Page 1

Winter 2014

Gearing Up for Transition


yields

Winter 2014

Who we are: Northwest Farm Credit Services is a customer-owned, financial services cooperative, providing more than $11 billion in credit, crop insurance, and related services to farmers, ranchers, agribusinesses, commercial fishermen, forest products producers, equipment dealers, chemical suppliers, part-time farmers, and country homeowners.

Board of Directors Karen Schott, Chair, Broadview, MT Dave Hedlin, Vice Chair, Mount Vernon, WA Rick Barnes, Callahan, CA Christy Burmeister-Smith, Newman Lake, WA Drew Eggers, Meridian, ID Jim Farmer, Nyssa, OR Mark Gehring, Salem, OR John Helle, Dillon, MT

FEATURE STORY > 5 Halibut is mostly caught in the frigid water west of Canada and in the Gulf of Alaska. The tough-to-find halibut is fished farther west in the Aleutian Islands and north of the Bering Sea. Halibut and black cod are typically caught long-lining, an environmentally friendly catch method that also preserves the quality of the fish.

Herb Karst, Billings, MT Bruce Nelson, Spokane, WA Dave Nisbet, Bay Center, WA Kevin Riel, Yakima, WA Julie Shiflett, Spokane, WA Shawn Walters, Newdale, ID

About Yields Yields is produced for stockholders of Northwest FCS, an Agricultural Credit Association. Comments and story ideas can be sent to the Marketing Department, c/o Northwest FCS, P.O. Box 2515, Spokane, Washington 99220-2515. website: northwestfcs.com

New RateWise™ program for young, beginning, small producers > 13 Rural Community Grants > 15

Northwest Farm Credit Services is an equal opportunity employer and does not discriminate on the basis of race, color, religion, sex, national origin, marital status, age, disability,

National Customer Discount Program > 17

disabled veteran, Vietnam era or other eligible veteran status.


Our Depth of Experience Phil DiPofi, President and CEO

The Farm Credit System was chartered nearly 100 years ago to serve producers in every county of the United States. Some people may not know Northwest FCS’ chartered territory includes Alaska. Our board and management team have been evaluating how we are serving this remote and challenging marketplace. While production agriculture is more limited, we are serving some producers who are overcoming harsh weather, short growing seasons and a lack of ag infrastructure to be successful. Northwest FCS is well known as an agricultural lender, yet some may not realize we also finance the commercial fishing industry, primarily out of our Seattle office. Seattle is home port to hundreds of vessels fishing in Alaskan waters and along the west coast of the United States. These fishing operations vary considerably in size, from small, salmon gillnetters to some of the largest catcher/processors in the fleet. Commercial fishing can be a risky business but the potential for returns can be significant. We are very fortunate to have employees who deeply understand the complexities of the industry and who work with some of the most successful fishermen in the Pacific Northwest and Alaska. Caring more about our customers and the industries we serve sets us apart from other lenders. You will see this philosophy ingrained when you talk to our staff, board or local advisors. You may find some financial institutions – community, regional and national banks – that do a good job serving some segments of agriculture some of the time. But, I don’t think they have near the depth and breadth of experience to serve our customers who produce and process nearly 150 different commodities. Sharing our knowledge, expertise and long-term commitment gives us an edge in an increasingly diverse, complex and volatile market. We see tremendous future growth potential for our customer-owners. We appreciate the opportunity to serve you and look forward to another successful year.

yields Winter 2014

|2


Northwest FCS Board Members Retire Many thanks to Bruce Nelson of Spokane, Wash., and Drew Eggers of Meridian, Idaho who retired from the Northwest FCS Board of Directors in January 2014. Bruce and Drew were asked to share their insights after serving on the Northwest FCS board 15 years and 13 years respectively.

Bruce Nelson

What are you most proud of?

Joined the Northwest FCS board in April 1999

I’m most proud of the way the board worked together to solve issues. In all my time on the board I had complete trust in every director and they had trust in me. We were a board that could do good, productive business. We didn’t necessarily agree all the time, but as a group we supported the final decision. It was truly a team effort and we accomplished some great things together.

Served as Northwest Board Chair 2008 through 2009 Served on the National Farm Credit Council Board from January 2003 through December 2011; served as FCC Board Chair 2007 - 2008

What are some of the lessons you’ve learned serving on the board of Northwest FCS? Being a customer, a stockholder and now serving on the board has instilled in me the true character of Northwest FCS. We serve our customer-owners. We preserve this association to be here in good times and bad times. We don’t run when things get tough. We know agriculture and we understand our customers’ businesses better than any other banking institution. When our customers get into trouble we’re there, hopefully to keep them farming and out of trouble to begin with. During my time on the board I’ve learned we’re not flawless either. It’s no different than farming. No matter how good you think you are, how good your employees are, or how well your processes work, there’s going to be a glitch. There’s always something you never imagined would happen. I remember the dot.com industry crash. Those were challenging times. Things happened that just came out of the blue. But the problem solving is the fun part. Challenging times are always the most interesting to work through and learn from. 3 | Nor thwest Farm Credit Ser vices

The number one job of the board is to fire or hire a CEO. Fortunately, we had the opportunity to hire one when Phil DiPofi joined Northwest FCS in 2011. I feel this was one of our greatest accomplishments as a board.

As you retire from the board, what thoughts would you leave with Northwest FCS customerowners? If the Farm Credit System wasn’t here, agriculture would be paying a lot more for their money. There would be no checks and balances with other lenders. Agriculture would be considered a high-risk business all the time. Stockholders should be very proud of this association and the Farm Credit System. It’s very unusual for a government sponsored enterprise or program to really work the way it’s supposed to. The Farm Credit System does. There are great people in the Farm Credit System. I was very fortunate to be able to meet many of them across the country. When it comes down to it, Northwest FCS is truly the best and this great work will continue. It was an honor to work with everyone on the board, the management team, local advisors and employees. This was truly the fun part of the job for me.


