Dr. Lori Wilcox Peter Zimmel Karisha Devlin

A Comprehensive Financial and Risk Management Solution for Beginning Farmers

and Ranchers – A Farm Level Approach

Dr. Lori WilcoxPeter Zimmel

Karisha Devlin

Overview

Background on beginning farmer and rancher grant – Dr. Lori Wilcox

Discussion of panel farm development and risk management tools – Peter Zimmel

Critical role of extension and outreach in farm development and outcome dissemination – Karisha Devlin

USDA/NIFA Grants

The 2002 & 2008 Farm Bills established a grant program focused on U.S. beginning farmers and ranchers Competitive Provide education, outreach, training and

technical assistance 18 need assessment areas identified First RFA in FY2009 for BFRDP grants 29 grants awarded in FY2009 for $17 million

40 grants for $18 million awarded in FY2010

Source: IHS Global Insight

Input costs will rise again

100

150

200

250

300

350

400

450

2004 2006 2008 2010 2012 2014 2016 2018 2020

Inde

x, 1

990-

92=1

00

Fuels Fertilizer All production items

WTI Crude Oil ~$110/barrel

Land Prices

Potential Barriers to Entry

Capital intensiveLand prices

Access to landVolatility (Good and Bad)

Input costs and ReceiptsInability to communicate long-range plan

to lender

A Comprehensive Financial and Risk Management Solution for Beginning Farmers and Ranchers –

A Farm Level Approach

FAPRI-MU awarded a 3 yr. BFRDP grant from FY2009 cycle Advisory Council

11 members Develop 4 panel farms Provide 5 year whole-farm analysis Scenario analysis

Individual analysis for panel participants Provide 5 year financial outlook Scenario analysis

Web-based decision support tools

Short-term Provide tools and educational materials to help

Missouri’s beginning farmers and ranchers achieve financial stability

Long-term Make the tools and information available to any

beginning farmer or rancher via the World Wide Web

Three year Project October 2009 – September 2012 Funding from USDA/CSREES/NIFA

Goals of grant funded project

Representative beginning farmer or rancher farm panels Develop 4 representative farms Consisting of panels of beginning farmers or

ranchers Using extension staff as facilitators Provide 5 year financial outlook Update farms yearly Run what-if scenarios to look at changes to

the operation size, structure, etc

Objectives

Establish an 11 person (give or take) advisory council Consisting of:

Extension staff (facilitators) Commercial lenders FCS Financial Missouri Department of Agriculture

MASBDA USDA/FSA Established producers

Provide input and feedback to help guide the project to a successful completion

Advisory Council

BFRDP Grant cont.

Beginning = Farming or ranching < 10 yrs. Created changes to one panel focused on

Annie’s Project participants“What-if” scenarios developed

independently by each panel farm Focus on production and structure, not policy

Trusting relationship with University Extension facilitator and FAPRI-MU staff crucial

BFRDP Grant cont.

Year 1 – October 2009 to September 2010 Fourteen Workshops Held

Two with advisory council 11 members

Twelve with four panels 21 participants on four panels

Four Panel Farms Average years farming – 3 to 6 years 100% are currently engaged in farming 100% plan to continue farming in the current year

Missouri Beginning Farmer Panels

Northeast Crop/Beef600 crop acres & 60 cows

Southwest Beef180 cows

North Central Crop/Beef500 crop acres & 15 cows

West Central Crop500 crop acres

BFRDP Grant cont.

Year 2 – October 2010 to September 2011 Five Workshops Held

One with advisory council 11 members

Four with panels 21 participants on four panels

Individual farm analysis with interested panel participants

Beginning Farmer and Rancher survey Available in hard-copy and online First disseminated to AFBF YF&R participants in Feb.

2011

BFRDP Grant cont.

Year 3 – October 2011 to September 2012 Survey results will be incorporated into online

tools Panel farms and FAPRI-MU 10 year baseline will

provide basis Individuals accessing the online tools will be able to

adjust for their operation, explore their own “what-if” scenarios

Financial statements and cash flow analysis will be available in addition to educational resources linking to other BFRDP grants and advisory council and other stakeholder online resources

Panel Farm Development

Panels facilitated by local extension specialist

Panels met 3 times in first year Initial data gathering Baseline validation & identify alternatives Alternative validation

86% attendance of panel membersSimulation begins in 2007, 3 years of

historyFarm size held constant for baseline

Southwest Missouri – Lawrence County

Representative Farm Started in 2003 (7 years old) Owned land: 150 acres purchased in 2003

$1,600 acre in 2009 Rented land: 560 acres cash rented 180 cow/calf pairs

Calves backgrounded for 60 days Sale weights: Steers – 680 lbs, Heifers – 620 lbs Purchasing all replacement heifers

Hay: 200 acres Own their own hay equipment


Representative Farm Simulation started in 2007 Debt in 2007

Land – 70% of current value Machinery – 50% of current value

Three years of historical data simulated 2007-2009

Farm size is kept constant for the projection period (2010-2014)

$300

$400

$500

$600

$700

$800

$900

2010 2011 2012 2013 2014Receipts Operating expenses Total costs no operator draw

FINANCIALS (2010-14)Operator assets $511,000 Cash risk score

Total cash receipts $139,000Net cash farm income $46,100Return to family living $21,700


Baseline Results

$98

$124

Prob. Of Color RiskDeficit* Score Score

Under 25 Low25 to 50 Moderate50 to 75 HighOver 75 Severe

* Probability of cash flow deficit in any year of theprojection period.

