Northwest FCS Yields - Gearing Up for Transition - Winter 2014

Winter 2014Winter 2014

Gearing Upfor Transition

Winter 2014

FEATURE STORY > 5

Halibut is mostly caught in the frigid water west of Canada and in the Gulf of Alaska. The tough-to-find halibut is fished farther west in the Aleutian Islands and north of the Bering Sea. Halibut and black cod are typically caught long-lining, an environmentally friendly catch method that also preserves the quality of the fish.

New RateWise™ program for young, beginning,

small producers > 13

Rural Community Grants > 15

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yiel

dsWho we are: Northwest Farm Credit Services is a

customer-owned, financial services cooperative,

providing more than $11 billion in credit, crop insurance,

and related services to farmers, ranchers, agribusinesses,

commercial fishermen, forest products producers,

equipment dealers, chemical suppliers, part-time farmers,

and country homeowners.

Board of DirectorsKaren Schott, Chair, Broadview, MT

Dave Hedlin, Vice Chair, Mount Vernon, WA

Rick Barnes, Callahan, CA

Christy Burmeister-Smith , Newman Lake, WA

Drew Eggers, Meridian, ID

Jim Farmer, Nyssa, OR

Mark Gehring, Salem, OR

John Helle, Dillon, MT

Herb Karst, Billings, MT

Bruce Nelson, Spokane, WA

Dave Nisbet, Bay Center, WA

Kevin Riel, Yakima, WA

Julie Shiflett, Spokane, WA

Shawn Walters, Newdale, ID

About YieldsYields is produced for stockholders of Northwest FCS, an

Agricultural Credit Association. Comments and story ideas

can be sent to the Marketing Department, c/o Northwest FCS,

P.O. Box 2515, Spokane, Washington 99220-2515.

website: northwestfcs.com

Northwest Farm Credit Services is an equal opportunity

employer and does not discriminate on the basis of race, color,

religion, sex, national origin, marital status, age, disability,

disabled veteran, Vietnam era or other eligible veteran status.

The Farm Credit System was chartered nearly 100 years ago to serve producers in every county of the

United States. Some people may not know Northwest FCS’ chartered territory includes Alaska. Our

board and management team have been evaluating how we are serving this remote and challenging

marketplace. While production agriculture is more limited, we are serving some producers who are

overcoming harsh weather, short growing seasons and a lack of ag infrastructure to be successful.

Northwest FCS is well known as an agricultural lender, yet some may not realize we also finance the

commercial fishing industry, primarily out of our Seattle office. Seattle is home port to hundreds of

vessels fishing in Alaskan waters and along the west coast of the United States. These fishing operations

vary considerably in size, from small, salmon gillnetters to some of the largest catcher/processors in the

fleet. Commercial fishing can be a risky business but the potential for returns can be significant. We are

very fortunate to have employees who deeply understand the complexities of the industry and who

work with some of the most successful fishermen in the Pacific Northwest and Alaska.

Caring more about our customers and the industries we serve sets us apart from other lenders. You will

see this philosophy ingrained when you talk to our staff, board or local advisors. You may find some

financial institutions – community, regional and national banks – that do a good job serving some

segments of agriculture some of the time. But, I don’t think they have near the depth and breadth of

experience to serve our customers who produce and process nearly 150 different commodities. Sharing

our knowledge, expertise and long-term commitment gives us an edge in an increasingly diverse,

complex and volatile market.

We see tremendous future growth potential for our customer-owners. We appreciate the opportunity

to serve you and look forward to another successful year.

yields Winter 2014 | 2

Our Depthof Experience

Phil DiPofi, President and CEO

Bruce Nelson

Joined the Northwest FCS board in April 1999

Served as Northwest Board Chair 2008 through 2009

Served on the National Farm Credit Council Board from January 2003 through December 2011; served as FCC Board Chair 2007 - 2008

What are some of the lessons you’ve learned serving on the board of Northwest FCS?

Being a customer, a stockholder and now serving on the board has instilled in me the true character of Northwest FCS. We serve our customer-owners. We preserve this association to be here in good times and bad times. We don’t run when things get tough. We know agriculture and we understand our customers’ businesses better than any other banking institution. When our customers get into trouble we’re there, hopefully to keep them farming and out of trouble to begin with.

During my time on the board I’ve learned we’re not flawless either. It’s no different than farming. No matter how good you think you are, how good your employees are, or how well your processes work, there’s going to be a glitch. There’s always something you never imagined would happen. I remember the dot.com industry crash. Those were challenging times. Things happened that just came out of the blue. But the problem solving is the fun part. Challenging times are always the most interesting to work through and learn from.

What are you most proud of?

I’m most proud of the way the board worked together to solve issues. In all my time on the board I had complete trust in every director and they had trust in me. We were a board that could do good, productive business. We didn’t necessarily agree all the time, but as a group we supported the final decision. It was truly a team effort and we accomplished some great things together.

The number one job of the board is to fire or hire a CEO. Fortunately, we had the opportunity to hire one when Phil DiPofi joined Northwest FCS in 2011. I feel this was one of our greatest accomplishments as a board.

As you retire from the board, what thoughts would you leave with Northwest FCS customer- owners?

If the Farm Credit System wasn’t here, agriculture would be paying a lot more for their money. There would be no checks and balances with other lenders. Agriculture would be considered a high-risk business all the time. Stockholders should be very proud of this association and the Farm Credit System. It’s very unusual for a government sponsored enterprise or program to really work the way it’s supposed to. The Farm Credit System does.

