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March 2021

Features

NEW

CEO MESSAGE OPPORTUNITIES MARKET PLANNING POLITICAL OUTLOOK C L I M AT E C H A N G E P L A N T I N G S E A S O N W E AT H E R GIVING SUMMARY

BEGINNINGS

A Letter From The CEO We are entering a hopeful time of the year.

With spring’s arrival in sight, farmers across our territory are preparing for the upcoming planting and growing seasons. And, with each planting season comes a new beginning. I think I can speak for most people when I say new beginnings are certainly welcomed after experiencing the year that was 2020.

What March also brings with it is dividend payments through AgCountry’s cash patronage program. We often say that it pays to be a member of our cooperative. This month quite literally demonstrates that with a record $64 million payout. In 2019, the AgCountry Board of Directors announced a target of a one percent cash dividend on all eligible business going forward barring unforeseen events. I am proud to say that we successfully achieved that goal for the second year in a row despite experiencing a global pandemic. This achievement speaks volumes for all the hard work put in by both our members and staff.

Of course, nothing really seemed to come easy last year. Whether it was something major like COVID-19 and the shutdowns that came with it or implementing and learning new technologies for a business as AgCountry did, we know that there have been bumps along the way. However, adversity is not necessarily always a bad thing.

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Having the right mindset is a key factor in success. If you open your mind and attitude to growth, good things tend to follow. What is a growth mindset? It is about being open-minded and leveraging what you learn in both good and challenging times in order to become better.

Farmers and ranchers know all too well about being placed in tough situations. Despite being out of our control, trade wars, extreme weather and commodity prices have all made their mark on our industry over the past few years.

As you and your operation have overcome these roadblocks, you have become stronger.

I challenge you to analyze how business is conducted today on your farm or ranch and think about what can be done to improve going forward. Embracing a growth mindset today is the first step in working towards a more successful future.

Thank you for everything that you do to help make AgCountry a great place to do business.

Sincerely,

Marc Knisely, CEO

A Look Inside

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THE POLITICAL OUTLOOK FOR RURAL COMMUNITIES A N D A G R I C U LT U R E C L I M AT E C H A N G E A N D A G R I C U LT U R E A N E Y E O N T H E W E AT H E R FAC I L I T Y L E A S I N G O F F E R S TA X A DVA N TAG E S A N D I M P ROV E S WO R K I N G C A P I TA L

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OPPORTUNITIES IN AGRICULTURE

With Improved Prices W R I T T E N B Y Brendon Foss, VP Loan Officer

Commodity prices and gross revenue per acre for corn and soybean operations increased considerably late in 2020 and into 2021. The increase has restored optimism in the country.

Projected profit margins have vastly improved compared to recent years in crop production.

Projected profit margins in the livestock sector also saw some improvement late in 2020, but cash flows remain rather tight heading into 2021.

We know that as fast as prices can improve, they can also disappear. Leveraging crop revenue insurance to take advantage of today’s prices is one path to lock in prices above break-even levels. Written marketing plans will need to be created, updated, and executed in the volatile markets we face in agriculture.

While 2021 projections look better than recent years, 2020 appears to have been a profitable year for many farm operations thanks in large part due to government payments and generally good yields. For some, the profits were just enough to cover their principal and interest payments on their debt. For others, working capital was rebuilt after being depleted due to tighter cash flows since 2013. Today’s commodity prices present an opportunity to rebuild liquidity, provided a crop is successfully grown and marketed.

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Why, you may ask, is working capital so important?

The cash position of your farm is key for a variety of reasons. First, liquidity acts as a safety net to absorb losses should adversity strike. Second, liquidity gives your farm negotiation power on capital investments, such as land, machinery or equipment. This negotiation power, in terms of quick access to funds and the ability to selffinance, can allow you to jump on opportunities as they arise. Lastly, generally speaking, liquidity allows you to be less reliant on your lender and offers you flexibility to manage your farm. Those farms with an increased cash position may feel the need to reduce debt in some cases. When deciding whether to pay ahead on term loans, each farm will need to consider if their working capital is strong enough for them to do so. It is typically better to apply extra proceeds/cash to short-term operating debt first, in order to maintain of build liquidity for the long haul.

Capital spending has been largely reduced over the last several years as farmers tried to cut costs and capital expenditures while prices were depressed. For some, it may be a good time to update farm machinery or make capital improvement investments. Before you go out and make a purchase, examine your current equipment and put together a multi-year capital spending plan to manage your line of machinery.

