Cultivate Magazine - Summer 2019

CULTIVATE A MAGAZINE FOR CLIENTS AND FRIENDS OF COMPEER FINANCIAL SUMMER 2019

GIVING $150 MILLION BACK

to our member-owners this year.

Compeer Financial® Patronage Program

As a Farm Credit cooperative, our member-owners share in the profits they help to create through our patronage program. By paying back a portion of our earnings to our member-owners, they can reinvest in their farms and businesses, which directly impacts our local and state economy. Keeping rural America strong is at the heart of everything we do.

SEE FOR YOURSELF HOW BEING A MEMBER-OWNER PAYS. COMPEER.COM/PATRONAGE Compeer Financial, ACA is an Equal Credit Opportunity Lender and Equal Opportunity Provider. ©2019 All rights reserved.

#CHAMPIONRURAL

CULTIVATE Volume 3, Issue 2 Summer 2019

EDITORIAL STAFF Rebecca Peterson, Editor Amy Barnett, Assistant Editor Terri Fast, Contributing Writer Nora Nolden, Contributing Writer Chastity Valvick, Contributing Writer Kelly Kendall Studios, Designer DIRECTORS Kevin Aves Kirkland, Ill. Ann Broome Austin, Texas Mark Cade Westby, Wis. Kaye Compart Nicollet, Minn.

Terry Ebeling Owatonna, Minn.

Daniel Erickson Alden, Minn.

Tim Evert North Freedom, Wis. Larry Fischer Sleepy Eye, Minn.

Kathleen Hainline Stanford, Ill. Dale Holmgren N. Mankato, Minn.

Lori Meinholz Middleton, Wis. Greg Nelson Spring Valley, Wis. Roger Newell Williamsfield, Ill. David Peters Manteno, Ill. Greg Pollesch Oshkosh, Wis. Stephanie Wise Joliet, Ill. Dan Zimmerman Rosendale, Wis. Cultivate is a publication of Compeer Financial, ACA. Compeer Financial exists to champion the hopes and dreams of rural America. This publication is copyrighted in its entirety. Cultivate is published by Compeer Financial, 2600 Jenny Wren Trail, PO Box 810, Sun Prairie, WI 53590.

Please send address changes to Compeer Financial, Attn: Cultivate Magazine, 2600 Jenny Wren Trail, PO Box 810, Sun Prairie, WI 53590 or call (844) 426-6733.

Compeer Financial, ACA is an equal opportunity employer, lender and provider.

Equal Credit Opportunity Lender. © 2019 All rights reserved.

10

8 12

16

CONTENTS 8 Doing It Their Way

Erickson brothers take pride in being hands-on farmland managers

10 Cultivating Connections

Couple grows their business while connecting to the community

4 CEO Message 5 Local Look 6 Board Chair Message 18 Calculating Cost of Production 20 Internships & Careers

12 Moving Forward

22 News & Announcements

16 Improving for the Future

Cover: The Didion Milling facility in Cambria, Wis. is nestled amidst the Wisconsin countryside. Learn more about the partnership between Didion Milling and Compeer Financial on page 12.

Didion Milling and Compeer Financial partner to build innovative dry corn milling facility

Making things better through innovation for the next generation

Cultivate is brought to you by Compeer Financial. This publication’s name represents our cooperative’s commitment to growing long-term relationships with our member-owners and championing the hopes and dreams of rural America. We hope you find the information and stories in each issue informational and inspiring. Please reach out with comments or suggestions for future issues to Rebecca.Peterson@compeer.com.

Summer 2019 • CULTIVATE 3

CEO MESSAGE

PROUD TO BE YOUR PARTNER:

Working together for the future of agriculture Rod Hebrink earned his Bachelor of Science degree in Agricultural Business Administration from the University of Minnesota and attended the School of Banking at the University of Wisconsin— Madison for post-graduate education. In 2017, he was selected to serve as President and CEO of Compeer Financial.

At Compeer Financial, we talk a lot about our partnerships with clients. But what exactly do we mean when we say “we’re your partner”?

For us, being your partner means committing to developing relationships that add value beyond the formalities of business. We do that by constantly expanding our knowledge and understanding of the industry and providing guidance in a variety of ways to help you achieve your hopes and dreams. We also offer a comprehensive list of no-cost client programs, services and benefits difficult to find in one place anywhere else.

Patronage is among the benefits member-owners receive when they partner with us. This summer, Compeer Financial is paying out $99 million in patronage, the second of two patronage payments being made this year.

Our Board of Directors annually reviews our patronage program and approves payouts based on Compeer’s financial performance. They’re thoughtful about their decision, weighing the impact the payout will have on the organization and the difference it could make for member-owners. Our board members are diligent in their approach to managing Compeer’s finances, and they share a common belief that Compeer’s financial stability should be extended to our clients – particularly in times when instability seems pervasive.

Diversification in our portfolio positively impacted 2018’s total earnings, as strong markets for some segments made up for weaker markets in others. When it came time to approve patronage payments last December, the Board of Directors noted the challenges that have affected member-owners. They opted to increase 2019 patronage payments by more than $42 million. Compeer distributed the year’s first patronage payment in February, and the second payment will be made before the end of summer. In total, our member-owners will collectively receive more than $150 million in patronage in 2019.

No doubt, our patronage program is at the top of the list when it comes to favorite member benefits.

While I can’t argue,I encourage you to also take advantage of the many other valuable services Compeer offers as part of our partnership and to ensure you have all types of support throughout the year.

