farm credit view - summer 2012

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IN THIS ISSUE 2 INTERESTing TIMES Tom Tracy, Senior Vice President, Operations 3 CROP INSURANCE NEWS Drought Discussion Meetings Gary Kopp, Regional Sales Manager 4 NEWS FROM THE FIELD New employees, milestones, retirements and upcoming events 5 CUSTOMER SPOTLIGHT Create Family Memories at Eckert’s 6 MEALS IN THE FIELD September 17-21 Register for a free meal for you, your family, friends and neighbors! FARM CREDIT view The market for farmland in Farm Credit Services of Illinois’ sixty county Farm Credit Services of Illinois territory remains strong at mid year. Land values are monitored using a 20 farm benchmark ap- praisal system which is updated during the first six months of each year. The updates for 2012 show a continuation of a developing trend over the past several years with an average increase of 22.2% compared to an 18.9% increase in 2011. All 20 benchmark farms showed an increase in value. As always, the market for agricultural real estate is extremely location specific; however some general observations can be made. Values of Class A land were up 15.6% with Class B increasing on aver- age by 24.7%. Class C land varies widely throughout the territory but on average was up 22.9%. It appears that although inves- tors are still in the market, a majority of land is being purchased by local farmers. The current drought conditions being felt in a large portion of our territory do not seem to be reflected in these values however; the long term effect the drought will have is yet to be determined. Drought conditions appear to be worse in the southern portion of the territory but are generally fair to poor Farmland Market Conditions By Kent Reid, Chief Appraiser throughout the sixty counties. On the bright side, commodity prices remain strong and inter- est rates are historically low. SUMMER EDITION 2012 NEWS & HIGHLIGHTS FROM FARM CREDIT SERVICES OF ILLINOIS

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This is Farm Credit Services of Illinois' quarterly newsletter that provides timely stories, financial and insurance information important to our stockholders.

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Page 1: Farm Credit View - Summer 2012

I N T H I S I S S U E

2 INTERESTing TImESTom Tracy, Senior Vice President, Operations

3 CROP INSuRaNCE NEwS Drought Discussion meetings

Gary Kopp, Regional Sales manager

4 NEwS fROm ThE fIElD New employees, milestones, retirements

and upcoming events

5 CuSTOmER SPOTlIGhT Create family memories at Eckert’s

6 mEalS IN ThE fIElD September 17-21

Register for a free meal for you, your family,

friends and neighbors!

FARM CREDIT view

The market for

farmland in Farm

Credit Services of

Illinois’ sixty county

Farm Credit Services

of Illinois territory

remains strong at mid year. Land values are

monitored using a 20 farm benchmark ap-

praisal system which is updated during the

first six months of each year.

The updates for 2012 show a continuation

of a developing trend over the past several

years with an average increase of 22.2%

compared to an 18.9% increase in 2011. All

20 benchmark farms showed an increase in

value. As always, the market for agricultural

real estate is extremely location specific;

however some general observations can

be made. Values of Class A land were up

15.6% with Class B increasing on aver-

age by 24.7%. Class C land varies widely

throughout the territory but on average was

up 22.9%. It appears that although inves-

tors are still in the market, a majority of land

is being purchased by local farmers.

The current drought conditions being felt in

a large portion of our territory do not seem

to be reflected in these values however;

the long term effect the drought will have

is yet to be determined. Drought conditions

appear to be worse in the southern portion

of the territory but are generally fair to poor

Farmland Market ConditionsBy Kent Reid, Chief Appraiser

throughout the sixty counties. On the bright

side, commodity prices remain strong and inter-

est rates are historically low.

SummeR eDITION 2012 • NEwS & hIGhlIGhTS fROm faRm CREDIT SERVICES Of Ill INOIS

Page 2: Farm Credit View - Summer 2012

2

INTERESTing TimesBy Tom Tracy, Senior Vice President, Operations

We hear a lot of discussion

these days about interest

rates. Most often the

reference is about floating

rates – specifically the

prime rate of interest which

is based on the federal funds rate set by the

Federal Open Market Committee (FOMC). For

the purpose of this discussion, let’s focus on the

outlook for floating rates. We’ll tackle longer

duration rates next time. Specifically, let’s focus

on the prime rate and examine an abbreviated

version of the most recent statement from the

FOMC: “The Committee decided to keep the

target range for the federal funds rate at 0

to 1/4 percent and currently anticipates that

economic conditions--including low rates of

resource utilization and a subdued outlook for

inflation over the medium run--are likely to

warrant exceptionally low levels for the federal

funds rate at least through late 2014.”

