Vermont Bankers Meeting

Ken Buzzell, Senior Vice President from the Newport office, attended the Orleans/Essex Vermont Bankers/Legislators meeting in Derby, Vermont on December 10th. Chris D'Elia President of the Vermont Bankers Association discussed the credit crisis and its effect on banking and consumers in Vermont. Legislators gave input and asked questions regarding the impact on Vermont Banks.

Happy Holidays

On behalf of the entire Yankee staff, Happy Holidays and best wishes for a successful 2009.

Interest Rate Changes 1/1/09

On December 16, 2008 the prime interest rate changed from 4.00% to 3.25% in response to actions taken by the Federal Reserve that day.

All Yankee Farm Credit variable interest rates will be decreased by 0.75% effective January 1, 2009.

Grafton Conference

Last week I attended a second meeting of the 33rd Grafton Conference, on the Vermont dairy industry. The first meeting was in March (see this post). The Windham Foundation will now publish a report from the conference. I will post a link here when it is available.

Much has happened since the March meeting. The Vermont Milk Commission has been active (more info here). Commodity prices peaked at the end of June and have since fallen dramatically. Milk prices are much lower than was expected last spring. The Chinese milk scandal (milk tainted with melamine) broke in July, significantly reducing demand for milk products in China. The Saputo cheese plant in Hinesburg was damaged by fire in September, and the company announced in October that it was closing the plant.

Outside of agriculture, the subprime financial crisis worsened significantly in September, prompting major government interventions in the financial markets. Earlier this month it was announced that we have been in a recession for a year. And the Obama administration and a new Congress take office next month, which will affect public policy of all kinds.

All of these topics were discussed. I was asked to speak on two topics:

The financial stress we are seeing on farms: We are hearing from farmers that there is considerable stress. It has not yet shown up in our statistics, but they always lag stress on the farm.

The effects of the financial crisis on the availability of credit for agriculture: As discussed in other posts on this blog, the Farm Credit System is still able to obtain funds, but at increased cost. Yankee's variable interest rates to members are presently 0.75% higher relative to prime than last summer.

UPDATE 1/23/09: The financial stress on farms has increased in the weeks since the Grafton Conference, as milk prices continue to decline and the general economy contracts. And while Yankee's variable interest rates to members are still 0.75% higher relative to prime than last summer, they are now the lowest in Yankee's history. Both topics are discussed in this post.

UPDATE 7/20/09: Click here for the conference report (1 MB PDF file).

My Favorite Entrepreneur

At Yankee this past year we have been talking about four values: integrity, relationships, competence and entrepreneurship. One of my heroes who exemplifies these values is Benjamin Franklin.

Integrity: Franklin developed a list of 13 virtues to live by, several of which are related to integrity.

Relationships: Several of the 13 virtues speak to the art of good relationships. Franklin was a master diplomat, securing the assistance of France in the American Revolution.

Competence: Benjamin Franklin was accomplished in many fields. From Wikipedia: "Franklin was a leading author and printer, satirist, political theorist, politician, scientist, inventor, civic activist, statesman, and diplomat."

Many of the Founding Fathers were exemplars of these three values. George Washington and Thomas Jefferson, in particular, come to mind. But perhaps alone among the Founding Fathers, Benjamin Franklin was also a successful entrepreneur. He was innovative—inventing the lightning rod, bifocals and the Franklin stove. He was a successful author, printer and merchant. It is ironic that Poor Richard's Almanack helped make him wealthy. He founded a mutual insurance company which is still in existence today.

I hope that Benjamin Franklin's portrait on the $100 bill reminds you of these qualities about him, and especially his entrepreneurship!

Agri-Mark Meeting

Ken Buzzell, Vice President from the Newport office, attended the district 12 Agri-Mark Regional Meeting in Morristown Vermont on December 1st. Elections for Director and other offices were held. Paul Johnson CEO of Agri-Mark spoke of the financial results of Agri-Mark and the challenges facing farmers in 2009.

Morgan Greenwood Rilling, Loan Officer from the White River office, represented Yankee at the Agri-Mark regional meeting held in West Lebanon, NH on December 4th. The major topic of the meeting was projections for next year.

UNH Cooperative Extension Course

Mike Moloney, Senior Records and Tax Specialist, and Jean Conklin, Loan Officer and Tax Specialist, both from the White River Junction office, were presenters at a "Keeping and Using Financial Records to Improve the Profitability of Your Farm" course on December 4, 2008.

Mike conducted a session about "Income Tax Planning in both High and Low Profit Years." Jean's presentation was "What a Lender Looks For" and discussed other various Farm Credit Programs.

The program was sponsored by UNH Cooperative Extension and held at the Student Conservation Association complex in Charlestown, NH.

Introduction to Farm Quickbooks

Join Records and Tax Specialist, Lisa Young, in a course for anyone that has the desire to do some farm bookkeeping. The course is offered in two locations: December 2nd at the Champlain Valley Expo Blue Ribbon Pavilion; and on December 5th at the Middlebury Extension office, 68 Catamount Park, Suite C. The program runs from 9am to 3pm and includes a lite lunch. This course is open to all agricultural producers and is most beneficial to the new Quickbooks user. Sponsored by UVM Extension in partnership with Northeast Sustainable Ag speakers fund and Yankee Farm Credit.

Please pre-register by November 26. 1-800-639-2130, UVM Extension, Glenn Rogers or Peggy Manahan.

4-H Foundation of NH

Ken Nelson, Senior Loan Officer from the White River Junction office, recently represented Yankee at the 4-H Foundation of New Hampshire 50th Annual Meeting. The meeting was held at Canterbury Woods Country Club in Canterbury, NH. The evening was a celebration of the past 50 years and looking forward to the future.

