Partners - Fall 2014

GreenStone FCS

Fall 2014

Promoting the business success of our customers and the rural community

A FINE

PICKLE TO

BE IN! FALL MARKET OUTLOOK

MY ACCESS IS NOW LIVE! LAND VALUES STUDY

2014 TAX TIPS GREENSTONE SCHOLARSHIPS TAXES AND THE AFFORDABLE CARE AC T LAKE ERIE ALGAL BLOOMS

Editor’s

NOTE Fall 2014 Published by:

GreenStone Farm Credit Services

2 Comments from CEO Dave Armstrong

School is in session, harvesters are in the fields and trucks are hauling on the roads, sports consume the weekends, and the fourth quarter holidays are in the horizon. While life on the farm seems to be moving at a quick step again this fall, GreenStone is keeping pace with your rhythm. We have launched My Access for customers, are processing 2.99 percent interest rate loan applications, are supplying resources on Farm Bill and legislative implications to producers, have been amplifying the agricultural voice in the elections through MI GreenStone PAC, and are in the thick of the 2015 business planning process. It is easy to get caught in the speed of the steps, but be sure to twirl safely this season; and when the tune dies down, take a break with this issue of Partners!

CEO Dave Armstrong provides a business update while touching on GreenStone's fall rate promotion, customer satisfaction results and new technology developments.

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Recent changes to lending regulations are keeping staff busy and compliant, while the MI GreenStone PAC is assuring agriculture's voice is heard.

4 Market Outlook Agricultural economist, Bob Utterback, forecasts fall market pricing and predicts what next year has in store.

25 Guest Column Lake Erie's algal blooms are complicated and a solution will likely involve everyone.

7 GreenStone's Story You can gain a big advantage with the right lending partner, but the driving force behind the value might surprise you.

8 Taxes and the Affordable Care Act Two ways the Affordable Care Act may affect your bottom line.

11 My Access Live Managing your GreenStone relationship is now easier than ever with these new online tools.

23 Legislative Matters/PAC Progress

.Fall

Notes

3 Farm Safety 13 2014 Tax Tips

20 2014 Farm Bill

9 Customer Satisfaction

Be ready to manage your tax liability before year-end with these mechanisms.

Get an overview of the complex changes within the Farm Bill, and the resources to help simplify it.

9 Dollars for Youth

15 Feature Article David Klingenberger's passion for food has taken him down a road less traveled, and he could not be happier about it.

19 Land Values

21 Directors' Perspective Hear firsthand how GreenStone's Appointed Directors contribute to our continued success.

GreenStone's study shows land values increased but the peak may be in sight.

9 Multicultural Scholars 10 Timber Rattlers Sponsorship 10 Pause for Applause 10 Candid Comments 11 Tech Tip 12 Scholarships 18 Summer Interns 20 Office Updates 20 Calendar of Events

This newsletter is published quarterly for the customers of GreenStone Farm Credit Services.

Partners, 3515 West Road, East Lansing, MI 48823 • 517-318-2290 • marketing@greenstonefcs.com

COMMENTS

From CEO Dave Armstrong

Welcome to the fall 2014 edition of Partners!

W

With such an unseasonably cool, wet planting and growing season, it is hard to believe that harvest is just around the corner.

While it is still too early to tell how this year’s crop will finish, some operations that feed corn are looking at record profits. Dairy producers, in particular, have arguably had one of their best years ever. Profits from segments of the industry like this will serve to buoy overall U.S. net farm income this year in spite of five year lows on corn and soybean prices. In fact, USDA estimates indicate that 2014 could be the fifth best year ever for net farm income after adjusting for inflation.

With this kind of overall financial performance in the ag industry, it is no wonder that GreenStone continues to perform at optimal levels in every area with the exception of loan growth, which is due to the relatively high levels of farm income mentioned above.

Fall Focus

Customer Focus

In order to build momentum for new loan growth into 2015, GreenStone is now offering a special, five year interest rate product of 2.99 percent on new real estate loans closed by Dec. 31, 2014! (See page 7 for more on this and other great values from GreenStone!)

I also would like to once again thank each and every one of our members who received and completed a GreenStone customer satisfaction survey this past spring.

As many of you know, GreenStone has conducted this survey every year since 2000 and uses an independent consulting firm to administer and complete the survey results. We are very pleased that you once again rated your satisfaction with GreenStone at a very high level of 95 percent satisfied or very satisfied. While this may not have set a record, which was set at 97 percent in 2012, it definitely represents world class performance for any firm in the financial services industry like GreenStone. Yet, let me assure you that we will not become complacent as a result of this feedback. Many of you were gracious enough to point out areas where we can still improve, and we take that feedback very seriously because you are what matters most to your Farm Credit association! Our best reward for results like this is your continued loyalty by keeping GreenStone as your financial service provider

Along with the rate special, GreenStone staff (including yours truly!) will be making over 1,000 on-farm visits with prospective and existing members alike to hear directly from you about what you value in a lender, and to get the word out about the distinctive advantages that continue to make GreenStone Michigan and northeast Wisconsin’s dominate provider of agricultural credit and financial services.

So, if you have any eligible outstanding loans with a GreenStone competitor, or if you are planning to make an eligible purchase in which you will need financing, now is the time to contact your local GreenStone branch to see how you can participate in this great rate!

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CEO COMMENTS

of choice. Thanks again for your confidence and honest feedback!

Safety Reminders

Technology Focus

According to the Centers for Disease Control and Prevention, agriculture ranks among the most hazardous industries. In 2012, over 370 farmers and farm workers died from a work-related injury.

One example I would like to point out of not becoming complacent is the recent launch of our new customer internet portal, My Access.

This new tool leverages the information technologies that are available today in a safe and secure environment. With everyone’s time being so limited in today’s fast-paced world, this kind of service can minimize the time it takes for us to communicate with each other while knowing that the information being shared is done so using state of the art security.

We launched My Access on Sept. 15 and have received very favorable feedback from many of our customers who have enrolled. You can read more details about My Access on page 11, or contact your local branch to get started.

In closing, I hope you will browse through this issue of Partners and realize that GreenStone is much more than a lender. Your association is an integral part of the rural communities it serves while also being the premier provider of credit and financial services to its marketplace.

GreenStone staff members work tirelessly to bring increasing levels of value to you, our members, through working with other agricultural organizations on legislative matters and getting industry-friendly candidates elected to state and national offices, providing countless hours of community service, being a dependable source of information on a wide array of industry subjects, from the Farm Bill to land values, and many, many more.

Stay safe this harvest season and keep these safety tips in mind: 1. While doing the routine maintenance check, incorporate a safety inspection; check the lights, turn signals, hazard lights, and slow moving vehicle sign, and ensure you have access to things like a flashlight, first aid kit, fire extinguisher, etc.

2. Always be aware of overhead power lines, especially when transporting equipment, and loading and unloading.

Best wishes for a successful harvest, and remember to be safe!

3. Avoid wearing loose clothing while entering confined spaces or near moving parts.

As always, please feel free to contact me directly at 517-318-4105 or dave.armstrong@greenstonefcs.com

4. Use seat belts while operating farm equipment, including the buddy seat when you have company in the cab.

5. Shut down all moving parts before dismounting equipment.

6. Be cautious on rural roadways; watch for oncoming cars, potholes, ditches and steep hills.

7. Use protective gear when operating machinery and handling chemicals or other hazardous materials.

Dave Armstrong

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PARTNERS Fall 2014

8. Educate your family and workers about safety practices and expectations.

MARKET OUTLOOK

MARKET

OUTL OK By: Bob Utterback

As harvest is underway and the grain is being tucked away in the bin, it is also time to sit down and think about what’s ahead. Only by looking objectively at the fundamental make-up of the markets can one attempt to formulate a plan of action that will give the best chance for financial improvement.