Consider completing a cost-benefit analysis on pieces of machinery that have required more repair expense in recent years. In addition, look at opportunities to sell farm machinery or assets that are no longer needed to help fund the capital purchases your farm needs. Each farm’s situation is different, and managers will need to consider what makes sense for them. For some, no capital expenditures are needed at this time. Instead, restoring working capital or reducing debt might be the better option.

Commodity price changes can have rippling effects throughout agriculture. The recent increase in corn and soybean prices may impact cashflow, land values, planting intentions, land rent and so forth. History shows us another implication of better commodity prices coming in the form of higher production costs. Slight increases in seed, fertilizer and fuel in 2021 are likely. Over the last several years, farm operations have gotten better at reducing costs by shopping around and obtaining prices from multiple suppliers. It is just as important when times are good to avoid bad habits and thoroughly examine your input costs to protect your potential profit. At the same time, it is important to cautiously make reductions in production costs so as not to significantly impact yield potential and those top profitable bushels.

“Slight increases in seed, fertilizer and fuel in 2021 are likely.”

In terms of land rent, be cautious about paying excessive cash rental rates that may not be profitable. Consider negotiating flexible lease options with agreeable landlords, which may set a practicable base rental rate with an opportunity for a higher final rental rate should crop prices or yields increase. Land values themselves should hold value or rise with increased prices. Some operations looking to purchase real estate may be positioned to pay more than others due to

different overall financial positions. Managers will need to carefully examine each land opportunity individually, shop around to find equivalent land sales in terms of quality, compare the costs of owning rather than renting and observe how a new long-term payment will impact cash flow for years to come.

“One could state there has never been a better time to restructure debt to take advantage of low interest rates.”

So, what does the 2021 outlook with higher prices have to do with credit? As farms look to take advantage of higher prices, and possibly adding acres or making changes within their operation, debt structure comes into play. One could state there has never been a better time to restructure debt to take advantage of low interest rates. A debt restructure could be done to restore liquidity, buy capital, etc. When examining your financial position, it is important both your balance sheet and cash flow are in check to establish and maintain a healthy overall financial position. A properly structured farm operation will be able to take advantage of opportunities that present themselves throughout the year.

I’m happy to report that there is once again optimism in agriculture. A sense of excitement moving into the 2021 crop cycle can be felt by talking with different farmers. With that said, each operation is positioned differently. Every farmer and rancher would be wise to manage their farm accordingly in order to set the table for greater future success.

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Making Your

Marketing Plan W R I T T E N B Y Katie Tangen, Market Education Specialist

It’s amazing the difference a year can make! As spring approaches and the first seeds of the 2021 crop prepare to go in the ground, producers are faced with a totally different market than last year at this time. Corn, soybeans and wheat have done a 180 degree turn from what was a very bleak outlook in 2020. Now, the potential for profitability is there— and good profitability at that!

Unfortunately, that doesn’t necessarily make selling bushels any easier. While low prices pose one set of challenges, rising price environments can also be difficult to manage. Here are some things to think about as you look ahead: O N E — Think about your crop insurance coverage. This is

really the base of your marketing plan. Carrying the correct level of coverage means you can take advantage of rising prices. What do I mean? Markets rally when there’s uncertainty.

Uncertainty means you, as a producer, are probably thinking, “What if I don’t get a crop?” That’s a valid question, but once the crop is planted, coverage has attached. As long as you carry a Revenue Protection (RP) policy and stay at or below your covered bushels, this won’t be an issue. If you have to buy out of a contract and prices are higher in the fall because no one has a crop, your claim will be paid at the higher price.

T W O — The flip side is coverage doesn’t attach until the

crop is planted. Is it a good idea to sell up to your guarantee before anything is planted? No, probably not. However, it’s likely something will get planted. Remember that selling ahead of planting means you are committing to put a certain amount of acres in the field. The level of comfort selling ahead of planting is going to vary between individuals, but generally speaking, 20% to 30% of expected production is going to be okay.

T H R E E — Margins. Farmers don’t make money on the price

of corn, soybeans or wheat alone — they make money on the price of corn, soybeans or wheat over inputs. If you are selling substantial quantities ahead, make sure your inputs are booked and your rents are locked in. Vice versa, if you

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are buying inputs, you should probably be selling some grain.

There’s isn’t much that’s more painful than buying high-priced fertilizer and selling low-priced corn 18 months later.

F O U R — Write it down. I know, you’re sick of hearing

that. But, there’s a reason so many marketing advisors, farm management instructors, and bankers say this. It helps keep you focused. If you have to, write down why you picked this price. No one’s saying you can’t revise targets if market outlooks change, but having a plan, and having it written down gives you some commitment. Even better, call the elevator and put orders in. Just don’t call five cents before they hit and take them out.

