spotlight SUMMER 2019
Expanding Markets for Imperial Valley Farmers PAGE 6
Views from the Road:
Shifting Agricultural Management Strategies PAG E 12
Equipment Financing 101 PAG E 14
Mission Statement Farm Credit West will ensure the customer comes first by providing superior service at competitive rates, in a timely, professional, and ethical manner, and by delivering a meaningful return on equity through our patronage program.
Board of Directors Update and 2019 Director and Nominating Committee Elections
Feature Story: Expanding Markets for Imperial Valley Farmers
One of the West’s leading agricultural lenders, Farm Credit West and its wholly owned subsidiaries are cooperatively-owned lending institutions providing financial services to farmers, ranchers, and agribusinesses. Our offices are located in Arizona and California’s Central Coast, Imperial Valley, South San Joaquin Valley, and Sacramento Valley.
2019 Holiday Schedule
Board of Directors
Chair of the Board Sureena B. Thiara. . . . . . . . . . . . . . . . Yuba City, CA
12 Dr. Kohl’s Corner:
Views from the Road: Shifting Agricultural Management Strategies
Who We Are
Vice Chair of the Board Douglas C. Filipponi. . . . . . . . . . . . . . . Creston, CA Joey Airoso. . . . . . . . . . . . . . . . . . . . . . . . . Pixley, CA Robert Amarel, Jr. . . . . . . . . . . . . . . . Yuba City, CA
Digital Strategy: AgWorx
From the Farmer’s Kitchen: Gilda's Smothered Burritos
Mark A. Cook. . . . . . . . . . . . . . . . . . . . . . Willcox, AZ
Candid Conversations: Equipment Financing 101
Craig C. Gnos. . . . . . . . . . . . . . . . . . . . . . . Davis, CA
Teresa Castanias. . . . . . . . . . . . . . . . . . . . Dixon, CA
Catherine Fanucchi . . . . . . . . . . . . Bakersfield, CA
Robert N. Hansen. . . . . . . . . . . . . . . . . Hanford, CA
Tech Watch: Wire Transfer Scams are on the Rise — Protect Your Business Now
Tom Ikeda. . . . . . . . . . . . . . . . . . Arroyo Grande, CA Colin Mellon . . . . . . . . . . . . . . . . . . . . . . . Yuma, AZ
T erritory and Office Locations
Blake Harlan . . . . . . . . . . . . . . . . . . . Woodland, CA
Mark Osterkamp. . . . . . . . . . . . . . . . . . Brawley, CA Barry Powell. . . . . . . . . . . . . . . . . . . Sacramento, CA Brian Talley . . . . . . . . . . . . . . . . Arroyo Grande, CA
Spotlight is produced for the customers, employees and friends of Farm Credit West. Comments and story ideas can be submitted by email to the Marketing Department at email@example.com.
PRESIDENT’S MESSAGE Mark Littlefield, CEO
Providing Sustained Value into the Future Farm Credit West began 2019 in a very strong position, celebrating two important milestones. In February, we were proud to distribute a historic 1% cash patronage to our member-owners for average eligible loan balances held in 2018. The record $115.7 million in patronage represents a 25 basis point increase over the prior year. Furthermore, just a few weeks later, we announced that our three year merger with Farm Credit Services Southwest had been completed. Your Association’s commitment to build and deliver sustained value to you — our customers — remains stronger than ever. We continue to provide products and services at highly competitive rates, in a way that exceeds your expectations and we continue to provide a meaningful return on equity through our patronage program.
we returned a record amount to our memberowners, totaling 1% of their average eligible loan balances for the year. The 2018 cash patronage returned represents 47% of our 2018 net income. Competitive Rates Your Association is actively examining how we source debt and how we position our equity to pass even more competitive pricing on to you, our customers. In our current structure, we are limited in how we price loans as interest rates are dependent on the cost to obtain debt on a loan-by-loan basis through our district bank. Your management team and Board are actively engaged in conversations with our district bank to identify areas for cost savings, which will ultimately enhance our ability to continue to provide you with increasingly competitive interest rates.
While our value proposition hasn’t changed in recent years, our approach to achieve these objectives has evolved with the shifting environment. Your Association’s ability to innovate and maneuver ever present challenges is reflective in a record year of earnings in 2018. To understand how our approach has evolved, let’s explore each component more fully.
Superior Service Over the last several years, your Association has made significant investments in technology. These investments advance an already great credit delivery process by focusing on ease of use for both staff and customers. By leveraging technology, we are ensuring that staff time is invested in what really matters: working as your relationship lender rather than spending time on paperwork and other administrative tasks that could be automated.
Patronage Since 2002, Farm Credit West has offered annual cash dividends to our member-owners through an active patronage program. While the initial rate of return was just 25%, we are pleased to have steadily increased this rate over the past 18 years. In 2018,
Your Association is constantly improving so that we can continue to provide you with sustained value. We believe better customer service through organizational innovation and change is the way of the future. We look forward to serving you not only today, but far into the future.
Financial Highlights Farm Credit West reported net income of $67 million for the first three months of 2019. These year-to-date earnings are ahead of our business plan target for the first quarter. Also, during the first three months of 2019 our average earning assets and capital levels increased and we strengthened our allowance for loan losses.