In the U.S., the prime rate runs about 300 basis

points (that’s a fancy way of saying 3%; a basis

point is 1/100th of a percentage point) above

the federal funds rate. Simply put: federal funds

rate + 3 % = prime rate. The current prime rate

is 3.25%. Most discussion today indicates the

FOMC is saying they will leave rates alone until

2014!

Effectively, they are saying the prime rate is

going to stay put until 2014. That, however, is

not entirely what the FOMC statement says.

The statement says they “currently anticipate”

the factors dictating this accommodative

policy will persist until late 2014. They even

tell us what factors they

are watching: resource

utilization and inflation. So

if we see significant upward

movement in these factors,

it would seem the FOMC

would be well within the

guidance they have given

us to increase the discount

rate. This will effectively

increase the prime rate prior

to “late 2014.” How much

has the Federal funds rate

stayed put over the years?

The rate has moved frequently and – in many

years – significantly. Above is a graph showing

the degree of change in the prime rate by

calendar year for roughly the past 40 years. Take

note that there were nine occasions in which the

prime rate changed 300 basis points or more

within one calendar period. This would represent

a near doubling of the rate today. There were

just five years in which the rate did not move;

four of those are the most recent years.

The futures market tells us the prime rate is

anticipated to remain relatively low. From the

perspective of an agricultural/farm business

owner, there appears to be a reduced need to

be concerned with short term interest rate shifts

within the next 24 calendar months. However,

the FOMC guidance of “late 2014” appears

to allow increases in rates that should warrant

some degree of consideration. This is especially

true If you are in the position of having floating

rate debt used for the purchase of a longer lived

asset and you do not anticipate paying off that

debt in the near term.

In the intermediate term of three to five years,

it appears there will be an increased need for

concern with movement in floating rates. These

rates may still be low by historical standards, but

they may move significantly on a relative basis

and overtake many of the current intermediate

and possibly even longer term fixed rates being

offered by Farm Credit today.

It may be an appropriate time, over the next

three to five years, to consider fixing interest

rates on all, or a portion, of your debt being

used to finance longer lived assets such as land

and equipment. It will cost you more in the short

term but potentially will save you much more in

the long term.

Contact your local Farm Credit office for more

information on interest rates and the loan

products available to help keep your farming

operation running smoothly.

Page 3: Farm Credit View - Summer 2012

3

Drought Discussion Meetings helD

Area producers flocked to twelve Drought

Discussion meetings held throughout July

by Farm Credit Services of Illinois. Cory

Mitchell, Farm Credit’s director of related

services stated, “It is good to see the active

participation by policyholders and their

eagerness to learn about handling crop

insurance claims as a result of the 2012

drought.” Crop insurance payments made to

producers are expected to far exceed any other

claim year in crop insurance history; nearly all

policies are expected to file a claim this year.

Already, 2012 is being compared with 1988,

1983, 1954, and 1930’s crop disasters.

Farm Credit crop insurance staff led these

discussions and presented attendees with

information on what to expect, what to do,

and what not to do to ensure producers

receive the full benefit of their 2012 crop

insurance coverage. Highlights included:

1. Turn in your harvest claim. If you think

you will have a loss, call your local Farm

Credit office.

2. Do not destroy the crop; do not bale,

chop, or graze it without getting a

company adjuster to appraise the crop

first. Call your Farm Credit office before

you take any destructive action with

your crop.

3. An adjuster must measure any leftover

2011 grain if you plan to store new

2012 grain in the same bin. Call your

local Farm Credit office to arrange for a

measurement before harvest.

4. Keep good harvest records for

each line of corn and soybeans on

your policy. Load records, combine

monitor information, scale records, bin

measurements, and settlement sheets

will all be very important in working your

possible claim. Identify each unit or farm

name on each piece of information.

5. Before claims over $200,000 per crop/

per county can be paid, RMA requires a

three year APH review to be completed

by the company. If your claim potentially

exceeds that, you may do this before

harvest and speed up the final payment

of your claim. Call your local Farm Credit

office if you want to do this early.

6. For tax purposes, producers need to

determine if claim proceeds will be paid

in 2012 or in 2013? Call your local

Farm Credit office to further discuss

your options.

7. Call your local Farm Credit office

immediately if you suspect Aflatoxin in

your corn. Samples must be taken by a

company adjuster BEFORE the grain goes

into the bin or other storage facility.