If you have been reading my outlooks for some years, you know that I have been known to have a bearish bias. It has been my perspective over the years that, as a professional market observer working with producers, it should not be my responsibility to make producers more bullish; in fact, I believe it is my responsibility to try to give producers an unbiased review of both sides of the market to assist them in pricing their product.

The brutal truth of the matter is U.S. producers, along with global producers [including China, South America and even parts of Europe] have experienced a solid production year. Essentially,

there is more supply of wheat, corn and soybeans than we had a year ago. Even with solid demand, we are experiencing a global build up of stocks.

Subsequently, prices have retreated significantly under the weight of too much supply. This is a fact!

What is ahead? First, with ample supply of corn, soybeans and wheat, the market will start to develop carry. This implies the deferred contract price will be premium to the nearby contracts.

This is one of the ways the market gives producers incentive to store forward. Second, the difference between the cash market and the

Fall 2014

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MARKET OUTLOOK

futures market [basis] will get wider. This is another way of forcing producers to store the product forward to a time when supply should be tighter in regards to demand.

Essentially, there is more supply of wheat, corn and soybeans than we had a year ago. Even with solid demand, we are experiencing a global build up of stocks.

The problem, however, is if producers do not sell the product forward for a future time period, an uncomfortable situation will develop. Producers are basing their pricing decision on the flat price. Since it is low and, in many cases, below the cost of production, they are unwilling to sell inventory. Subsequently, the risk I see is they are following the market instruction to put unpriced grain in the bin because of carry and wide basis, but they are not pricing the product because of low flat price. The end result I fear is we see producers store product all the way to next summer and possibly sell it at a lower price than when they put it in the bin minus all the storage cost.

Subsequently, if anyone is storing for the carry and wide basis, they need to price it now to assure they capture the premium. If depressed about the net selling price, there is always the option of [speculatively] trying to capture some upside flat price potential once the bin doors shut this fall. I, however, must tell you it is going to be an uphill battle. Be very cautious. I would prefer keeping all long positions in the nearby futures and not buy any more carry than possible. I would target purchasing in October and, if possible, when the last 20 percent of the corn or soybean crops are being harvested. As to technique, I favor being long deep-in-the-money calls and short out-of-the-money calls at the strike price where I would be pleased to take profit. I would also suggest selling puts once I get some solid signs of a bottom. However, let me repeat my warning, I expect 2015 corn and soybeans prices “without a weather event� will amount to the deferred contracts sliding to the nearby contracts. The only time period of potential upside price uncertainty will develop from next April to July when the market is trying to assure enough corn and soybean acres are planted, and with concern about the crops developing normally.

Now that we have taken care of the 2014 pricing strategy, I really need to address the pricing of the expected 2015! I expect 2015 could be a difficult transition year. Producers are storing a lot of unpriced grain forward in the hope of a big flat price rally to lift prices well above cost of production. Subsequently, little to no attention will be placed on selling anticipated 2015 inventory. Looking forward to June and July of 2015, if we see a few acres less of corn, but more acres of soybeans, the stage is set for a market that will be extremely sensitive to weather. If we were to experience another year with corn yields above 165 and soybean yields above 46, we will set the stage for prices to slip even further below the cost of production in the last half of 2015. The stage will be set for panic dumping of inventory into the market in late July to early August of next

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PARTNERS Fall 2014

year. I believe producers must start to turn their attention to this risk.

I see a lot of downside risk with limited upside potential for 2015. That is why I will be suggesting producers need to be seasonally selling a lot of inventory from April to July.

I am concerned the prices will be difficult to stomach which will keep acceptance of a selling strategy very low. To help pull the trigger, I believe producers need to make decisions now on how to manage the risk. I suggest on lows this fall buy deep-out-of-themoney September or December 2015 calls at price levels that they want to insulate their cash sales from a weather market event. Focus on buying the lowest strike price possible with no more than 25 cents for corn and 50 cents for soybeans. I realize this is a lot of money so try to reduce this cost by selling deep-outof-the-money May and July 2015 puts for time value decay. Again, these puts will be a speculative feature and should be placed into position after the expected fall lows.

Remember, the function of the long calls strategy is to give flexibility to aggressively price inventory at the best seasonal time for highs, while protecting against a summer yield reduction event. Frankly, I feel the odds are low for 2015, but Mother Nature always has a way of throwing a curve ball. Preparing for the unknown is the only way I know to mange the risk of uncertainty.

MARKET OUTLOOK

While the grain prices have been breaking, it has been the complete opposite for the meats. We have experienced all-time highs for pork and beef prices in 2014. The continued slow expansion of poultry, beef and hogs has kept supplies extremely tight. We have experienced, in my opinion, better than expected domestic and international demand in light of stagnate economic conditions. It just goes to show you that consumers the world over still like a good steak and pork chop.

Looking forward, the big question is what to do. I would first focus on protecting feed costs this fall, for next spring and summer feed needs. I would not start to look at multiple-year feed needs until well into the fall of 2015. If anyone is building new hog buildings because of the high profit, you know that you are not the only one. By the latter half of 2015 to early 2016, I believe pork supplies will be on the risk unless we experience unexpected events like the virus that hit swine herds this year.

I strongly suggest that, if we experience any type of problems this winter, use it aggressively to start pricing for the eventual expansion we all know is starting to show up in the pork and poultry sectors.

While cattle herds are not going to quickly expand, we have to assume some growth will occur with the low feed costs that are starting to develop. Granted, the pastures are still stressed in the western states, but they are in great shape in the Midwest and eastern

Grain producers must be prepared for a period of margin compression that could last longer than many currently think is possible. production regions. If I was a producer of feeders, I would be very intent on locking up long-term exposure on any bounce this winter close to the old highs. My bias: From here on in, keep a floor under the feeder cattle and fat cattle prices.

Summary: Grain producers must be prepared for a period of margin compression that could last longer than many currently think is possible. With the balance sheets in rather good condition, I do not expect much downside price pressure in land prices and related costs of production until we are well into the 2016 marketing season. This all suggests the earlier producers sell, the better off they will be; but be flexible to defend due to any change in the fundamentals such as a major bullish weather event or a change in government policy due to a long time period of low prices.

This material has been prepared by a sales or trading employee or agent of Utterback Marketing Services, Inc. and is, or is in the nature of a solicitation. This material is not a research report prepared by Utterback Marketing Services, Inc. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.

Distribution in some jurisdictions may be prohibited or restricted by law.

Persons in possession of this communication indirectly should inform themselves about and observe any such prohibition or restrictions. To the extent that you have received this communication indirectly and solicitations are prohibited in your jurisdiction without registration, the market commentary in this communication should not be considered a solicitation. The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Utterback Marketing Services, Inc. believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

ABOUT THE AUTHOR Bob Utterback is the Farm Journal Economist and President of Utterback Marketing in New Richmond, IN. Call Bob for strategy updates at 877-898-4324. Email comments on Outlook to utterback@utterbackmarketing.com. he opinions stated herein are not necessarily T those of GreenStone Farm Credit Services.

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GREENSTONE'S STORY

members that have led us to greener grass both today and in the future, and not just on the other side of the fence. We have learned from our success and from our failures, but our history is only part of the story of who we are today. It is our Core Four Values that set us apart and the reason you, and thousands of others, have chosen to be a partner in our story.