There are great people in the Farm Credit System. I was very fortunate to be able to meet many of them across the country. When it comes down to it, Northwest FCS is truly the best and this great work will continue. It was an honor to work with everyone on the board, the management team, local advisors and employees. This was truly the fun part of the job for me.

Northwest FCSBoard Members RetireMany thanks to Bruce Nelson of Spokane, Wash., and Drew Eggers of Meridian, Idaho who retired from the Northwest FCS Board of Directors in January 2014. Bruce and Drew were asked to share their insights after serving on the Northwest FCS board15 years and 13 years respectively.

3 | Nor thwest Farm Credit Ser vices

Drew Eggers

Joined the Northwest FCSboard in February 2001

Served as Northwest FCSBoard Chair in 2010

What are some of the lessons you’ve learned

serving on the board of Northwest FCS?

During my tenure

on the board I’ve

seen excellent times

in agriculture –

when our numbers

were strong and

nonaccruals were

almost non-existent

– to challenging

times when stressed

loans were an area

of concern. I’ve been

very pleased with the way management, employees and

the board worked through the challenging situations and

tough times. The association is strong even when some of

our commodities struggle. I think that’s a testament to our

diversity in the Northwest. We can spread our risk so if a

few industries aren’t doing well, the rest are able to help us

weather the storm.

I’m a farmer with an engineering background and I’ve al-

ways had a good understanding of my own budget and bal-

ance sheet. But, I hadn’t been exposed much to the world

of finance. I’ve enjoyed learning how the financial industry

does its job to make funding available for farmers and

ranchers. Agriculture is a risky business. It’s mind blowing to

see the risk management processes Northwest FCS uses to

cover a lot of those risks and uncertainties.

What are you most proud of?

In my early years on the board, we worked really hard to

re-affiliate with CoBank, our Farm Credit System wholesale

bank. It was quite a process to work through. Today, we have

a great relationship with CoBank and we’ve been able to

partner very well to serve all segments of agriculture.

During my

last term as

director, I knew

the board

would need

to hire a new

CEO when Jay

Penick retired.

I was fortunate

to be chairman

of the board

during that

time. I’m very proud of the process the board went through

and the result of bringing Phil DiPofi to Northwest FCS. The

board’s number one job is to hire the CEO and I think we did

an excellent job.

As you retire from the board, what thoughts

would you leave with Northwest FCS customer-

owners?

There is no doubt in my mind that Northwest FCS will be

here to serve farmers and ranchers for many generations to

come. I’ve thoroughly enjoyed my time as a director and I

think I’m leaving the board at a great time. We’ve seen quite

a few directors reach their term limits over the years. We

sure missed them, but they were replaced with some great

directors who brought new energy, ideas and a willingness

to learn. I was one of 14 directors on the board. I’m confident

the person who sits in my chair will continue to do the job

well and keep the association strong for the future.


Gearing Up for Transition

When Paul Clampitt was a college student

in the 1970s people were talking about the

“Population Bomb” that would outpace

agricultural growth, leading to starvation

and societal upheavals across the globe. Paul

was studying marine resources at Western

Washington University. His generation

believed they would eventually feed the

world’s population from the ocean’s deep,

abundant resources. While the demand for food

continues to grow, plenty has changed in the

U.S. fishing industry as Paul prepares his sons

to take the helm of the family business.


Paul Clampitt and his oldest son Ben who now captains their longliner vessel.

Gone are the days of derby-style fishing

where thousands of boats chased fish in a

high-stakes competition with other vessels.

Today, the National Marine Fisheries Service

issues a limited number of permits and

establishes a maximum Total Allowable

Catch annually for most major fisheries

(aka, a single species in a single fishing

ground) to protect the ocean’s biomass,

increase crewmember safety and improve

the quality of the fish.

Individual Fishing Quotas were established in 1995 for halibut and black cod in a new, federally-regulated system. Simply put, these fisheries were divided into pieces like a pie. Eligible vessel owners were given a slice – a percentage of the Total Allowable Catch – based on a five-year fishing history. IFQs now determine the number of pounds by species they’re allowed to harvest each year.

Under this “rationalized” system, the quota holders can fish, lease, sell or otherwise transfer their quota based on pro-gram rules. The first generation of quota owners is allowed to hire a skipper and lease the right to fish for their shares. The system includes restrictions designed to prevent too many quota shares from falling into too few hands by instilling ownership, or vessel caps. To date, many credit this system for transforming the industry from a bruising race for fish into a civil affair of contracts and cooperation, efficiency and higher profits.

“We fished years before the black cod and halibut fisheries were rationalized so we ended up with a lot of quota, which was fantastic,” explains Paul. “If we had fished one more year in the Pacific cod fishery before it was rationalized, we would have ended up with quota there, too. IFQs are a boon because you can build your business plan around them. I know how many pounds I’m going to catch before the season starts. And we will catch those fish! But, the Total Allowable Catch continues to decline.”


$-

$1.00

$2.00

$3.00

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$7.00

$8.00

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Black cod ex-vessel price

Halibut ex-vessel price

0

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20,000,000

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60,000,000

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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Black cod TAC

Halibut TAC

Total Allowable Catch Trends Price Trends

Jake Clampitt

Paul remembers a time when the TAC for the Alaskan halibut fishery was more than 58 million pounds. In 2013, the TAC was down to just over 21 million pounds, an all-time low, and is expected to decrease another 21 percent this year.

Asia and European markets have a major impact on fish prices and buyer demand can be affected by a number of factors, including foreign exchange rates. Approximately 90 percent of black cod is shipped to Japan. Three years ago, with a weak dollar against the yen, black cod prices were at an all-time high. Today, prices have plummeted along with black cod quo-tas. To deal with the declining trends, the Clampitts are improving efficiency, reducing labor costs and diversify-ing their operation beyond halibut and black cod.