AVERAGE EARNING ASSETS* (in millions)
MEMBERS’ EQUITY AS A % OF TOTAL ASSETS
Average earning assets increased $255 million, or 2.7%, during the first three months of the year. FCW is experiencing modest levels of loan growth in 2019; this level of loan growth is expected to continue through the remainder of the year. At the end of the first quarter, average earning assets exceeded the first-quarter business plan target by $161 million. NONEARNING ASSETS (in millions)
Nonearning assets (nonaccrual loans plus other property owned) decreased by $9.9 million or 8.8% to $103 million at March 31, 2019. The decrease was due to a reduction in nonaccrual loan volume as a result of $10.5 million in net repayments partially offset by transfers to nonaccrual of $0.6 million during the first quarter. The other property owned balance remained unchanged from the prior year end.
Our allowance for loan losses totaled $64 million (0.64% of loan principal and interest) at March 31, 2019, compared with 0.61% of loan principal and interest at December 31, 2018. The allowance is our best estimate of the amount of probable losses existing in our loan portfolio as of each balance sheet date. We determine the allowance based on a regular assessment of the loan portfolio, which generally considers recent historic charge-off experience, collateral evaluations and adjustments for other relevant economic factors.
*Average earning assets amount for 2017 was adjusted to exclude nonaccrual loan volume for comparison to subsequent years.
ALLOWANCE FOR LOAN LOSSES AS A % OF LOANS
In the first nine months of 2019, total members’ equity increased $65 million, primarily due to net income of $67 million. Partially offsetting net income during the three months were preferred stock dividends of $2 million.
Board of Directors Update Congratulations to Sureena Thiara and Douglas Filipponi, who were recently appointed to Chair and Vice Chair of the Farm Credit West Board of Directors. Thank you to Joey Airoso (2016 – 2019) for his service as chairman of the board. Sureena Thiara
2019 Director and Nominating Committee Elections Donʼt Forget to Vote
The strength and long-term success of Farm Credit West depends on continued sound leadership, vision, and direction by the Farm Credit West Board of Directors. This is possible only with a Board composed of industry and community leaders who are committed to the long-term success of agriculture and Farm Credit West.
BOARD OF DIRECTOR CANDIDATES POSITION 1 Sacramento Valley Region
The election package for Board and 2019 Nominating Committee candidates were mailed in late May to all eligible voting stockholders. Complete biographical information for the Board of Directors Candidates will be included in the election package.
Nominating Committee Candidates
The Nominating Committee plays an integral part of the success of the Farm Credit West Board of Directors. This group of customers is elected by voting stockholders to serve a term of one year. Their responsibilities include screening, interviewing and selecting director candidates to appear on the ballot in each director election. Eligibility to serve on a nominating committee is limited to voting stockholders, who are not directors, director candidates, officers, employees or agents of the Association.
2019 CANDIDATES FOR THE FARM CREDIT WEST 2019 – 2 020 NOMINATING COMMITTEE Coastal Region Ron Denner
Sacramento Valley Region
Bryan Barrios Paul Squires Southern San Joaquin Region Louis Pandol Julien Parsons Southwest Region Mike Blohm
Michael Dias Paul Greidanus
Mark McBroom Kim Grizzle
POSITION 2 Coastal Region
Steven (Steve) Hollister Arroyo Grande, CA
Blake Garnett Vann
Arroyo Grande, CA
DIRECTOR CANDIDATE VIDEOS Learn more about the 2019 Board of Director candidates. After ballots are mailed in late May, videos statements from each candidate will be posted on our website at:
F E AT U R E S T O RY
Expanding Markets for Imperial Valley Farmers By John Frith
Southern California’s Imperial Valley has been a major farming region since canals first brought water from the Colorado River more than 100 years ago to transform a barren desert — the area gets about 3 inches of rain a year — into a year-round garden that supplies the nation with the bulk of its winter vegetables. Today, more than 450,000 acres of fertile soil are actively farmed, with production totaling nearly $2.1 billion, according to a report last year produced for the Southern California Association of Governments. Besides vegetables, leading crops have traditionally included cattle, hay, grass seed, and wheat. Like farmers everywhere, growers in the Imperial Valley need to sell their products profitably.
But in a global market, how can an individual farmer find the best prices? That’s why El Toro Export was founded nearly 40 years ago, said company President and CEO William “Bill” Plourd.
the Imperial Valley. Originally focusing on grain, the company now has proprietary production and trading operations dealing in hay, grain, seed, cattle, compost and transportation. Today, the company has about 135 employees in Southern California and exports to countries including China, Japan, United Arab Emirates, South Korea, Taiwan, and Vietnam. But while the basic concept is simple, the operational details are anything but. “We seek out the best market for those crops, we bring them back to the farmer and we give them the best competitive value we can. Then in turn we take these commodities, process them in some fashion, and move them into different export and domestic markets,” Plourd said.
“Farmers are producing dozens of different crops on their fields here in the Imperial Valley and they need to find markets for those crops,” Plourd said. “Companies like us, our primary function is to bring the highest value we can by seeking out what the best market would be for those different crops and bringing those values competitively to Imperial Valley farmers.”
Hay is one of the largest commodities El Toro deals in and is a good example of what’s involved.
From a small beginning — two members of the ownership team and one support staff person — El Toro has slowly grown over the years to become a leading commodity trading group in
“It starts early with establishing long-term relations with the growers,” he said. “We compete for their business every day, trying to buy hay in the spring and summer months. Once we buy that hay, it’s up to us now to manage that and eventually
The process begins early as El Toro’s staff regularly meets with area growers to evaluate the quality of the crop and give them their idea of what the market value will be.