CUSTOMER FIRST– We have high standards of success at GreenStone and one of those measurements is customer satisfaction.

We believe so highly in providing our members the opportunity to tell By: Ben Mahlich, GreenStone us how we are doing Regional Vice President that we conduct a customer satisfaction You have likely heard about GreenStone’s current survey each year, and 2.99 percent interest rate special on five year new real also hold member estate loans. It is on the back cover of this publication, meetings annually. Add you will see it along the roadway on billboards, and to that the fact that you might even hear about it on the radio. we are a cooperative, and therefore we work While we have done a lot to make sure for you, our member-owners, and not you are aware of this special interest investors; this allowed us to provide a rate opportunity, we haven’t been as patronage payment of $29 million this vocal about the service and benefits past spring. In total, we have returned that comes with our nearly 100 years $163 million to members over the last of experience. nine years.

In looking back at those almost 100 DELIVER QUALITY– Our team of years of service to our members, and professionals are committed to being looking forward to many more, we are informed and aware of markets and excited by the vision of a centennial economic changes. By knowing what sign in our office similar to the signs is on the horizon, we can ask the right we see on many of your farms. It is questions when we are meeting with the tradition and commitment the you on the farm or in the office to sign represents that makes what we ensure we provide options that will best do every day seem better than the fit your needs. It is widely known that previous, and certainly more valuable employees who are engaged with their than a one-time rate special. work and satisfied with their company Having seen many lenders here today help their organization move quickly, and gone tomorrow, I am confident keep customers satisfied, and help sustain a competitive advantage. For that it is our partnerships with our

Experience the Benefit of Our Story!

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PARTNERS Fall 2014

this reason, we also measure employee engagement annually and achieved an exceptionally high ranking from our staff. Our 2014 results were higher than 90 percent of other organizations nationally. Like customer satisfaction, we are also focused on continual improvement internally each year.

GET INVOLVED– GreenStone encourages and even provides time to all of our teammates to be involved in the communities where we work and live. Whether it is supporting 4-H and FFA youth, establishing a garden with the Wisconsin Timber Rattlers ball park to benefit the St. Joseph’s Food Program, or helping Detroit reclaim their town by planting trees in the community, you know you can count on GreenStone to lend a hand in your community.

DO THE RIGHT THING– Being member-owned allows us to focus on being good stewards of investments, but also focus on ensuring our members are provided the necessary tools to be competitive in their markets. This stretches beyond our patronage program; for example, in recent years it has included lowering rates on current loans through our conversion options, and being the leader in delivering the fruit crop disaster loans which allowed our members to bridge their operation until the next production cycle.

While our core values are all reasons we have partnerships that last multiple generations, these competitive advantages are amplified with special financing programs. GreenStone is pleased to offer you the opportunity to participate in a 2.99 percent five year interest rate special for all new real estate loans. This special runs through Dec. 31, 2014; do not wait to talk to your financial services officer in one of our local 36 branches, and let us reaffirm why you have chosen to be a part of the GreenStone story—service, value and so much more! If you are new to GreenStone, there is no better time to experience the benefits of being a GreenStone member. Let us help you become a partner in our story!

NEWS UPDATE

NEWS UPDATE FALL 2014 Satisfied Customers, Committed Cooperative The results are in, and customers have once again reported strong satisfaction with their financial cooperative.

GreenStone scored a 95 percent satisfaction rating on a 2014 survey conducted by Michigan-based Advantage Research and Analysis. That makes thirteen consecutive years that our customers have rated GreenStone with a satisfaction score above 90 percent.

“Our team strives to deliver quality services and put our customers first each and every day,” said GreenStone President and CEO, Dave Armstrong. “It is our mission to promote the success of our customers and the rural community by being the best at providing credit and financial services. I am extremely proud of our team for delivering such outstanding service year after year.”

Customers who participated in the survey indicated they were most satisfied with the performance of clerical support staff and loan officers, the financial soundness of the cooperative, and the value GreenStone has for its customers.

“GreenStone customer satisfaction rates have been in the 94 – 97 percent range for more than five years now, and for the 2014 survey, 94 percent of respondents said they would return to GreenStone for future loan needs,” said Dr. Robert Myers, Project Director from Advantage Research and Analysis. “These are exceptional levels of customer satisfaction and loyalty for a financial institution, which more typically fall in the 65 – 85 percent range. Clearly, GreenStone is delivering outstanding service to their customers.”

% 95

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PARTNERS Fall 2014

Raising Dollars to Support Youth

provide hands-on learning opportunities.

Like GreenStone, our employees are committed to supporting youth events within the communities we serve.

We often coordinate employee fundraisers with various organizations who share in the vision of serving local communities and the next generation of agricultural leaders.

We know that supporting our customers and providing leadership to the agricultural community through organizations such as these is not only part of our company mission, but is also a part of the rich history of many employees. We are proud to instill the values we hold and help replenish the industry with passionate individuals.

GreenStone employees recently participated in a fundraiser to support our youth through the Michigan Livestock Expo (MLE) and two Wisconsin FFA chapters.

Donations made to the MLE enabled employees to participate in the purchase of animals during the Expo’s annual Sale-abration. “Thank you for your support at this year’s MLE auction and for your support in years past,” said one Sale-abration exhibitor. “I can’t begin to thank you enough for your purchase [of my animal]…it will be a big help towards paying for my college education.

I hope one day I will be able to give the same support you have given me.”

GreenStone employees also contributed to the local Wisconsin FFA chapters of Denmark and Marion. Both are dedicated to helping students achieve their goals. The donated funds assist with building various programs that

Michigan State University Young Scholar Programs This summer, GreenStone welcomed students from several Michigan State University (MSU) College of Agriculture and Natural Resources (CANR) programs to learn more about careers in agriculture.

High school students enrolled in the ANR Institute for Multicultural Students spent a week on MSU’s campus and visited the GreenStone corporate headquarters.

GreenStone also hosted high school students in the Multicultural Apprenticeship Program.

These students spent six weeks in the program learning about careers agricultural and food sciences, natural resources and related fields.

The MSU College Assistance Migrant Program Scholars Initiative (CAMP) is an educational program

NEWS UPDATE

that offers individuals with migrant or seasonal farm work backgrounds, a unique opportunity to begin an undergraduate program at MSU. One of the MSU CAMP participants, Juana Lopez, spent the summer as a training and development intern at GreenStone's East Lansing corporate office.

“This experience has given me the chance to meet many great people and also learn about the other opportunities available within the Farm Credit System,” said Juana.

“Also through this internship, I have been exposed to all the positive effects farm credit institutions have on agriculture and those who depend on it for a living.”

Read Juana’s Intern Spotlight on the Open Fields Blog at greenstonefcs.com.

GreenStone Teams with Timber Rattlers Ballpark Vegetable Garden The Wisconsin Timber Rattlers partnered with GreenStone on a vegetable garden at Neuroscience Group Field at Fox Cities Stadium in Appleton, Wisconsin.

In its inaugural year, tomatoes, potatoes, carrots, cucumbers, cantaloupes and green peppers are among the fruits and vegetables harvested from the GreenStone Garden. The produce that is grown is being donated to the St. Joseph’s Food Program.

director of the St. Joseph Food Program. “St. Joseph Food Program couldn’t provide the current level of nutrition without the help of our community and this partnership is a great example of how we can all work together to accomplish great results!”

The garden is located beyond the left field grass seating area at Neuroscience Group Field.

It is 20’ wide by 30’ long.