Increasing efficiency in thelongline fishery

Halibut is mostly caught in the frigid water west of Canada and in the Gulf of Alaska. The tough-to-find halibut is fished farther west in the Aleutian Islands and north of the Bering Sea. Halibut and black cod are typically caught longlining, an environmentally friendly catch method that also preserves the quality of the fish.

Longlining translates into hundreds of hooks on 9,000-plus feet of line, then hauling in the “strings” of the catch. String is an interesting word for it. The mainline is close to half an inch thick in diameter, with a breaking strength of more than 1,800 pounds. Every 36 to 48 inches a leader and hook are tied to the mainline.

The Clampitts’ vessel, the Augustine, is an 81-foot schooner-style longliner. Paul’s sons, Ben 37 and Jake 24, remember spending 18 hours a day hand-baiting hooks on the open seas. Ben has been fishing for 20 years. Imagine baiting some 15,000 hooks by hand, day after day after day.

To improve efficiency and reduce injuries, the Clampitts invested $300,000 in an automatic baiting system financed by Northwest FCS in 2009. The equipment can bait 180 hooks a minute (three per

second) and has reduced the number of crew members needed from six to four. The technology paid for itself in just two years. Plus, you don’t pay personal liability insurance on a piece of equipment.

“We carry $10 million of liability coverage per incident, per person,” says Paul. “We used to

carry $1 million in coverage which is pretty standard in the fleet. But, in 1992 I had a boat sink with five guys in

the Bering Sea. They spent five hours in the water before a Coast Guard helicopter made a heroes’ rescue. We fall under the maritime Jones Act, which means if anything happens we’re responsible. They ended up suing me for pain and suffering. And you know what? They did suffer. I said you can have the money; you deserve it. But, the incident taught me something – we needed more coverage to protect our risk.”


Typically, when

the TAC declines

prices increase with

a limited supply,

and vice versa. But,

that’s not always

the case.

The auto-baiting system handles the entire process from baiting, setting the line, hauling the line, hook cleaning and storage.

Photo courtesy of Mustad Autoline.

Diversifying operations

In a typical year, the Clampitts will leave the port of Seattle in March, fish the Gulf of Alaska, head out to the Bering Sea, and finish off the coast of Washington and Oregon before Halloween. That’s eight long months at sea. But, with a drop in quota and prices the Clampitts are changing their business plan. This year they will put their quota on other boats in the far-reaching areas and pick up quota leases in areas closer to home. During the summer months they’ll now “tender” for salmon processors, a strategy that requires a complete stem-to-stern renovation of the Augustine to install a state-of-the art refrigeration system financed by Northwest FCS.

Vessels that “tender” for salmon processors in Alaska

are like giant fish taxis. The boats are designed to hold

hefty amounts of fish and keep them chilled as they’re

transported from salmon boats to processors on the

docks. The Augustine will be able to hold more than

250,000 pounds of salmon when the project is complete.

Plus, it only takes two or three crew members to tender.

The Alaskan salmon fisheries are booming and tendering

doesn’t require quota or a permit.

“In the past, when the halibut quota was down we’d

become black cod fishermen and fish halibut part time,

or the other way around,” says Paul. “But, when both

quotas are down you’re watching your equity dissolve. If

everything is rationalized you can’t go another direction.

You better not wait for that eventuality. While we still

have strong equity we’re going to take advantage of

opportunities, like tendering.”

“We’re investing a lot of money to get the Augustine ready to tender,” says Ben. “But, in the end we’re adding value to the boat. It’s not like buying quota that can


To create a level playing field, the aggressive, fast-paced salmon fishery in Bristol Bay limits vessel length to 32 feet, increasing the need for large tendering vessels to deliver salmon to processors on the dock.

Northwest FCS Relationship Manager Evan Heriot and Paul view installation of the new refrigeration system.

always go down. If you were going to buy $500 grand in quota and it drops, then you’re looking at some real potential losses.”

Whales take the catch

Whale “predation” is quickly becoming a serious problem for fishermen, particularly in the black cod fisheries. Some estimate killer and sperm whales are taking 20 to 30 percent of their catch. These whales are smart and they’re getting smarter all the time. Working in pods, they will grab the mainline, pull it taut and simply snap the fish off the line to avoid getting hooks in their mouths. Fishermen have tried a number of strategies, including high-pitch sound waves to keep them away. The noise worked for a while but now it’s like ringing a dinner bell.

Jake uses this analogy, “Imagine working on a critically important project when someone lets a monkey into the office. The monkey wreaks havoc, continually tearing the project apart. You’re not allowed to go home until the project is done. There’s nothing you can do but start over and over again. People say you can’t touch the monkey because he’s protected. You can’t even think bad thoughts about the monkey.”

Right now, scientific observers seem to discount the whale problem. “They say whales are only taking 2 percent of the fish,” says Paul. “That’s because, if they don’t see a black cod head or lip left on a hook they can’t count it on the longline survey. Whales don’t operate that way. They aren’t eating part of the fish; they’re taking the whole thing. The scientists’ goal is to determine what the harvest level should be so it doesn’t jeopardize the fisheries. If you can’t measure the whale predation how does that affect their biomass models? It compresses them. If whales are only taking 2 percent, then there’s obviously less fish. But, if whales are taking 20 to 30 percent the biomass is actually larger.”

Proposing a gear change

Paul believes a shift to pot fishing may be the solution to the whale predation problem. The Clampitts are preparing to take advantage of

the opportunity with modifications being made to the Augustine. Currently, pot fishing for black cod is illegal in the Gulf of Alaska. However, pot fishing is allowed in the Bering Sea and along the west coast of the United States and Canada. Opponents argue that pot fishing allows a fisherman to “hold” the fishing ground, basically pre-empting a longliner’s gear.