William “Bill” Plourd
get it sold into our customer base, most of which is in Asia.” “There’s a quality control aspect to it because we require traceability in everything we do,” he continued. “When a customer orders hay it will come from our storage yard, run through our quality assurance program to make sure we’re lining up the right type and quality of hay that the customer ordered, brought into the production facility where we recompress it to give it higher density, loaded into ocean-going containers, and eventually ship those containers to the U.S. ports and then on to Asian ports.” Along the way, employees are empowered to correct problems they encounter, such as pulling out a bad bale at any point in the process to make sure it doesn’t go any further. And relationships with buyers are as important as they are with sellers. Most Asian customers order 100 metric tons at a time and he said El Toro officials “spend a lot of face time” with their buyers. In fact, Plourd was interviewed from Seoul, South Korea, where he was on an extended trip to meet with buyers.
They understand what we do and the quality we put into our products. It’s our reputation and our system they have confidence in. But managing a year-round export business also requires risk management. El Toro’s vertical integration and diversified product base helps the company manage risk, but the company also has systems in place to further manage risk. “We handle a lot of commodities, so we have a natural bit of risk management built in because we’re not dependent on a single commodity or market center,” Plourd said. “Especially when it comes to cattle,
we have felt in order to grow we need to use risk management tools. A bad year or two could be very difficult to manage.” Plourd, who began in 1985 as one of the members of the ownership team, said the company is now a major producer of beef, and that’s where risk management is especially important. El Toro routinely buys steer calves from large-scale dairies in California’s Central Valley and brings them to their feed lot when the calves weigh about 300 pounds. Around a year later, when the steers weigh about 1,300 pounds, they sell them to processors. And during that year, there are numerous opportunities for exposure to risk. “The day a feed yard buys a calf, it’s at risk for the finished value of the animal going down in value,” he said. “If the price of beef goes down, you have the risk of losing money when it comes time to sell it. Of course you have the responsibility to feed the animal, and there’s a risk the price of feed will change overtime. If the price goes up, you would be spending more than you projected initially.” “Fortunately, we can project how much feed the animal will need over a year before it is processed. The trifecta is knowing the value of the calf today, projecting the changing cost of feed and the market value of meat in a year, and managing all the components in order to reduce risk and maximize profits.” He said El Toro will buy and sell futures options for eight, 10, and even 14 months in the future as it regularly analyzes what the projected value of meat is going to be worth. He acknowledged that agreeing on prices for a portion of their inventory several months before the steers are ready to be processed and locking in some of their feed costs in advance, reduces the company’s chances of hitting a home run if the market value of the steers goes up or if the cost of feed drops substantially. However, he said, using options and futures also minimizes risk substantially, which is important because El Toro’s business model is to maintain a feedlot at capacity. Continued on next page
Continued from previous page
“We want a yard full of animals while running an efficient operation,” he said. He explained that the first step is to understand the risks associated with your operation, such as knowing how many animals you have and how much feed they will need before the animal is harvested.
You need to project your risk accurately. We spend a lot of time on database work to understand how much risk we have.
It takes knowledge of your market, industry experience, and understanding the amount of risk you want to take on. El Toro generally stays away from using algorithms, which he said can tend to be more of a short-term than long-term tool. The owners meet often with Plourd and other members of the management team and evaluate their risks on an ongoing basis. “We’ll look at what cattle futures are worth a year or more in advance, what the calf value is today, and what our projected feed values are. You can buy futures of corn in advance, for example, and hedge or lock values in to guarantee a profit on an animal going forward,” he said. Of course, Plourd said Farm Credit West customers operate in a different environment than farmers and ranchers in the Midwest, who often have a wide range of futures options available that growers of many California commodities don’t have. But he said Western growers do have tools, such as forward contracting a portion of their crop in advance to hedge against falling prices at harvest. And he reiterated that diversification — in crops and markets — is crucial for everyone. As a current example, he noted that while the U.S. and China have raised tariffs as part of their ongoing trade issues, Japanese, Korean and Middle Eastern markets continue to operate normally. Fortunately, El Toro’s balanced approach to destination markets minimizes its exposure in any single market and is part of its overall risk strategy. “International geopolitical risks are always there,” he said. “Some markets, like Japan and Korea, are transparent and government-to-government relations are generally good. But for China, a country we could have put in a higher profile, is generally not as transparent. We had to evaluate the risks of doing business there and didn’t put that much exposure into China because of it.” It’s because of companies like El Toro who are specialized in monitoring agricultural market challenges and risks that growers in the Imperial Valley can continue to thrive. They have been dedicated to providing the highest value markets to local farmers for over 40 years, and will continue to do so for the foreseeable future. John Frith is a public relations consultant and writer who specializes in helping business associations and companies tell their stories. Based in Folsom, the USC graduate’s clients include Farm Credit West, the Farm Credit Alliance, and the Family Business Association. He previously was a newspaper reporter, congressional press secretary, and public affairs director for several state agencies and trade associations. For more information, visit twscommunications.com.
Risk Management Strategies for Farmers Farming and ranching are especially prone to risk, and regularly face a wide range of uncertainties impacting bottom lines. Some of the more widely used strategies are outlined below:
Diversification: Invest in a variety of commodities so that low income years for one crop is offset by higher income years from others.