This issue of Cultivate contains stories about the services that come with your Compeer “membership.”

You’ll meet two young, beginning farmers in Illinois; entrepreneurs in Minnesota who are furthering their goals through a grant from our Fund for Rural America; a mill in Wisconsin that’s raising the bar on safety with funds from our Mission Financing program; and a Compeer board member who regularly looks to his financial officer for insights when implementing new innovations in his operation.

In this issue, you’ll also find information about upcoming educational offerings that focus on becoming more resilient to changing economic conditions as well as a summary to future grant opportunities tailored to the variety of clients we serve.

It’s obvious one of our goals is to be the best partner there is in agriculture. In reality, it’s unattainable because you’ve already got us beat.

Thank you for choosing Compeer Financial. We’re proud to be by your side, working together in agriculture and residing in rural America

Rod Hebrink, President and CEO 4 CULTIVATE • Summer 2019

LOCAL LOOK

At left: The Hugh O’Brian Youth Leadership Program of Illinois Central-South received a $8,000 General Use Grant from the Compeer Financial Fund for Rural America to support support a food packing and hunger banquet event.

More than 140 students in the program volunteered at the Midwest Food Bank, packing meals to benefit more than 39,000 people who face food insecurity.

At right: Team members from the Sun Prairie office donated to the Columbia County Humane Society after an office fundraiser.

Team members donated $300 out of their own pockets, which was matched by Compeer for a total donation of $600 to help with costs after the Humane Society was broken into.

At far right: The Normal office presented a donation of baby supplies and a check to The Baby Fold Healthy Start program. They hosted an in-office competition to see who could raise the most supplies. In total, they collected 6,875 diapers and 203 packages of wipes.

At far left: Team members present a check to the Crawford County Meat Animal Auction to expand the swine and sheep barn as part of the County Fair Grant Program through the Compeer Financial Fund for Rural America.

At left: Team members present a check to the Winnebago County Fair. The funds were used to purchase barn gates and fairground signs, and to restore the entrance archway as part of the County Fair Grant Program.

At right: For the second year, Compeer Financial hosted the #GiveGallons social media campaign during June Dairy Month.

For every photo that was posted using #GiveGallons, we pledged to donate two gallons of milk to food banks across our territory to help close the milk gap. Thanks to all who participated!

Summer 2019 • CULTIVATE 5

BOARD CHAIR MESSAGE

TWO YEARS POST-MERGER:

Reflecting on Compeer Financial ’s progress As our second year of doing business as Compeer Financial officially comes to a close, I took some time to reflect on the progress and changes of the last couple of years. Some days it feels like only yesterday that our boards began conversations around what a merger could look like for our clients. Other times, it feels like we started those discussions a lifetime ago because so much progress has been made.

On behalf of the Compeer Financial Board of Directors and team, I want to thank you all for your understanding and patience as we maneuvered through the merger and integration. Our team worked relentlessly behind the scenes to ensure a smooth process, and I want to recognize them for their dedication. As would be expected, we encountered a few bumps in the road that provided learning opportunities; but overall the integration has been a success and is now complete.

Being in agriculture all my life, I’ve experienced a lot of ups and downs and a whole lot of change. I’m sure many of you are nodding your heads in agreement. With all I’ve experienced, what we’re seeing today might be some of the most volatile times yet. While I was confident in the merger after we completed the due-diligence process and gave our recommendations to member-owners, I’m more certain than ever in the decision we reached together as I see the benefits coming to fruition for our clients and team.

Most importantly, because of the merger, Compeer is well positioned to serve our clients through these challenging times in agriculture. As if markets aren’t enough to manage, now we have legislative challenges like trade and tariff issues to deal with, diseases like African swine fever to keep us up at night, and prevent plant in many areas of our territory that forced farmers to make tough decisions.

Rod Hebrink, Compeer’s President and CEO, calls out the importance of partnership in his column, and he does an excellent job summarizing what it truly means for us at Compeer. What I’ve always loved about the Farm Credit System and representing you on the board is that we’re in a unique position to truly work side by side with our clients through the good times and the challenging times.

And we do it in a variety of ways. We invest in industry specialists to help guide our clients. We strategically diversify our portfolio to weather difficult industry dynamics and maintain a strong balance sheet. We offer a strong patronage program to ensure you’re receiving a return on your investment. To keep agriculture top of mind and invest in our next generation, we give back to local communities, including many of the county and state fairs you’re visiting this summer. I could go on, but these are just a few key ways that come to mind.

It’s been a long time since we talked about it, but the name Compeer actually has significance; Compeer means coming together as equals. Not only did three Farm Credit associations come together for this merger as equals, but we come together with you – our clients – each and every day. As we close out the second year of partnering with you as Compeer, I couldn’t be more pleased with the progress and partnerships that have formed.

I encourage you to learn more about our work since the merger by reviewing the final semiannual merger update on our website: compeer.com.

Over the past two years, we’ve highlighted the steps we’ve taken to realize the advantages and avoid the potential disadvantages that were disclosed prior to the merger. I’m pleased to report all of our advantages have been realized. Thank you for putting your trust in us.

Mark Cade, Board Chair 6 CULTIVATE • Summer 2019

Do you know someone who is

CHANGING THE FACE OF FARMING?