Paul understands the fears, but he thinks they’re overblown. “In the early 80s some pot boats in southeast Alaska out competed the longliners. The longliners had more political clout so they lobbied for an amendment to make pot fishing illegal. But, that was during the derby-style fishing days before IFQs were established. Now we have our quota, so what difference does it make if we catch it by pots or by hooks? I’m on the North Pacific Fishing Council’s gear committee. There will be details to work out – like not letting someone just drop their pots and head into town or putting limits on the number of pots that can be used – but I don’t think there’s any way around making the change. I do believe it’s going to happen sooner or later. Hopefully for us it’s sooner.”


Planning for succession

Like farming, helping the next generation get started in commercial fishing is a challenge, particularly in a rationalized fishery with expensive quota shares. Last year Paul bought out his 20-year partner on the Augustine to give Ben and Jake an opportunity to build equity of their own. Ben now owns 20 percent of the vessel and has purchased more than $1 million in quota with the help of Northwest FCS. Ben has been the vessel’s captain in Alaska since 2009. Jake just finished his first, full-year fishing season after college and recently bought his first quota shares.

“For a young person like me, thank God this is a family business,” says Ben. “I couldn’t do this without my dad. I know the amount of money I’ve put into buying quota and it’s only a sliver of what he has.”

“Barriers to entry for the next generation are a big concern in the industry,” says Paul. “The rules make it almost impossible for me to pass quota to my kids. The current thinking is that I have to sell my quota when I retire, which will lower the price and make it easier for the next generation to get in. But, the theory doesn’t hold true. I didn’t pay for my quota initially because everything was based on my fishing history. If I were to sell quota to my boys now, I’d have to sell at the market rate and pay capital gains. There has to be a better solution.”

Looking to the future

The Clampitts are optimistic about the future despite some of the challenges. They’re fishermen after all, well known for their seafaring spirit and guts. There will always be ups and downs in the fish populations, they

say. Sometimes the ocean just needs time to replenish

and rebuild. Fishing rules are designed to make sure

the public resource is sustainable long-term. In the

meantime, the Clampitts will continue to explore new

opportunities when they launch the Augustine in March.

“I’m always excited when the season starts and the

guys come back,” says Ben. “This is something I grew up

doing. Fishing reminds me of playing sports. You have

this camaraderie with the crew and there’s always some

good, healthy competition within the fleet. We talk about

who had the biggest ‘man share’ and we’ve always been

in the top 10. Fishing is physical, too, and you’re working

outside. Where else do you get to see glaciers and

Alaskan mountain ranges on the job? It’s a pretty cool

landscape to work in.”

Evolution of the U.S. Fishing Industry• In 1976 Congress passed the Magnuson-Stevens Act, establishing

U.S. authority for all fishery management activities within a 200 nautical mile zone off U.S. shores. Prior to 1976, these areas were considered international waters, dominated by large, foreign vessels.

• The Magnuson-Stevens Act (named for Warren Magnuson, former U.S. Senator from Washington and Ted Stevens, former senator from Alaska) sets the rules and regulations under which the federal fisheries are administered.

• The National Marine Fisheries Service regulates federal waters (between three and 200 miles off U.S. shores). The NMFS is a federal agency, reporting through the National Oceanic and Atmospheric Administration to the U.S. Secretary of Commerce.

• Fishery Management Councils were established for all federal waters in each area of the United States. The North Pacific Fishery Management Council regulates federal waters in Alaska. The Pacific Fishery Management Council regulates federal waters off Washington, Oregon and California. Council members include representatives from the fishing industry, fisheries scientists and the U.S. Coast Guard.

• Fishery Management Councils recommend maximum catch limits for each fishery. With approval by the National Marine Fisheries Service and the U.S. Secretary of Commerce, Total Allowable Catch limits are set annually in Alaska and every two years in Washington, Oregon and California. The Councils also recommend quota share systems within in each fishing sector.

• When a fishery is “rationalized” a form of privatization of a public resource occurs and participants in the fishery are defined in terms of who has access to fish (limited to specific participants) and to what extent they have access (based on their past catch history).

• In 1995, the black cod and halibut industries were rationalized after years of debate and discussions. Under the system, Individual Fishing Quotas were given to vessel owners based on a five-year catch history. These IFQs can be fished, leased, sold or transferred based on program rules.


Scott and his wife, Connie, raise bison and hay and board horses on their 800 acre farm 100 miles away from Fairbanks. Native Washingtonians, what brought them to Alaska is almost as interesting as the challenges they face in this extreme location. Five years ago, they were dairy farmers in western Washington, having spent more than 15 years doing custom harvesting. One evening, Scott watched a television program about farming in Alaska and became intrigued. A quick Google search located a farm for sale, and when he asked Connie about relocating north, her reply was a quick, “Let’s do it!”

This intrepid spirit has served them well as they’ve adjusted not only to the short days of winter, but the exceptionally long days of summer. “We have a short growing season, but once it starts, the grass grows fast,” Scott says. “It greens up in May and three weeks later the crop is ready to cut.”

It helps that much of the Plagermans’ land is irrigated, which yields them two or three good hay cuttings in a season. Irrigation is also helpful when faced with a serious drought as they were this past year. Scott’s production was cut short and he ended up needing to buy and transport hay out of British Columbia to meet his customers’ needs. These customers are primarily horse and cattle owners, who buy three quarters of Scott’s 2,000 tons of hay; the remainder he keeps for his own horses and the 40 to 80 animals he boards for outfitters during the winter months.