F I V E — Ask questions and have a converstaion. There is

nothing wrong with asking questions or having a conversation with someone that’s not so close. This could be a trusted friend, a spouse, your loan officer, insurance agent, farm management instructor or otherwise. Different perspectives can bring up things you haven’t thought of before. Those conversations may or may not change your approach, but they will give you confidence to see it through.

Lastly, as you put together plans for 2021, remember in marketing no one is right. There are no right answers for everyone; there are only right answers for you. Cost structures are different, and neighbors do things differently.

That’s okay. Don’t get hung up on that. Don’t get stuck on the fact that prices are rising either. It’s all too easy to look back when we have rallying markets and say, “I wish I hadn’t made that sale.” You can’t change it. You probably shouldn’t even try to average it. You just need to look ahead on what’s not sold along with your financial position and make a decision from there. It’s easier said than done, but that’s what the marketing education department is here for - to help talk through the risks and rewards of your marketing decisions.

If you have any questions throughout 2021, please call Rob Fronning, Jeff Beaudry or myself and we can help you weigh out some of these choices.

Upgrade to AgPay & New Mobile App

Live March 23, 2021

We’re excited to announce that AgCountry is providing you with a better overall online experience with AgPay! The recent pandemic has proven that more convenient access to online and mobile services are critical to your business operations, 24/7.

INCREASED SELF-SERVICE FEATURES • Customized views (nickname accounts, group, hide or change the order of tiles) • Setup alerts (payment reminders or balance/transaction alerts) • Add or remove external bank accounts • Two transfer screens available: • Loan Payments • Funds Transfer

ENHANCED SAFETY & SECURITY To ensure the highest level of security for customer’s online information, security updates are required beginning March 2, 2021 during initial login on a browser.

Users will be required to update their password, agree to an updated Online Agreement and establish a secondary security authentication method.

Mobile users: once this initial login is complete, download the new AgPay app (available 3/23/21 and beyond) by searching, “AgCountry,” and will use the same secure login to enjoy many of the same AgPay features on mobile devices.

EASIER ACCESS AgPay is designed to allow easier access to loans and statements online for users that have signed on the note or have signed a personal guaranty on entity loans in which they are an owner. We’re also upgrading logins to one, secure login for My AgCountry and AgPay (including the mobile AgPay app).

AgCountry Online Services We Serve Agriculture: Whenever. Wherever.

UPGRADING...

UPGRADING...

W W W. S T U D I O -S TA N DA R D.CO

855-402-7849 | OnlineServices@AgCountry.com

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The Political Outlook for

Rural Communities and Agriculture W R I T T E N B Y Todd Van Hoose, President and CEO, Farm Credit Council

With a new year, new Congress and new president, 2021 brings many opportunities for America’s farmers and ranchers and the rural communities where they live.

Historically (and fortunately), agriculture has enjoyed bipartisan support on a wide variety of issues in the U.S. Congress. That will be more important than ever in 2021. The U.S. Senate is evenly divided – with Vice President Kamala Harris breaking any tie votes – and the U.S. House of Representatives is controlled by Democrats, but with one of the smallest majorities in modern history.

So, what can we expect?

C O R O N AV I R U S President Biden has named battling the COVID-19 pandemic as job #1. He has set ambitious goals for vaccine distribution and economic support for families and businesses alike, among other areas.

Past legislation related to the pandemic and its impact on the economy has included relief for agriculture, and we’re closely monitoring what new legislation might include. While Democrats and Republicans remain far apart on consensus, we continue to work with our friends and allies to help them understand the needs of producers everywhere.

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We may need your help. If the opportunity presents itself on this relief package or others, please stand ready to advocate for farmers, ranchers and rural communities. Your messages to your members of Congress make a difference.

Please take a moment and join our grassroots program. Visit https://farmcredit.com/takeaction and enter your name. We’ll follow up when we need your voices to tell Congress to support agriculture.

USDA President Biden nominated Tom Vilsack as Secretary of Agriculture. If his name sounds familiar, it’s because he served in the same position for all eight years of President Obama’s administration. His support from within the agriculture industry is strong – and for good reason. He shares a deep understanding and appreciation for ag and rural America.

Thanks to his prior service, he will hit the ground running at USDA and provide the support our country’s producers need. Farm Credit looks forward to working with Secretary Vilsack to strengthen the farm safety net and other programs important to farmers and ranchers.