Contracting or Hedging: Reduce risk by guaranteeing prices, market outlets, or other terms of exchange in advance. Hedging uses futures or options contracts to reduce the risk of adverse price changes prior to an anticipated cash sale or purchase of a commodity.
Leverage: Higher levels of debt, relative to net worth, are generally considered riskier. The optimal amount of leverage depends on several factors, including farm profitability, the cost of credit, tolerance for risk, and the degree of uncertainty in income.
Liquid Assets: Keep your ability to generate cash quickly and efficiently to meet financial obligations. Liquidity can be enhanced by holding cash, stored commodities, or other assets that can be converted to cash on short notice without incurring a major loss.
Vertical Integration: While not the best fit for every operation, vertical integration can reduce your exposure to risk. Vertically integrated operations retain ownership or control of a commodity across two or more phases of production and/or marketing.
Crop Insurance: Maintain insurance on lost revenue in case of price shortfalls or reduced yield. Several federally subsidized revenue insurance plans are available for major crops.
Source: Adapted from the U.S. Department of Agricultureâ€™s Economic Research Service, available at https://www.ers.usda.gov/topics/farm-practices-management/risk-management/risk-management-strategies.aspx
2019 HOLIDAY SCHEDULE (Farm Credit West offices are closed.)
MONDAY, MAY 27, 2019 THURSDAY, JULY 4, 2019
MONDAY, OCTOBER 14, 2019 MONDAY, NOVEMBER 11, 2019
THURSDAY, NOVEMBER 28, 2019 WEDNESDAY, DECEMBER 25, 2019
MONDAY, SEPTEMBER 2, 2019
Hancock College Young Farmer Rancher Club Participates in Ag Day at the Capitol Sixteen student members of Hancock College’s newly formed Young Farmer Rancher Club traveled from Santa Maria to Sacramento to participate in Ag Day at the Capitol on March 20th. During the trip members toured the capitol building, met with representatives including Karen Ross, Secretary of California Department of Food and Agriculture, and learned about laws and legislation impacting the state’s agriculture industry. The Hancock Young Farmer Rancher Club is a collegiate chapter of
the California Farm Bureau Federation. The club brings together aspiring, young farmers and ranchers to develop leadership skills and build connections for their future in agriculture. Farm Credit West was a key sponsor of the Capitol trip and continues to be a supporter for the Hancock Young Farmer Rancher Club and the College’s agricultural education program. Pictured Above: Student members of the Young Farmer Rancher Club at Hancock College in Santa Maria, CA.
Midwest Flood Relief Historic flooding devastated the Midwest this Spring, causing destruction and hardship to farms, families and communities. Although the impacts of the floods were widespread, the flooding damage in Nebraska and Iowa have been extensive. Many producers lost livestock, farm equipment, personal property and are now faced with lingering impacts to farm ground. Farm Credit West along with other associations are supporting flood victims through contributions to the Nebraska Farm Bureau Disaster Relief Fund and Nebraska Cattleman Disaster Relief Fund. 100% of donations to both organizations will be distributed to affected farmers and ranchers to help them rebuild. The local chapters of the American Red Cross are also accepting donations to support flood victims.
AZ FFA Blue & Gold Gala Earlier this year, The Arizona Agricultural Education (FFA Foundation) hosted a Blue & Gold Gala. Farm Credit West was once again a proud sponsor of this event. As a result of this Gala, the FFA Foundation raised over $265,000 for the FFA and agricultural education in Arizona. Through monetary donations and staff time, Farm Credit West is a strong supporter of the FFA and pleased with the success of this event. Rural branch manager Mark Brawley has served on the Foundation Board for many years as their treasurer. Photo credit left to right: FCW staff and spouses in attendance included Trevor Hall, Travis and Cary Lilly, Doug and Christianne Norton, Dawn and Mark Brawley, and Alisa and Matt Beyer.
Templeton Annex Groundbreaking On April 4, 2019, Farm Credit West celebrated the start of construction of an expansion to the Templeton, CA office. The project will add an 11,109 square foot annex to the existing facility and will include 10 offices, a large open workspace, breakroom, conference room, and two restrooms. The event brought together Farm Credit West executive leadership, board members and staff from across the state. Representatives from Harris Architecture & Design and Rarig Construction, Inc. also participated in the groundbreaking ceremony.
UC Davis Small Farmer “Meet the Buyers” Tour In February, Farm Credit West joined other California Farm Credit associations and CoBank to sponsor the Sacramento “Meet the Buyers Tour” hosted by UC Sustainable Agriculture Research and Education Program (SAREP), UC Cooperative Extension Capitol Corridor, and CSU Chico. This program provides young, beginning, and small farmers the opportunity to meet and network with local grocers, distributors, restaurants and other wholesale produce buyers. Twenty-nine farmers from Solano, Yolo, Sacramento, Butte, and Tehama counties participated in the event. Chuck Moore, Sr. Vice President of Credit, based out of the Woodland Farm Credit West branch served as a guest speaker on the tour. Pictured Above: Chuck Moore speaks to young, beginning, and small farmers about different financing options.
Photo left to right: FCW staff and board leadership: Kevin Ralph, Tom Ikeda, Christine Roche, Doug Filipponi, Mark Littlefield, Sureena Thiara, Joey Airoso, Bob Cox, Tom McGuire, and Dan Clawson.