Rounding out his operation, Scott raises 90 head of bison, which are well-adapted to the extreme conditions. “They’re outside all the time and seem to be relatively unaffected,”

he says. “Every pasture has several acres of wood for wind protection and they know how to go into it.” Good quality feed and a consistent water supply – delivered using an extensive system of heated pipes – are also essential for animal health. Scott’s bison are sold to a destination restaurant near Denali National Park.

While the weather and daylight fluctuations are key differences from his days in Washington, one of the biggest challenges Scott faces in Alaska is the lack of agriculture infrastructure. “There aren’t any equipment dealers or farm supply stores nearby, so we have to have all our seed, fertilizer and equipment parts shipped up,” he says. “We also have to do all of our own repairs.”

With so little agriculture in the state, finding a financial partner in their remote area could have been a challenge, but Northwest FCS was there. “My brothers use Northwest Farm Credit in Washington and they recommended them to me,” he says. “We were happy they were able to give us the financing we needed up here in Alaska.”

Farming the Alaskan Frontier

With winter days lasting just a few hours and temperatures regularly dropping far below zero, it’s no surprise that the land of the midnight sun isn’t known for its agriculture. Yet despite the challenges, Northwest FCS customer Scott Plagerman is one hard-working member of a small and dedicated group of Alaskan agriculture producers.


Earning RateWise Credits – Participants can accumulate RateWise Credits for six years beginning on the date of their program registration. Credits will also be accepted online for eligible programs attended in the 12 most recent months prior to registering for the RateWise program.

Interest Rate Reductions – Rate reductions increase with the number of credits earned.

10 credits: 0.25 percent interest rate reduction for three years



Certifying RateWise Credits – After registering for the RateWise program, participants can certify workshops and seminars completed by submitting a copy of the program’s agenda online.

Additional Benefits – Book your first loan using RateWise credits and receive all the benefits of our nationally recognized AgVision® program available to young, beginning, and small producers including an invitation to the Young and Beginning Producers Conference.

Northwest Farm Credit Services is dedicated to helping the next

generation of producers learn and grow. Our RateWise program rewards

young, beginning and small producers for continuing their management

education with interest rate reductions on new loans.

EligibilityRateWise is part of our nationally recognized AgVision program available to young, beginning and small producers with at least one of the following characteristics:

• 35 years of age or younger.

• 10 years or less agriculture experience.

• Producer with annual gross farm production of less than $250,000.

Program FeaturesLearn and Earn – Participate in educational programs, enhance

your management skills, make your operation more successful,

and accumulate RateWise credits to qualify for interest rate

reductions on your next loan or renewed operating loan.

RateWise Registration – Register online at northwestfcs.com/

RateWise to begin accumulating your RateWise credits today.

Eligible Education Programs – Programs eligible for RateWise

credits include: 1) programs hosted by Northwest FCS’

Business Management Center and Knowledge Center; 2)

programs hosted by universities, industry groups and the Farm

Service Agency; 3) programs hosted by other resources to

improve producers’ management and production skills.

RateWise™ Program

*Participation in and/or completion of degreed programs is not eligible

Northwest FCS Programs

1 credit regardless of duration

(maximum of 5 total credits earned)

½ day = 2 credits

1 day = 4 credits

1+ days = 6 credits

½ day = 1 credit

1 day = 2 credits

1+ days = 3 credits

University, Industry and Farm Service Agency Programs

OtherPrograms

™

Contact your local Northwest FCS officefor more information

-OR-Register for the RateWise™ program today at

northwestfcs.com/RateWise


When the major news networks like CNN, Bloomberg, and CNBC start calling me for interviews on farm and agricultural conditions, you know change is coming in the agricultural industry. Looking back five years from now on 2013 might indicate that this was a pivotal year for change in the economics of agriculture.

The emails I receive and the look in people’s eyes at industry events suggest anxiety about the future, but not necessarily gloom and doom. It is very encouraging to see groups of lifelong learners at these events who want to be informed so that they can be proactive managers in the changing cycles.

It is amazing that 2013 had all the hype of strong corn and soybean prices early on, but recently we have seen the air come out of the economic balloon with $4.00 per bushel corn and some suggesting $2.70 per bushel corn. The lesson now being learned by those without a proactive risk man-agement program and forward pricing is that negative mar-gins can quickly arise, which, if sustained, can quickly burn through working capital and equity. Will 2013 be the start of the moderation and end of the great commodity super cycle? On the bright side, the livestock industry finds people with a newfound energy as prices and reduced costs are sug-gesting some favorable economic times ahead for them.

The year 2013 has seen a slowdown in growth of the emerging nations and softening of the ethanol and biofuel mandates. A close watch of weather conditions in the southern hemisphere along with Federal Reserve action may foretell the future direction of profits, prosperity, and wealth on U.S. farm balance sheets.

Turning to land values, they are very regionally and locally determined. In my travels discussions concerning “no sales,” fewer bidders at auctions, and actually some reduction in cash rents in certain areas are signs of behavioral change

in this aspect of the profit equation and the balance sheet. Wealth preservation versus wealth accumulation of the past few years may be in order as we close 2013.

The general economy in the United States has made a modest comeback despite inaction in Washington, D.C. The year 2013 will go down as the year in which the United States moved toward energy independence, which is primarily on the shoulders of agriculture and rural regions.

In 2013 I noticed a trend involving strategic alignment among producers, suppliers, and lenders. Each is seeking quality people and businesses to plug into their successful business model.