Nominate them for

GROUNDBREAKER of the YEAR

2019

WINNER RECEIVES $5,000 CASH AWARD

Do you know a young, beginning and/or small-operation farmer or rancher who is passionate about what they do and makes a positive impact on their industry and profession? Nominate them for Compeer’s GroundBreaker of the Year. The winner will receive $5,000 cash to help further their goals.

• Nominations accepted now until October 31 • The winner will be announced at the GroundBreakers Conference in January 2020 For more information or to nominate someone, visit:

compeer.com/groundbreakeroftheyear Compeer Financial, ACA is an Equal Credit Opportunity Lender and Equal Opportunity Provider. ©2019 All rights reserved.

Summer 2019 • CULTIVATE 7

Doing it

THEIR WAY

Erickson brothers take pride in being hands-on farmland managers

8 CULTIVATE • Summer 2019

ABOUT THE ERICKSONS

Milan, Ill.

Nick and wife, Kelsey (local high school teacher) Bradley and wife, Sarah (nurse), have two small children Parents are David and Tammy; Grandparents are Wayne and Carol Nick and Bradley farm 1,000 acres corn and soybeans.

Together with David and Wayne, they farm a total of 3,400 acres.

Above: Brothers Nick and Bradley Erickson look forward to seeing what they harvest this fall after a late planting season this spring. Opposite page: From left to right, Nick Erickson, Bradley Erickson and their Compeer Financial Officer Corey Bull are pictured in front of the Ericksons recently expanded grain setup that was completed in early fall of 2018.

Bradley and Nick are also seed dealers for DeKalb Asgrow, which they credit with allowing them to stay connected to other farmers within the community.

MILAN, Ill. – Leaned up against the counter of their machine shop, Nick and Bradley Erickson field questions about the first decade of farming land on their own – finishing each other’s sentences like only brothers and business partners can.

Bradley noted that it was a farm located in the Mississippi River bottom. “The first year we farmed it, we had to do it three times due to historic flooding. It was definitely a learning curve,” Bradley added with a chuckle.

officer, Corey Bull, at Compeer Financial since day one. “We can trust Corey with everything, which is really important to us,” Nick said. “There may be some things we don’t want to tell him, but we trust that he always has our backs.”

Representing the seventh generation of their family to farm, they attribute the support and guidance of the two generations before them to their understanding of the grain industry.

The Erickson brothers have gained more rental opportunities over the years by making connections in their community and proving their value by how they tend to the land they rent.

Bradley added that Corey is more than a lender. “He has been more like a counselor to us as we’ve gotten our start,” he said.

“Our dad and grandpa gave us hands-on experience early on,” Nick said. “It wasn’t just understanding the equipment, but being candid and transparent with the financials of the operation.”

“When someone entrusts us to farm their land, that’s a huge honor,” Nick said.

“We want them to trust we will be good stewards of the land and know when they see a piece of equipment pull into their field, it’s always one of us – we take pride in being hands-on with every piece of land we run.”

“We have always made decisions as a team,” Bradley added. “We’ve helped each other through some stressful times, and being open to each other’s ideas has led Nick and me to become better managers.”

GETTING THEIR FEET WET After graduating high school and earning their college degrees in farm management, Nick and Bradley got their first opportunity to rent land on their own.

“A family friend helped get us started by renting us his farm right out of college,” Nick said.

PROVEN PARTNERSHIPS In recent years, Nick and Bradley have invested in building more grain storage, saying it allows them to be more efficient at harvest time and better handle their grain.

“It’s been a good return on investment,” Bradley said. “We want to make those types of strategic decisions that will help safeguard our future as managers and stewards of the land.”

One key to their success is the strong partnership they’ve built with their financial

“That trust goes both ways,” Corey said. “[Compeer does] things the right way, and being open with each other is a two-way street.”

STAYING ON TRACK When they look to the future, Nick and Bradley want to focus on sustaining a good living for their families, while maintaining what they’ve established and pursuing growth when it makes sense. Their goals are to continue fostering relationships with their landlords, improving the land they run and being a part of the community.

“We also hope to one day take over what our dad and grandpa have built,” Nick said.

Bradley added, “But until then, we will continue to work as a team – supporting each other and counting our blessings that each and every day we get to do what we love alongside family.”

Summer 2019 • CULTIVATE 9

Cultivating

CONNECTIONS

Couple grows their business while connecting to the community

10 CULTIVATE • Summer 2019

Above left: Cindy Hale at the Clover Valley Farms processing facility in Superior, Wis. Above right: The Clover Valley Farms booth at the Duluth Farmers Market is open every Wednesday. Opposite page: Jeff Hall applies labels to the latest batch of rhubarb-mint shrub.

DULUTH, Minn. – Fifteen years ago, Cindy Hale and Jeff Hall began raising chickens part time. With little livestock and farming experience, their venture required research, persistence and a lot of trial and error. They both liked the idea of homegrown eggs and poultry, so with Hall working in special education and having summers off, they figured, why not take the plunge?

To say their operation has grown since then would be an understatement. Running their 10-acre diversified farm just north of Duluth, Minn., has turned into a full-time job for the couple, who have embraced the lifestyle and community that come with farming.

DIVERSIFY AND VALUE-ADD After starting with chickens, Hale and Hall began growing apples, then raising pigs, followed by more fruits. In 2009, they started dabbling in culinary vinegars. They begin by fermenting the fruit they grow into wine. Then they ferment it again using the “mother,” an aceto-bacteria culture that turns the alcohol into acid. Voila! You’ve got vinegar.