During my

Drew Eggers

last term as Joined the Northwest FCS board in February 2001

director, I knew

Served as Northwest FCS Board Chair in 2010

would need

the board to hire a new CEO when Jay Penick retired. I was fortunate to be chairman of the board

What are some of the lessons you’ve learned

during that

serving on the board of Northwest FCS?

time. I’m very proud of the process the board went through During my tenure on the board I’ve seen excellent times

and the result of bringing Phil DiPofi to Northwest FCS. The board’s number one job is to hire the CEO and I think we did an excellent job.

in agriculture – when our numbers were strong and nonaccruals were

As you retire from the board, what thoughts would you leave with Northwest FCS customerowners?

almost non-existent – to challenging

There is no doubt in my mind that Northwest FCS will be

times when stressed

here to serve farmers and ranchers for many generations to

loans were an area

come. I’ve thoroughly enjoyed my time as a director and I

of concern. I’ve been

think I’m leaving the board at a great time. We’ve seen quite

very pleased with the way management, employees and

a few directors reach their term limits over the years. We

the board worked through the challenging situations and

sure missed them, but they were replaced with some great

tough times. The association is strong even when some of

directors who brought new energy, ideas and a willingness

our commodities struggle. I think that’s a testament to our

to learn. I was one of 14 directors on the board. I’m confident

diversity in the Northwest. We can spread our risk so if a

the person who sits in my chair will continue to do the job

few industries aren’t doing well, the rest are able to help us

well and keep the association strong for the future.

weather the storm. I’m a farmer with an engineering background and I’ve always had a good understanding of my own budget and balance sheet. But, I hadn’t been exposed much to the world of finance. I’ve enjoyed learning how the financial industry does its job to make funding available for farmers and ranchers. Agriculture is a risky business. It’s mind blowing to see the risk management processes Northwest FCS uses to cover a lot of those risks and uncertainties.

What are you most proud of? In my early years on the board, we worked really hard to re-affiliate with CoBank, our Farm Credit System wholesale bank. It was quite a process to work through. Today, we have a great relationship with CoBank and we’ve been able to partner very well to serve all segments of agriculture.

yields Winter 2014

|4


Gearing Up for Transition

Paul Clampitt and his oldest son Ben who now captains their longliner vessel.

When Paul Clampitt was a college student in the 1970s people were talking about the “Population Bomb” that would outpace agricultural growth, leading to starvation and societal upheavals across the globe. Paul was studying marine resources at Western Washington University. His generation believed they would eventually feed the world’s population from the ocean’s deep, abundant resources. While the demand for food continues to grow, plenty has changed in the U.S. fishing industry as Paul prepares his sons to take the helm of the family business.

5 | Nor thwest Farm Credit Ser vices


yields Winter 2014 | 6


Gone are the days of derby-style fishing where thousands of boats chased fish in a high-stakes competition with other vessels. Today, the National Marine Fisheries Service issues a limited number of permits and establishes a maximum Total Allowable Catch annually for most major fisheries (aka, a single species in a single fishing ground) to protect the ocean’s biomass, increase crewmember safety and improve the quality of the fish. Individual Fishing Quotas were established in 1995 for halibut and black cod in a new, federally-regulated system. Simply put, these fisheries were divided into pieces like a pie. Eligible vessel owners were given a slice – a percentage of the Total Allowable Catch – based on a fiveyear fishing history. IFQs now determine the number of pounds by species they’re allowed to harvest each year. Under this “rationalized” system, the quota holders can fish, lease, sell or otherwise transfer their quota based on program rules. The first generation of quota owners is allowed to hire a skipper and lease the right to fish for their shares. The system includes restrictions designed to prevent too many quota shares from falling into too few hands by instilling ownership, or vessel caps. To date, many credit this system for transforming the industry from a bruising race for fish into a civil affair of contracts and cooperation, efficiency and higher profits.

“We fished years before the black cod and halibut fisheries were rationalized so we ended up with a lot of quota, which was fantastic,” explains Paul. “If we had fished one Jake Clampitt more year in the Pacific cod fishery before it was rationalized, we would have ended up with quota there, too. IFQs are a boon because you can build your business plan around them. I know how many pounds I’m going to catch before the season starts. And we will catch those fish! But, the Total Allowable Catch continues to decline.”

Total Allowable Catch Trends

Price Trends

70,000,000

$8.00

60,000,000

$7.00

50,000,000

$6.00 $5.00

40,000,000

$4.00 30,000,000

$3.00

20,000,000

$2.00 Black cod TAC

10,000,000

Halibut TAC

0 2004

2005

2006

2007

2008

2009

7 | Nor thwest Farm Credit Ser vices

2010

2011

2012

2013

Black cod ex-vessel price

$1.00 $-

Halibut ex-vessel price

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013


The Clampitts’ vessel, the Augustine, is an 81-foot schooner-style longliner. Paul’s sons, Ben 37 and Jake 24, remember spending 18 hours a day hand-baiting hooks on the open seas. Ben has been fishing for 20 years. Imagine baiting some 15,000 hooks by hand, day after day after day. To improve efficiency and reduce injuries, the Clampitts invested $300,000 in an automatic baiting system financed by Northwest FCS in 2009. The equipment Paul remembers a time when the TAC for Typically, when can bait 180 hooks a minute (three per the Alaskan halibut fishery was more than second) and has reduced the number of the TAC declines 58 million pounds. In 2013, the TAC was prices increase with crew members needed from six to four. The down to just over 21 million pounds, an technology paid for itself in just two years. a limited supply, all-time low, and is expected to decrease Plus, you don’t pay personal liability insurance and vice versa. But, another 21 percent this year. on a piece of equipment.

that’s not always “We carry $10 million of liability coverage per Asia and European markets have a major the case. incident, per person,” says Paul. “We used to impact on fish prices and buyer demand carry $1 million in coverage which is pretty standard in can be affected by a number of factors, including foreign the fleet. But, in 1992 I had a boat sink with five guys in exchange rates. Approximately 90 percent of black cod is shipped to Japan. Three years ago, with a weak dollar against the yen, black cod prices were at an all-time high. Today, prices have plummeted along with black cod quotas. To deal with the declining trends, the Clampitts are improving efficiency, reducing labor costs and diversifying their operation beyond halibut and black cod.

