1. Livestock Financing Perspectives
Angie Treptow
Regional Vice President

2. Farm Credit Services of America
Customer-Owned Cooperative serving all of Iowa, Nebraska, South Dakota, Wyoming, and the eastern 1/3 of Kansas
57,000 Member-Customers
$30 billion in loans
48 retail offices
1,750 employees

3. Industry concentration
Farm Credit Services of America Finances
$8.2 Billion to Livestock Operations

4. Agenda
Considerations for Financing Expectations of Customers Financial Management Strategies

5. Considerations for Financing
2-3 years financial information
Breakeven analysis
Sensitivity analysis or What If’s
Production records for at least 1 year
Production efficiency ratios compared to industry
Provide Good understanding
Source of livestock (possible due diligence needed)
Genetics
Livestock Flow

6. Consideration for Financing
Risk Management
Agreements / supplier contracts
Monitoring
Borrowing Base
Monthly / Quarterly Financials
Monthly production
Payments to match income stream

7. Borrowing Base Analysis
Collateral
Advance
Borrowing
Owned Cattle
$735,243
70%
$514,670
Owned Cattle - Hedged/Contracts
$277,369
80%
$221,895
623 Totat head
Deposits in Transit (≤ 10 Days)
$32,000
100%
Cattle Purchase Down Payment
$66,500
75%
$49,875
Other Eligible Trade A/R's (<30 days)
Other A/R's as approved by Lender $0
Feed & Grain Inventory
$359,000
$251,300
Feedyard Supplies & Meds
$20,000
$14,000
Prepaid Expenses
Liquidated Value of Secured Trading Account
Crop Inputs
Potential Crop in Field
$330,000
$231,000
Total Collateral:
$1,820,112
$1,314,740
Less:
FCSA Loan Balance
$750,000
Accrued Interest
$173,673
Drafts Outstanding
$24,045
Accounts Payable - External
Other Deductions
Total Liabilities
$947,718
Borrowing Base Margin (Deficit):
$872,393
$367,022
52.07%
72.08%
Borrowing Base
Analysis

8. Considerations for Financing
Construction
Disbursements
Lien Waivers
Inspections
Cost and Cost Overruns
Coverage
Business interruption, personal property, key person, construction insurance

9. Customer Expectations
Have a Written Business Plan
Executive Summary
Elevator Pitch
Business Description
Size and Scope of operation
Players- who’s involved
Production Records / Herd Health
Appropriate concern for the environment
Financial reporting and record keeping
What are you willing to change?

10. Customer Expectations
Know Your Expenses – beyond the napkin math
Spend as much time on managing your finances and risks as you do on managing your production
Complete a Realistic Cash Flow
Income, Expense, Debt Service, Family Living
Breakeven analysis
Communicate with your Lender and Ask for Help
Advice and Adjustments
Lender has a vested interest

11. Components of Breakeven
B/E Price
ESTABLISH WHAT WE ARE SHOWING:
The left axis represents theoretical corn breakeven per bushel.
The right side of the balance beam are costs; the left side, revenue.
As you can see on the far right, as the cost balance beam moves down, it adds to working capital and vice versa.
Working Capital – the first shock absorber

12. Impact of lowering Cost or restructuring debt
B/E Price
If you reduce your debt or extend the repayment period, it lowers current cash repayment needs drop and debt has less impact on cost.
CLICK - BAR DROPS
NO ANIMATION: The same impact occurs if you lower other inputs, such as variable inputs or cash rent.
CLICK

13. Revenue Impacts
B/E Price
Adding or subtracting income will cause the balance beam to fall or rise.
For instance, more non-farm income has the same effect as cost cutting: It causes the breakeven balance beam to drop.
CLICK

14. Revenue falls
B/E Price
Now, say a weather event reduces your production. The value of production falls and the breakeven balance beam rises.
CLICK
On the right side, the balance beam dips into working capital.
But your crop insurance stops how far the balance beam is able to go on the right.

15. Customer Expectations
Have a Written Marketing Plan
Based on Strategy and Strike Price (Break-evens)
Strategy
Best days should be emptying the barn
Break-even
Hit Singles and get on base
Good Relationships with Marketing Advisors

16. Financial Management Strategies
Contract Finishing
Fixed Cost $25/space (PITI)
Operating Expense $9.25/Space
Labor $6/space
Swine- Owned
Working Capital $40/head marketed/year
Sow Unit P&I $4-6/head marketed/year
Guidelines
NOTE- this cost is $40.25

17. Financial Management Strategies
Beef Cow / Calf
Working Capital $100/cow
Fixed Cost (term principal & interest +land rent+ RE taxes) $ /head
Cattle Feeding
Working Capital Minimum $250/head on feed or 25-30% of feeder cattle purchase price
Fixed Cost (term principal & interest +land rent+ RE taxes) $50-85/head
Guidelines

18. Questions?

19. Farm Credit Services of America
THANK YOU
Farm Credit Services of America
FARM
The following material is provided for informational purposes only.  Farm Credit Services of America is not providing advice, nor does Farm Credit Services of America warrant the accuracy or completeness of this information or undertake to update it. 
  Copyright © 2016 Farm Credit Services of America