C L I M AT E C H A N G E Climate change was a major issue on which President Biden and many Democrats campaigned. And with 22 storms each costing our economy more than $1 billion in 2020, it’s difficult to disagree that the climate is changing.

President Biden has pledged to tackle the issue from a variety of fronts, and that includes agriculture.

As media reported on his confirmation hearing, Secretary Vilsack said that agriculture policy might be the president’s best tool to take quick steps toward combating climate change, including new incentives for producers to implement more sustainable farm practices.

Secretary Vilsack intimated his preference for voluntary and market-based programs, a sentiment echoed by many in Congress. But how much can happen through USDA versus Congressional legislation remains unclear.

As we all know, farmers and ranchers have been strong stewards of the land for generations.

From cover crops, conservation tillage, nutrient optimization and crop rotation, or for updated equipment with precision technology necessary for these farming practices, Farm Credit supports farmers as they implement these climate-smart technologies.

Our challenge: share these stories with lawmakers and the media.

At Farm Credit, we let the voices of America’s farmers educate and influence lawmakers and their staff in Washington, D.C. It’s those stories that make a difference.

If you have a story to share, please let your loan officer or others at AgCountry know. The more voices and stories, the better chance we have.

And thankfully, we’re not alone. Our efforts join those of many other farm groups, all working together, to help policymakers understand what’s happening on our farms and ranches every day.

GRAIN BIN

RESCUE

PROGRAM 2021 AgCountry is once again donating grain bin rescue units to area fire departments to help support rural communities and promote farm safety.

Applications are being accepted from March 1 - May 21, 2021.

Apply at AgCountry.com/Rescue

7 3 GRAIN BIN R ESC U E U N IT S H AV E B E E N D O N AT E D B Y AGCOUNTRY SINCE THE PROGRAM BEGAN IN 2017!

C L I M AT E C H A N G E A N D A G R I C U LT U R E

A look at legislative activities, administration priorities and industry actions.

W R I T T E N B Y Howard Olson, SVP Government and Public Affairs

Climate change and climate policy are top priorities for President Biden, United States Department of Agriculture (USDA) Secretary, Tom Vilsack, and the new administration. Legislation has been introduced in both the U.S. Senate and the U.S. House that gives USDA authorization to act as a facilitator for the carbon markets. This has several agricultural organizations putting together workgroups, white papers and recommendations on climate responses. Agriculture will play a key role in the climate change fight. The question is how, and can we have input that benefits our industry?

L E G I S L AT I O N Last June, Senate Ag Committee Chairwoman Debbie Stabenow and others introduced a bill in the Senate, with a similar bill dropping in the House, called the Growing Climate Solutions Act. The goal of the legislation is to bring transparency and build trust among farmers and ranchers who want to participate in private carbon markets. It creates a carbon market certification program at USDA, a Greenhouse Gas Technical Provider and a Third-Party Verifier Certification program to provide transparency and legitimacy to the ag carbon markets. They want to help private landowners generate carbon credits through

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a variety of agriculture and forestry-related practices and connect landowners to private sector carbon markets. It also calls for USDA to create a website, which will serve as a “one-stop shop” of information and resources.

A D M I N I S T R AT I O N A N D U S D A The Climate 21 Project is considered a blueprint for the new administration and has a section specific to USDA. The plan includes recommendations to invest in natural climate solutions and make climate-smart investments, such as: •

Establish a carbon bank using Commodity Credit Corporation (CCC) authorities and funding;

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Fund climate-smart practices through USDA conservation programs;

•

Create incentives in climate-smart agriculture through crop insurance policies; and

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Increase the adoption of methane digesters for livestock.

DAIRY METHANE RESEARCH Dr. Frank Mitloehner, also known as the GHG Guru, from the University of California Davis is sharing new information that livestock herds are not adding to greenhouse gases and that with the use of methane digesters, can actually be a part of the solution to reduce greenhouse gas levels and slow climate change. Livestock and other animals are net neutral to greenhouse gas levels.

They only increase greenhouse gases if herd size increases and that’s not happening.

According to Dr. Mitloehner, in the U.S., dairy cow numbers have shrunk from 25 million in 1950 to 9 million cows in 2020. At the same time, milk production has increased nationally by 60%. The carbon footprint of a glass of milk is two-thirds smaller today than it was 70 years ago! More information on Dr. Mitloehner’s research can be found: clear.ucdavis.edu/. The video resource on that website, “Rethinking Methane,” is a very interesting, five-minute video to help viewers understand livestock methane and how it can be a part of the solution.