Increasing efficiency in the longline fishery Halibut is mostly caught in the frigid water west of Canada and in the Gulf of Alaska. The tough-to-find halibut is fished farther west in the Aleutian Islands and north of the Bering Sea. Halibut and black cod are typically caught longlining, an environmentally friendly catch method that also preserves the quality of the fish. Longlining translates into hundreds of hooks on 9,000plus feet of line, then hauling in the “strings” of the catch. String is an interesting word for it. The mainline is close to half an inch thick in diameter, with a breaking strength of more than 1,800 pounds. Every 36 to 48 inches a leader and hook are tied to the mainline.

The auto-baiting system handles the entire process from baiting, setting the line, hauling the line, hook cleaning and storage. Photo courtesy of Mustad Autoline.

the Bering Sea. They spent five hours in the water before a Coast Guard helicopter made a heroes’ rescue. We fall under the maritime Jones Act, which means if anything happens we’re responsible. They ended up suing me for pain and suffering. And you know what? They did suffer. I said you can have the money; you deserve it. But, the incident taught me something – we needed more coverage to protect our risk.”

yields Winter 2014 | 8


Diversifying operations In a typical year, the Clampitts will leave the port of Seattle in March, fish the Gulf of Alaska, head out to the Bering Sea, and finish off the coast of Washington and Oregon before Halloween. That’s eight long months at sea. But, with a drop in quota and prices the Clampitts are changing their business plan. This year they will put their quota on other boats in the far-reaching areas and pick up quota leases in areas closer to home. During the summer months they’ll now “tender” for salmon processors, a strategy that requires a complete stem-tostern renovation of the Augustine to install a state-of-the art refrigeration system financed by Northwest FCS.

“In the past, when the halibut quota was down we’d become black cod fishermen and fish halibut part time, or the other way around,” says Paul. “But, when both quotas are down you’re watching your equity dissolve. If everything is rationalized you can’t go another direction. You better not wait for that eventuality. While we still have strong equity we’re going to take advantage of opportunities, like tendering.”

Vessels that “tender” for salmon processors in Alaska are like giant fish taxis. The boats are designed to hold hefty amounts of fish and keep them chilled as they’re transported from salmon boats to processors on the docks. The Augustine will be able to hold more than 250,000 pounds of salmon when the project is complete. Plus, it only takes two or three crew members to tender. The Alaskan salmon fisheries are booming and tendering doesn’t require quota or a permit.

To create a level playing field, the aggressive, fast-paced salmon fishery in Bristol Bay limits vessel length to 32 feet, increasing the need for large tendering vessels to deliver salmon to processors on the dock.

9 | Nor thwest Farm Credit Ser vices

Northwest FCS Relationship Manager Evan Heriot and Paul view installation of the new refrigeration system.

“We’re investing a lot of money to get the Augustine ready to tender,” says Ben. “But, in the end we’re adding value to the boat. It’s not like buying quota that can


always go down. If you were going to buy $500 grand in quota and it drops, then you’re looking at some real potential losses.”

Whales take the catch Whale “predation” is quickly becoming a serious problem for fishermen, particularly in the black cod fisheries. Some estimate killer and sperm whales are taking 20 to 30 percent of their catch. These whales are smart and they’re getting smarter all the time. Working in pods, they will grab the mainline, pull it taut and simply snap the fish off the line to avoid getting hooks in their mouths. Fishermen have tried a number of strategies, including high-pitch sound waves to keep them away. The noise worked for a while but now it’s like ringing a dinner bell. Jake uses this analogy, “Imagine working on a critically important project when someone lets a monkey into the office. The monkey wreaks havoc, continually tearing the project apart. You’re not allowed to go home until the project is done. There’s nothing you can do but start over and over again. People say you can’t touch the monkey because he’s protected. You can’t even think bad thoughts about the monkey.” Right now, scientific observers seem to discount the whale problem. “They say whales are only taking 2 percent of the fish,” says Paul. “That’s because, if they don’t see a black cod head or lip left on a hook they can’t count it on the longline survey. Whales don’t operate that way. They aren’t eating part of the fish; they’re taking the whole thing. The scientists’ goal is to determine what the harvest level should be so it doesn’t jeopardize the fisheries. If you can’t measure the whale predation how does that affect their biomass models? It compresses them. If whales are only taking 2 percent, then there’s obviously less fish. But, if whales are taking 20 to 30 percent the biomass is actually larger.”

the opportunity with modifications being made to the Augustine. Currently, pot fishing for black cod is illegal in the Gulf of Alaska. However, pot fishing is allowed in the Bering Sea and along the west coast of the United States and Canada. Opponents argue that pot fishing allows a fisherman to “hold” the fishing ground, basically preempting a longliner’s gear. Paul understands the fears, but he thinks they’re overblown. “In the early 80s some pot boats in southeast Alaska out competed the longliners. The longliners had more political clout so they lobbied for an amendment to make pot fishing illegal. But, that was during the derby-style fishing days before IFQs were established. Now we have our quota, so what difference does it make if we catch it by pots or by hooks? I’m on the North Pacific Fishing Council’s gear committee. There will be details to work out – like not letting someone just drop their pots and head into town or putting limits on the number of pots that can be used – but I don’t think there’s any way around making the change. I do believe it’s going to happen sooner or later. Hopefully for us it’s sooner.”