“The GreenStone Garden provides an excellent opportunity for us to showcase agriculture while benefiting our community,” said Amanda Kroll, financial services officer for GreenStone. “By involving other community organizations, including the Freedom FFA Chapter, to maintain the garden and the food pantry, we are able to foster the next generation of agricultural leaders and provide wholesome food to those in need. It is truly a homerun for everyone involved.”

“We are excited to partner with GreenStone on such a unique idea and utilize an area of the ballpark that had previously gone unused,” said Timber Rattlers president Rob Zerjav. “The St. Joseph’s Food Program is such a vital part of our community and we are happy to contribute in any way we possibly can.”

Pause for Applause Gov. Rick Snyder recently announced the appointment of Melissa Stolicker, executive vice president and chief internal auditor for GreenStone, to the Oakland University Board of Trustees.

Stolicker has 22 years of experience as a registered accountant, and recently celebrated 10 years of service with GreenStone. She is also a member of the Michigan Association of Certified Public Accountants, Association of Independent Certified Public Accountants, and the Institute of Internal Auditors as a member of the Lansing Chapter program committee.

Candid Comments...

GreenStone FCS, "Thank you so much for your ongoing support!

We appreciate your ability to understand what we are doing as state officers, and why it means so much! Thanks again for everything!”

–Michigan FFA Association State Officers Throughout the summer we received many comments recognizing GreenStone's support of youth fairs and animal exhibits. We are grateful for all the notes and have included a snipit of them here: “Thank you GreenStone…for buying my champion soybean plants…”

“I just wanted to take a moment to thank the Ionia branch for being the barn sponsor for our exhibit this year. We would not have been able to have our exhibit without all the community support!”

“Thank you to GreenStone Farm Credit Services for supporting 4-H Super Showmanship…”

“We are thrilled to have GreenStone team up with the Timber Rattlers to Grow a Row for St. Joe’s,” said Karen Ziemke, development

Have something to share?

Submit your "Candid Comment" to: marketing@greenstonefcs.com

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MY ACCESS

ENROLL Today

➊ Go to www.greenstonefcs.com ➋ Select ‘My Access’ under the ‘Account

Login’ dropdown found in the top right corner of the site

➌ Click the ‘Enroll Now’ button Note: Previous online banking customers should follow the steps already provided.

File Exchange: Through My Access, File Exchange is a two-way communication tool where documents can be sent and received securely between you and GreenStone staff members. Some examples might include: loan application documents, providing updated financials, tax preparation documents, etc.

My Documents: With the use of My Documents, you will have access to view and download specific documents GreenStone has securely stored.

Customized Convenience at your Fingertips…

My Alerts: Take control and set alerts to be sent to any email or mobile phone number you desire. Based on the type of loans you have, you can establish custom email and/or text alerts for the available line of credit or loan maturity date. You can also set alerts to be notified when documents are received through File Exchange.

MY ACCESS IS NOW LIVE!

Online Banking: Manage your account 24 hours a day with GreenStone’s Online Banking system available through My Access. Among the many options, you can view account history and details, access and print bills and statements, view drafts, transfer funds, and schedule payments.

My Access hit the cyber waves less than a month ago.

Since that time, GreenStone’s existing Online Banking customers have been making the switch to the new, single sign-in system. While these users gain direct access to their Online Banking account, they have also opened the door to a variety of useful tools designed to take their local GreenStone relationship one step further.

The simplicity of these user-based solutions within this portal make managing information, accounts and communication with GreenStone more convenient than ever. With 36 offices throughout Michigan and northeast Wisconsin, GreenStone is committed to being your local financial partner.

Why wait? Enroll today and begin experiencing these online benefits with GreenStone!

TECH TIP: Password Points Passwords are used everywhere these days and we know how important it is to make them secure! A strong password is the first defense against others gaining access to your personal information. Passwords are recommended to be at least eight characters long, use upper and lower case letters, contain at least one number, and/or use special characters. Your password should not include your real name, company name, or a complete dictionary word. Each password should be different for each of your accounts and should not follow a pattern (Pa$$word1, Pa$$word2, etc.). While it may sound like a lot remember, utilities are available to help create and store passwords. The website https://strongpasswordgenerator.com can be used to generate strong passwords; and at http://keepass.info/index.html you can download KeePass to your computer to securely store passwords for reference when needed.

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PARTNERS Fall 2014

GREENSTONE SCHOLARSHIPS

A

GreenStone Awards $12,000 in Scholarships to Incoming Freshmen Students across the country have now settled into their educational year to become one step closer to their career goals. GreenStone is proud to assist six college freshmen continue their pursuit of a degree related to agriculture at Michigan State University (MSU) and the University of Wisconsin (UW).

B

C

[A] EMMA BLOUGH

[C] DALTON HARD

Daughter of Gary and Laurie Blough

Son of Mike and Rachel Hard

Majoring in: Food Science at MSU

Majoring in: Agribusiness Management at MSU

People would be interested to know: “I am serving as the Michigan FFA State Reporter.”

People would be interested to know: “I am currently serving as the Michigan FFA State Treasurer.”

Prefers to spend time: Outside with livestock.

Prefers to spend time: Being outdoors camping, fishing, hunting, driving the four wheeler and working on the 700 acre corn and soybean farm.

Dream Job: Owning a beef cow operation.

[B] LOGAN CRUMBAUGH

D

Son of Clay and Chris Crumbaugh Majoring in: Agribusiness Management at MSU People would be interested to know: “I love nothing more than driving a tractor.”

E

Prefers to spend time: Helping out on the farm.

Dream Job: Working on the farm I have been on all my life.

[E] LEE JAKOB MARCINIAK Son of Tanya Tuinstra and John Eichorn, and Lee Joseph Marciniak Majoring in: Agricultural Industries at MSU People would be interested to know: “I am the oldest of seven kids.”

Prefers to spend time: Shooting guns and spending time with friends.

Dream Job: Farming on my family’s farm.

Dream Job: A professional fisherman.

[F] HAILEY SHARRARD [D] MELISSA LECAPTAIN Daughter of Dean and Barb LeCaptain Majoring in: Agribusiness at UW-Manitowoc People would be interested to know: “I love everything about agriculture and farming.”

Prefers to spend time: Running.

Dream Job: Making a difference in people’s lives.

Daughter of Joe and Amy Sharrard Majoring in: Animal Science at MSU People would be interested to know: “Our family farm milks more cows than our town’s population.”

Prefers to spend time: Biking, running, reading and working with cattle.

Dream Job: Large or small animal veterinarian in a rural farm town.

F

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TAX PLANNING

2014

Tax Planning Tip$

By: Steve Zimmerman, GreenStone Senior Tax Accountant Certain commodity sectors are experiencing a high net income year in 2014. A tax liability that results from a high income year needs to be managed before year end as the most effective tax planning aims to keep taxable income at a consistent level.

Tax planning accomplishes either deferrals or eliminations of tax.

Many deferral mechanisms exist to help farmers minimize their current year tax liability, but few eliminators of tax exist to help the tax planning strategy.

A main goal of tax planning is to “move” income that may be taxed at individual rates in the 25 percent or higher marginal federal income tax rate.

Tax Deferral Mechanisms: 1. Delay sales of commodities until the following year, but it cannot be construed as a mechanism to avoid tax. The commodity sale delay should be a marketing mechanism to improve the value of that commodity.

2. Prepay operating costs before year end. a. The prepaid amount cannot exceed 50 percent of a normal years expenses. b. It must be for a bona fide business reason and not be to avoid tax. c. It cannot be a deposit of money toward a future purchase.