After receiving a grant from the U.S. Department of Agriculture and conducting a feasibility study in 2012, Hale and Hall discovered their crazy idea just might work.

And Clover Valley Farms was born.

Today, the couple grows more than 10 different fruits, including apples, rhubarb, currants and juneberries. They also raise a variety of herbs in addition to sheep and rabbits. Their main products are vinegars, shrubs (concentrated syrups that combine fruit, sugar and vinegar for making

sparkling soda, cocktails and more) and herb-infused salts.

“The nature of our operation is that we’re essentially running four businesses in one,” Hall said. “We’re growing the fruits and herbs, creating a value-added product, packaging, and direct marketing to customers at farmers markets and events across the region.”

While juggling the many facets of their business can be a challenge, the couple is passionate about an ecological approach to farming.

“We both just love the process,” Hale said.

“Our focus is on being students of the ecological systems we work with – those complex communities of organisms: wild, natural and modified. You really have to understand that to make it work. We find it really intellectually rewarding.”

CONNECT AND GROW As immersed as they are in the ecology and science behind their operation, community is at the heart of Clover Valley Farms. It’s really all about people.

“We’re fortunate to have a network of other farmers to collaborate with and the consumers in the area who really appreciate what we do, how we do it, why we do it,” Hale said. “Support and positive feedback make us feel like we’re doing something good – not only for us – but for our community.”

As a way to pay it forward, Hale and Hall work with multiple organizations to provide dollar matching to Electronic

Benefits Transfer-eligible shoppers and children who visit the Duluth Farmers Market. They also provide educational opportunities. On a recent Wednesday, Hale and their daughter May led a session where farmers market shoppers created their own container gardens.

“Community outreach is such an important part of the farm market,” Hale noted.

“Without the community aspect, you’re just another store selling vegetables. We’re committed to making a difference to those around us.”

FARMERS MARKET WEEK August 4-10 is National Farmers Market Week. This year, the Compeer Financial Fund for Rural America offered Farmer Market Grants for the first time to vendors and markets. Clover Valley Farms was among the vendor recipients and plans to use the funding to update signage and purchase a canopy for their booth.

Farmers Market Facts • The number of U.S. farmers markets has grown by more than 2,200 in the past 20 years.

• Locally owned retailers, like farmers markets, return more than three times as much to the local economy than chain stores do.

• Growers who sell locally create 13 fulltime jobs per $1 million earned.

• Farmers market shoppers have 15 to 20 social interactions per visit versus 1 to 2 per visit to a grocery store.

Source: Farmers Market Coalition Summer 2019 • CULTIVATE 11

Moving

FORWARD Didion Milling and Compeer Financial partner to build innovative dry corn milling facility

12 CULTIVATE • Summer 2019

CAMBRIA, Wis. – Nestled amid the winding roads of rural Wisconsin is one of the most technologically advanced dry corn milling facilities in the world: Didion Milling. The state-of-the-art facility that exists today is even more aweinspiring considering the hurdles the organization overcame.

After tragedy struck the corn processing and ethanol facility in May 2017, leaving the corn mill inoperable, the leadership team at Didion had every reason to close its doors.

“Seven out of eight companies that go through what we went through don’t come out of this,” said Luke Burmeister, chief financial officer at Didion Milling, which began operating in the early 1990s.

But Didion’s leadership team didn’t consider giving up. Instead, the team convened shortly after the incident and decided they were going to lead with their hearts and carry on. Their goal was to think 10 steps ahead and consider the employees, the community and the farmers who live, work and do business with the mill. The leadership team’s tenacity, along with its selection of supportive business partners, got the company through one of the toughest business problems any organization could face.

BUILDING A PARTNERSHIP The relationship between Didion and Compeer Financial started in 2006 when Didion was looking to expand its offerings. Didion wanted to construct an ethanol facility to more efficiently utilize the co-products from the milling process.

With decades of expertise in financing agribusinesses like Didion, Compeer Financial was a natural fit as a financial partner and adviser. When the bid for the new ethanol facility opened in 2006, the two companies got to know each other, and Compeer Financial financed the construction and eventually the business’s operating needs. Through this initial business partnership, the two companies saw the same values in each other.

At left: Compeer Financial Food and Agribusiness Director Jason Johnson speaks with the Didion Milling management team during a recent visit to the newly constructed dry corn milling facility.

Summer 2019 • CULTIVATE 13

At right: The Didion Milling facility in Cambria is nestled amidst the Wisconsin countryside, about 45 minutes north of Madison.

At far right: The Didion Milling team conducts a safety inspection. Their new facility is the safest and most automated facility of its kind today.

“We built up a lot of trust,” said Jason Johnson, food and agribusiness director for Compeer Financial. “It was clear to me that the Didion folks were always transparent with who they were and what their end goals were.”

Compeer Financial and Didion were able to serve as excellent resources for each other as the ethanol facility was built and became operational.

“Compeer is able to provide information to us on how we can improve, because they work with numerous agribusinesses, including a number of ethanol plants,” Burmeister said. “We like to ask our partners how we can get better in all facets of our business.”

Johnson noted that both organizations are focused on solutions and working together toward the end goal. “The bottom line is we have a high level of trust and confidence in the Didion team,” he said.

“This relationship helped lay the groundwork for success when times got tough,” Johnson said.

REBUILDING A FACILITY — AND A COMMUNITY After the May 2017 incident decimated the mill, Didion faced an uphill battle that would require not only funding to rebuild but also a hefty dose of trust and collaboration.