Proposing a gear change Paul believes a shift to pot fishing may be the solution to the whale predation problem. The Clampitts are preparing to take advantage of

yields Winter 2014 | 10


Planning for succession Like farming, helping the next generation get started in commercial fishing is a challenge, particularly in a rationalized fishery with expensive quota shares. Last year Paul bought out his 20-year partner on the Augustine to give Ben and Jake an opportunity to build equity of their own. Ben now owns 20 percent of the vessel and has purchased more than $1 million in quota with the help of Northwest FCS. Ben has been the vessel’s captain in Alaska since 2009. Jake just finished his first, full-year fishing season after college and recently bought his first quota shares.

say. Sometimes the ocean just needs time to replenish and rebuild. Fishing rules are designed to make sure the public resource is sustainable long-term. In the meantime, the Clampitts will continue to explore new opportunities when they launch the Augustine in March. “I’m always excited when the season starts and the guys come back,” says Ben. “This is something I grew up doing. Fishing reminds me of playing sports. You have this camaraderie with the crew and there’s always some good, healthy competition within the fleet. We talk about who had the biggest ‘man share’ and we’ve always been in the top 10. Fishing is physical, too, and you’re working outside. Where else do you get to see glaciers and

“For a young person like me, thank God this is a family business,” says Ben. “I couldn’t do this without my dad. I know the amount of money I’ve put into buying quota and it’s only a sliver of what he has.” “Barriers to entry for the next generation are a big concern in the industry,” says Paul. “The rules make it almost impossible for me to pass quota to my kids. The current thinking is that I have to sell my quota when I retire, which will lower the price and make it easier for the next generation to get in. But, the theory doesn’t hold true. I didn’t pay for my quota initially because everything was based on my fishing history. If I were to sell quota to my boys now, I’d have to sell at the market rate and pay capital gains. There has to be a better solution.”

Looking to the future The Clampitts are optimistic about the future despite some of the challenges. They’re fishermen after all, well known for their seafaring spirit and guts. There will always be ups and downs in the fish populations, they

Alaskan mountain ranges on the job? It’s a pretty cool landscape to work in.”

Evolution of the U.S. Fishing Industry • In 1976 Congress passed the Magnuson-Stevens Act, establishing U.S. authority for all fishery management activities within a 200 nautical mile zone off U.S. shores. Prior to 1976, these areas were considered international waters, dominated by large, foreign vessels. • The Magnuson-Stevens Act (named for Warren Magnuson, former U.S. Senator from Washington and Ted Stevens, former senator from Alaska) sets the rules and regulations under which the federal fisheries are administered. • The National Marine Fisheries Service regulates federal waters (between three and 200 miles off U.S. shores). The NMFS is a federal agency, reporting through the National Oceanic and Atmospheric Administration to the U.S. Secretary of Commerce. • Fishery Management Councils were established for all federal waters in each area of the United States. The North Pacific Fishery Management Council regulates federal waters in Alaska. The Pacific Fishery Management Council regulates federal waters off Washington, Oregon and California. Council members include representatives from the fishing industry, fisheries scientists and the U.S. Coast Guard. • Fishery Management Councils recommend maximum catch limits for each fishery. With approval by the National Marine Fisheries Service and the U.S. Secretary of Commerce, Total Allowable Catch limits are set annually in Alaska and every two years in Washington, Oregon and California. The Councils also recommend quota share systems within in each fishing sector. • When a fishery is “rationalized” a form of privatization of a public resource occurs and participants in the fishery are defined in terms of who has access to fish (limited to specific participants) and to what extent they have access (based on their past catch history). • In 1995, the black cod and halibut industries were rationalized after years of debate and discussions. Under the system, Individual Fishing Quotas were given to vessel owners based on a five-year catch history. These IFQs can be fished, leased, sold or transferred based on program rules.

11 | Nor thwest Farm Credit Ser vices


Farming the Alaskan Frontier

With winter days lasting just a few hours and temperatures regularly dropping far below zero, it’s no surprise that the land of the midnight sun isn’t known for its agriculture. Yet despite the challenges, Northwest FCS customer Scott Plagerman is one hard-working member of a small and dedicated group of Alaskan agriculture producers. Scott and his wife, Connie, raise bison and hay and board horses on their 800 acre farm 100 miles away from Fairbanks. Native Washingtonians, what brought them to Alaska is almost as interesting as the challenges they face in this extreme location. Five years ago, they were dairy farmers in western Washington, having spent more than 15 years doing custom harvesting. One evening, Scott watched a television program about farming in Alaska and became intrigued. A quick Google search located a farm for sale, and when he asked Connie about relocating north, her reply was a quick, “Let’s do it!” This intrepid spirit has served them well as they’ve adjusted not only to the short days of winter, but the exceptionally long days of summer. “We have a short growing season, but once it starts, the grass grows fast,” Scott says. “It greens up in May and three weeks later the crop is ready to cut.” It helps that much of the Plagermans’ land is irrigated, which yields them two or three good hay cuttings in a season. Irrigation is also helpful when faced with a serious drought as they were this past year. Scott’s production was cut short and he ended up needing to buy and transport hay out of British Columbia to meet his customers’ needs. These customers are primarily horse and cattle owners, who buy three quarters of Scott’s 2,000 tons of hay; the remainder he keeps for his own horses and the 40 to 80 animals he boards for outfitters during the winter months.

he says. “Every pasture has several acres of wood for wind protection and they know how to go into it.” Good quality feed and a consistent water supply – delivered using an extensive system of heated pipes – are also essential for animal health. Scott’s bison are sold to a destination restaurant near Denali National Park. While the weather and daylight fluctuations are key differences from his days in Washington, one of the biggest challenges Scott faces in Alaska is the lack of agriculture infrastructure. “There aren’t any equipment dealers or farm supply stores nearby, so we have to have all our seed, fertilizer and equipment parts shipped up,” he says. “We also have to do all of our own repairs.” With so little agriculture in the state, finding a financial partner in their remote area could have been a challenge, but Northwest FCS was there. “My brothers use Northwest Farm Credit in Washington and they recommended them to me,” he says. “We were happy they were able to give us the financing we needed up here in Alaska.”