In traveling North America, the convergence of biotechnology, information technology, and engineering technology is playing out in crops, livestock and other agricultural sectors. Soybeans are now being grown in Western Canada with high yields. Despite challenging planting conditions, I have seen uniform crops out the windshield of my Hertz rental car, and producers and other leading agriculture industry experts are discussing how technology has aided this sector.

A continued favorable trend of 2013 is the youth movement in agriculture. At recent seminars and events, well over half of the attendees have been under forty years of age. The energy and new ideas are welcomed, but one hopes they will heed the advice of senior generations who have experienced the downturn of the 1980s, particularly if we go into some tough economic times.

Interacting with thousands of producers, lenders, agribusi-nesses, educators, and others with a passion to make agri-culture better assures me that the future of agriculture is in capable hands as we look to the new year ahead.

Reflectionson 2013Dr. David KohlProfessor Emeritus, Virginia Tech



Rural Community GrantsNorthwest FCS Rural Community Grants

are given to support creative, collaborative

projects that address emerging challenges

and opportunities for rural communities.

In 2013 Northwest FCS, with support from

CoBank, awarded 34 rural grants worth

nearly $63,000. Since 2007, Northwest FCS

has presented nearly 250 community grants

totaling more than $500,000.

Rural Community Grant projects come in all

shapes and sizes. Some improve community

infrastructure, like buildings and facilities.

Others support rural safety and health. The

projects may be wildly diverse, yet they all

share one thing in common – community

driven support.

West Jefferson High SchoolAg Program

Terreton, Idaho

“With many schools being in the midst of tough economic times, we have had to search for alternative funding sources to update old and depleted

equipment,” says Don Bird, West Jefferson ag teacher. “Having new and updated welders in the ag shop allows students to

use machines currently being used in the welding industry and at post-secondary education programs. Students at West Jefferson High School will now be familiar with machines being used at welding competitions, giving them the same advantage as students from other schools. Also, the ag fabrication classes will have newer machines to complete welding projects within the community and fairgrounds. Thank you so much Northwest FCS for helping the West Jefferson Agricultural Program purchase the much needed welding equipment.”

Bruneau Quick Response Unit

Bruneau, Idaho

“It is with excite-ment and gratitude that the Bruneau Quick Response Unit says ‘thank you’ to Northwest Farm Credit Ser-vices,” says Mary Tindall with the QRU. “The Emergency Operations Building will provide much needed space for housing our response vehicle, a classroom for training, space for cleaning of equipment, room for storage of supplies, and a secured place for storage of records and patient information. The primary purpose of the Emergency Operations Center will be to meet the needs (train-ing, sanitation, safety, secure storage of information, etc.) of the QRU members, however the community will be encouraged and expected to have access to the classroom for meetings, lectures, gatherings, or special events.”

Wasco Community Garden

Sherman County, Oregon

Citizens of the small town in Sherman County, Oregon formed a non-profit group to create a community garden for residents to grow a variety of fruits and

vegetables. Plots are available to any household in the city of Wasco. In addition to directly benefitting local citizens,


the garden will also benefit the local food bank and the Potlatch program to supplement family meals with low-cost, nutritious, fresh produce. The garden project will also include an educational meeting area where local children and adults, alike, will learn how to grow, how to use what is grown, and all the benefits that come from gardening.

Grant Union High School

John Day, Oregon

Northwest FCS Regional Vice President, Beau Reynolds, applied for the Rural Community Grant in 2012 on behalf of Grant Union High School. Reynolds, a

1999 graduate of the school, was well aware of the destruction of the 2011 floods and wanted to help his alma mater.

“The excessive rains and spring run-off of May 2011 caused severe flooding in the Canyon City/John Day area,” says Beau. “Grant Union High School was in the middle of all the flooding and ended up having their track and field area, old gymnasium and metal shops under a foot of standing water, causing extensive damage to all of them. Through insurance proceeds the school district was able to repair the damage incurred to the gymnasium and buildings, however were short of funding to replace the track facility.”

Grant School District #3 Superintendent Mark Witty says, “The track community and Grant SD #3 are very appreciative of the financial grant from Northwest FCS. The monies will be utilized to support the goal of completing the eight lane track. The completed track will be an asset for our students and community for years to come by supporting our student athletes, community fitness and adding business to our county when we sponsor a track meet.”

Big Timber Community Food Bank

Big Timber, Montana

“We are so excited to be replacing many of our quite elderly second-hand refrigerators and freezers, thanks to your very generous grant,” says Christine Tochihara from the Big Timber Community Food Bank. “Funds were matched with donations

from community partners and many local donors. An obvious advantage of these appliances is that we no longer need to monitor temperatures daily and wait for a breakdown to decide whether to repair or replace. Less obvious are the savings in electricity with the energy efficient models available now, the convenience to our many volunteers who man the food bank helping clients, stocking shelves and restocking our perishables, and the ability to reliably keep perishable food at optimum temperature until it is distributed.”

Chelan Douglas Land Trust,The Saddle Rock Restoration Project

Chelan, Washington

“Financial support from Northwest Farm Credit Services is being used to help make the much-loved and heavily used trails at Saddle Rock safer for all trail users,” says Sharon Lunz, Communications and Development Director for the Chelan Douglas Land Trust. “We will be repairing some trails, and re-routing others to a more sustainable route. We will begin restoring native vegetation and educate volunteers.

Saddle Rock is a community treasure, and we are thrilled to be able to start making improvements to the neglected trails. Thank you for your support!”

Rural Community Grant Deadlines:

October 1 and February 1For more information visit northwestfcs.com/ruralgrants

or contact Jennifer Rohrer [email protected] or

800-743-2125 ext. 5303.