Didion took this moment to refocus the company’s vision, realizing its goals were more important than ever.

“We immediately started talking about who we would need to collaborate with to rebuild in order to take care of our employees and the community,” Burmeister said. “In today’s world of compliance, it has become harder for banks to lend based on off-balance sheet items like character and leadership, but thankfully Compeer Financial stepped up to the plate.”

The power of this collaboration isn’t lost on second-generation owner and President Riley Didion.

“Compeer Financial trusted our vision. Essentially, they were betting on our word – that we were who we said we were.”

Riley Didion, Didion Milling

14 CULTIVATE • Summer 2019

“Compeer Financial trusted our vision and our relationships with our customers,” Didion said. “Essentially, they were betting on our word — that we were who we said we were.”

The trust was mutual for Compeer Financial.

“In our business, the financials matter, but we’re really taking mitigated risks on the management teams of these agribusinesses,” Johnson said. “We have to trust their vision, foresight and execution of their business plan.”

It wasn’t all about cash flow and collateral.

The Compeer Financial team reviewing the proposal remembered how Didion was able to work through challenges during its ethanol build and startup in the middle of the “great recession.” That character and collaboration helped seal the deal.

TODAY AND BEYOND The vision for the new facility was founded on futuristic thinking and centered on the people who work there. The state of the art mill has been operating since March of 2019 with more focus than ever on safety, automation and doing business the right way.

“Our differentiator is our people,” Burmeister said. “We care about culture, safety and providing the best customer care possible as a team.”

This differentiation and focus on people — for their customers, employees and farmer vendors — make Didion Milling a highperforming workplace.

“I’m very proud of what Didion aspires to be — great culture, great people and an incessant focus on improving processes to help feed the world,” Didion said.

Above: Didion Milling President Riley Didion and Jason Johnson share a handshake. Their relationship has been built on trust and equal partnership.

Summer 2019 • CULTIVATE 15

DIRECTOR PROFILE

Improving

FOR THE FUTURE Making things better through innovation for the next generation

16 CULTIVATE • Summer 2019

ROSENDALE, Wis. – When farming is a major part of your family history, cultivating a legacy is just as important as raising livestock or crops. For Dan Zimmerman, that means passing the farm down in even better condition than when he took over in an effort to give the next generation a successful start.

Zimmerman and his brother took over the family’s 2,700-acre soybean, corn and winter wheat farm after their father passed away 37 years ago. Their dad was a hard worker who made many improvements on the farm, even when times were tough.

It’s a legacy Zimmerman is working to continue, in more than just farming.

Like many farmers, Zimmerman, who serves on Compeer Financial’s Board of Directors, has weathered all kinds of challenges during his decades in the fields – most recently with historic spring planting delays, concerns about local impacts of global trade and challenging commodity prices. But he says hard work, perseverance and an intense dedication to his farm and its future will help overcome such difficulties.

“My dad always said if you work hard, you can enjoy the fruits of that labor – but you have to work hard first,” Zimmerman said.

“If you have a true faith in something, I believe you will persevere. It’s not easy.

There will be a lot of sacrifices and it takes dedication and hard work, but it’s worth it.”

Zimmerman’s farming roots in the Rosendale area date back to 1850. Today, he and his brother are one of three generations working on the farm – their 87-year-old mother assists with the books and a nephew also joined the operation.

The family has adapted and innovated over the years – improving farming processes, embracing technology, creating efficiencies – each generation making it better for the next.

“We’re always experimenting and regularly trying something new,” Zimmerman added.

“About 15 years ago we tested strip tilling, a conservation practice we’ve adopted because we can do almost twice as much with a smaller tractor, which saves fuel and a lot of time. And we’ve found we have less erosion, which means less damage to the land.”

During the past 35 years, Compeer Financial has supported Zimmerman and the innovations and advancements the family has made on the farm. Their financial officer, John Goode, has seen the family through many new concepts and enhancements over the years.

“When we say we want to do something, John is on board and finds ways to support us,” Zimmerman noted. “We have a great partnership. He’ll even meet us right in the field to get everything done. It’s really what makes Compeer stand out.”

DAN ZIMMERMAN

Rosendale, Wis.

• Family includes wife Kelli, four grown daughters and three grown stepchildren • Grain farmer who operates 2,700 acres with his brother • Elected to the board in 2015 • Serves on Compeer Financial’s Board Enterprise Risk and Corporate Giving committees

Making things better for the next generation goes beyond the farm fields for Zimmerman. He’s committed to making a difference in the community as well, having served on both his church council and local school board. And the Zimmerman family set up a scholarship fund in honor of their father, providing financial resources to local FFA students heading to college.

Zimmerman is further shaping the future of agriculture by serving on Compeer Financial’s Board of Directors, guiding the organization as it works to champion the hopes and dreams of rural America and serve its member-owners.

“If you think about it, we’re just borrowing this land for the short time that we’re on this earth,” he said. “It’s of great importance to me and our family to leave the land and the farm better than we got it.

Above: Zimmerman’s farm has a federal elevator license. He buys grain from local farmers or stores and dries it for them. Opposite page: After wet weather delayed planting, Zimmerman checks over equipment in anticipation of dryer conditions and getting back in the field.

“It should be a goal of every farmer to appreciate the natural resources we have, to invest in our communities and to leave everything we touch better than we found it,” Zimmerman said.