Rounding out his operation, Scott raises 90 head of bison, which are well-adapted to the extreme conditions. “They’re outside all the time and seem to be relatively unaffected,”

yields Winter 2014

| 12


RateWise™ Program Northwest Farm Credit Services is dedicated to helping the next generation of producers learn and grow. Our RateWise program rewards young, beginning and small producers for continuing their management education with interest rate reductions on new loans.

Eligibility RateWise is part of our nationally recognized AgVision program available to young, beginning and small producers with at least one of the following characteristics: • 35 years of age or younger.

Earning RateWise Credits – Participants can accumulate RateWise Credits for six years beginning on the date of their program registration. Credits will also be accepted online for eligible programs attended in the 12 most recent months prior to registering for the RateWise program. Northwest FCS Programs

University, Industry and Farm Service Agency Programs

½ day = 2 credits

½ day = 1 credit

1 day = 4 credits

1 day = 2 credits

1+ days = 6 credits

1+ days = 3 credits

• 10 years or less agriculture experience. • Producer with annual gross farm production of less than $250,000.

1 credit regardless of duration (maximum of 5 total credits earned)

*Participation in and/or completion of degreed programs is not eligible

Program Features Learn and Earn – Participate in educational programs, enhance your management skills, make your operation more successful, and accumulate RateWise credits to qualify for interest rate reductions on your next loan or renewed operating loan. RateWise Registration – Register online at northwestfcs.com/ RateWise to begin accumulating your RateWise credits today. Eligible Education Programs – Programs eligible for RateWise credits include: 1) programs hosted by Northwest FCS’ Business Management Center and Knowledge Center; 2) programs hosted by universities, industry groups and the Farm Service Agency; 3) programs hosted by other resources to improve producers’ management and production skills.

Interest Rate Reductions – Rate reductions increase with the number of credits earned. 10 credits: 0.25 percent interest rate reduction for three years 20 credits: 0.50 percent interest rate reduction for three years 30 credits: 0.75 percent interest rate reduction for three years

Certifying RateWise Credits – After registering for the RateWise program, participants can certify workshops and seminars completed by submitting a copy of the program’s agenda online. Additional Benefits – Book your first loan using RateWise credits and receive all the benefits of our nationally recognized AgVision® program available to young, beginning, and small producers including an invitation to the Young and Beginning Producers Conference.

Contact your local Northwest FCS office for more information -ORRegister for the RateWise™ program today at northwestfcs.com/RateWise

13 | Nor thwest Farm Credit Ser vices

Other Programs


Reflections on 2013 Dr. David Kohl Professor Emeritus, Virginia Tech

When the major news networks like CNN, Bloomberg, and CNBC start calling me for interviews on farm and agricultural conditions, you know change is coming in the agricultural industry. Looking back five years from now on 2013 might indicate that this was a pivotal year for change in the economics of agriculture. The emails I receive and the look in people’s eyes at industry events suggest anxiety about the future, but not necessarily gloom and doom. It is very encouraging to see groups of lifelong learners at these events who want to be informed so that they can be proactive managers in the changing cycles. It is amazing that 2013 had all the hype of strong corn and soybean prices early on, but recently we have seen the air come out of the economic balloon with $4.00 per bushel corn and some suggesting $2.70 per bushel corn. The lesson now being learned by those without a proactive risk management program and forward pricing is that negative margins can quickly arise, which, if sustained, can quickly burn through working capital and equity. Will 2013 be the start of the moderation and end of the great commodity super cycle? On the bright side, the livestock industry finds people with a newfound energy as prices and reduced costs are suggesting some favorable economic times ahead for them. The year 2013 has seen a slowdown in growth of the emerging nations and softening of the ethanol and biofuel mandates. A close watch of weather conditions in the southern hemisphere along with Federal Reserve action may foretell the future direction of profits, prosperity, and wealth on U.S. farm balance sheets. Turning to land values, they are very regionally and locally determined. In my travels discussions concerning “no sales,� fewer bidders at auctions, and actually some reduction in cash rents in certain areas are signs of behavioral change

in this aspect of the profit equation and the balance sheet. Wealth preservation versus wealth accumulation of the past few years may be in order as we close 2013. The general economy in the United States has made a modest comeback despite inaction in Washington, D.C. The year 2013 will go down as the year in which the United States moved toward energy independence, which is primarily on the shoulders of agriculture and rural regions. In 2013 I noticed a trend involving strategic alignment among producers, suppliers, and lenders. Each is seeking quality people and businesses to plug into their successful business model. In traveling North America, the convergence of biotechnology, information technology, and engineering technology is playing out in crops, livestock and other agricultural sectors. Soybeans are now being grown in Western Canada with high yields. Despite challenging planting conditions, I have seen uniform crops out the windshield of my Hertz rental car, and producers and other leading agriculture industry experts are discussing how technology has aided this sector. A continued favorable trend of 2013 is the youth movement in agriculture. At recent seminars and events, well over half of the attendees have been under forty years of age. The energy and new ideas are welcomed, but one hopes they will heed the advice of senior generations who have experienced the downturn of the 1980s, particularly if we go into some tough economic times. Interacting with thousands of producers, lenders, agribusinesses, educators, and others with a passion to make agriculture better assures me that the future of agriculture is in capable hands as we look to the new year ahead.