The 4-H Foundation helps support the various 4-H programs in New Hampshire which involve over 25,000 youth and 2,500 adult volunteers in all aspects of 4-H. In the most recent year, the Foundation provided financial support of over $150,000 to help fund these programs.

One of the many fund raisers that the Foundation has each year is the Tom Fairchild 4-H Golf Tournament which is scheduled for May 15, 2009 at Canterbury Woods. (See this post for our participation last spring.) For more information please contact Wendy Brock, 4-H Youth Development Program Leader and Executive Director at 603-862-2187. Yankee Farm Credit supports the 4-H Foundation of New Hampshire as an "Achiever" donor.

New Zealand #2

Tomorrow I leave on a personal trip to New Zealand (see this post). I will return on December 1. Bill Heath is in charge while I'm away. Actually, everyone inside Yankee knows that my co-blogger is really in charge. Bill and I just take turns pretending. :)

I had intended to blog about New Zealand—before, during and after the trip. After all, it was blogging about China that kicked off this blog. I had fun doing that, and many people told me that they enjoyed my China posts. I was hoping to repeat the experience with New Zealand.

As you can see from the title of this post, I did not get far. Somehow life happened. I suppose that a financial crisis didn't help, either.

In any event I'm going to take a break from blogging. I will not be blogging from New Zealand. I will resume blogging after I return and get caught up.

Farm Credit System Financial Results

The previous two posts discuss the current health of the financial markets. There are some concerns. How about Yankee and the Farm Credit System? Are they healthy?

Yes, and third quarter results are out so you can read all about it.

Click here for Yankee's third quarter results. Loan volume is down 2% from year-end. Credit quality remains excellent. Year-to-date net income is down 17% from last year, which is one reason we are paying attention to our margins. But we remain profitable, and enough so that we continue to expect to pay a 2008 patronage refund by March 31, 2009. Capital remains strong.

Click here for a summary of the Farm Credit System's third quarter results. Look for the press release dated October 31, 2008. More detailed information can be found here. Loan volume is up 11% from year-end. Nonperforming loans increased from 0.4% of the loan portfolio at year-end to 0.7% at 9/30/08. That is still a good number. (Yankee's number was 0.3%.) Year-to-date net income is up 17% from last year. (Yup, it's a coincidence that the System is up 17% and Yankee is down 17%. The System had loan volume growth. Yankee didn't.) Capital/assets decreased from 14.2% at year-end to 13.4% at 9/30/08 due to loan volume growth. Liquidity increased, which is good in today's uncertain markets.

For comparison, I wrote about the System's second quarter results here.

You may also be interested in the following fact sheet published by the Farm Credit Council:
The Farm Credit System: Financial Strength Benefiting Rural America

Financial Markets, Part 2

This post is part 2 of 2. Click here for part 1.

So what does all this have to do with the Farm Credit System and Yankee? The Farm Credit System is a U.S. government sponsored enterprise (GSE), what does it have to do with interbank lending in London?

It turns out that LIBOR interest rates are widely used, throughout the world, as a benchmark. When the Farm Credit System issues variable rate debt, it is often pegged to LIBOR. When the Farm Credit System issues long term fixed rate debt, it is often desirable for purposes of prudent asset-liability management to synthetically convert that debt to variable rate debt, pegged to LIBOR, using interest rate swaps.

It is true that the Farm Credit System can presently issue short term fixed rate debt at attractive rates. Not as attractive as the U.S. Treasury, but close. But what good does that do us? Short term debt must be refinanced frequently. One always runs the risk that a day will come when it cannot be refinanced, which is a sure bullet in the head.

It is essential for the Farm Credit System to issue a considerable amount of longer term debt to more closely match the term of our loans. And since the majority of our borrowers choose variable rate loans, the debt should also be variable rate—either directly issued as variable rate debt or issued as fixed rate debt and then swapped to a variable rate. Either way will usually involve LIBOR.

As noted in the previous post, interest rates have gone crazy since mid-September. As a result, CoBank has changed the way it calculates the interest rate on the money it lends to associations such as Yankee. Effective November 1 a portion of our interest expense is now directly tied to LIBOR. Now even little ol’ Yankee is directly affected by interbank lending in London. This is new for us.

Yankee is now exposed to more interest rate volatility than it was before. It will take some getting used to. That is also part of the reason why we decreased rates only 0.25% on November 1, and why the other northeast Farm Credit associations did not decrease interest rates at all.

It’s a brave new world.

Financial Markets, Part 1

It has been a wild time in the financial markets!

Previous posts on this subject:
11/10 – Interest Rates (letter to members)
10/10 – Interest Rates (letter to members)
09/30 – Financial Markets, Part 1 and Part 2
09/08 – Fannie and Freddie, Part 1 and Part 2

In brief the Federal government placed Fannie Mae and Freddie Mac into conservatorship on September 7. Lehman Brothers filed for bankruptcy on September 15. Interest rates went crazy.

Much has been written recently about the stock market. My last comment was on 9/30 at which time the DJIA was down 27% from its all-time high of last year. It is now down 37%. That is now worse than the downturn of 2002 (down 31%). But still a ways to go to equal the crash of 1973-74 (down 45%) or the Great Depression (down 89%).

Less has been written about the credit markets, but the credit markets are important to Yankee. Interest rates have been behaving strangely since the subprime crisis started in August 2007. At first the strange behavior was favorable to the Farm Credit System, but since the end of April 2008 interest rates have been adverse to the System.

As a result many System institutions (but not Yankee) were in the process of increasing rates to members even before the fallout from Fannie, Freddie and Lehman Brothers was apparent.

Why have interest rates gone crazy since the Fannie, Freddie and Lehman Brothers events? Investors lost a lot of money on preferred stock in Fannie and Freddie and on Lehman Brothers debt. Investors became less willing to lend money to anyone except the U.S. government (and even then they preferred short term debt over long term debt). In particular, financial institutions became less willing to lend money to each other. As a result interest rates, other than rates on U.S. Treasury debt, have increased significantly.