D R . KO H L’ S C O R N E R
Views from the Road:
Shifting Agricultural Management Strategies By Dr. David M. Kohl MY EXTENSIVE TRAVEL to work with agriculture producers, lenders, and agribusiness people provides a special vantage point for assessing shifts in management priorities. Management strategies and tactics are shifting in this economic environment of low margins and high volatility. Let's examine a few of the nuggets from the road where there is a surprise around every corner. One Step Backward and Two Steps Forward In the height of the great commodity super cycle where prices and margins resulted in multimillionaires overnight, one young producer took a bold action. This individual had grown his business quickly by acquiring land and rented ground, which squeezed his working capital. This producer heeded my advice and sold some of the farm ground at the peak of the cycle at $13,000 per acre. He was able to utilize the influx of liquidity to capture cash discounts and advantageous prices through negotiations on inputs. On the revenue side, the extra working capital provided flexibility on how and when to market his crops in his marketing program. Despite the current agriculture economic reset, both strategies have generated positive profits. The real advantage came recently when he purchased the same farm ground back at $7,000 per acre.
Cost of Farming the Road The good times in agriculture often resulted in growth and expansion at all costs. Another young producer conducted enterprise analysis on each crop field. The result was a decision to drop 3,000 acres of rented ground that was somewhat marginal and an uneconomical distance from the base operations. Less acreage, combined with better management on existing acreage
through agronomy and marketing practices, led to an increase in net income of $275,000. Getting strategically smaller also provided him with more family time. The old principle of “better is better before bigger is better” was very applicable in his situation.
Agriculture Entrepreneur The term agriculture entrepreneur quickly comes to mind when working with the next generation of young producers. The younger generations are multitaskers who leverage technology, time, and talents to explore new opportunities that will provide a positive net margin and cash flow. An example includes a son who is in business with his baby boomer dad. The son’s “side gig” is a towing service. During inclement weather, this towing business is a cash flow generator. As a matter of fact, the father indicated that his son made more money during three weekends with snow and ice than the farm made in the first quarter. This towing business meets the passion of the son and fills downtime on the farm during bad weather.
Marketing Advisory Service At a recent meeting, a producer shared a story of hiring a marketing advisory service to help him learn valuable information about the market and trends, while still allowing him to make the ultimate marketing decisions.
Dr. David Kohl energizes agricultural lenders, producers, and business professionals with his keen insight into the agricultural industry through extensive travel, research, and networking around the globe. He is a Professor Emeritus of Agricultural Finance and Small Business Management and Entrepreneurship at Virginia Tech, Blacksburg, VA.
This individual, while working with a farm management consultant, also decided to share equipment with other young producers, reducing his fixed cost per unit. The farm management consultant developed the cost of production data and allowed the producer to proactively capture profits in a volatile market with low margins.
The Power of the Projected Cash Flow The cash flow statement is 80 percent of the business plan. Detailed production schedules provide how seasonal cycles will play out. Throw in a little shock testing on production, costs, and market prices and you have created a powerful tool that can be a valuable asset in managing the business. In this case, one producer found that monitoring cash flow on a quarterly basis with the lender and crop and livestock advisors was very valuable in tweaking the economic game plan throughout the year. He stated that he acts as the “head coach” of his business and his “assistant coaches” are constantly feeding him insight and information for more astute decision-making. The views from the road find that despite challenging economic times that there are individuals who are finding better methods not only to survive, but to take advantage of opportunities given the right economic conditions.
Dr. Kohl has traveled over 9 million miles in his career and conducted over 6,000 workshops and seminars for a variety of agricultural audiences. Additionally, Dr. Kohl’s personal involvement with agriculture provides a unique perspective into the future trends of the agricultural industry and economy.
D I G I TA L S T R AT E G Y
TRANSFORMATIVE CHANGES TO FCW ARE COMING! Farm Credit West is investing in several new technologies that will continue to enhance customer service. This year we are launching AgWorx, a custom FCW platform built on Salesforce and nCino platforms. AgWorx is an application that will help your Association streamline customer data and minimize redundancy. Customers can expect faster loan processing times, fewer duplicative forms, more electronic forms, and increased digital correspondence. We are excited to move forward with a new “state of the art” platform that will benefit Farm Credit West customers for years to come.
KEEP YOUR CONTACT INFORMATION UP-TO-DATE Your security is very important to us. Maintaining accurate contact information is a critical step towards ensuring your information does not end up in the wrong hands. It also ensures that you receive important information in a timely manner. This past Spring, Farm Credit West has been working on a project to verify and update contact information for all customers. As we transition to AgWorx and adopt other digital tools, accurate customer contact information will help us continue to provide you the best customer experience.