Summer 2019 • CULTIVATE 17

IDENTIFY OPPORTUNITIES: Calculating Cost

By Matt Lange, Compeer Financial Dairy Specialist

of Production

(This is an excerpt from an article originally published in Progressive Dairyman.)

Cost of production (COP) is one of the most important metrics in evaluating a dairy operation’s financial status. It determines whether your operating margin is positive or negative.

When discussing COP, people typically refer to cash flow and include purchased feed, labor, principal and interest payments, and any cash capital purchases. While cash flow is important, this approach fails to consider the value created in forage production or heifer rearing and doesn’t include any unpaid bills on your accounts payables list or depreciation on assets. To get a clearer picture, COP should be viewed from an accrual standpoint.

FEED COSTS Feed costs per cwt = (forage feed cost + grains + supplements) per cwt.

The largest cost for any dairy is feed, including purchased and homeraised feeds. Placing a market value on forages, including haylage, corn silage and grain, will help determine total feed cost. For Midwest dairy producers, Compeer Dairy Consulting uses these values for 2018: • Corn silage – $34.40 per ton at 35 percent dry matter (DM); • Haylage – $66.80 per ton at 40 percent DM; and • Corn – $3.30 per bushel.

LABOR COSTS Labor costs per cwt = (hired labor expense + owners’ draws) per cwt.

Labor costs include wages, payroll taxes, workers’ compensation and benefits paid to employees; as well as salaries and benefits paid to owners (including wages shown as draws). In the Compeer Dairy Consulting benchmark, 2018 total labor cost averaged about $3.21 per cwt. Some operations in the top 25 percent for net income were below $2.80 per cwt on an energy-corrected basis.

NET HERD REPLACEMENT COST Net herd replacement cost (NHRC) per cwt = [(total number of cull cows + dead cows) x $1,700 – cull cow income] per cwt.

fixed as operating losses become termed out over five to seven years in most cases.

OTHER PRODUCTION AND OVERHEAD COSTS Other production costs are dairy related expenses covering animal health, bedding, breeding, and supplies. Overhead expenses like administrative, fuel, insurance, marketing, repairs and utilities are added together as well as any individual farm specific custom expenses, seed, chemicals, and fertilizers. Generally, other production comprises $2 to $2.20 per cwt. in cost while “overhead” generally is in the range of $5.75 to $6.75 per cwt.

FINAL PHASE In the final phase of calculating COP, it’s important to deduct all other revenue not related to milk and cull cow income. The two major sources of accrual earnings are: • Crop production – The value of all crops grown in the calendar year, not necessarily what was sold. Crop revenues may be in the range of $3 to $3.50 per cwt, but it depends on the operation.

• Heifer appreciation – The increased value of heifers as they age. It’s important to show increased value to offset the heifer raising cost invested for the same time period. Generally, this is approximately $64 per month per heifer. So in a given 12-month cycle, one heifer will increase in value by $768, recorded as earnings.

A lot goes into accurately calculating your COP and, while operational expenses will vary from farm to farm, driving down COP is the most long-term, sustainable method to achieve dairy financial success. As you complete your financials, take time with your lender, a consultant or adviser to help calculate your COP and assess where you stand and – more importantly – where opportunities lie to improve the bottom line.

EXAMPLE MIDWEST DAIRY HERD

NHRC is the number of animals leaving your herd (cull, dairy sale or death) multiplied by their balance sheet value (typically $1,700 per head, less any cull cow revenue). The 2018 Compeer average was $1.40 per cwt; herds in the top 25 percent averaged $1.34 per cwt on an energycorrected basis.

Milk shipped per day:

72,000 lbs (720 cwt)

CAPITAL COSTS Capital costs are composed of depreciation, interest and leases. They have risen nearly 40 cents per cwt for the average dairy over the last three years, predominantly due to increases in interest expense. This is due to a shortage of liquidity, leading to increased borrowing to finance operating expenses and compounded with increasing interest rates. Additionally, this expense has become quasi18 CULTIVATE • Summer 2019

Herd Size:

1,000

Heifers:

800

Milking:

880

Worksheet 1: This worksheet provides a more detailed look at COP calculations using an example herd and includes a blank column to calculate your COP. Total Pounds Energy-Corrected Milk** Shipped in Year:

Farm Name:

Line

How to Calculate

Supplements

Total purchased feed including payables

B

Grains

Total inventoried dry corn x $3.30/bu. @ 85% dm equivalent

$149,796

C

Forages

2017 haylage @ 40% DM = $46.50/ton 2018 haylage @ 40% DM = $66.80/ton 2017 & 2018 corn silage @ 35% DM = $34.40/ton

$614,952

D

Feed Total

(Take lines A + B + C) / cwt shipped

E

Hired Labor

Wages, workers’ compensation insurance, state and federal taxes, other benefits

$735,840

F

Owner Draws & Family Living Expense

Draws, benefits, insurance, etc.