One way to talk about this is to examine the spread between the 3-month rate for U.S. Treasury debt and the 3-month LIBOR rate. This is sometimes called the TED spread. LIBOR is the interest rate at which banks are willing to lend to each other, and this spread is an indication of the amount of unease in the financial markets.

For the 5 year period ending July 2007 the TED spread averaged 28 bp (bp=basis point, 1 bp=0.01%). For the 12 month period beginning August 2007 the TED spread increased to 125 bp. For the month of October 2008 the TED spread averaged 334 bp!

There is a lot of unease in the financial markets.

This post is part 1 of 2. Click here for part 2.

Interest Rates

The following letter is being mailed to members with the next monthly billing statement:

November 10, 2008

Dear Member,

Yankee decreased its variable interest rates to members by 0.25% effective November 1.

The commercial bank prime interest rate fell twice in October. It fell by 0.50% (from 5.00% to 4.50%) following an unexpected action by the Federal Reserve (Fed) on October 8. Yankee did not decrease rates in response to that event. See my letter dated October 10. The prime rate fell again by 0.50% (from 4.50% to 4.00%) following Fed action at its regularly scheduled meeting on October 28-29. Our 0.25% decrease effective November 1 was in response to this event.

Why didn’t Yankee decrease its rates by the full 1.00%, or at least the 0.50% in the latest action?

Our cost of funds has been materially impacted by current events in the financial markets. We have seen an increase in both the level of our cost of funds relative to U.S. Treasury debt and in the volatility of our cost of funds. We believe it is important to maintain the financial health of your association. We also understand that many of you are facing financial stress in your businesses. At this time we believe that a 0.25% decrease is an appropriate balance between the needs of the association and your needs.

We considered making no decrease at all. But there have been recent signs that credit markets are beginning to improve, just slightly. As a result we felt confident enough to make a 0.25% decrease. We continue to monitor financial markets closely, and will make future adjustments as needed. Future adjustments may be either upward or downward.

While the current situation in the financial markets has affected our cost of funds, it has not to date affected the availability of funds to the Farm Credit System. We still have funds available to lend and we continue to make loans the same as always.

I continue to post occasional comments about the current financial situation on Yankee’s blog at www.yankeeaca.blogspot.com. You can also find links there to current financial information for Yankee and the Farm Credit System, which both remain strong.

Thank you for your continued support and patronage.

Sincerely,

George S. Putnam
President and CEO

Northeast Regional Dairy Challenge

The Northeast Regional Dairy Challenge was held October 30 - November 1, 2008 at Penn State University in Harrisburg, PA. Loan officer Jean Conklin, from the White River Junction office, is a member of the National Dairy Challenege board of directors and represented Yankee by volunteering at the event. Jean presented the Don Rogers Platinum Awards to the two top teams: Adisseo and Blue Seal Richer Feeds. Approximately 100 students from 12 colleges in the Northeast and Canada attended the event and were hosted by three farms in Lancaster County, PA. There are four regional events which prepares the teams for the national contest being held in Syracuse, NY in Marh 2009.

Yankee Farm Credit is a Silver sponsor of the event and is proud to have Jean represent us.

Exciting News for Beginning Farmers!

Today Yankee Farm Credit entered into a Memorandum of Understanding (MOU) with the Farm Service Agency (FSA) and the Vermont Agency of Agriculture, Food and Markets concerning beginning farmers.

The MOU allows Yankee to make FSA guaranteed loans to qualified beginning farmers without having to charge the borrower the usual 1% FSA guarantee fee. FSA will waive the fee. This will allow these beginning farmers to keep more of their cash on the farm. A beginning farmer is a farmer who has been farming for less than 10 years.

Please pass the word! For more information please contact your local office or click here to send an e-mail.

UPDATE: Vermont Agency of Agriculture news release here.

Director Nominations

It's that time of year again when Yankee's Nominating Committee begins selecting director candidates for the elections in April 2009. There will be three elections, one director seat in each region. Each position is for a three year term. If you would like to be considered for nomination, please contact a member of the Nominating Committee at the numbers below or call your local branch.

Region #1 (Chittenden, Franklin, Grand Isle counties, Vt.; Essex, Clinton counties, N.Y.)
Arnold Mercy 802-326-4200
Wynn Paradee 802-524-4202
Mark Wrisley 518-963-4039

Region #2 (Caledonia, Essex, Lamoille, Orange, Orleans, Washington counties in Vt.; Coos and Grafton counties, N.H.)
Richard Hall 802-229-6342
Richard Martin 802-328-4120
Rendell Tullar 603-353-4860

Region #3 (Addison, Bennington, Rutland, Windham, Windsor counties, Vt.; Cheshire and Sullivan counties, N.H.)
David Ainsworth 802-763-8017
Paul Audy 802-388-2348
Bruce Bascom 603-835-6361

If you have any questions about the purpose or the procedures of the Nominating Committee, please contact John Peters, VP Operations at 800-639-3053.

Dairy Calf & Heifer Association Seminar at Miner

Loan Officer Kelly Langmaid attended the Dairy Calf & Heifer Association (DCHA) profit seminar at the Miner Institute in Chazy, NY on Thursday, October 30, 2008. This seminar was one of several one-day profit seminars put on by the DCHA at various locations thoughout the United States. At the Chazy meeting the keynote speakers were Jason Karszes of Cornell University and Normand St-Pierre of Ohio State University. In addition to the keynote speakers the group was updated on the Beef Check-off program and the DCHA during the lunch hour.

Dr. St-Pierre talked about "The 10 Best Ways to Mess-up a Good Ration." The discussion talked about how you can have the perfect ration and still not have it turn out right due to weather and moisture changes, as well as human and mechanical error.