yields Winter 2014

| 14


Rural Community Grants Northwest FCS Rural Community Grants

use machines currently being used in the welding industry and at post-secondary education programs. Students at West Jefferson High School will now be familiar with machines being used at welding competitions, giving them the same advantage as students from other schools. Also, the ag fabrication classes will have newer machines to complete welding projects within the community and fairgrounds. Thank you so much Northwest FCS for helping the West Jefferson Agricultural Program purchase the much needed welding equipment.”

are given to support creative, collaborative projects that address emerging challenges and opportunities for rural communities. In 2013 Northwest FCS, with support from CoBank, awarded 34 rural grants worth nearly $63,000. Since 2007, Northwest FCS has presented nearly 250 community grants totaling more than $500,000. Rural Community Grant projects come in all shapes and sizes. Some improve community infrastructure, like buildings and facilities. Others support rural safety and health. The projects may be wildly diverse, yet they all share one thing in common – community driven support.

West Jefferson High School Ag Program Terreton, Idaho “With many schools being in the midst of tough economic times, we have had to search for alternative funding sources to update old and depleted equipment,” says Don Bird, West Jefferson ag teacher. “Having new and updated welders in the ag shop allows students to

15 | Nor thwest Farm Credit Ser vices

Bruneau Quick Response Unit Bruneau, Idaho “It is with excitement and gratitude that the Bruneau Quick Response Unit says ‘thank you’ to Northwest Farm Credit Services,” says Mary Tindall with the QRU. “The Emergency Operations Building will provide much needed space for housing our response vehicle, a classroom for training, space for cleaning of equipment, room for storage of supplies, and a secured place for storage of records and patient information. The primary purpose of the Emergency Operations Center will be to meet the needs (training, sanitation, safety, secure storage of information, etc.) of the QRU members, however the community will be encouraged and expected to have access to the classroom for meetings, lectures, gatherings, or special events.”

Wasco Community Garden Sherman County, Oregon Citizens of the small town in Sherman County, Oregon formed a non-profit group to create a community garden for residents to grow a variety of fruits and vegetables. Plots are available to any household in the city of Wasco. In addition to directly benefitting local citizens,


the garden will also benefit the local food bank and the Potlatch program to supplement family meals with low-cost, nutritious, fresh produce. The garden project will also include an educational meeting area where local children and adults, alike, will learn how to grow, how to use what is grown, and all the benefits that come from gardening.

Grant Union High School John Day, Oregon Northwest FCS Regional Vice President, Beau Reynolds, applied for the Rural Community Grant in 2012 on behalf of Grant Union High School. Reynolds, a 1999 graduate of the school, was well aware of the destruction of the 2011 floods and wanted to help his alma mater. “The excessive rains and spring run-off of May 2011 caused severe flooding in the Canyon City/John Day area,” says Beau. “Grant Union High School was in the middle of all the flooding and ended up having their track and field area, old gymnasium and metal shops under a foot of standing water, causing extensive damage to all of them. Through insurance proceeds the school district was able to repair the damage incurred to the gymnasium and buildings, however were short of funding to replace the track facility.” Grant School District #3 Superintendent Mark Witty says, “The track community and Grant SD #3 are very appreciative of the financial grant from Northwest FCS. The monies will be utilized to support the goal of completing the eight lane track. The completed track will be an asset for our students and community for years to come by supporting our student athletes, community fitness and adding business to our county when we sponsor a track meet.”

Big Timber Community Food Bank Big Timber, Montana “We are so excited to be replacing many of our quite elderly second-hand refrigerators and freezers, thanks to your very generous grant,” says Christine Tochihara from the Big Timber Community Food Bank. “Funds were matched with donations

from community partners and many local donors. An obvious advantage of these appliances is that we no longer need to monitor temperatures daily and wait for a breakdown to decide whether to repair or replace. Less obvious are the savings in electricity with the energy efficient models available now, the convenience to our many volunteers who man the food bank helping clients, stocking shelves and restocking our perishables, and the ability to reliably keep perishable food at optimum temperature until it is distributed.”

Chelan Douglas Land Trust, The Saddle Rock Restoration Project Chelan, Washington “Financial support from Northwest Farm Credit Services is being used to help make the much-loved and heavily used trails at Saddle Rock safer for all trail users,” says Sharon Lunz, Communications and Development Director for the Chelan Douglas Land Trust. “We will be repairing some trails, and re-routing others to a more sustainable route. We will begin restoring native vegetation and educate volunteers. Saddle Rock is a community treasure, and we are thrilled to be able to start making improvements to the neglected trails. Thank you for your support!”

Rural Community Grant Deadlines: October 1 and February 1 For more information visit northwestfcs.com/ruralgrants or contact Jennifer Rohrer at jennifer.rohrer@northwestfcs.com or 800-743-2125 ext. 5303.

yields Winter 2014

| 16


National Discounts for Northwest FCS Customers “Ownership has its privileges.” As a customer-owner of the Northwest FCS cooperative you can receive discounts on nationally-recognized products and services. It’s our way of saying, “Thank you for your business.” To receive these discounts, be sure to identify yourself as a Farm Credit member and provide the discount codes listed below.

Save 15 percent on flowers, plants, gift baskets, and more. Go to 1800flowers.com or call 888.755.7474. Use discount code FCCS to receive the discount.