2010-11 2012-14

Net Return per Cow


Alternative 1 – Background purchased calves Cash risk score

Alternative 2 – Add cows through the use of management intensive grazing Cash risk score

Northeast Missouri – Marion, Knox, & Shelby Counties

Representative Farm Started in 2003 (7 years old) 600 tillable acres, 210 acres of pasture/hay

250 acres of corn (145 bu. 5 yr. avg. yld.) 350 acres of soybeans (45 bu. 5 yr. avg. yld.) 120 acres of pasture 90 acres of hay

60 cow/calf pairs Calves backgrounded for 120 days Sale weights: Steers – 750 lbs; Heifers – 700 lbs Raising their own replacements


Representative Farm Owned land: 170 acres purchased in 2003

$2,800/acre in 2009 Rented land:

Cash: 400 acres ($120/acre) Share: 80 acres (50/50 share) Pasture/Hay: 180 acres ($30/acre)

Farm is associated with a larger farming operation Multi-family operation Perks






$200

$250

$300

$350

$400

$450

2010 2011 2012 2013 2014

Receipts Operating expenses Total costs no operator draw




Baseline Results

$51

$49Net Return per Acre





Alternative 1 – Increase the cow herd and plant cover crop (add 16 cows over 4 yrs) Cash risk score

Alternative 2 – Add 400 acres of cash rented crop acres Cash risk score

North Central Missouri – Carroll & Saline Counties

Representative Farm Started in 2006 (4 years old) 500 tillable acres, 45 acres of pasture

250 acres of corn (170 bu. 5 yr. avg. yld.) 250 acres of soybeans (45 bu. 5 yr. avg. yld.) 45 acres of cash rented pasture

15 cow/calf pairs Selling calves at weening Sale weights: Steers – 500 lbs; Heifers – 450 lbs Raising there own replacements




Cash: 210 acres ($150/acre) Share: 210 acres (50/50 share) Pasture: 45 acres ($30/acre)







$200

$250

$300

$350

$400

$450

$500

$550

2010 2011 2012 2013 2014




North Central Missouri – Carroll & Saline CountiesBaseline Results

$106$107

Net Return per Acre




2010-11 2012-14


Alternative 1 – Add 200 acres of cash rented crop acres in 2010 and 2012 Cash risk score

Alternative 2 – Add grain bins in 2010 & 2012 and 400 acres of cash rented crop acres in 2012 Cash risk score

Alternative 3 – Purchase 90 calves and background for 120 days Cash risk score

West Central Missouri – Lafayette County

Representative Farm Started in 2003 (7 years old) 400 tillable acres

200 acres of corn (150 bu. 5 yr. avg. yld.) 180 acres of soybeans (46 bu. 5 yr. avg. yld.) 20 acres of wheat/dc beans (55 bu./25 bu. 5 yr. avg. yld.)

No cattle




Cash: 320 acres ($145/acre) Share: 0 acres Pasture: 0 acres







$0

$100

$200

$300

$400

$500

$600

$700

$800

2010 2011 2012 2013 2014




West Central Missouri – Lafayette CountyBaseline Results

$93-$60Net Return per Acre




2010-11 2012-14


Alternative 1 – Add 40 acres of cash rented crop acres in 2010, 2012, & 2014 Cash risk score

Alternative 2 – Purchase 80 acres of cropland (70 acres tillable) in 2011 Cash risk score

Alternative 3 – Add 140 tillable acres of cash leased cropland in 2011 Cash risk score

Risk Management Tools

Beginning farmer and rancher section on FAPRI web site

Representative Farms section detailing farms and alternatives

Online and downloadable tools for beginning farmers and ranchers FAPRI Baseline data drives the tools

How is Extension Involved?

Identify beginning farmers in areaInitiate communication with selected

farmersServe as contact person for beginning

farmer panelFacilitate meetings

Four Extension facilitators

Characteristics of Beginning Farmer

Late 20s, early 30sPassionate about farmingUsually linked to a family operationInvolved in a variety of activities

Off farm work Custom farming Value added agriculture Share arrangements

Benefits of Program

Extension Increased beginning farmers’ awareness of

Extension Involvement in other programs Interest in serving on Extension council and

other community organizations

Benefits of Program

Beginning Farmer Education Assistance with alternative scenarios for farm Decision-making tools Networking with other young farmers Leadership opportunities

Questions

Contacts: Dr. Lori Wilcox

[email protected] Peter Zimmel

[email protected] Karisha Devlin

[email protected]

mailto:[email protected]



Documents

Dr. Lori Wilcox Peter Zimmel Karisha Devlin