1. A Comprehensive Financial and Risk Management Solution for Beginning Farmers and Ranchers – A Farm Level Approach Dr. Lori Wilcox Peter Zimmel Karisha Devlin

2. 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

3. 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

4. Source: IHS Global Insight WTI Crude Oil ~$110/barrel

5. Land Prices

6. 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

7. 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

8.  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

9.  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

10.  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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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  2007-2009  Farm size is kept constant for the projection period (2010-2014)

19. FINANCIALS (2010-14) 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 $124 2010-112012-14 Net Return per Cow

20. 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

21. 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

22. 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

23. 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  2007-2009  Farm size is kept constant for the projection period (2010-2014)

24. FINANCIALS (2010-14) 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

25. 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

26. 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

27. 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

28. 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  2007-2009  Farm size is kept constant for the projection period (2010-2014)

29. FINANCIALS (2010-14) 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 2010-112012-14

30. 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

31. 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

32. 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

33. 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  2007-2009  Farm size is kept constant for the projection period (2010-2014)

34. FINANCIALS (2010-14) 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 2010-112012-14

35. 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

36. 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

37. 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

38. 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

39. Benefits of Program  Extension  Increased beginning farmers’ awareness of Extension  Involvement in other programs  Interest in serving on Extension council and other community organizations

40. Benefits of Program  Beginning Farmer  Education  Assistance with alternative scenarios for farm  Decision-making tools  Networking with other young farmers  Leadership opportunities

41. Questions  Contacts:  Dr. Lori Wilcox  wilcoxl@missouri.edu wilcoxl@missouri.edu  Peter Zimmel  zimmelp@missouri.edu zimmelp@missouri.edu  Karisha Devlin  devlink@missouri.edu devlink@missouri.edu