Jason Karszes followed with a discussion on the importance of the replacement program to the dairy. This discussion talked about how to take the replacement program out of the dairy and treat it as a different entity to really see how the program is doing.

In the afternoon Dr. St-Pierre continued with a discussion on feeding heifers during these financially difficult times. He looked at different commodities, commodity prices and how they can be incorporated into the ration, while still allowing the most effect for the least cost.

Jason also discussed how to prioritize and make improvements to the replacement program by looking at the numbers. Using a series of spreadsheets Jason led the group through an example of tracking expenses. The spreadsheets are available for use at the Pro-Dairy website: http://www.ansci.cornell.edu/prodairy, select the Winter Dairy Management Tools.

This rounded out the day of a very informative meeting. Both speakers gave excellent information and were very interactive with the group. The meeting was sponsored by various companies including Yankee Farm Credit.

Tax tip newsletter

Our October issue of Tax Tips newsletter was mailed earlier this week! This newsletter is sent to current tax and records clients, if you would like to be added to the mailing list for future editions please contact your local office. We anticipate sending this out quarterly. Below is an excerpt from the newsletter, to read the whole thing click here.

Year End Tax Planning Strategies
by Michael Moloney, EA - Senior Records and Tax Specialist

As we approach the end of another year, we thought it would be a good time to talk about some of the yearend tax planning strategies available. Remember that having up to date records is a key part of the tax planning process.

Section 179 Expensing: For 2008 the Section 179 deduction has been increased to $250,000 with a purchase limit of $800,000. In other words if you have purchased more than $800,000 in qualifying property, the deduction phases out dollar for dollar on the amount over the limit. Qualifying property is “tangible personal property” (i.e. cattle, machinery and equipment, and single purpose buildings) placed in service and available for use by December 31, 2008.
For the 2009 tax year the Section 179 limit returns to the $125,000 amount (indexed for inflation) that was in effect for 2007.

For further assistance, please feel free to call a Financial Services Representative at your local office.

Congratulations to Morgan and Jon!

Congratulations to Morgan Greenwood and Jonathan Rilling on their marriage! Morgan is a loan officer in the White River Junction Office. We wish you both happiness and love always.

Interest Rates

The following letter is being mailed to members with the next monthly billing statement:

October 10, 2008

Dear Member,

The Federal Reserve (Fed), in conjunction with other global financial institutions and governments, recently responded to continued weak economic data and unsettled market conditions by lowering interest rates. The Fed cut the federal funds rate from 2.00% to 1.50% on October 8, 2008. The commercial bank prime rate decreased from 5.00% to 4.50%.

Yankee’s practice in recent years has generally been to change its variable interest rates to members on the 1st of the month following changes in the commercial bank prime rate. This time Yankee will not be reducing member variable rates.

This decision is due to current conditions in the financial markets. Nearly every sector of the credit markets has seen increasing costs and volatility in recent months, and these conditions have adversely affected Yankee’s earnings. Until market conditions settle down, we believe it is prudent to maintain member variable rates at present levels.

We recognize that many of the industries Yankee serves are also struggling with lower earnings and higher input costs. We believe that current interest rates offered by Yankee are still competitive in today’s tough financial markets. Yankee remains committed to returning excess profits to our members in the form of a patronage dividend, and we expect to pay a 2008 patronage dividend to members around March 31, 2009.

Yankee remains financially strong, as does the overall Farm Credit System. Rest assured that we continue to have funds available to meet your credit needs. We are dedicated to agriculture and the members we serve and we will continue to do our best to keep your cooperative sound and on solid financial footing.

If you would like more information on how current conditions in the financial markets are affecting Yankee and the overall Farm Credit System, you can visit Yankee’s blog at www.yankeeaca.blogspot.com. There are two postings dated September 30, 2008, titled Financial Markets, Part 1 & Part 2. We will post updates as warranted.

Thank you for your business and allowing us to serve you.

Sincerely,

George S. Putnam
President and CEO

Across the Fence 10/3

Members of the Northeast Kingdom Dairy Farmers appeared on the Across the Fence program (Link may go bad after a while) on WCAX Channel 3 on October 3rd.

For more information about the North East Kingdom Dairy Farmer Group, please contact Planning Committee member, Kelly Langmaid, at Yankee's Newport office. 800-370-2738

Click here for a complete listing of streaming videos of Across the Fence.

Ag Career Day

Loan Officer Chuck Custeau (right) from Yankee's St. Albans office, and Appraisal Analyst Robert Guay (left) from Yankee's Chazy, NY office submitted the following article:

On Friday, October 3, 2008 Cornell Cooperative Extension of Clinton and Essex Counties held the inaugural Agricultural Career Day for local high school students at W.H. Miner Institute Farm in Chazy, New York. Several local high schools participated with total attendance estimated at 100 students. With agricultural education on the decline in school systems, many students do not realize the opportunities which exist for careers in agriculture nor the paths which lead to these careers. The importance of educating local youth about the career opportunities which are available to them in agriculture is more important than ever.

Yankee Farm Credit was a proud sponsor of this event and had a career table set up with information about Farm Credit and specifically about the Career Development Trainee and Summer Internship positions which are available through Northeast Farm Credit. Our aim was to educate students about careers in agriculture which are less obvious to them than the traditional “farming” careers associated with local agriculture. We extend our thanks to Clinton and Essex Counties’ Cornell Cooperative Extension for organizing, and to W.H. Miner Institute Farm for hosting, such an important event. It was a success and plans are already being made for next year.