3. Elect to defer crop insurance proceeds as income in the following year. a. It cannot be on a crop revenue coverage policy.

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b. The deferral can only be elected if the crop is normally sold in the year following the year it is produced.

4. Elect to expense certain capital purchases under code section 179. a. This expense deduction is currently at $25,000 and only if you purchase less than $125,000 of capital items in the year. (Note: This expensing amount is subject to change if Congress acts on raising that threshold.

It is hoped by the small business community that the expensing limit will be raised to $500,000 and allow this larger deduction to occur on the 2014 tax return.)

Stay tuned for this much watched issue to be potentially increased.

5. Fund a retirement account that allows a deduction in 2014. a. IRA contributions are allowed up to $5,500/$6,500 for individuals over the age of 50. This contribution reduces taxable income now but will be taxed when it is drawn out at a retirement date. If an individual(s) is already covered by a retirement plan, the high income year may disallow the deductibility of an IRA contribution(s). b. SIMPLE IRA’s had to be established prior to Oct. 1 of the current year, but may allow a greater deduction than the $5,500/$6,500 IRA. Certain employees may also need to be provided this retirement account. c. SEP IRA can be established any time up until the due date of the return, including extension. Amount of contribution is determined by the profit volume of the business. Certain employees may need to be covered by this retirement plan.

TAX PLANNING

Tax Elimination Mechanisms: 1. Farm Income Averaging: If the three prior years’ taxable income are in lesser marginal tax brackets than 2014, an election can be made to “borrow” some of the lower tax brackets from the prior years and move some of the higher 2014 taxable income into those lower brackets. This is a federal income tax savings but will not reduce any state income tax.

2. Calculate a Domestic Productions Activities Deduction (DPAD): The deduction is based on the net income of the business and the volume of wages paid to employees. This deduction may be passed through to a taxpayer from a marketing cooperative and may prevent a stand-alone calculation.

5. A health savings account (HSA) could be coordinated with the 105 plan. The HSA needs to be coupled with a high deductible health plan.

The HSA contribution will reduce taxable income and may not be a taxable withdrawal when taken out for qualified medical expenses.

Bookkeeping item to consider for tax reductions: 1. Review the depreciation schedule to locate any remaining basis in breeding livestock that may have been sold or that died. Any remaining basis that can be used on the return to reduce taxable income will only reduce income tax and not self-employment tax.

Consideration of all these topics is important when you meet with your tax advisor. Complete and accurate records are very critical to the tax planning process. It will also be important to know the remainder of the year’s income and expenses. Start the tax planning process early to allow for proper installation of any tax minimization strategy; call your local GreenStone tax accountant today.

3. Sole Proprietors can pay wages to their dependent minor children that perform purposeful work for the business. The wages paid to the dependent minor child are not subject to FICA tax and can be included as labor expenses in the business records. The dependent minor may have to file their own income tax return to pay their respective Federal and State income tax if their total wages/income is above certain thresholds.

4. Install a Section 105, medical reimbursement plan: This is a mechanism that could allow the ability to deduct unreimbursed medical costs and medical insurance for the family of employee(s).

If family members work for the business, it could be a way to deduct medical bills that may not be deductible on the tax return because of itemized deductions limits. Certain discrimination tests and documentation requirements exist for this type of plan.

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YBSF FEATURE

David Klingenberger, 34, has always known he would make a living by feeding people.

As a teenager, he expected that he would do so as a farmer. He learned the trade of organic farming while working at Tantre Farms in Chelsea, Michigan, where he developed a deep-rooted passion for food, farming, and ultimately fermentation.

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“When I was 17, I went out to Tantre and fell in love with farming,” says David. He made his first batch of sauerkraut in 2000, and has been hooked on fermentation ever since.

“Fermentation is one of the coolest ways to preserve food. Some of the finest foods on this planet are fermented: cheese, salami, bread, wine and beer. All the good stuff.”

He is now the owner of The Brinery in Ann Arbor, Michigan, a business founded on the necessity of preserving a field of autumn cabbage. David employs between 10 and 12 people, with five of those being full-time team members working on administration, production, sales and purchasing.

YBSF FEATURE

The Brinery creates everything from pickles to tempeh, sauerkraut, kimchi, and hot sauce. Embracing food cultures all over the world, David says their desire for variety and innovation leads them to try almost everything. Now with a part time chef on the team, he is able to test new products weekly.

“When I started this business four years ago, every time we made a new batch [of sauerkraut], we would jar it up and take it down to the farmer’s market to see how people liked it,” said David. “For better or worse, that’s how we keep evolving.”

Sourcing Michigan produce whenever possible, the team at The Brinery makes use of what is in season and plentiful.

“We really like to work with local farmers,” said David.

“Instead of going into the season saying ‘these are our recipes’ and having to fit it, we look at what is abundant and try to adapt to what is in season and what is delicious.”

David began working in a free commercial kitchen space, making sauerkraut in five gallon buckets before eventually finding a home at the Washtenaw Food Hub and upgrading to industrial barrels. The Washtenaw Food Hub, located near Ann Arbor, was founded in 2011 by the owners of Tantre Farms. It aims to promote economic development around the local food movement by providing space for processing, storage and distribution.

The Brinery buys most of their produce directly from farmers. For their signature sauerkraut, the vegetables are shredded and mixed with sea salt. Then they are packed into barrels, where they spend anywhere from six weeks to three months going through an anaerobic fermentation process.

“There has not been enough science put into sauerkrauts, but we’ve noticed the longer they go, the more complex and amazing the flavor is,” said David.

While he sells products on his website, his primary distribution is through local farmers markets. So far, The Brinery’s own variety of hot sauce has been its best-selling product. “People go crazy for it,” David said.

They have also experimented with products like tempeh, which is native to Indonesia and can be produced quickly, usually from dry bean to finished product within 48 hours.

“It is still in research and development,” he said. According to David, tempeh is one of the more difficult products to create. While making sauerkraut offers some flexibility with timing and temperature, the tempeh has to be precise. “It’s a completely different process. It’s like we have to re-create Indonesia,” he said.

Despite the difficulties of production, tempeh is a product The Brinery team is committed to perfecting. “Michigan is a leading producer of dry beans. Tempeh allows us to utilize these dry beans, which are non-perishable, for a year-round, locally grown product.”

Getting Started David says that from the very beginning, his motto has always been to just hit the ground running. “I started very grass-roots,” he said. “I had $600 in my pocket. It started incrementally and I never over-extended, and I didn’t over think it. I was looking for an entrepreneurial food-related experience and it just clicked.”

From his experience working at Tantre Farms, David built relationships with local restaurants and people in the Ann Arbor agricultural community. “I knew all the farmers. I knew farming,” he said. “I was able to translate that into a sauerkraut business pretty quickly.”

David cites his relationship with GreenStone as the one thing that gave him the ability to take his business to the next level. “GreenStone made everything possible,” he said.

“With the help of GreenStone, we’ve been able to be seen as a legitimate business.” David first learned of GreenStone Farm Credit Services through Richard Andres, owner of Tantre Farms, the Washtenaw Food Hub, and a GreenStone customer.

“I was actually out at the food hub visiting with Richard Andres and was introduced to David, and let him know that we could help him,” said Michael Niesyto, financial services officer for GreenStone. Michael has worked with David from that day forward. “David has been an absolute pleasure to work with. His passion for his business and agriculture is infectious. I’m excited to see where David and his team take The Brinery in the next few years.”

