A Comprehensive Financial and Risk Management Solution for Beginning Farmers and Ranchers – A Farm Level Approach Dr. Lori Wilcox Peter 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 WTI Crude Oil ~$110/barrel

Land Prices

Potential Barriers to Entry  Capital intensive  Land prices  Access to land  Volatility (Good and Bad)  Input costs and Receipts  Inability 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/Beef 600 crop acres & 60 cows Southwest Beef 180 cows North Central Crop/Beef 500 crop acres & 15 cows West Central Crop 500 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 members  Simulation begins in 2007, 3 years of history  Farm 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

Southwest Missouri – Lawrence County  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   Farm size is kept constant for the projection period ( )

FINANCIALS ( ) Operator assets $511,000Cash risk score Total cash receipts $139,000 Net cash farm income $46,100 Return to family living $21,700 Southwest Missouri – Lawrence County Baseline Results $98 $ Net Return per Cow

Southwest Missouri – Lawrence County  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

Northeast Missouri – Marion, Knox, & Shelby Counties  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

Northeast Missouri – Marion, Knox, & Shelby Counties  Representative Farm  Simulation started in 2007  Debt in 2007  Land – 80% of current value  Machinery – 50% of current value  Three years of historical data simulated   Farm size is kept constant for the projection period ( )

FINANCIALS ( ) Operator assets $802,000Cash risk score Total cash receipts $336,900 Net cash farm income $77,400 Return to family living $38,500 Northeast Missouri – Marion, Knox, & Shelby Counties Baseline Results $51 $49 Net Return per Acre

Northeast Missouri – Marion, Knox, & Shelby Counties  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

North Central Missouri – Carroll & Saline Counties  Representative Farm  Owned land: 85 acres purchased in 2006  $5,000/acre in 2009  Rented land:  Cash: 210 acres ($150/acre)  Share: 210 acres (50/50 share)  Pasture: 45 acres ($30/acre)  Farm is associated with a larger farming operation  Multi-family operation  Perks

North Central Missouri – Carroll & Saline Counties  Representative Farm  Simulation started in 2007  Debt in 2007  Land – 89% of current value  Machinery – 50% of current value  Three years of historical data simulated   Farm size is kept constant for the projection period ( )

FINANCIALS ( ) Operator assets $587,000Cash risk score Total cash receipts $256,900 Net cash farm income $81,500 Return to family living $57,800 North Central Missouri – Carroll & Saline Counties Baseline Results $106 $107 Net Return per Acre

North Central Missouri – Carroll & Saline Counties  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

West Central Missouri – Lafayette County  Representative Farm  Owned land: 88 acres purchased in 2002  $3,200/acre in 2009  Rented land:  Cash: 320 acres ($145/acre)  Share: 0 acres  Pasture: 0 acres  Farm is associated with a larger farming operation  Multi-family operation  Perks

West Central Missouri – Lafayette County  Representative Farm  Simulation started in 2007  Debt in 2007  Land – 67% of current value  Machinery – 50% of current value  Three years of historical data simulated   Farm size is kept constant for the projection period ( )

FINANCIALS ( ) Operator assets $759,000Cash risk score Total cash receipts $237,400 Net cash farm income $49,800 Return to family living $14,700 West Central Missouri – Lafayette County Baseline Results $93 -$60 Net Return per Acre

West Central Missouri – Lafayette County  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 area  Initiate communication with selected farmers  Serve as contact person for beginning farmer panel  Facilitate meetings  Four Extension facilitators

Characteristics of Beginning Farmer  Late 20s, early 30s  Passionate about farming  Usually linked to a family operation  Involved 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   Peter Zimmel   Karisha Devlin 