Across the Fence 10/3

The Northeast Kingdom Dairy Farmers approached the Across the Fence program on WCAX Channel 3 news as a way to promote the program. The taping was completed last Friday and is due to air this Friday, October 3rd at 12:10. Colleen Leonard, Dairy Specialist for UVM Extension, Meghan DuBois, Loan Officer Trainee for the Farm Service Agency, Matt Maxwell of Maxwell’s Neighborhood Farm and Eric Schneider, herdsman of Chaput Family Farms, were on the program. Colleen and Meghan are both on the planning committee for the group and Matt and Eric are two of the groups’ members.

For more information about the North East Kingdom Dairy Farmer Group, please contact Planning Committee member, Kelly Langmaid, at Yankee's Newport office. 800-370-2738

Financial Markets, Part 2

This post is part 2 of 2. Click here for part 1.

How does the current turmoil in the financial markets affect Farm Credit? Is Farm Credit still lending money? Can Farm Credit still borrow money itself? Will interest rates go up?

Yes, we are still lending money and Farm Credit is still able to borrow money itself.

A good source of information is the Federal Farm Credit Banks Funding Corporation, which issues debt for the System. The Funding Corporation recently posted a "Questions and Answers" document that addresses some of these questions. In brief, the System is financially strong. I encourage you to read the Q&A document yourself. You can find it under Press Releases on the Funding Corporation's web site. Look for the press release dated 9/24/08.

The Funding Corporation's web site also includes regular press releases every time the System issues term debt. At the above link you can find press releases for the two most recent issuances of term debt, called Designated Bonds. On 7/10/08—before the crisis, the System issued $2 billion of 3-year Designated Bonds at a yield of 3.6%. Last Friday (9/26/08) the System issued $1.55 billion of 5-year Designated Bonds at a yield of 4.0%.

Finally, the Funding Corporation's web site includes annual and quarterly information statements for the System which describe the financial condition of the Farm Credit System in considerable detail.

I am not aware that any part of the Farm Credit System is in financial distress at present. Farmer Mac has had negative press recently, but they are not part of the System. Farmer Mac does not obtain its funds through the Funding Corporation and the System is not liable for Farmer Mac's debt. Farmer Mac and the Farm Credit System do share a common federal regulator, the Farm Credit Administration. If you want to follow Farmer Mac, their SEC filings are here. Farmer Mac has exposure to the Fannie Mae takeover (1 million shares of preferred stock) and the Lehman Brothers bankruptcy ($60 million of Lehman debt).

Employees of Yankee Farm Credit are naturally concerned about what is happening with Merrill Lynch, because Merrill Lynch manages our retirement accounts. The purchase of Merrill Lynch by Bank of America is reassuring. Indications are that it will be business as usual with our retirement accounts, except of course that anyone invested in the stock market is suffering declines along with everyone else.

Customers of Yankee Farm Credit may be concerned about what is happening with Wachovia, because we use Wachovia to disburse funds. The purchase of Wachovia by Citigroup is reassuring, and indications are that it is business as usual with our cash disbursement operations. See, for example, this FDIC press release.

Are interest rates going up? Many market interest rates are indeed increasing, as lenders and creditors perceive more risk in the world. LIBOR rates, for example, are increasing. (If you aren't familiar with LIBOR, there is a primer here.) LIBOR rates are important to many financial institutions, including Farm Credit.

Our cost of funds at Yankee has increased as a result of increases in LIBOR. It is likely that we will need to increase interest rates to borrowers at some point, but we are not increasing rates at present. I am aware that First Pioneer Farm Credit is increasing rates by 0.25% effective Oct. 1 and Farm Credit of Maine is increasing rates by 0.25% effective Oct. 8. If we increase rates it will be Nov. 1 at the earliest.

One should certainly not expect Yankee's interest rates to decrease. Historically we have followed changes in the prime interest rate, which in turn has historically followed interest rate changes by the Federal Reserve. We don't expect any immediate change in interest rates by the Fed. But it is possible that the Fed would decrease interest rates in response to current financial conditions. If the Fed does decrease interest rates, we will break with our historical practice and not follow.

What will happen next? I can only note that today is quarter-end for most institutions, and it is likely that there will be more surprises. Stay tuned.

UPDATE 10/01/08: Developments at Farmer Mac: the five banks in the Farm Credit System plus Zions Bancorporation invested $65 million in preferred stock; and Farmer Mac's board of directors appointed Michael Gerber, president and CEO of Farm Credit of Western New York, as acting president and CEO, replacing Henry Edelman, effective immediately. Farmer Mac news releases here. Funding Corporation news releases (including a "Questions and Answers" document about these events) here.

Financial Markets, Part 1

The Dow Jones Industrial Average fell 777 points yesterday, the largest one-day point drop in history. Is it time to worry yet?

Let's review some recent events:

Weekend of Sept. 6-7: The government took over Fannie Mae and Freddie Mac.

Weekend of Sept. 13-14: The government allowed Lehman Brothers to fail. Bank of America bought Merrill Lynch in a fire sale. At the beginning of the year there were five investment banks on Wall Street: Bear Stearns (acquired by J.P. Morgan Chase in March in a forced sale), Lehman Brothers, Merrill Lynch, Morgan Stanley and Goldman Sachs. Only two were left after this weekend.

Week of Sept. 15-19: The government took over AIG. One institutional money money fund "broke the buck." Another institutional money market fund closed and started to liquidate itself. The government announced that it was working on a plan, of a size not yet determined, and subject to Congressional negotiation and approval, to shore up financial markets.

Weekend of Sept. 20-21: The size of the government bailout plan was announced at $700 billion. Negotiations began with Congress. The last two investment banks on Wall Street (Goldman Sachs and Morgan Stanley) agreed to become commercial banks, subject to regulation by the Federal Reserve. The investment banking model died.

Week of Sept. 22-26: Washington Mutual (WaMu) failed in the largest bank failure in U.S. history (assets of about $300 billion). Its assets were sold to J.P. Morgan Chase. Negotiations continued on the $700 billion plan.