If the rains come, there is still hope for the

soybean crop, however; in most areas, the corn

is either done or done for. Everyone will agree

choosing to protect your 2012 crop with crop

insurance will be one of the best decisions

you have made this year. Your crop insurance

specialist at Farm Credit can answer any

ongoing questions you have.

Crop Insurance News & UpdatesBy Gary Kopp, Crop Insurance Training Coordinator

Crop Insurance News

Page 4: Farm Credit View - Summer 2012

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Field News

Important Dates

Kaitlin SmithParis

FCS Team MilestonesA special salute to employees reaching milestones in their years of service

5 YearsAlicia Sandidge

Jacksonville

mark Your Calendar

35 Yearsmark Weber

Highland

5 YearsDerek Stayton

Taylorville

With a combined years of services of 34

years, Don Schuette, Vice President of

Lending in Carlinville regional office and

Carol Stoll, Sales and Services Specialist in

Red Bud regional office retired from Farm

Credit. Don retired as of May 31, 2012 and

Carol will retire on August 31, 2012. We

congratulate Don and Carol and thank them

for their dedicated service to Farm Credit.

Retired EmployeesCongratulations to Don Schuette and Carol Stoll!

Welcome Aboardmeet the newest staff members at regional offices

• August 7 - Red Bud Office Customer Appreciation Dinner Ag Bldg. - Scheve Park, Mascoutah, IL 4:30 PM - 7:00 PM

• August 8 - Carlinville Office Customer Appreciation Dinner Elks Lodge, Carlinville, IL 5:30 PM - 7:30 PM

• August 9 - Highland Office Customer Appreciation Dinner Highland KC Hall, Highland, IL 5:00 PM - 7:30 PM

• August 9 - Shelbyville Office Customer Appreciation Dinner 4-H Center Bldg. - Shelbyville, IL 4:30 PM - 6:30 PM

• August 9 - All Offices Drought Discussion Northfield Center, Springfield, IL 10:00 AM - Lunch to follow

• August 13 - Lawrenceville Office Customer Appreciation Dinner Trace Inn, Red Hills State Park, Sumner, IL 5:00 PM - 8:00 PM

• August 14 - Red Bud Office Customer Appreciation Dinner St. John’s Lutheran School, Red Bud, IL 4:30 PM - 7:00 PM

• August 16 - Highland Office Customer Appreciation Dinner Addieville Community Club, Addieville, IL 5:00 PM - 7:30 PM

• August 16 - Shelbyville Office Customer Appreciation Dinner DeMars Center located in Peterson Park, Mattoon, IL 5:30 PM - 7:00 PM

• September 3 - Labor Day Offices Closed

• September 30 - Crop Insurance Sales Closing Date—Wheat

• October 31 - Crop Insurance Final Planting Date—Wheat

• November 1 - Crop Insurance Premiums Due—Corn, Bean and Grain Sorghum

Paula Keehner Paris

Ashley BramletHarrisburg

10 YearsNancy Allison

Red Bud

Carol StollRed Bud

Don SchuetteCarlinville

5 Yearsmark Kabatmt.Vernon

Page 5: Farm Credit View - Summer 2012

1100 Farm Credit Drive

mahomet, IL 61853

www.fcsillinois.com

Meals in FieldSeptember 17 - 21, 2012 — Register Today!

Feeding farmers who feed us; that is only

part of the Meals in the Field program. Since

2001, Farm Credit Services of Illinois has been

delivering meals and safety tips to farmers.

Each year, Farm Credit serves around 1,100

farmers on 110 farm visits. Farm Credit

firmly believes that educating farmers and

their families about safety is vital to every

operation. After all, farming is the fourth most

dangerous occupation in America. Meals in

the Field corresponds with National Farm

Safety & Health week. This

year, it is September 16-22.

Monday through Friday, each

of the 16 local offices go to

the winners’ fields with a

meal. The farmers selected

are encouraged to bring their

family, crew and neighbors out

to their fields to learn about

safety while enjoying the meal. This fits right

into the theme this year: Agriculture Safety

& Health: a family affair. Meals in the Field

provides a great opportunity for all involved

to learn about agriculture safety. In addition,

Farm Credit leaves the family with a farm

safety kit to help make their farms a safer

place to work.

Even if you are not a customer of Farm Credit,

you can enter to win. In order to enter your

farm into the drawing, you can do one of

three things: visit or call your local office, or

sign up at www.fcsillinois.com. Meals in the

Field is more than just feeding farmers; it’s

about promoting farm safety.in the

MealsMealsFieldField

lawrenceville office staff serve a meal to the atwood family on their Richland county farm in 2011.

Page 6: Farm Credit View - Summer 2012