National Discounts forNorthwest FCS Customers “Ownership has its privileges.” As a customer-owner of the Northwest FCS cooperative

you can receive discounts on nationally-recognized products and services. It’s our way of

saying, “Thank you for your business.”

To receive these discounts, be sure to identify yourself as a Farm Credit member and provide thediscount codes listed below.

Save 15 percent on flowers, plants, gift baskets, and more. Go to 1800flowers.com or call 888.755.7474. Use discount code FCCS to receive the discount.

Go to floralambiance.com or call 800-672-4137 to save $20 off orders valued at $30 or more.Use promotion code fccsflowers. Note: the owner of this business is a Farm Credit customer.

Save up to 30 percent depending on configuration. Go to dell.com/farmcredit or call 800-695-8133.Use member ID CS25031329.

National and Almo require us to “protect” our discount codes. To obtain this information, pleaseemail Pat McFarland at [email protected].

Save up to 60 percent – only available when you shop on-line at osincentives.com/farmcredit.

Save 12 percent on your monthly service charges. Go to sprint.com/farmcredit or call 866-639-8354.If requested, please reference Farm Credit Council by phone and MFCCS_ZZZ online.

Includes moves within California, Delaware, Florida, Idaho, Main, Maryland, Tennessee, Texas, Utah, Wisconsin or Wyoming, or between any of the 48 contiguous states. Discounts for as much as 65 percent are only available via United Agent, Barrrett Moving & Storage. Call 800-879-1283 oremail: [email protected]

To view all discounts, visit fccservices.com. If you haven’t received a log-in forour new website, please email [email protected].

IDAHORobert Ball HamerCody Bingham JeromeJeff Blanksma, Jr. HammettAdrian Boer JeromeRay Carlson BlackfootConnie Christensen BlackfootBill Clayton WilderCade Crapo St. AnthonyRon Elkin BuhlCarl Ellsworth LeadoreBruce Foster AberdeenDavid Funk HansenLeRoy Funk BurleyBrent Griffin RupertJackie Hillman DuboisBrian Huettig HazeltonKen Koompin American FallsBrent Lott Idaho FallsKaren Lustig CottonwoodMarty Lux NezperceDan Mader GeneseeRay Matsuura BlackfootKyle Meyer RathdrumRon Mio FruitlandGreg Moss KetchumKirk Nickerson HoweLisa Patterson HeyburnErick Peterson MoscowNate Riggers Nez PerceRoyce Schwenkfelder CambridgeKirt Schwieder Idaho FallsScott Searle ShelleyTodd Simmons TerretonRobert Swainston PrestonRyan Telford RichfieldBernie Teunissen CaldwellDale Thomas GoodingCamellia Thurgood NampaJustin Tindall BruneauRitchey Toevs AberdeenSteven Toone GraceJames Udy American FallsTodd Webb DecloShane Webster Rexburg

73 Fort Hall Avenue, Suite AAmerican Falls, Idaho 83211(208) 226-1340

370 North Meridian Street, Suite ABlackfoot, Idaho 83221(208) 782-3800

1408 Pomerelle Avenue, Suite BBurley, Idaho 83318(208) 678-6650

501 King StreetCottonwood, Idaho 83522(208) 962-2280

2225 West Broadway, Suite AIdaho Falls, Idaho 83402(208) 552-2300

2631 Nez Perce Drive, Suite 201Lewiston, Idaho 83501(208) 799-4800

16034 Equine DriveNampa, Idaho 83687(208) 468-1600

102 North State, Suite 2Preston, Idaho 83263(208) 852-2145

1036 Erikson DriveRexburg, Idaho 83440(208) 656-2100

815 North College RoadTwin Falls, Idaho 83301(208) 732-1000

MONTANALes Arthun WilsallDavid Bell Great FallsBill Bergin MelstoneMark Bergstrom BradyAdam Billmayer HogelandBart Bitz Big SandyRyan Bogar VidaKeven Bradley Cut BankSandy Carey BoulderTom Cheetham RedstoneCalvin Danreuther LomaNels DeBruycker ChoteauVicki Eggebrecht MaltaWarren Flynn TownsendConni French MaltaJoe Fretheim ShelbyScott Glasscock AngelaBeth Granger Great FallsGreg Grove MoccasinChad Hansen DillonCraig Henke ChesterCourtney Herzog RapeljeDale Hirsch KinseyCraig Iverson WinnettAlan Klempel BloomfieldSteve Lackman ForsythTim Lake PolsonBryan Mussard DillonCorie Mydland JolietKen Olson RicheyTracey Pearce SheridanRobert Peterson HobsonTrudi Peterson Judith GapShawn Rettig RudyardDave Sattoriva HinghamNancy Schlepp RinglingKim Skinner HallCarmie Steffes PlevnaSteve Swank ChinookKurt Swanson ValierDuane Talcott HammondDale Tarum RichlandBob Taylor DentonKelly Toavs Wolf PointMark Tombre SavageMiles Torske HardinBrian Tutvedt KalispellLarry Tveit, Jr. FairviewBruce Udelhoven WinifredMike Wallewein ConradSteve Wood Sheridan

Tech Plaza, Building 1, Suite 3003490 Gabel RoadBillings, Montana 59108(406) 651-1670