Weekend of Sept. 27-28: Citigroup bought Wachovia in a forced transaction. Negotiations were finalized on the $700 billion plan.

Monday, Sept. 29: The U.S. House of Representatives voted down the $700 billion plan by a vote of 205-228. The DJIA dropped 777 points (7%).

While yesterday's decline was the largest one-day point decline in history, it was not the largest one-day percentage decline. I think that record goes back to 1914 [see correction below], but to keep to more recent times, on Oct. 19, 1987, Black Monday, the DJIA dropped 23%. I remember that day and week. I had been controller of Champlain Valley Farm Credit for a little over a year. Both the economy and Farm Credit survived that crisis just fine.

What about time periods longer than one day? On Friday, Sept. 5, just before the timeline above, the DJIA closed at 11,221. It closed yesterday at 10,365. So although the DJIA dropped 7% yesterday, it is down only slightly more (856 points or 8%) for the tumultuous period described above.

The DJIA is now 27% below its all-time high of 14,165 reached just under a year ago on 10/09/07. It may fall further. We are certainly in a bear market (generally defined as a decline of 20% or more). We have survived bear markets before. In the stock market downturn of 2002, the DJIA fell 31%. In the stock market crash of 1973-4 the DJIA fell 45%. We are a long ways from the Great Depression, when the DJIA fell 89% from 1929 to 1932.

This post is part 1 of 2. Click here for part 2.

CORRECTION 10/01/08: The worst one-day percentage decline for the DJIA was not in 1914 as stated above. It was 10/19/87. Clarification here.

UPDATE 10/03/08: Wachovia is now being acquired by Wells Fargo instead of Citigroup. WSJ article. Wells Fargo news release. Federal Reserve news release. Citigroup news release.

Introducing Audrey Tetu

I am pleased to announce that Audrey Tetu from West Lebanon, NH has joined our White River Jct. staff as a Credit Analyst. Audrey grew up on the Vermont side of the river (Windsor) and attended college at Indiana University of Pennsylvania (IUP) located in Indiana, PA (near Pittsburgh). She studied economics at IUP and is presently pursuing an Executive Graduate Certificate in accounting at Strayer University (online).

Audrey starts tomorrow, September 30th. I hope you'll join me in welcoming Audrey to the Yankee team!

FDIC Insurance Limits

A couple of borrowers have recently inquired about the $100,000 FDIC insurance limit at depository institutions (i.e., not Yankee). Yesterday's Wall Street Journal had a good article on this subject: "Your Cash: How Safe is Safe?" Another good source of information is the FDIC itself: EDIE the Estimator.

New York Farm Day

On September 23rd Senator Clinton will host "New York Farm Day" in Washington. This annual event to showcase New York agricultural products has become one of the most popular events on Capitol Hill. The array of foods and beverages is dizzying. For photos from last year, see Senator Clinton's web site.

This sentence from the press release is interesting: "Cornell University, a participant in past years, will offer a newly-formulated fruit beverage fortified with protein from skim milk, and will invite participants to suggest names for the new drink." Much of the increased demand for dairy products over the last few years has come from demand for the components of milk.

Yankee Farm Credit is one of the sponsors of "New York Farm Day."

China Matters to Dairy

There was an interesting article in Dairy Herd Management yesterday titled "China Matters!" (to the dairy industry). Dairy industry leaders in China as well as political leaders are promoting increased dairy consumption for health reasons. Even small increases in individual dairy consumption can have a large effect on world consumption, because China's population is so large. There are several interesting statistics and details in the article.

The article also mentions a point made on this blog earlier (here and here) — that the Olympics will likely have a positive effect on cheese consumption in China.

Thanks to Mike Farmer for pointing out this article.

Welcome FP Readers

If you found this blog by way of Financial Partner magazine, welcome!

The president's column in the Fall 2008 issue of Financial Partner magazine was titled "A Farm Debt Crisis?" In it I compared the financial health of the Farm Credit System today with that of the 1980s, when a Federal bailout was required. The column included System financial results through the first quarter of 2008. I promised to write about the System's second quarter results here on the blog.

The System continued to grow in the second quarter. Loan volume increased by 6% in the second quarter, after an increase of 7% in the first quarter. Loan volume in the first half of 2008 increased by 13%, as compared to 16% for the year in 2007 (and also 16% in 2006).

Commodity prices have fallen slightly since mid-July when I wrote my column for the magazine. This should result in less loan growth for the Farm Credit System, and perhaps even a decrease in loan volume.

Loan quality remains excellent with only 0.55% of loans considered high risk at 6/30/08, up slightly from 0.53% at 3/31/08 and 0.43% at 12/31/07. This ratio was 14% in 1985 and peaked at a whopping 26% in 1986. For reference, we consider 2% or less as the standard for this ratio.

The magazine column was an update to a series of blog posts last spring, also titled "A farm debt crisis?" You can find those blog posts in the archives for April, or here: part 1, part 2, part 3.

The Farm Credit System is in good shape. The same cannot be said of other Government Sponsored Enterprises (GSEs). I wrote about this last week: part 1, part 2.

If you are new to blogs, click here for some helpful tips. You may also be interested in this post.

Promotion - Suzanne

I am pleased to announce that Suzanne Petig in our St. Albans office has been promoted to Credit Analyst.

Suzanne started work for the Champlain Valley association in 1988 as an office assistant. In addition to normal office assistant duties, she has at times provided recordkeeping services to clients, and she is a key employee in the process for closing and booking loans in the St. Albans office. Suzanne is always interested in learning new things and proposing new procedures for doing things better. In 1994 she completed a degree at Trinity College, while continuing to work full time.