F R O M T H E FA R M E R’ S K I T C H E N
Gilda’s Smothered Burritos By Stefanie Smallhouse, 5th Generation Rancher in Redington, Arizona Serves 4 INGREDIENTS tortillas desired toppings: shredded cheese, diced tomatoes, diced onions, shredded lettuce, sour cream, avocados, and olives Beef and Bean Filling: 2½ cups beans prepared with salt pork 1 pound hamburger salt & pepper (to taste) ½ teaspoon garlic powder 1 cup salsa
Red Chili Sauce: 10½ oz prepared red enchilada sauce (Old El Paso preferred) 1 tablespoon chili powder ½ teaspoon garlic powder ½ teaspoon pepper 1½ teaspoons salt 3 teaspoons onion powder 1 cup water 1½ tablespoons flour
P R E PA R AT I O N Start by preparing your beef and bean filling. Cook your beans with salt pork (⅓ pound). Depending upon method allow 2 to 4 hours. Do not drain beans; you will need bean broth for later. Fry hamburger over medium high heat adding seasoning and salt and pepper to taste. Drain off the fat, leaving a little for flavor. Add the salsa to the beef and simmer for about 15 minutes. While the beef and salsa simmers, prepare your red chili sauce. Add all seasonings to the red enchilada sauce and bring to a boil. Next, prepare your bean sauce. In a blender, puree about 1 cup of the prepared beans with ⅓ cup of the bean broth and 3 tablespoons
Adapted from Arizona Farm Bureau’s Fill Your Plate fillyourplate.org
of prepared red chili sauce. Blend until smooth and creamy with an easy to pour consistency. This makes about 2 cups of sauce to pour over the burrito once filled with your burrito goodies. Add the remaining beans to your beef and salsa mixture that’s on low-simmer on the burner. Simmer the mixture mashing slightly, for another 15 minutes. If a little dry, add more salsa or bean broth to your liking. Turn to low and keep warm. Roll warmed tortillas with beef filling and pour the bean sauce and red chili sauce over the top. Top with your favorite toppings such as cheese, diced tomatoes, onions, lettuce, sour cream, avocados, and olives.
Stefanie Smallhouse and her husband Andy Smallhouse represent the fifth generation to own and operate Carlink Ranch in Redington, Arizona. Carlink Ranch is a diversified cow/calf operation that has been operated by the same family for over 130 years. Stefanie is actively involved in her community and provides leadership to the agriculture industry. She is currently serving as the President of the Arizona Farm Bureau and a member of the American Farm Bureau Board of Directors.
C A N D I D C O N V E R S AT I O N S
Equipment Financing 101 A GUIDE TO SOUND BUSINESS PRACTICES By Ryan Camara, Vice President — Credit; Tulare Branch
WHAT IS YOUR EQUIPMENT COSTING YOU? As your equipment ages, it starts costing you time and money. Repair expenses start to mount, and the equipment spends more time in the shop than on the ranch. Your profits begin to deteriorate due to increased repair, labor, and opportunity costs. As you probably already know, time is the most valuable commodity you have. When aging equipment starts stealing time from you and your employees, it’s time to consider a replacement. When is it right to replace your equipment? To know if the time is right to upgrade, there are two key indicators to watch. First, be sure to consistently keep detailed records of services, maintenance, and repairs occurring on farm and fleet equipment. Having this information gives a clear picture of which machinery is costing you more money than it’s making for you. Check your records monthly to identify problem equipment. Second, expand your record keeping to include the loss of efficiency on your equipment as it ages (depreciation). By doing this, you could proactively avoid some repair expenses. From the moment you bring a new piece of equipment or a vehicle on to the farm it begins to lose value because of wear and tear. If you track this cost
by calculating depreciation on your equipment and vehicles every month, you’ll have a better idea of its value at any point in time during its useful life. Keeping a record of that value will help you determine when it’s time to replace the machinery. For example, if your annual costs to repair and maintain the equipment become greater than the current value, it’s time to upgrade. Depreciation is a real cost and impacts more than just your taxes! How do I calculate depreciation on my equipment? The most common method of calculating depreciation is with the straight line method (also referred to as economic depreciation). In the straight line method you: ♦♦ Determine the cost of the asset ♦♦ Determine the useful life of a piece of equipment or vehicle. Based on your knowledge of your equipment, how long can you use the new equipment before you start the period of major repairs? ♦♦ Subtract out the salvage value. This is the value you believe the equipment could be sold for at the end of its useful life. ♦♦ Divide the remaining amount by the useful life of the equipment. Depreciation = (cost – salvage value) / (expected years of useful life) For example: The cost of a new tractor is $100,000 and has a useful life of 10 years before it starts needing major repairs. The tractor can be salvaged for $25,000 at the end of the ten year use. Depreciation = ($100,000 - $25,000) / 10 years The estimated annual depreciation expense for this tractor per year is $7,500.
At the end of the year the tractor is worth: 1
$100,000 - $7,500 = $92,500
$92,500 - $7,500 = $85,000
$85,000 - $7,500 = $77,500
$77,500 - $7,500 = $70,000
$70,000 - $7,500 = $62,500
$62,500 - $7,500 = $55,000
$55,000 - $7,500 = $47,500
$47,500 - $7,500 = $40,000
$40,000 - $7,500 = $32,500
10 $32,500 - $7,500 = $25,000 As the equipment ages, you may consider replacing it to avoid major repair bills, especially if you can sell it for more than its depreciated value. By doing so, you may avoid major repair expenses, and more importantly you may avoid losing time in the field. I need new equipment, should I finance it or pay cash for it? Every business is different. Some have monthly cash flow, while others receive the cash quarterly, semi-annually, or annually. When making the decision whether to pay cash or to finance a piece of equipment, you should consider how that decision affects your working capital. What is working capital and why is it important? Working capital is the money available to support the day-to-day operation of your business. It is calculated by subtracting your current liabilities from your current assets. Current liabilities include accounts payable and loan balances on your operating line of credit while current assets include cash in the bank, accounts receivable, and inventory. Working capital is an indication of your business’s health, and your ability to pay your bills in the short-term. When you pay cash for the full amount of an equipment purchase, you are reducing your business’s ability to pay its bills. This may not have an immediate effect, but it is usually felt when some unforeseen circumstance strikes the business. By financing the purchase of equipment, you can maintain your working capital and the ability to deal with unforeseen circumstances.