Go to floralambiance.com or call 800-672-4137 to save $20 off orders valued at $30 or more. Use promotion code fccsflowers. Note: the owner of this business is a Farm Credit customer.

Save up to 30 percent depending on configuration. Go to dell.com/farmcredit or call 800-695-8133. Use member ID CS25031329.

National and Almo require us to “protect” our discount codes. To obtain this information, please email Pat McFarland at pat.mcfarland@fccservices.com.

Save up to 60 percent – only available when you shop on-line at osincentives.com/farmcredit.

Save 12 percent on your monthly service charges. Go to sprint.com/farmcredit or call 866-639-8354. If requested, please reference Farm Credit Council by phone and MFCCS_ZZZ online.

Includes moves within California, Delaware, Florida, Idaho, Main, Maryland, Tennessee, Texas, Utah, Wisconsin or Wyoming, or between any of the 48 contiguous states. Discounts for as much as 65 percent are only available via United Agent, Barrrett Moving & Storage. Call 800-879-1283 or email: don.olson@barrettmoving.com

To view all discounts, visit fccservices.com. If you haven’t received a log-in for our new website, please email info@fccservices.com. 17 | Nor thwest Farm Credit Ser vices


local

advisors and locations

IDAHO Robert Ball Cody Bingham Jeff Blanksma, Jr. Adrian Boer Ray Carlson Connie Christensen Bill Clayton Cade Crapo Ron Elkin Carl Ellsworth Bruce Foster David Funk LeRoy Funk Brent Griffin Jackie Hillman Brian Huettig Ken Koompin Brent Lott Karen Lustig Marty Lux Dan Mader Ray Matsuura Kyle Meyer Ron Mio Greg Moss Kirk Nickerson Lisa Patterson Erick Peterson Nate Riggers Royce Schwenkfelder Kirt Schwieder Scott Searle Todd Simmons Robert Swainston Ryan Telford Bernie Teunissen Dale Thomas Camellia Thurgood Justin Tindall Ritchey Toevs Steven Toone James Udy Todd Webb Shane Webster

MONTANA Hamer Jerome Hammett Jerome Blackfoot Blackfoot Wilder St. Anthony Buhl Leadore Aberdeen Hansen Burley Rupert Dubois Hazelton American Falls Idaho Falls Cottonwood Nezperce Genesee Blackfoot Rathdrum Fruitland Ketchum Howe Heyburn Moscow Nez Perce Cambridge Idaho Falls Shelley Terreton Preston Richfield Caldwell Gooding Nampa Bruneau Aberdeen Grace American Falls Declo Rexburg

73 Fort Hall Avenue, Suite A American Falls, Idaho 83211 (208) 226-1340 370 North Meridian Street, Suite A Blackfoot, Idaho 83221 (208) 782-3800 1408 Pomerelle Avenue, Suite B Burley, Idaho 83318 (208) 678-6650 501 King Street Cottonwood, Idaho 83522 (208) 962-2280 2225 West Broadway, Suite A Idaho Falls, Idaho 83402 (208) 552-2300 2631 Nez Perce Drive, Suite 201 Lewiston, Idaho 83501 (208) 799-4800 16034 Equine Drive Nampa, Idaho 83687 (208) 468-1600 102 North State, Suite 2 Preston, Idaho 83263 (208) 852-2145 1036 Erikson Drive Rexburg, Idaho 83440 (208) 656-2100 815 North College Road Twin Falls, Idaho 83301 (208) 732-1000

Les Arthun David Bell Bill Bergin Mark Bergstrom Adam Billmayer Bart Bitz Ryan Bogar Keven Bradley Sandy Carey Tom Cheetham Calvin Danreuther Nels DeBruycker Vicki Eggebrecht Warren Flynn Conni French Joe Fretheim Scott Glasscock Beth Granger Greg Grove Chad Hansen Craig Henke Courtney Herzog Dale Hirsch Craig Iverson Alan Klempel Steve Lackman Tim Lake Bryan Mussard Corie Mydland Ken Olson Tracey Pearce Robert Peterson Trudi Peterson Shawn Rettig Dave Sattoriva Nancy Schlepp Kim Skinner Carmie Steffes Steve Swank Kurt Swanson Duane Talcott Dale Tarum Bob Taylor Kelly Toavs Mark Tombre Miles Torske Brian Tutvedt Larry Tveit, Jr. Bruce Udelhoven Mike Wallewein Steve Wood

1001 West Oak Farm Credit Building, Suite 200 Bozeman, Montana 59772 (406) 556-7300 519 South Main Conrad, Montana 59425 (406) 278-4600 134 East Reeder Street Dillon, Montana 59725 (406) 683-1200 501 First Avenue South Glasgow, Montana 59230 (406) 228-3900 700 River Drive South Great Falls, Montana 59405 (406) 268-2200 1705 Highway 2 Northwest, Suite A Havre, Montana 59501 (406) 265-7878

502 South Haynes Miles City, Montana 59301 (406) 233-3100 3021 Palmer Street, Suite B Missoula, Montana 59808 (406) 532-4900

P.O. Box 2515, 1700 S. Assembly St. Spokane, Washington 99220-2515 509.340.5300 | northwestfcs.com

OREGON Wilsall Great Falls Melstone Brady Hogeland Big Sandy Vida Cut Bank Boulder Redstone Loma Choteau Malta Townsend Malta Shelby Angela Great Falls Moccasin Dillon Chester Rapelje Kinsey Winnett Bloomfield Forsyth Polson Dillon Joliet Richey Sheridan Hobson Judith Gap Rudyard Hingham Ringling Hall Plevna Chinook Valier Hammond Richland Denton Wolf Point Savage Hardin Kalispell Fairview Winifred Conrad Sheridan