Gaining Momentum As The Brinery has grown, so has their recognition within the food community. The iconic Zingerman’s Delicatessen uses The Brinery’s sauerkraut on their best-selling Ruben sandwich. It was also through the connection with Zingerman’s that David was able to meet celebrity chef and

“ When I started this business four years ago, every time we made a new batch [of sauerkraut], we would jar it up and take it down to the farmer’s market to see how people liked it. For better or worse, that’s how we keep evolving.”

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YBSF FEATURE

part-time Michigan resident Mario Batali. David gave Batali some of his products, and now The Brinery is listed on Batali’s website as one of his favorite food producers in Michigan.

“A big part of the narrative for us is the sourcing,” said David. “Our goal is to add more direct contacts with farmers every year.”

The Brinery partners with programs like Grown in Detroit and the Michigan State University Student Organic Farm to help with that goal. Grown in Detroit produce is farmed by families and youth in urban and community gardens throughout the city and surrounding areas like Hamtramck and Highland Park. The Student Organic Farm at Michigan State University grew an acre of cabbage especially for The Brinery.

The students harvested the cabbage and came to Ann Arbor to learn the art of making sauerkraut with the cabbage they helped grow.

“It’s fun to have that synergy and cobranding,” said David. “It’s good for their program, and it is good for us because it is a unique thing.” As with many of their products, the sauerkraut bears the Student Organic Farm logo prominently on the front of the jar, which is sold at their weekly farm stand on campus.

The Brinery also gained national recognition as a winner of the 2014 Good Food Awards for its Sea Stag Kraut and Oh Gee Kimchi. Based in San Francisco, the Good Food Awards recognize the best artisan producers across the country with a blind tasting by top chefs, food journalists and food producers. David plans to enter the contest again, this time using a unique primary ingredient. “We’re using wild harvested Michigan ramps in a special batch of kimchi,” said David.

David and the team at The Brinery also love to share their knowledge of fermentation with the community.

They have hosted Fermentation 101 workshops at the Washtenaw Food 17

PARTNERS Fall 2014

Hub. “People love getting handson,” said David. “It helps us to share the culture of The Brinery and our love of fermentation. Every culture across the world has had some kind of fermented crop on their countertop, and people are really interested in making fermented foods at home.”

The Brinery’s tagline is “stimulating your inner economy.” It is a play on the intricate connection of health, culture, creativity and local farming. “What we’re doing here is culturing food,” said David. Passing on that knowledge and the love of fermentation is clearly a strong motivation for David and his team. “It’s an exciting, low-energy form of food preservation. Instead of storing it in a refrigerated room, it can be kept in a room that ranges from 60 to 80 degrees and the food is perfectly preserved.”

Now in their fourth year of business, David and his team are looking to the future. “Every year we have doubled our growth and it has been so quick,” said David. As part of their five year planning process, they brought on an intern from the University of Michigan business school to help. “Now, the bigger we grow, the more there is at stake and the more systems we have to have in place.”

Currently, their products are in more than 100 stores and restaurants. “I’m really doing some soul searching to find

Top: Jimmy Bates mixes the seasoned vegetables used in The Brinery's signature kraut.

Above: The MSU Student organic Farm sells The Brinery's sauerkraut at its weekly farm stand on campus.

where I want to be with The Brinery in five years from now, even 30 years from now,” said David. “I see us being really strong in the Midwest region. I hope that when people come to Ann Arbor, they think of The Brinery in the way they think of Zingerman’s. I want to be part of the fabric of the local food economy in Michigan, and bring attention to our products as Michigan grown and made.”

YBSF FEATURE

STRAIGHT TALK

Q:

hen you were eight, what W did you want to be when you grew up?

David: “ A magician, an astronaut,

a NBA basketball star and a detective. ”

Q: When did you first realize

that you wanted to farm for a living?

David:

“ When I was 18, working at Tantre Farms, I knew it was my path in life to feed people.

I thought it was going to be through farming, but it evolved into fermenting. Four years ago, I knew I wanted to feed people through the ancient art of fermentation”.

Q: Who do you look up to; who is your mentor?

David: “ Richard Andres, owner of

Tantre Farm and the owner of Zingerman’s Delicatessen in Ann Arbor.”

Q: What is the biggest

challenge for young, beginning, or small farmers today?

David: “ Access to funding, land and infrastructure. It is especially tough with agriculture.“

Q: What advice do you have

for young, beginning, or small farmers starting out?

David:

“ As a fermenter, don’t be afraid of failure. Grow it, make it, and get it to five or ten people, friends and family. Don’t wait for the perfect plan or wait 20 years for the dream facility.

Grow food, feed people, even if it just a few people to begin with.”

Intern Wrap Up In our previous, Summer Partners issue, we introduced seven interns who were beginning their 14 week journey with GreenStone. They returned to school this fall, but throughout their internship we learned about their post-graduation goals, tools they acquired during the internship, how GreenStone has helped their future, and so much more; the highlights are included here.

Adam Boes: Capital Markets Abby Carpenter: Regional Sales Joshua Jordal: Credit/Audit Juana Lopez: Training & Development Matt Perry: Information Systems Daniel Score: Information Systems Kelsey Vanderploeg: Regional Sales What have you enjoyed most about your internship?

Adam: My fellow co-workers, who are always so kind and willing to teach me new things.

Daniel: All the new practical things I’ve been learning to improve application development.

Kelsey: Getting to know the GreenStone employees that work in the corporate office and the other summer interns.

How has your experience helped your future?

Abby: This experience has given me a deeper look into the Farm Credit System and allowed me to see a future career in financial services.

Joshua: This internship has provided insight of how I can use my finance degree in the agriculture industry.

Daniel: GreenStone has given me an idea of the type of company I aim to work for. My knowledge in the information services field has immensely increased and I have built many great relationships!

What is most interesting about your day-to-day responsibilities with GreenStone?

Adam: The variety of activities I get to do, from conference calls to monitoring reports to research papers.

Juana: The assignment of different tasks and learning something new every day.

Kelsey: Interacting with the other GreenStone employees and interns. Everyone has made me feel welcome and has gladly helped with any problems I may have experienced.

What surprised you the most about your internship?

Joshua: How hands on and involved I am within my department as the credit intern.

Juana: All the administrative work it takes to plan an event and put together training courses.

Daniel: How quickly time is passing! The environment at GreenStone is great for learning, which makes it easy to come to work.

What are your plans after graduation?

Abby: To work in the agribusiness field with the intent of eventually returning home to help run my family’s fall agritourism business.

Joshua: To work as a credit analyst with a Farm Credit association or possibly work for an agrifinance firm. Also, I plan to purse a Master's Degree in agricultural finance or economics.

Matt: To find a job somewhat close to home for at least a few years before branching out.

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LAND VALUES

Study Shows Land Values Increased; Sales Slowing GreenStone recently completed a study of real estate land value trends. This is an annual study of land sales where a team of GreenStone certified and licensed staff appraisers update the corresponding valuation of a “benchmark farm” within GreenStone’s geographic territory of Michigan and northeast Wisconsin.

The study utilizes 10 geographic benchmark farms representative of the wide variation in crop land in our territory. Over the past eight years, these benchmark farm values have increased an average of 88 percent in Michigan and northeast Wisconsin. For the 12 month time period ending June 30, 2014, land values have continued to trend higher in all categories with an average increase of 11 percent. Within that average, prices varied significantly in different areas, from 2 percent to an almost 20 percent increase.