AG INDUSTRY DEVELOPMENTS Food and Agriculture Climate Alliance (FACA), was launched last summer by the American Farm Bureau, the National Farmers Union, the National Council of Farmer Cooperatives

and the Environmental Defense Fund. They created workgroups and developed policy recommendations. FACA recommends federal policy should provide incentives and support for farmers, ranchers and forest owners as they tackle the challenges created by climate change. Their report includes several specific recommendations to achieve this. They have presented their full report to members of Congress, the Biden administration and USDA with favorable reviews and support. Since the inception, the number of organizations associated with FACA continues to grow.

Just recently, Land O’Lakes announced that their agronomic business Truterra has launched a program called TruCarbon that will be the first farmer-owned carbon program. They also announced their first buyer of carbon credits will be Microsoft. Farmers can sell carbon credits for $20 per ton and may be eligible for agronomic practices completed in the past five years.

The climate change issue and response started years ago as a ripple and now feels like a full-scale tidal wave coming at us. Farmers, ranchers and the agriculture industry now have a choice to make – we can either try and fight this and attempt to push back against the tidal wave, or we can grab a board and ride this wave in a direction favorable to farmers, ranchers and American agriculture.

I M A G E S O U R C E : H T T P S : //C L E A R . U C D AV I S . E D U / E X P L A I N E R S / B I O G E N I C- C A R B O N - C YC L E - A N D - C AT T L E

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AN EYE ON THE

WEATHE R

A look at what’s in store for the planting season.

WRITTEN BY

Eric Snodrass, Principal Atmospheric Scientist for Nutrien Ag Solutions

FRONT HALF OF WINTER The beginning of winter did not pan out as forecast. Fall featured a rapidly developing La Niña, which historically favor more frequent cold air outbreaks from the Canadian Prairie. Early season snow in late fall hit the Northern Plains hard, but mild Pacific air from a slower jet stream kept Arctic air at bay during December and January. The Polar Vortex split and weakened throughout January, which is typically a sign of a major cold air outbreak, but this split targeted Russia, Kazakhstan, and China with winter’s first major cold air outbreak. It took another 40 days for that cold air to cross the North Pole and finally invade the Canadian Prairie and Northern Plains of the U.S. around Super Bowl weekend. That Arctic air that firmly stood in place through Valentine’s Day week was very dry, and didn’t yield much snow. Figure 1 shows the snowfall anomalies through Feb 8, 2021 compared to the 2008-2019 average. Notice the deficits in snowfall in parts of the Dakotas.

F I G U R E 1 . ( TO P) S E A SO N A L S N OW FA L L D EPA RT U R E FRO M N O R M A L (I N CH ES) T H R O U G H F E B 8 , 2 0 2 1 . ( B O T T O M ) S N O W WAT E R E Q U I VA L E N T ( I N C H E S A N D C M ) T H R O U G H F E B 8 , 2 0 2 1 S O U R C E : H T T P S : // W W W . N O H R S C . N O A A . G O V/ SN OW FA L L /

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FIGURE 2

DROUGHT DISCUSSION Drought area has not changed much this winter.

Over 60% of the lower 48 states is covered in some stage of drought. The early February drought monitor reveals that drought severity increases from western Wisconsin through the Red River Valley. It is rare that drought area is reduced in winter due to frozen soils, but this winter’s lack of deep snowpack reveals that if we were to melt all the snow on the ground across the upper Midwest it would be the equivalent to getting a two-inch rainfall event, assuming that moisture would soak into the soil (see bottom of Figure 1). A southwest flow in the jet stream is needed in March and April to get consistent moisture return and alleviate drought risk into spring. Winter 2020-2021 has been completely void of flow from Hawaii through California into the Great Lakes, which has limited the formation of big winter storms and droughtrelieving precipitation. Watch closely in March for a ridge to develop over the Southeastern U.S. If the Southeast warms quickly while the Canadian Prairie remains cold (the fastest jet stream winds flow between these two features), the upper Midwest will have a lot of late winter storm systems, which will bring drought relief and replenish soil moisture deficits. The unfortunate

side effect is that this pattern often leads to higher prevent plant acreage due to spring flooding. The drought needs to be broken slowly in spring followed by routine thunderstorm activity in summer, which would be the most ideal situation for the 2021 growing season. Figure 2 shows the extent of the drought through Feb 4, 2021 on the US Drought Monitor.