Ryan Camara is a Loan Officer based out of Farm Credit West’s Tulare branch, primarily lending to Dairy operations. Ryan has been employed with Farm Credit West for six years. He can be reached at ryan.camara@FarmCreditWest.com
We can help. Introducing Equipment Plus, an equipment financing product that can be pre-approved and is designed to help you maintain working capital and reduce costs associated with aging equipment. This program includes:
Equipment Loans • 100% financing of the purchase price in most cases. You can make a down payment or trade in, and we will finance the balance. • Simple loan documentation. • You own the equipment, and we take the equipment as collateral. • Fixed or variable interest rates. • No prepayment fees for early payoffs on variable rate loans. • Fixed rate loans are only subject to prepayment fees for the first six months. • Flexible payment schedules available to accommodate seasonal cash flow.
True Leases • 100% financing of the purchase price. Farm Credit purchases the equipment and leases to you. • Fixed payments for the lease term. • Fixed Purchase Option and/or Renewal Options at the end of the lease term. • Lease rentals may be tax deductible (discuss with your tax advisor). • Early payoffs may be subject to prepayment fees and taxes.
Capital Leases • 100% financing of the purchase price. • Fixed payments for the lease term. • $1 Fixed Purchase Option at the end of the lease term. • You take the depreciation on the equipment (discuss with your tax advisor). • Early payoffs may be subject to prepayment fees and taxes.
All three products are eligible for: • Pre-approval for purchases over a specified period of time. • Interim funding. This allows you to pay vendors for an equipment build over time before the final loan/lease terms are determined. • Patronage. Farm Credit West is a cooperative, which means we share a portion of our profits with our members.
Ready to get started? Contact your relationship manager to learn more. You can also read more about these products on our website at FarmCreditWest.com
T E C H WAT C H
Wire Transfer Scams are on the Rise — Protect Your Business Now By Michael Levin, CEO/Founder of the Center for Information Security Awareness | cfisa.com
mail fraud involving wire transfer scams are evolving and becoming more prevalent, costing businesses billions of dollars annually. Businesses of all sizes are targeted and can fall victim to email fraud. The best way to protect your business is to have a good understanding of how these crimes are committed and to train your employees to be on the lookout for potential scams. Business Email Compromise (BEC) is a type of advanced email fraud that uses a very basic strategy to scam companies — deception. Scammers go to great lengths to deceive companies by sending spoof business emails from fake email addresses, by using social engineering to assume the identity of the company’s executives or high level staff (e.g. the company CEO, or attorney), or by pretending to be a trusted vendor or customer. Typically, the attackers target employees with access to company finances. Unfortunately, the crime often results in tricking the employee into conducting a wire transfer of funds to the attacker’s bank account. Criminals study the business and develop a good understanding of the victim’s normal practices. Statistics indicate that victims in these crimes provide a wide variety of different goods or services and often belong to no specific business sector. All BEC scams involve some form of deception. Frequently, scammers will compromise the company email system and will send a spoof email to begin the scam. In email spoofing, there is often only a one letter difference to an email address that is familiar to the recipient and the victim is tricked into completing a fraudulent transfer of funds into the scammer’s bank account. There are many variations of this scam that business need to look out for. Awareness is Key. Watch Out For: 1. Spoofed email accounts and websites; these could be slight variations of a legitimate email address with just a one letter alteration on the employee name or company name. Everything could look exactly like previous email messages you have received before. Fraudulent emails often mirror the content and format of past messages, and include the company logo and familiar names.
2. Spear-phishing emails are fake email messages believed to be from a trusted co-worker, vendor or customer prompting the victim to provide information. 3. Malware or malicious software, is any program or file intentionally designed to harm a computer, including computer viruses, worms, Trojan horses and spyware. In BEC, it is used to attack the company network and gain access to the email system. Malware can be used to access passwords and other company data that can then be used to obtain financial information. 4. Phone calls from new contacts; this could include fraudulent calls from new individuals representing existing vendors, current customers or individuals representing a financial institution. Ways to Protect Your Company from Business Email Compromise: ♦♦ Every business needs strong internal prevention processes and procedures when dealing with all Electronic Funds Transfer (EFT) requests. In many cases, a direct confirmation phone call following an EFT request would prevent fraud attempts from being successful. It is essential that all requests for funds transfers are reviewed by more than one employee. ♦♦ All EFT requests should be held for a period of time with strict external verification procedures. Any request for sensitive data or EFT transfers that involves secrecy or quick action should be viewed as a potential fraud attempt. ♦♦ Never trust the display name in an email address or URL. Before you open the email, try hovering the mouse over the email address or links to view the full information. ♦♦ Use the “forward” option on suspicious email messages or financial transfer requests instead of “reply” or “reply all”. By forwarding the message back to the sender, you increase the likelihood that you will use the legitimate email address from your address book and not a potentially spoofed address from the original email. ♦♦ Review and restrict information on company websites and social media that provide the hierarchy of the company or detailed information on a specific individuals’ job duties.