$105,120

G

Labor Total

(Take lines E + F)/ cwt shipped

H

Herd Replacement Expense

(Culls + deads) x $1,700

$569,500

I

Cull Cow Income

Enter cull cow income

$195,750

J

Net Herd Replacement Cost Total

(Take line H – line I) / cwt shipped

K

Depreciation (Machinery)

Take machinery value on balance sheet x 12%

$210,000

A

Your Herd's Values

Example Herd* Based on 262,800 cwt of milk shipped in year

Item

$1,445,400

$8.41

$3.20

$1.42

L

Depreciation (Buildings)

Take buildings value on balance sheet x 5%

$187,500

M

Interest Expense

Total interest expense for year

$325,000

N

Leases

Total equipment lease payments for year

O

Capital Costs Total

(Take lines K + L + M + N) / cwt shipped

P

Animal Health, Bedding, Breeding, Supplies

Add all dairy supporting expenses

Q

Other Production Total

Take line P / cwt shipped

R

Administration, fuel, insurance, marketing, repairs, utilities

Add all farm-related expenses

S

Seed, Chemical, Fertilizer, Land Rent

Add all agronomy-related expenses

T

Overhead Total

(Take line R + S) / cwt shipped

U

Crop Production

2018 dry corn x $3.30/bu. @ 85% dm equivalent 2018 corn silage @ 35% DM = $34.40/ton 2018 haylage @ 40% DM = $66.80/ton

$880,380

V

Heifer Appreciation

$64 x (Total heifers - loss of heifers) x 12 months in inventory for a herd with stead state heifer inventory

$552,960

W

Other Non-dairy Income

All other non-dairy income including patronage, government receipts, custom work income, rental income and interest income

$302,220

X

Less Other Income

(Take line U + V + W ) / cwt shipped

Y

Whole Farm Cost of Production

(Add lines D, G, J, O, Q & T), then subtract line X

Compeer Financial, ACA is an Equal Credit Opportunity Lender and Equal Opportunity Provider. ©2019 All rights reserved.

$0 $2.75 $525,000 $2.00 $328,500 $1,314,000 $6.25

$6.60

$17.43

** Energy-Corrected Milk = (Total lbs x 0.327)+(Fat lbs x 12.95)+(Protein lbs x 7.2) Summer 2019 • CULTIVATE 19

HELPING BUILD THE FUTURE At Compeer Financial, it’s important to us to have a solid process to ensure we hire the most qualified interns who have the potential to become full-time team members. By creating a talent pool of young professionals fully prepared to help us achieve our mission to enrich agriculture and rural America, we are better positioned to meet the needs of the business and our clients well into the future.

SUMMER AND SCHOOL-YEAR INTERNSHIPS Throughout the entire year, we have over 50 interns employed with us, selected from over 500 applicants. Some work part time during the school year, and this summer we have 36 full-time interns employed with Compeer across 12 office locations in Illinois, Minnesota and Wisconsin. Our 2019 interns represent 25 colleges and universities.

Compeer’s Internship Program gives interns opportunities to contribute to our success, while also developing skills for their future endeavors. Through this program, students have the opportunity to network and learn about the entire organization and gain transferable skills for their professional career. Most importantly, interns can have a direct impact on enriching the future of agriculture and rural America.

FINANCIAL ASSOCIATE PROGRAM Our interns often become the future of Compeer Financial, which is very apparent through our Financial Associate Program. Over the last two years we have hired 24 entry-level financial associates, of which 16 of those hires were former interns.

High-quality talent is hard to come by. The Financial Associate Program establishes a foundation for the organization to build our

“Through my internship experience, I learned just how many different things Compeer Financial does; we do more than just lend to farmers. We serve rural America in many ways that make a difference.

This has remained true throughout my eight years with Compeer since completing my internship.”

20 CULTIVATE • Summer 2019

During College and Beyond talent for the future of Compeer from the ground up. This entry-level program is open to recent college grads as well as those who may have more limited work experience.

The 12- to 18-month entry-level program prepares the new team member for a position as a Financial Officer, Insurance Officer, Credit Officer or Certified Appraiser. When turnover occurs, often through retirements the Financial Associate Program provides a smooth transition, as the financial associates are ready to step into the position and hit the ground running to meet the needs of our clients.

UNIVERSITY CAREER FAIRS Compeer Financial representatives will be at the following university career fairs during the fall of 2019: Illinois State University – Agriculture – Normal Minnesota State University – Mankato South Dakota State University – CAFES – Brookings University of Illinois – ACES + LAS Career Fair University of Minnesota – CFANS – Twin Cities University of Wisconsin – River Falls University of Wisconsin – Madison University of Wisconsin – Platteville University of Wisconsin – Accounting – Whitewater For more information on internships or the Financial Associate Program, please visit compeer.com/CollegeRelations.

“The values definitely haven’t changed from when I was an intern to now — we continue to champion the culture of rural America and you can really feel it when we’re working with the different farmers and businesses that Compeer supports. One of the most impactful things I do on a regular basis is work with the financials of hospitals and nursing homes in rural areas. It’s great to see the impact these institutions have on the health of rural communities and know that Compeer is able to support them.”

Amy Schroepfer

Ben Larson

Sr. Market Insights Analyst 2008-2009 Marketing Intern 8 years of service

Associate Credit Officer 2016 Crop Insurance Intern 1 year of service

“Through my internship and career journey at Compeer Financial, I’ve recognized the incredible work ethic of those in rural America. It’s amazing how innovative our clients are; they trust themselves and the land they care for, while always finding a way to make things work. My father is a Compeer client, and, as a kid, I had the chance to meet his loan officer. That experience helped me realize I wanted to work for Compeer and help people like me, my dad and others who call rural America home.”

“Although I started as a loan accounting intern, I was able to gain experiences throughout the finance department. Interns add real value because they help the organization find strong team members early in their careers. Because of the cyclical nature of the work, interns help pick up the extra workload during the busy times. It’s a win-win for the student and Compeer Financial. The student gains real-life work experience and the Compeer team gains a balanced workload and an opportunity to acquire a full-time team member.”