Tech Plaza, Building 1, Suite 300 3490 Gabel Road Billings, Montana 59108 (406) 651-1670

120 Wunderlin Street, Suite 6 Lewistown, Montana 59457 (406) 538-7737

Headquarters

Monet Allen Reed Anderson Roben Arnoldus Glenn Barrett John Boyer Greg Brink Ron Brown George Bussmann Warren Chamberlain Jason Chapman Tim Dahle Dan Dawson Mike DeWall Susan Doverspike Rod Fessler Tom Fessler Joe Finegan Bruce Ford Javier Goirigolzarri Dennis Harmon Matt Insko Kenneth Jensen Kyle Kenagy Jeremy Kennel Alan Keudell David Kunkel Leland Lage Dan C. Lewis Sharon Livingston Bill Martin Scott McClaran Ron Meyer Greg Myers David Neal Mary Olson Larry Parker Alan Parks Amy Doerfler Phelan John Reerslev Stephen Roth Shannon Rust Marc Staunton Anna Sullivan Steve Walker Eric White

WASHINGTON Montague, CA Brownsville Cove Bonanza Haines Joseph Milton-Freewater Sixes Vale Klamath Falls The Dalles Roseburg Harrisburg Burns Madras Mt. Angel Cornelius Hermiston Roseburg Grants Pass LaGrande Vale Roseburg Monmouth Aumsville Portland Hood River Gaston Mt. Vernon Rufus Joseph Talent Tillamook Tangent Monmouth Helix Silver Lake Aumsville Junction City Brothers Echo Merrill Hereford Stanfield Nyssa

3370 10th Street, Suite B Baker City, Oregon 97814 (541) 524-2920 2345 N.W. Amberbrook Drive, Suite 100 Beaverton, Oregon 97006 (503) 844-7920 650 E. Pine, Suite 106A Central Point, Oregon 97502 (541) 665-6100 2911 Tennyson Avenue, Suite 301 Eugene, Oregon 97408 (541) 685-6140 300 Klamath Avenue, Suite 200 Klamath Falls, Oregon 97601 (541) 850-7500 378 West Idaho Avenue Ontario, Oregon 97914 (541) 823-2660 12 Southwest Nye Pendleton, Oregon 97801 (541) 278-3300 3113 S. Highway 97, Suite 100 Redmond, Oregon 97756 (541) 504-3500 2222 Northwest Kline Street Roseburg, Oregon 97471 (541) 464-6700 650 Hawthorne Ave. S.E., Suite 210 Salem, Oregon 97301 (503) 373-3000 3591 Klindt Drive, Suite 110 The Dalles, Oregon 97058 (541) 298-3400

Dave Allan Jeff Bosma Russ Byerley Roger Canfield Bill Clark Mike Cobb Bill denHoed Richard DeRuwe Frank DeVries Scott Eschbach Patrick Escure Kevin Filbrun Stacy Gilmore Alan Groff Lori Hayles Jim Kile Cris Kincaid Jim Klaustermeyer Dave Klaveano Tristan Klesick Chris Kontos Steve Krupke David Lange Josh Lawrence Poppie Mantone Dan McKay Alan Mesman John Miller Pat Murphy Jeff Raap Sara Rolfs Jason Salvo Derek Schafer Jeff Schilter Danielle Scrupps Ben Smith Jerry Smith Lori Stonecipher Mark Tudor Jake Wardenaar Andy Werkhoven

Wapato Outlook Touchet Olympia Chelan Ephrata Grandview Dayton Lynden Yakima Quincy Pasco Pasco Wenatchee Pasco St. John Pullman Othello Pomeroy Stanwood Walla Walla Reardan Colfax Royal City Bingen Almira Mt. Vernon Toledo Chehalis Ellensburg Wenatchee Seattle Ritzville Olympia Ritzville Sequim Benton City Walla Walla Grandview Royal City Monroe

265 East George Hopper Road Burlington, Washington 98233 (360) 707-2353 629 South Market Boulevard Chehalis, Washington 98532 (360) 767-1100 224 North Main Colfax, Washington 99111 (509) 397-2840 1501 East Yonezawa Boulevard Moses Lake, Washington 98837 (509) 764-2700 455 East Hemlock Street, Suite D Othello, Washington 99344 (509) 488-2396 9530 Bedford Street Pasco, Washington 99301 (509) 542-3720 1223 Sheridan Avenue, Suite A Prosser, Washington 99350 (509) 786-6400 1900 W. Nickerson Street, Suite 215 Seattle, Washington 98119 (206) 691-2000 1515 S. Technology Blvd., Suite B Spokane, Washington 99224 (509) 340-5600 2735 Allen Road Sunnyside, Washington 98944 (509) 836-3080 1 West Pine Walla Walla, Washington 99362 (509) 525-2400 667 Grant Road, Suite 1 East Wenatchee, Washington 98802 (509) 665-2160 1360 North 16th Avenue Yakima, Washington 98902 (509) 225-3200

123 North Central Avenue Sidney, Montana 59270 (406) 433-3920

yields Winter 2014

| 18


P.O. Box 2515 Spokane, Washington 99220-2515 New address? Please notify your local Northwest FCS office.

Northwest FCS customer Stuart Schuttpelz

Northwest Farm Credit Services is a cooperative. When you become a customer you also become an owner. You have a voice and a vote in how our association does business. Plus, when we do well we share profits with you in the form of patronage. No bank does this. You borrow. You own. You earn. You grow. Learn more about the benefits of being a customer-owner at northwestfcs.com/fisheries or 800.372.0112.

Northwest FCS Yields - Gearing Up for Transition - Winter 2014  

When Paul Clampitt was a college student in the 1970s people were talking about the “Population Bomb” that would outpace agricultural growth...