“While land values continued to increase over the July 2013 through June 2014 period, data from the last six months in the study indicate the market is softening. Our research

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confirmed a drop in the number of farm real estate sales when compared to the 2013 study. A slowdown in sales and a continued weakening of grain markets would support opinions that land values may be reaching their peak,” said James Garvey, vice president and chief appraiser for GreenStone.

The benchmark study is also used to analyze the changing real estate collateral risk of GreenStone’s loan portfolio. “This information is a critical component of our loan portfolio stress test,” said Paul Anderson, executive vice president and chief credit officer for GreenStone.

“We run multiple land price reduction scenarios on the portfolio, which is primarily based on the rate of increase in land values over the past eight years.

The use of the study information is one of many proactive risk management

tools we utilize to assess the risk bearing capacity of GreenStone. Our objective is to position the association in a financially responsible manner to ensure the continued delivery of sound, constructive credit to our customers even in a prolonged, financially challenged environment that agriculture may face at some time in the future.”

While GreenStone’s appraisal team does not reference the benchmarks as part of their formal customer appraisal process, their execution of this study does speak to the knowledge and expertise customers have direct access to when they finance with GreenStone. The training, education and qualifications required of association appraisers ensure GreenStone customers receive prompt, thorough, experienced and more accurate results.

FARM BILL

2014

FARM BILL COMPLEXITY SIMPLIFIED

The 2014 Farm Bill brought about many positive changes. It expanded risk management opportunities for specialty crop growers, created new programs for dairy producers (Dairy Margin Protection), and provided additional benefits to young, beginning, and small farmers and ranchers.

With those changes also came changes for the traditional commodity programs.

Coming early next year, producers will be required to make a one-time decision to enroll in either the Price Loss Coverage (PLC) or Area Revenue Coverage (ARC) commodity programs through their local Farm Service Agency office.

These new commodity programs were created in the 2014 Farm Bill in order to strengthen the safety net available to America's farmers. If there is a down side to expanding the commodity programs, it is that they usually become more complicated. This trend has held true with the Dairy Margin Protection (DMP), PLC and ARC programs.

To this point, GreenStone is ready to once again be the trusted advisor for you, our producers. We have researched the changes, attended trainings, and are here to make sure you have the information and tools needed to make informed decisions.

Today, you can learn more on the PLC and ARC programs, as well as the new DMP,

through two newsletters we recently published. Both are available at your local GreenStone branch, or you can find them on the publications page of our website: www.greenstonefcs. com/publications.

GreenStone recently finished a series of education sessions where we partnered with Michigan State University Extension to educate producers on the DMP program. Starting in late 2014/early 2015, GreenStone will also host a series of informational meetings through Michigan and northeast Wisconsin to provide more in depth knowledge on the PLC and ARC programs to help you be prepared to make an informed decision for your operation.

As more information on these programs and the forthcoming informational meetings become available, we will make sure to keep you informed of the details.

In the meantime, do not wait to meet with your local GreenStone crop insurance specialist to start discussing the best options for you!

GreenStone Office Updates Bad Axe, Michigan: A new office will be built on South Van Dyke Road in Bad Axe. Construction began in August with the move planned for early 2015.

Schoolcraft, Michigan: Construction will start in October for a new office at the same location. The completion is anticipated in Spring 2015.

Alma, Michigan: In 2015, a new office will be constructed on West Monroe Road in Alma.

CALENDAR OF EVENTS SEPTEMBER [30-Oct 4] World Dairy Expo Alliant Energy Center, Madison, WI

NOVEMBER [8]

39th Annual AutumnFest MSU Pavilion, East Lansing, MI

[27-28]

GreenStone Offices Closed In Honor of Thanksgiving

DECEMBER [9-11] Great Lakes Fruit,

Vegetable and Farm

Market Expo

DeVos Place Convention Center, Grand Rapids, MI [24-25]

GreenStone Offices Closed In Honor of the Holiday

JANUARY [1]

GreenStone Offices Closed In Honor of the New Year

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DIRECTORS' PERSPECTIVE

DIRECTORS’ PERSPECTIVE GreenStone serves a very valuable purpose in providing an essential part of our productive economy, agriculture, with sufficient capital to expand and prosper. It needs the guidance, expertise, and commitment of all 16 members of the board of directors to be successful.

Within those 16 individuals sit two appointed directors. Their role is to provide perspective and an outside view that the board and management can utilize to define the organization's goals.

The 14 elected members are operating agricultural enterprises; they are highly sophisticated, and are most knowledgeable in their specific area of farm business. Part of the outside director's value is to be able to see the organization from a macro perspective and focus on the larger view. Here, GreenStone’s appointed directors, Dennis Muchmore and Gene College, share their perspective on the role of their appointed director position and the expertise they bring to our cooperative members.

1. W hat compelled you in agreeing to join GreenStone’s board of directors; what is your position on the board and what area of expertise you provide?

Dennis: GreenStone has been and continues to be one of the most exhilarating and interesting opportunities experienced in my professional life. During my twelve years, I have been part of a highly successful effort to expand the breadth of the Legislative/Public Policy Committee. Each of the board members and GreenStone management team have been very supportive as we listened to our members and moved to becoming more engaged in both state and federal efforts, and greatly expand our communications with members relating to politics. Having spent most of my life in politics, I feel passionately about the need for everyone to participate in the public process. However, again and again, the board’s Legislative/Public Policy Committee has

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invigorated GreenStone's position in the political process and enhanced our standing.

Gene: Five years ago, I was asked by the GreenStone board to serve as one of two appointed directors. It was an easy decision to make because I knew GreenStone was a very well managed entity with great core values. It obviously provides an array of financially loan related products, but what stood out was the emphasis of serving customers. It was that serving aspect that was most critical to me.

2. H ighlight your professional background and notable personal elements of your autobiography.

Dennis: For over forty years, I have been intimately involved in the political process, as a consultant and administrative assistant to the State Senate, SVP of the Michigan Chamber of Commerce, owner of a government affairs company, executive director of a major association and as Chief of Staff to the Governor of Michigan. On a personal note, my wife Deb and I live near Laingsburg, Michigan with our dog, Spot.

DIRECTORS' PERSPECTIVE

Dennis Muchmore

Gene College

4. F rom your professional perspective, what are the prominent areas of focus for GreenStone?

Gene: My background is essentially finance oriented. I started my career with a public accounting firm in Minneapolis, and then took a position as chief financial officer with a Farm Credit bank/associations serving a part of the Midwest where I finished my working career. Home is in Omaha, Nebraska; and my two children and four grandchildren round out my family.

3. I n your opinion, why are appointed directors necessary for a cooperative? Are there key differences in the responsibilities of an appointed director verses an elected member director?

Dennis: Appointed directors are simply perspective managers. We are neither farm income dependent nor reportable to any segment of the business; rather, we perform what is a fiduciary responsibility to the members of the cooperative and the organization as a whole. Both Gene and I take our responsibilities very seriously, but enjoy our association with a great management team and the integrity of our fellow board members.

Best practices typically require two outside directors, and at least one of us have extensive analytical financial experience that can be utilized on the Audit Committee, while the other is able to serve in other capacities.

Gene: GreenStone has two appointed directors in addition to 14 stockholderelected directors. I currently serve as chairperson of the Audit Committee.

Appointed directors are generally selected to fill a specific role of emphasis on the board. As a result of my lengthy career in the accounting/ finance side of an organization, my role includes assisting the board in evaluating financial reports, internal controls, compliance matters, etc.

In reality, however, I am merely one of 16 well qualified board members whose focus is to maintain a financially sound organization committed to meeting customer needs in a manner that is as personal and professional as possible.