Cameron Rowe

Brittanie Koch

Financial Officer 2016 Crop Insurance Intern 1 year of service

Reporting Analyst 2006-2007 Loan Accounting Intern 10 years of service

Emerging Markets

TECHNOLOGY GRANT Compeer Financial® is offering grants up to $500 for: • Technology purchases related to your farm operation • Registration fees for farm-related conferences or workshops • Technical assistance ELIGIBILITY

• Must be a Compeer Financial EMERGING MARKETS client • Must reside within Compeer Financial’s 144-county territory • Must not have previously received a Beginning with Compeer Financial grant or a Beginning with Badgerland grant • Must provide proof of purchase for an eligible expense

FOR MORE DETAILS & TO APPLY ONLINE: compeer.com/TechGrant

Sign up for our Emerging Markets e-newsletter!

Get expert, timely information direct to your inbox.

Visit compeer.com/Emerging to sign up today!

Summer 2019 • CULTIVATE 21

NEWS & ANNOUNCEMENTS

SAVE THE DATE FOR THESE UPCOMING EVENTS GrainVantage Meetings 2019 Gain insights into marketplace projections, global issues for the year ahead and Compeer Financial’s top priorities. You will also learn strategies to manage risk during times of volatility and uncertainty. Mark your calendar for one of our seven location offerings.

Additional details to come!

BOARD OF DIRECTOR ELECTION BALLOTS DUE OCTOBER 3 The Compeer Financial Board of Directors election is quickly approaching. Here are a few things to keep in mind: •

•

Ballots are anticipated to hit mailboxes early-September.

Visit us at Compeer.com/ Elections to learn more about the candidates.

•

For each eligible ballot cast in the 2019 Compeer Financial Board of Director Elections, the Compeer Financial Fund for Rural America will make a $5 donation to AgrAbility.

The organization’s mission is to enhance quality of life for farmers, ranchers, and other agricultural workers with disabilities, so that they, their families, and their communities continue to succeed in rural America.

•

Up to $10,000 per state will be donated for a total donation of up to $30,000.

•

Ballots must be received by October 3.

22 CULTIVATE • Summer 2019

• • • • • • •

December 2 – Eau Claire, Wis. December 3 – Rochester, Minn.

December 5 – Worthington, Minn.

December 6 – Mankato, Minn.

December 9 – Madison, Wis. December 10 – Utica, Ill. December 11 – Macomb, Ill.

Resilient Farms Conference 2019 (Partnering with UW-Extension)

This one-day conference is aimed to provide inspiration and concrete decision-making tips and resources for farmers who know they need to add revenue streams but aren’t sure where or how to begin evaluating ideas.

• • •

December 12 – Wisconsin Dells, Wis. Option to attend virtually at select Compeer office locations will also be available.

More details to follow.

UPCOMING GRANT DEADLINES EMERGENCY

RESPONSE

Emergency Response Equipment Grant Application Period: August 1-31 Compeer Financial’s Emergency Response Equipment Grant Program supports rural communities in our service area by funding emergency response equipment for volunteer fire, rescue and ambulance departments.

Farmers Market – Organization Grant

HOLIDAY HOURS Compeer Financial offices will be CLOSED in celebration of the upcoming holiday:

Labor Day (September 2)

Application Period: October 1-November 15 Compeer Financial’s Farmers Market – Organization Grant helps organizations enhance services to consumers and vendors, benefiting all those utilizing the market.

Farmers Market – Vendor Grant Application Period: October 1-November 15 Compeer Financial’s Farmers Market – Vendor Grant supports farmers with marketing or technology advancements, including branding development, website creation or mobile payment technology products or fees. Applicants must be a client of Compeer Financial.

SIGN UP FOR E-NEWSLETTERS Interested in receiving the latest updates and insights from our industry experts?

Sign up for our e-Newsletters and have them sent right to your inbox.

Visit Compeer.com to enroll.

Our place is RIGHT HERE

PROVIDING HOME MORTGAGE EXPERTISE. At Compeer Financial , we live and work in the same rural communities and small towns you do. We’re your friends, neighbors and fellow volunteers. Although our cooperative has grown, we’re still your local home mortgage financial partner, ready to help you achieve your goals. ®

Because serving rural America is where we belong.

#CHAMPIONRURAL

Visit us at compeer.com/homefinancing or call (844) 426-6733 to learn more.

Compeer Financial, ACA is an Equal Credit Opportunity Lender and Equal Opportunity Provider. NMLS #619731 ©2019 All rights reserved.

Summer 2019 • CULTIVATE 23

2600 Jenny Wren Trail PO Box 810 Sun Prairie, WI 53590

Your loan.

YOUR WAY. As a farmer, many variables impact your bottom line. Add stability and flexibilty to your balance sheet with Compeer Financial®. Together, we can tailor financing to fit your needs, manage your interest rate risk and position your business for long-term success.

LONG-TERM, FIXED RATES PROVIDE STABILITY • Lock in rates for up to 30 years • Set payments every month or year SPLIT-RATE LOAN FEATURE ADDS FLEXIBILITY • Choose a portion of your loan to have a variable rate and the remaining on a fixed rate

Download a free balance sheet and learn how flexible financing can impact your bottom line!

COMPEER.COM/FLEXIBLEFINANCING

(844) 426-6733 | #CHAMPIONRURAL

Compeer Financial, ACA is an Equal Credit Opportunity Lender and Equal Opportunity Provider. ©2019 All rights reserved.