E A R LY S P R I N G O U T L O O K The most trusted long-range model, the European Center for Medium Range Weather Forecasting (ECMWF), or “European model”, has limited the deep arctic cold to February and returns more mild air to the upper Midwest through March. It also forecasts above average precipitation, which is exactly what the upper Midwest needs to prevent the spread of drought. Figure 3 shows the ECMWF forecast for March 2021. The ECMWF also forecasts the La Niña to fade into spring, which could build more westward momentum into the jet stream and allow for better southwest flow in the jet stream. These are all positive signs, but they will have to carry into April and May for a fast plant without risk of widespread spring flooding.

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F I G U R E 3 . E C M W F F O R E C A S T F O R M A R C H 2 0 2 1 T E M P E R AT U R E A N O M A L I E S ( T O P ) A N D P R E C I P I TAT I O N A N O M A L I E S ( B O T T O M ) . S O U R C E : E C M W F V I A H T T P S : // W W W .

W E AT H E R B E L L . C O M

L A N I N A A N D PA C I F I C O C E A N T E M P E R AT U R E The current La Niña is the strongest since winter 2010-11. Unlike that La Niña, though, the coldest water in 2021 is confined to the equatorial Pacific Ocean. Big La Niña events occasionally have cold water anomalies along the west coast of North America into the Gulf of Alaska, which is often a precursor to summer drought in the upper Midwest. Figure 4 shows two composite maps of the driest/hottest summers for the Midwest.

On the left of Figure 4 is the trough/ridge pattern when the Midwest is in drought. Notice it features a cool west coast and large, blocked ridge over the Great Lakes. This pattern effectively shuts down the return of Gulf of Mexico moisture and traps heat within a dry dome of high atmospheric pressure. The map on the right of Figure 4 shows the ocean temperature pattern during those same hot/dry summers. Notice the spread of cold water off the west coast of the U.S. – especially off the Baja of California. Figure 5 shows the sea surface temperature anomalies as of February 7, 2021, and

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the forecast for sea surface temperatures during May through July from the ECMWF model. As the La Niña fades in Spring 2021 from its peak in January, watch for cooler water off the west coast.

If it cools down, the risk for summer drought increases in the upper Midwest. Each summer, a part of the subtropical ridge system will become established across some part of North America.

The farther west this ridge forms the better the chances for the upper Midwest to see normal summer temperatures and thunderstorm activity.

If this ridge sets up over Minnesota, North Dakota, or Wisconsin in July or August, the risk for extreme heat and flash drought increases substantially.

The trend over the last decade is for the ridge to stay west over the Rockies, but summer 2021 has an increased risk for this ridge to move east. This is the most important factor to watch from now through the 4th of July.

FI G U RE 4. (LEF T ) CO M POSITE MAP O F TH E TROUG H (COO L CO LO RS) AN D RI DG E ( W A R M C O L O R S ) P AT T E R N D U R I N G T H E H O T T E S T/ D R I E S T S U M M E R S I N T H E U P P E R M I D W E S T . ( R I G H T ) C O M P O S I T E M A P O F S E A S U R F A C E T E M P E R AT U R E A N O M A L I E S D U R I N G T H E H O T T E S T/ D R I E S T S U M M E R S F O R T H E U P P E R M I D W E S T . S O U R C E : N O A A H T T P S : // P S L . N O A A . G O V / C G I - B I N / D ATA / C O M P O S I T E S / P R I N T P A G E . P L

F I G U R E 5 . ( L E F T ) S E A S U R F A C E T E M P E R AT U R E A N O M A L I E S F O R F E B 7 , 2 0 2 1 S O U R C E : H T T P S : // W W W . O S P O . N O A A . G O V / P R O D U C T S / O C E A N / S S T/ A N O M A LY / ( R I G H T ) E C M W F F O R E C A S T O F S E A S U R F A C E T E M P E R AT U R E A N O M A L I E S F O R M AY / J U N E / J U LY 2 0 2 1 S O U R C E : E C M W F F R O M H T T P S : // W W W . W E AT H E R B E L L . C O M

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FACILITY LEASING OFFERS TAX ADVANTAGES AND IMPROVES WORKING CAPITAL When planning to update, expand or enhance your current buildings or grain systems, there are many financing options available to you. It is important to consider the short- and long-term financial benefits, as well as the potential to benefit generations to come. A lease can be a wise choice to capture these benefits.

AgCountry’s Facility Lease offers a financing solution that also provides tax planning, capital preservation, customized payment structures, project financing and estate planning.

TA X A D VA N TA G E S Facility leases can offer tremendous tax advantages. Lease payments may be fully deductible as business expenses on a properly structured, true lease. Expensing level lease payments over the term of the lease may equate to more advantageous deductions and reduce your taxable income.