Dennis: If we serve our customers, develop good products and maintain a satisfying professional environment for our employees, we will continue to keep the focus GreenStone is known for and for which members are appreciative. Competition is the best antidote for any complacency, and we have plenty of competition. It is a lot easier to take care of a customer you already have than find a new one, so if the major thrust of our focus is our customer, we will continue to be successful.

Gene: GreenStone is currently evaluating additional services that it can make available to customers, including potential assistance in the information technology area; but GreenStone’s focus will always be on providing what is ultimately best for the customer.

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LEGISLATIVE MATTERS

Legislative Matters As a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) in 2010, the Consumer Financial Protection Bureau (CFPB) was created as a new federal agency. The resulting effect has been dramatic on consumer financial services throughout the U.S. It has been reported that this legislation has brought the most significant changes to financial regulation since the Great Depression. Although the Farm Credit System is not directly regulated by the CFPB, because the Farm Credit Administration (FCA) is its primary financial regulatory agency, GreenStone is required to address the CFPB consumer regulation changes within its applicable product offerings.

“ The CFPB is an independent bureau within the Federal Reserve System with the purpose of promoting fairness and transparency among mortgages, credit cards, and other consumer financial products and services.”

The CFPB is an independent bureau within the Federal Reserve System with the purpose of promoting fairness and transparency among mortgages, credit cards, and other consumer financial products and services. The CFPB intends to establish and enforce clear, consistent rules that allow consumers to openly see the costs and features of products and services. The regulatory framework and oversight of the FCA is to act under its own authority to assure the Farm Credit System functions within many of the CFPB rules for consumer product offerings.

Of the regulatory changes the CFPB has released, its most recent final rule will take effect on Aug. 1, 2015 for new integrated mortgage disclosures. The rule incorporates the forms required under the Truth in Lending Act (TILA) and the Real Estate Settlement and Procedures Act (RESPA). The closing process will significantly change as a Loan Estimate will replace the current Good Faith Estimate and early TILA disclosure, while a Closing Disclosure will replace the HUD-1 and final TILA disclosure.

GreenStone’s Compliance Work Group continues to address all of the requirements of the CFPB. This group of professionals represent a cross-section of disciplines whose areas of responsibilities is managing and delivering the GreenStone products and services affected by the regulations. Members of the team include credit, technology, legal, accounting, training, marketplace, operational and internal audit professionals. GreenStone has approximately 38 different existing policies that have already been impacted by these regulations, and several new policies and procedures are being developed to meet further requirements.

While GreenStone is fully committed to meeting all federal requirements, it is not always without impact to the customer. The added steps dictated by compliance rules unfortunately mean a more complex and time consuming process for our customers. Our team will continue to evaluate options to be compliant while minimizing the impact on your experience.

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LEGISLATIVE MATTERS

PAC PROGRESS: MI GreenStone PAC We continue to coordinate with other agricultural leaders and their associations to make this voice strong. The Legislative/Public Policy Committee of the GreenStone Board of Directors has met to provide membership perspective and focus on the course of the MI GreenStone PAC. The committee has also received input from GreenStone's lobbying consultant, Kelley Cawthorne, to help identify current legislative leaders who are important to sound agriculture policy on a statewide basis.

MI GreenStone PAC has currently identified 15 state Senators and 17

Since the summer issue of Partners, GreenStone has been active in continuing to build relationships to keep the voice of agriculture ringing in the ears of the Michigan legislature in a meaningful way.

state Representatives as targeted recipients of PAC proceeds.

Additionally, the state’s Attorney General and Secretary of State are supported candidates, as they have demonstrated an open ear to listen to agriculture policy issues. GreenStone leadership is well underway in its effort to make disbursements with personal contact to each candidate.

This usually occurs with other common and complementary interests coming together to share in the message of the importance of protecting agriculture and rural interests of our state.

As reported in the last Partners issue, we have approximately $18,000 to distribute from 2014 MI GreenStone PAC membership drive efforts. Of that, $7,050 will be distributed to senate candidates, and $8,000 to representative candidates. The balance will be held in reserve to identify any late arising support communication needs.

The message that is brought forward is fairly simple: do not forget about the importance of rural Michigan and the agricultural diversity of the state.

While population may be shrinking in rural Michigan, it is an important asset to protect, and a key economic driver for all of us. We appreciate that our GreenStone members stand proudly with other agricultural interests throughout the state.

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GUEST COLUMN

LAKE ERIE ALGAL BLOOMS– It’s a Complicated Issue By: Alan Hahn In the summer of 2014, nearly a half million people in northeastern Ohio and southeastern Michigan were unable to use their tap water for consumption or bathing.

Naturally-occurring, blue-green algae had grown and formed a Harmful Algal Bloom (HAB) in Lake Erie.

What caused this HAB and how to avoid future incidents has been the subject of considerable conversation. As expected, some of the attention has been directed toward agriculture in the Lake Erie watershed.

Who is to blame and what the possible solutions might be are complicated.

Part of the problem of this particular HAB is attributed to northerly winds that pushed the bloom to Toledo’s water intake.

According to NOAA Great Lakes Environmental Research Lab, the 2014 bloom is neither larger nor more intense than any other recent year; it has

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simply had a more direct human impact because of its location in Maumee Bay. Reducing the likelihood of future algal blooms from becoming HABs requires that we better understand the nutrients that are feeding these blooms. A recent report in Great Lakes Now suggests the bad actor is dissolved phosphorus. According to Dr. Jeffrey Reutter, Director of Ohio State University’s Sea Grant Program, “…the one (source) that contributes the most or puts in the largest portion of the (dissolved phosphorus) load is agricultural runoff…so we

GUEST COLUMN

are trying to not apply more than (is) needed and (to) modify the way they apply fertilizer, we think pretty much those two things together will solve the problem.”

However, it is not that simple, says Dr. Patrick Doran, Michigan Director of the Nature Conservancy. He points out that the problem is complex and involves other factors, such as invasive species (e.g., zebra mussels) that have created much clearer waters in

the Great Lakes. This clearer water, in turn, allows sunlight to penetrate deeper into the water column, creating a better environment for photosynthesis and subsequent algal growth.

Tim Davis, a HAB specialist with the NOAA Great Lakes Environmental Research Lab, agrees. He pointed out that nitrogen is the other nutrient that we need to be concerned about.

In fact, my colleague, Dr. Michael Sklash, recently conducted a webinar on assessment of nitrogen run-off for National Milk Producers Federation (See National Milk Producers Federation’s website for details).

To complicate this issue further, the Great Lakes watershed is shared by two countries: the U.S. and Canada. In fact, the International Joint

Commission (IJC) issued a report in early 2014 on the HAB issue in Lake Erie. The IJC looked at ways to reduce blooms and phosphorus loading. They provided suggestions including the use of Best Management Practices at farms, addressing urban runoff, and restoring coastal wetlands.

So who or what is to blame for HABs? There are no easy answers. But with the recent passage of the Harmful Algal Bloom and Hypoxia Research and Control Amendments Act of 2014, expect more research dollars to be spent on understanding the cause(s) of this “growing” problem.

Finally, while everyone should be fully supportive of finding a solution to this issue, we caution everyone (farms, municipalities, or others) not to commit to an order or request by a state or federal regulator without appropriate legal and technical advice.

ABOUT THE AUTHOR Alan Hahn is an Environmental Professional and Business Development Manager at The Dragun Corporation in Farmington Hills, Michigan The opinions stated herein are not necessarily those of GreenStone Farm Credit Services.

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