As a credit analyst, Suzanne's duties will move beyond loan documention into credit analysis. She is also learning about income tax preparation. We will be hiring an additional office assistant in St. Albans to take over some of Suzanne's current duties.

Congratulations, Suzanne!

Entrepreneurship or Innovation?

Ruchel has proposed using "innovation" instead of entrepreneurship for our 4th value:

George, I'm not too fond of the word entrepreneurship - it's hard to say & spell. Plus some people have preconceived notions about what the word means, which may or may not be the meaning that you have attached to it. I'd like to propose we use the word innovative or innovation instead. I think this quote from Wikipedia covers what you wanted to represent with the word entrepreneurship: "The goal of innovation is positive change, to make someone or something better." (http://en.wikipedia.org/wiki/Innovation)

(See Ruchel's comment posted 9/09/08 here.)

Ruchel, thanks for your innovative suggestion! Let's discuss it a bit.

I like the Wikipedia quote. It certainly does capture a good deal of what I am trying to say. For that aspect of what I'm trying to say, I admit that it is a better word than entrepreneurship. (advantage: innovation) I also like that "innovation" is easier to say and spell than "entrepreneurship."

On the other hand, to me entrepreneurship connotes more of a concern with risk, revenue and costs than does innovation. I am trying to represent all of those concepts, too. (advantage: entrepreneurship)

I assume that your comment about "preconceived notions" refers to the fact that some people associate entrepreneurship primarily with startup enterprises while I have been applying the concept to both startup and established enterprises. (advantage: innovation) Were you referring to anything else?

To all readers: What do you think? Which word do you prefer, and why? Is there yet another word that we should consider? Perhaps we should go with both words, as in innovation/entrepreneurship. Please join the discussion by sharing your thoughts in the comments.

Addison Young Farmer Meeting

There will be a young farmers meeting at DeBoer Farm on Route 7 south of Vergennes on Thursday September 11. The meeting will take place in the BMR plot on the west side of Rt. 7. and is sponsored by Kurt Vala of UAP and Claude Fortin of Mycogen Seed.

Agronomist Art Graves and nutrionist John Broullette from Mycogen will lead the meeting.

Some of the topics that will be covered: BMR placement on your soils, BMR savings on grain costs and mixing BMR corn with conventional corn.

The meeting will begin at 6PM and dinner will be provided.

For more information, please contact Kurt Vala 603 520-6422.

Fannie and Freddie, Part 2

This post is part 2 of 2. Click here for part 1.

Q. Why is the Federal takeover of Fannie Mae and Freddie Mac relevant to Farm Credit?

A. Fannie Mae, Freddie Mac and Farm Credit are all Government Sponsored Enterprises or GSEs. There is one other major GSE, the Federal Home Loan Banks. GSEs are created by Congress to facilitate the flow of credit into specific sectors of the economy. Farm Credit serves agriculture. The other three major GSEs serve the housing sector.

Most corporations are issued state charters, but GSEs are issued Federal charters. Because of the Federal charter, investors assume that GSE debt is safer than corporate debt. GSEs can therefore borrow money more easily and more cheaply than corporations. Congress intends that this will translate into more and cheaper credit for borrowers—homeowners and farmers.

Farm Credit is the oldest GSE, but it is far smaller than the three housing GSEs. At 12/31/07, total assets were $1.2 trillion for the Federal Home Loan Banks, $900 billion for Fannie Mae, $800 billion for Freddie Mac, and $200 billion for Farm Credit. (Yankee Farm Credit had total assets of $300 million.)

Q. Why do investors assume that the Federal charter makes GSE debt safer than corporate debt? After all, when Congress creates a GSE, it explicitly states that the U.S. government is not guaranteeing the debt of the GSE.

A. No one believes Congress. Indeed, Congress bailed out Farm Credit in the 1980s (see this earlier post), and now there has been a bailout of Fannie and Freddie.

Q. What are the possible implications for Farm Credit?

A. The primary source of funds for all GSEs is debt. All of the GSEs borrow money from the same types of investors. Those investors know that the GSEs share certain characteristics. Our cost of money has been higher than normal since around the end of April, due to the bad news surrounding Fannie and Freddie. It remains to be seen if yesterday's action will help our funding costs, or further hurt them.

Yesterday's actions may also have political implications. In his press release yesterday, Treasury Secretary Henry Paulson said: "I attribute the need for today's action primarily to the inherent conflict and flawed business model embedded in the GSE structure..."

All GSEs are subject to Congressional oversight and Federal regulation. Farm Credit is regulated by the Farm Credit Administration while the housing GSEs are regulated by the Federal Housing Finance Agency. In Congress, oversight of Farm Credit is delegated to the agriculture committees while oversight of the housing GSEs is delegated to the banking committees. So there is a degree of political separation between Farm Credit and the housing GSEs, but it is something to watch.

Q. Was this a surprise?

A. Some observers have been concerned about Fannie and Freddie for years. I have a thick file of newspaper articles about Fannie and Freddie that I started in 2000. For a time it looked like Congress might do something to reduce the risk of the housing GSEs. But in recent years it became clear that Congress would do nothing until there was a crisis. The crisis has now come.

UPDATE 10/05/08: Interesting New York Times article about what went wrong with Fannie: "Pressured to Take More Risk, Fannie Reached Tipping Point." The pressure came from all sides: banks, investors and Congress.