A conditional sales lease is also available, providing the benefits of a lease along with depreciation and other tax benefits.

A C C E L E R AT E D W R I T E - O F F Facility leases offer the advantage of accelerated write-off.

The write-off of a 20 to a 39.5-year asset can be accelerated by expensing the full lease payment over seven to ten years.

With a 25% residual, approximately 75% of the asset can be written off in seven to ten years as opposed to depreciation.

It is an incredible tax planning tool and by far the number one benefit for producers.

Step-up or step-down payments are also available.

PROJECT FINANCING Project or construction financing is a popular option on facility leases. We handle all of the funding of vendor invoices during the construction phase, and the completed project transitions seamlessly into the lease. This streamlines the overall project and can minimize out-of-pocket expenses. If your project is already underway, there are other options to place it on lease. Additionally, equipment used in the facility can also be included in a single lease.

E S TAT E P L A N N I N G How can you ensure a seamless transition into the operation for the next generation? Leasing can efficiently transition ownership of a facility to the next generation at the end of a lease. When the lease ends, the next generation can purchase the facility for a set purchase option amount. At that time, ownership will transfer directly to the next generation, keeping the asset out of the estate.

HOW CAN WE MEET FINANCING NEEDS?

YO U R

FAC I LIT Y

Tailored to meet your business needs, flexible lease structures allow you to take advantage of these benefits on facilities of all types and sizes, including: • Machine sheds and storage buildings

C A P I TA L P R E S E R VAT I O N

• Grain storage and handling facilities

One of the greatest benefits of a lease for farmers is capital preservation. With a lease, farmers are able to maintain financial flexibility and stability by preserving working capital.

Leasing can provide 100% financing - including soft costs with no down payment required in order to preserve cash on hand.

• Climate controlled buildings

C U S T O M I Z E D PAY M E N T S T R U C T U R E S Lease payments can be tailored to fit your business cash flow - monthly, quarterly, semi-annual, annual, as well as seasonal.

• Livestock and dairy facilities • Pole barns • Farm shops • Greenhouses • Commercial buildings, like warehouse and office facilities (Seven year lease versus 39.5 year depreciation – a tremendous tax advantage)

Contact your AgCountry loan officer for more information on leasing your next facility.

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LAND VALUE

L A N D VA L U E S

VALUE ($)

ND

mn

wi

$7K $6K $5K $4K $3K $2K $1K $0

2012 2013 2014 2015 2016 2017 2018 2019 2020 YEAR

COMMODITY PRICES CORN

SOYBEAN

WHEAT

PRICE

$16 $14 $12 $10 $8 $6 $4 $2 $0

2012 2013 2014 2015 2016 2017 2018 2019 2020 YEAR

T R E A S U R Y R AT E S 10 yr treasury rate

20 yr treasury rate

RATE

4% 3.5%

The value of land plays an important role within every farming operation. Like anything else that is bought or sold, there are different variables that affect the price and/or value. For example, location, supply, soil quality, irrigation, drainage, commodity prices, interest rates, competition and personal reasons can all factor in. As Warren Buffett once said, “Price is what you pay; value is what you get.”

At AgCountry, we actively track land sales within our marketplace. These graphs depict a simplified proxy for land sales over the course of the last decade by states within our service area.

It is important to keep in mind that all markets are local, so your land sales may not follow this trend, or may have more volatility. Land valuation can and does vary greatly within our 65-county local service area throughout Minnesota, North Dakota and Wisconsin.

As you can tell from Figure A, we have seen sales trending down around 20% since their peak in 2013-2014 to midyear 2020. A 35% decline in commodity prices (Figure B) during this same time period put stress on profitability and cash flows for farmers. However, downward pressure on prices was partially offset by a limited supply of land for sale, falling interest rates (Figure C), and volatility in other investments. If it seems like land prices in your area have not experienced a corresponding drop due to commodity prices, odds are good it is due to one or more of these offsetting factors.

In the fall of 2020, we started to see strong land sales again. Limited amount of land available, stronger commodity prices and low interest rates are likely the driving forces behind the increases.

How long the current commodity prices and interest rates remain will play a significant part in determining the value of land.

3% 2.5% 2% 1.5% 1% 0.5% 0%

SUMMARY

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 YEAR

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GIV IN G S U M M A R Y It is our mission to serve agriculture and rural America. One way in which we fulfill our mission is by giving back. We know giving back can sound like a pretty broad term. We have included a snapshot of examples for actions we have taken in a year where the needs within our communities sharply grew.