1001 West OakFarm Credit Building, Suite 200Bozeman, Montana 59772(406) 556-7300

519 South MainConrad, Montana 59425(406) 278-4600

134 East Reeder StreetDillon, Montana 59725(406) 683-1200

501 First Avenue SouthGlasgow, Montana 59230(406) 228-3900

700 River Drive SouthGreat Falls, Montana 59405(406) 268-2200

1705 Highway 2 Northwest, Suite AHavre, Montana 59501(406) 265-7878

120 Wunderlin Street, Suite 6Lewistown, Montana 59457(406) 538-7737

502 South HaynesMiles City, Montana 59301(406) 233-3100

3021 Palmer Street, Suite BMissoula, Montana 59808(406) 532-4900

123 North Central AvenueSidney, Montana 59270(406) 433-3920

OREGONMonet Allen Montague, CAReed Anderson BrownsvilleRoben Arnoldus CoveGlenn Barrett BonanzaJohn Boyer HainesGreg Brink JosephRon Brown Milton-FreewaterGeorge Bussmann SixesWarren Chamberlain ValeJason Chapman Klamath FallsTim Dahle The DallesDan Dawson RoseburgMike DeWall HarrisburgSusan Doverspike BurnsRod Fessler MadrasTom Fessler Mt. AngelJoe Finegan CorneliusBruce Ford HermistonJavier Goirigolzarri RoseburgDennis Harmon Grants PassMatt Insko LaGrandeKenneth Jensen ValeKyle Kenagy RoseburgJeremy Kennel MonmouthAlan Keudell AumsvilleDavid Kunkel PortlandLeland Lage Hood RiverDan C. Lewis GastonSharon Livingston Mt. VernonBill Martin RufusScott McClaran JosephRon Meyer TalentGreg Myers TillamookDavid Neal TangentMary Olson MonmouthLarry Parker HelixAlan Parks Silver LakeAmy Doerfler Phelan AumsvilleJohn Reerslev Junction CityStephen Roth BrothersShannon Rust EchoMarc Staunton MerrillAnna Sullivan HerefordSteve Walker StanfieldEric White Nyssa

3370 10th Street, Suite BBaker City, Oregon 97814(541) 524-2920

2345 N.W. Amberbrook Drive, Suite 100Beaverton, Oregon 97006(503) 844-7920

650 E. Pine, Suite 106ACentral Point, Oregon 97502(541) 665-6100

2911 Tennyson Avenue, Suite 301Eugene, Oregon 97408(541) 685-6140

300 Klamath Avenue, Suite 200Klamath Falls, Oregon 97601(541) 850-7500

378 West Idaho AvenueOntario, Oregon 97914(541) 823-2660

12 Southwest NyePendleton, Oregon 97801(541) 278-3300

3113 S. Highway 97, Suite 100Redmond, Oregon 97756(541) 504-3500

2222 Northwest Kline StreetRoseburg, Oregon 97471(541) 464-6700

650 Hawthorne Ave. S.E., Suite 210Salem, Oregon 97301(503) 373-3000

3591 Klindt Drive, Suite 110The Dalles, Oregon 97058(541) 298-3400

WASHINGTONDave Allan WapatoJeff Bosma OutlookRuss Byerley TouchetRoger Canfield OlympiaBill Clark ChelanMike Cobb EphrataBill denHoed GrandviewRichard DeRuwe DaytonFrank DeVries LyndenScott Eschbach YakimaPatrick Escure QuincyKevin Filbrun PascoStacy Gilmore PascoAlan Groff WenatcheeLori Hayles PascoJim Kile St. JohnCris Kincaid PullmanJim Klaustermeyer OthelloDave Klaveano PomeroyTristan Klesick StanwoodChris Kontos Walla WallaSteve Krupke ReardanDavid Lange ColfaxJosh Lawrence Royal CityPoppie Mantone BingenDan McKay AlmiraAlan Mesman Mt. VernonJohn Miller ToledoPat Murphy ChehalisJeff Raap EllensburgSara Rolfs WenatcheeJason Salvo SeattleDerek Schafer RitzvilleJeff Schilter OlympiaDanielle Scrupps RitzvilleBen Smith SequimJerry Smith Benton CityLori Stonecipher Walla WallaMark Tudor GrandviewJake Wardenaar Royal CityAndy Werkhoven Monroe

265 East George Hopper RoadBurlington, Washington 98233(360) 707-2353

629 South Market BoulevardChehalis, Washington 98532(360) 767-1100

224 North MainColfax, Washington 99111(509) 397-2840

1501 East Yonezawa BoulevardMoses Lake, Washington 98837(509) 764-2700

455 East Hemlock Street, Suite DOthello, Washington 99344(509) 488-2396

9530 Bedford StreetPasco, Washington 99301(509) 542-3720

1223 Sheridan Avenue, Suite AProsser, Washington 99350(509) 786-6400

1900 W. Nickerson Street, Suite 215Seattle, Washington 98119(206) 691-2000

1515 S. Technology Blvd., Suite BSpokane, Washington 99224(509) 340-5600

2735 Allen RoadSunnyside, Washington 98944(509) 836-3080

1 West PineWalla Walla, Washington 99362(509) 525-2400

667 Grant Road, Suite 1East Wenatchee, Washington 98802(509) 665-2160

1360 North 16th AvenueYakima, Washington 98902(509) 225-3200

advisors and locations HeadquartersP.O. Box 2515, 1700 S. Assembly St.Spokane, Washington 99220-2515509.340.5300 | northwestfcs.com

local


P.O. Box 2515Spokane, Washington 99220-2515

New address?Please notify your local Northwest FCS office.

Northwest Farm Credit Services is a cooperative. When you become a customer you also become an owner. You have a voice and a vote in how our association does business. Plus, when we do well we share profits with you in the form of patronage. No bank does this. You borrow. You own. You earn. You grow. Learn more about the benefits of being a customer-owner at northwestfcs.com/fisheries or 800.372.0112.

Northwest FCS customer Stuart Schuttpelz

Northwest FCS Yields - Gearing Up for Transition - Winter 2014

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