feel an appraiser made a miscalculation by not considering certain market data or considering improvements to the property, they should express their concerns with the appraiser and provide additional market or cost data that may have been missed in the initial valuation. However, one item to consider is that one sale alone does not

Serving Agriculture and Rural America

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AgCountry Farm Credit Services / Grow / June 2021

AgCountry has a New Podcast!

FIELDING QUESTIONS PODCAST AgCountry has officially launched a new podcast called Fielding Questions, which explores a wide range of topics within the world of farm finance and rural living. Each episode will feature a subject expert from AgCountry. Episodes will be kept around 10 minutes in length to allow for easy listening!

WE WANT YOUR QUESTIONS! Do you have a question about a financial topic? Is there a specific product or service you’re wondering about? Here is your chance to ask questions and learn more from experts across our association.

Listeners are encouraged to submit questions to us through Facebook, Twitter or the contact us feature on AgCountry.com. We welcome any and all questions. Please follow us on social media as we will preview upcoming topics.

Episode 3 - Hail Insurance AgCountry Farm Credit Services

INTERESTED IN LISTENING? The Fielding Questions podcast can be found on Apple Podcasts, Google Play and SoundCloud. You can also visit AgCountry.com and find a link to episodes under the “Advocating for Ag” tab.

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Experts in Every Field

AgCountry Farm Credit Services / Grow / June 2021

Give us your

BEST SHOT! Do you have a photo that captures the essence of agriculture or rural life? Be sure to enter it into AgCountry’s photo contest for a chance to win a cash prize and be featured in our 2022 calendar! Photos will be accepted until September 1, 2021. Each participant is allowed to submit up to five photos.

Last Year’s Winners

Photos can be submitted by visiting

agcountryphotos.com $500 Second Place: $350 Third Place: $200 First Place:

First Place

Second Place

AgCountry.com

Third Place 17

AgCountry Farm Credit Services / Grow / June 2021

2021 High School Scholarship Recipients Congratulations to the 2021 High School Scholarship Winners. 36 high school seniors were chosen to receive a $1,000 AgCountry scholarship.

The scholarship will be awarded upon proof of enrollment in college in the fall of 2021. Congratulations letters were mailed to the recipients on April 15, 2021. A total of 159 applications were received. Here is a complete list of the 2021 winners.

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Lillian Bitker

Levi Black

Peter Bryn

Caden Carlson

Kate Christensen

Tahtankka Damm

Halstad, MN

Merrill, WI

Dazey, ND

Pennock, MN

Battle Lake, MN

Medford, WI

Wyatt Dietsche

Riley Dreher

Jaydon Estebo

Hannah Flogstad

Wilson Gratz

Joseph Groth

Loyal, WI

Mizpah, MN

Redwood Falls, MN

Donnelly, MN

Atwater, MN

Ogema, MN

Samuel Hagen

Katherine Hansen

Abigail Helbach

Jacob Huhn

Gina Huhnerkoch

Autumn Kramer

Fordville, ND

Vining, MN

Amherst, WI

Litchfield, MN

Redwood Falls, MN

Kindred, ND

AgCountry.com

AgCountry Farm Credit Services / Grow / June 2021

C O N G R AT S

CLASS OF 2021!

Elias Markusen

Ryan Miller

Justus Moser

Haley Van Nurden

Joshua Olson

Ethan Price

Park River, ND

Herman, MN

Morris, MN

Sunburg, MN

Forbes, ND

Lamberton, MN

Maleah Redmann

Derek Reister

Macy Robert

Nicole Schroepfer

Sara Snortheim

Roman Steffan

Athens, WI

Medina, ND

LaMoure, ND

Lamberton, MN

Arpin, WI

Lakota, ND

Sierra Strenge

Gabriel Thompson

MacKenna Toyne

Amanda Wevley

Tristan Wirkus

Adam Zee

Wyndmere, ND

Perham, MN

Lisbon, ND

Starbuck, MN

Stratford, WI

Pittsville, WI

Your Best Total Solution

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AgCountry Farm Credit Services P.O. Box 6020 Fargo, ND 58108

2020 PATRONAGE

$64 MILLION PAID TO MEMBERS

It pays to be a member of our cooperative.

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