In 2020, AgCountry Farm Credit Services donated more than $1,300,000 to various causes throughout Minnesota, North Dakota and Wisconsin.

THE NEXT GENERATION The future of American agriculture depends on the success of the next generation of farmers, ranchers, and ag leaders.

Because of their importance, we support organizations that focus on youth education and leadership. These groups and initiatives include: 4-H, FFA, Ag in the Classroom, Student NAMA and other local leadership programs.

COLLEGE SCHOLARSHIPS Each year, we provide 36 scholarships to graduating high school seniors who are from farming families or who will pursue a career in agriculture. In addition, we award 10 scholarships to students already enrolled in college who have completed 69 credits and are working towards a career in an ag-related industry. An investment in those seeking additional education will benefit agriculture and rural life for years to come. A third type of scholarship is also given to students in the Farm Credit Fellows Program at North Dakota State University, University of Minnesota - Crookston and for Young Beginning Farmers (YBF) for ag education training.

GETTING STARTED Young and beginning farmers face a number of unique

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challenges, so AgCountry provides them support in a number of ways. In addition to our special programs, scholarships are available to young and beginning farmers for appropriate farm/business management classes and other educational opportunities.

GRAIN BIN RESCUE PROGRAM Last year was the fourth year for AgCountry’s Grain Bin Rescue Program. Through the program, AgCountry donates grain bin rescue units to area fire departments in an effort to help support rural communities and promote farm safety.

The units are designed to be used specifically for grain bin entrapments. Since the program began, 73 area fire departments have received rescue units.

SUPPORTING COMMODITIES AND AGRICULTURE GROUPS Because we are involved in agriculture, it is important that we support our peers. AgCountry is proud to support the commodity groups in our territory along with groups such as the Farm Bureau, Farmers Union, Farm Rescue, AgriWomen and many Extension and farm safety programs. We also support numerous ag advocacy groups such as Common Ground, AgriGrowth Council and the Ag in the Classroom program.

HUNGER RELATED CAUSES It is only appropriate that we assist groups and organizations that are feeding those in need within our local communities.

AgCountry makes annual donations to hunger-related organizations across our 65-county marketplace.

COMMUNITY GIVING Community involvement is an important way for us to further our mission of supporting the areas where we live and work. AgCountry donates to a wide range of local causes.

Several offices contribute to United Way chapters via payroll deduction, which qualifies for a company match.

VOLUNTEER EFFORTS Through AgCountry’s ‘Give Back’ volunteer program, employees are allowed to take paid hours each year to spend volunteering for causes near and dear to them. We consider our employees to be the backbone of everything we do, and we’re proud to be able to let them share their many talents in their communities.

A SCHOLARSHIP OPPORTUNITY FOR COLLEGE STUDENTS We believe that an investment today can lead to greater yields in the future. We also believe in the importance of a good education. AgCountry has long been a strong supporter of building the next generation of farmers, ag professionals and rural leaders. One way we invest is by helping offset part of the cost of higher education.

AGRICULTURE UNIVERSITIES AND COLLEGES

If you or your child already has taken some college credits, be sure to check out this great opportunity!

We have a rich history of supporting colleges and universities that provide valuable agricultural education to students.

This includes funding projects that grant students access to cutting edge technology and facility space that fosters academic growth.

UPPERCLASSMEN SCHOLARSHIP

GIVING AND GROWING We know that there are great needs all across our territory.

So, we came up with a program that both makes a difference and empowers staff. In 2018, we launched the Giving and Growing program. This program allows each AgCountry employee to contribute $600 to a cause of their choosing.

Last year a total of over $268,000 was given out. The list of causes impacted by this program range anywhere from local schools, women’s shelters and animal rescue, to individuals battling health issues and many more!

AgCountry is offering ten, $1,000 scholarships for upperclassmen college students who have completed 69 credits at a college or university; are studying in an agribusiness, business or related field of study; and plan on working in agricultural lending or related agricultural services.

Selection is based on academic aptitude, vocational promise, personal attributes and leadership. Children of AgCountry Farm Credit Services Executive Leadership, Board Members or Selection Committee Members are not eligible to apply.

The application deadline is June 1, 2021.

You can find the application to our scholarship by visiting agcountry.com. Once there, click “Scholarship Programs” under the “Advocating for Ag” tab.

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

2 0 2 0 PAT R O N A G E

$64 MILLION PA I D T O M E M B E R S

It pays to be a member of our cooperative.

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