♦♦ Beware of vendor or supplier account changes. Arrange a backup method of authentication early in the relationship that is separate from email in order to avoid interception by the hacker. ♦♦ Always use an alternative backup method to authenticate and verify a funds request prior to sending funds or data. Institute phone call verification as part of the two-factor verification process in order to verify all phone numbers and any changes in the process or account information separate from email. ♦♦ If you suspect you were victimized in a BEC scam, notify your bank immediately and speak to a bank manager and the fraud department. Your funds might be recovered if you act quickly.
♦♦ Educate employees and provide ongoing security awareness training. Security Awareness Training for All Employees Like most cyber scams, business email compromise is another crime where security awareness training can greatly help a business reduce their risk. It is critical that all employees are aware of the different types of scams so they can help stop fraud attempts from going through. Ensure your employees know what to look for and have preventative procedures in place. By being proactive, you will greatly reduce the likelihood that you are victimized.
The Timeline of Business E-Mail Compromise1 :
Michael Levin is a nationally known cyber security professional who spent over twenty-two years in the U.S. Secret Service protecting presidents and heads of state. Michael retired from the U.S. Department of Homeland Security — as the Deputy Director of the National Cyber Security Division in Washington DC. He enjoyed a distinguished thirty-year career in public service and law enforcement. CFISA has been providing online and in person security awareness training since 2007. CFISA security awareness training stresses the importance of educating employees to help reduce company risk and protect against these types of crimes. 1
Congratulations to our 2019 Scholarship Recipients! Over the past
Recipients of Farm Credit West College scholarships have clearly
scholarship towards higher education for the 2019 – 2020 school year.
Scholars that continue to maintain academic excellence are eligible to
Farm Credit West has awarded over
demonstrated their commitment to agriculture and worked to make a difference in their communities. These students will receive a $1,500
renew their $1,500 scholarship for up to three years after their initial award, bringing the total award available to $6,000 per scholar. For students renewing their scholarship, please send your 2018 – 2019 transcripts to firstname.lastname@example.org by July 1, 2019. Farm Credit West’s college scholarship program is an important component of our commitment to young and beginning farmers. By supporting the education of these students, we are investing in the future of agriculture.
in scholarships to
OUR 2019 S CHOLA RSHIP RECIPI ENTS
Cal Poly, SLO Plant Science
Virginia Tech Ag or Mechanical Engineering
Purdue Agricultural Engineering
Matt & Linda Pandol
AREN VAN HOFWEGWEN
Cal Poly, SLO Dairy Science
California State Chico Animal Science
Dordt University Agribusiness
Jack & Ellie Kasbergen
Donald Van Hofwegen
TANNER VAN HOFWEGWEN
Yuba City, CA
UC Davis Agricultural & Environmental Education
Cal Poly, SLO Agricultural Systems Management
Dordt University Agribusiness
William & Christina Reiman
Donald Van Hofwegen
Tulare , CA
Fresno State University Agribusiness
Cal Poly, SLO Ag and Environmental Science
Colorado State University Animal Science
Jeff & Lisa Wilbur
Cal Poly, SLO Agriculture Science
University of Arizona Computer Science, Precision Agriculture
Fresno State University Agribusiness
Kyle (KC) Woods
Dordt University Agribusiness
Oregon State University Wildlife Biology
Territory and Office Locations Yuba City Woodland
Farm Credit West Administrative Office
Tulare Paso Robles Templeton Kern County Santa Maria Ventura
Tempe Imperial Valley
ADMINISTRATIVE OFFICE 3755 Atherton Road Rocklin, CA 95765 916.780.1166
Rural Arizona/ Safford
PASO ROBLES 1446 Spring Street Suite 201 Paso Robles, CA 93446 805.237.0998
KERN COUNTY 19628 Industry Parkway Drive Bakersfield, CA 93308 661.399.7360
DINUBA 940 W. El Monte Way Dinuba, CA 93618 559.591.9378
RURAL ARIZONA / SAFFORD 1120 S. 20th Avenue Safford, AZ 85546 928.348.9571
TEMPLETON 175 Cow Meadow Place Paso Robles, CA 93446 805.434.3665
WOODLAND 440 Pioneer Avenue Woodland, CA 95776 530.666.3333
HANFORD 1111 W. Lacey Boulevard Hanford, CA 93230 559.584.2681
SANTA MARIA 1178 Tama Lane Santa Maria, CA 93455 805.922.7991
TULARE 200 E. Cartmill Avenue Tulare, CA 93274 559.684.1478
YUBA CITY 1800 Lassen Boulevard Yuba City, CA 95993 530.671.1420
IMPERIAL VALLEY 485 Business Park Way Imperial, CA 92251 760.355.0291
TEMPE 3003 S. Fair Lane Tempe, AZ 85282 602.431.4100
VENTURA 2031 Knoll Drive Ventura, CA 93003 805.477.1020
YUMA 2490 S. 5th Avenue Yuma, AZ 85364 928.344.3200
3755 Atherton Road Rocklin, CA 95677
By Farm Credit West The smart way to finance your machinery.
What is your equipment costing you? As your equipment ages, it starts costing you time and money. Repair expenses mount, and your equipment spends more time in the shop than in the field.
Equipment Plus can help.
Farm Credit West’s equipment financing program will help you maintain working capital and reduce costs associated with aging equipment. Equipment Loans Operating Leases Capital Leases
Features & Benefits
Pre-approval Interim funding • Patronage — annual cash dividends back to • •
Ready to get started?
Visit FarmCreditWest.com to find an office near you
COMMITTED. TRUSTED. EXPERIENCED.