Fannie and Freddie, Part 1

Yesterday the Federal government took the unprecedented step of placing Fannie Mae and Freddie Mac into conservatorship. The fate of Fannie and Freddie is no small matter: "[Treasury Secretary Henry] Paulson noted that more than $5 trillion of debt and mortgage-backed securities issued by Fannie and Freddie is owned by central banks and other investors world-wide. 'Failure of either of them would cause great turmoil in our financial markets here at home and around the globe,' Mr. Paulson said." (source: WSJ article)

What is a conservatorship? It means the Federal government has taken over management of the companies. Dividends and rights of ownership for stockholders have been suspended. Common stock and preferred stock remain outstanding, but it is unclear if they have any value. Directors and the two CEOs have been removed. With financial assistance from the U.S. Treasury, interest and principal payments on debt continue, including both senior debt and subordinated debt. The companies are not being liquidated, but will likely shrink in size. (more info)

Financial institutions in the U.S. have historically been regulated by the government, but not actually operated by the government. This action is "one of the most sweeping government interventions in private financial markets in decades." (source: WaPo article) The U.S. taxpayer is now liable for the payment of the $5 trillion in debt mentioned in the first paragraph. For reference, the annual gross domestic product of the U.S. was $14 trillion in 2007 (source) and the U.S. national debt is $10 trillion (source). The ultimate cost to the U.S. taxpayer will not be anywhere near $5 trillion. The debt is backed by U.S. home mortgages, and so the ultimate cost will depend on the value of those mortgages, which is presently unknown. The cost could easily be in the hundreds of billions of dollars.

This post is part 1 of 2. Click here for part 2.

Doc Rock

The September 2008 issue of Business People-Vermont magazine has a nice article titled "Doc Rock" about Dr. Rocki-Lee DeWitt, one of two outside directors on the Yankee Farm Credit Board of Directors. Dr. DeWitt is the dean of the UVM School of Business Administration. The article mentions that most people call her Rocki. At Yankee we call her Rocki-Lee to distinguish her from Rocky Giroux, also a director. I once got accused of sounding like her mother, who apparently also calls her Rocki-Lee. (I didn't think I was using that tone of voice!)

Rocki-Lee has been a Yankee director since 2004. She chairs our Audit Committee and Strategic Planning Committee (no one else on the Board has a PhD in strategic planning!), and also serves on the Compensation Committee. Rocki-Lee has an agricultural background: she grew up on a farm, studied agricultural economics, worked for International Harvester. As dean of the business school, she also brings a unique and valuable business perspective to Yankee, as well as many contacts outside our normal circles.

Rocki, we are pleased to have you as part of the Yankee team.

George Birkett-Laramie

I am pleased to announce that George Birkett-Laramie from Rouses Point, NY has joined our St. Albans staff as a Financial Services Representative. George is a recent graduate from Plattsburgh State University with a major in Finance and minors in Accounting and Business Analysis.

George will start on September 15th, and will train with Farm Credit to work towards a Tax Specialist designation. The training is extensive and spans two years.

I hope you'll join me in welcoming George to the Yankee team!

Young Farmers Meeting

Addison County Young Farmer Meeting

Date/Time: Wednesday, September 3, 2008 at 6:30 pm, dinner will be provided.

Location: Allan Brisson’s Farm, 1535 Monkton Road, Vergennes. Roger Ellis, New York State Veterinarian, will speak about dairy quality assurance and on-farm drug handling safety.

Sponsors for the meeting are: Elanco and Yankee Farm Credit

Please RSVP: to Vergennes Large Animal Association (802) 877-9901 or vlaassoc@yahoo.com

Vermont Ag Hall of Fame

Four individuals were inducted into the Vermont Agricultural Hall of Fame today at the Champlain Valley Fair:

Sen. Justin Smith Morrill (posthumous by 110 years)
Sen. Patrick Leahy
W. Dean Merrill
Philip K. Grime

Sen. Morrill, the father of the Land Grant College system, is the only Vermonter in the National Agricultural Hall of Fame.

A little known fact about Sen. Leahy: He was a top shooter on the rifle team at Saint Michael's College (graduated in 1961). I shot on the rifle team at the University of Maine (graduated in 1977) and I enjoyed comparing notes with the Senator today about college rifle teams. Sadly, neither school has a rifle team any more.

Congratulations to the 2008 inductees to the Vermont Agricultural Hall of Fame!

This was the 6th year of the Vermont Agricultural Hall of Fame. Here are all the inductees from 2003-2008 (click to enlarge):

China and Entrepreneurship

The Beijing Olympics finished up last week, and were generally acclaimed a resounding success. Earlier this week the Wall Street Journal had an opinion column by Tony Blair about what it all means for China and the world.

This is a historic moment of change.

Tony Blair is a uniquely interesting person to write on this subject. He is the former prime minister of Britain—the first Western country to make significant contact with China, but unfortunately not in a good way, with the Opium Wars of the mid 1800s. And it is Britain which will host the next Olympics in 2012.

The Olympic Games are a wonderful means of communication:

These Games have given people a glimpse of modern China in a way that no amount of political speeches could do.

And Mr. Blair liked what he saw. It struck him in an emotional way that his previous contacts with China had not. Here is how he described a recent meeting with "some of the younger Chinese entrepreneurs":

Above all, there was a confidence, an optimism, a lack of the cynical, and a presence of the spirit of get up and go, that reminded me greatly of the U.S. at its best and any country on its way forward.

That is a better description of the entrepreneurial spirit than anything I have written on this blog. Thank you, Mr. Blair.

I, too, saw some of this entrepreneurship in China (example).

Farm Credit Fellow - Dan Lyons

The last student to serve a week in Yankee as a Farm Credit Fellow this year was Daniel Lyons.

Dan is a senior at the University of Maine in Orono and will be graduating in the spring of 2009. He grew up on the coast of Maine in a fishing and tourism based community. Dan took an interest in agriculture 3 years ago after a family member's acquisition of a 280 acre organic farm in Orwell, VT. He worked on the farm full time last summer and part time this summer. As of now he plans to explore the country upon graduation and make use of his construction background but wants to settle down on the family owned farm where he hopes to grow grains and experiment with biofuels and other alternate energy sources.

Dan's week in the St. Albans office of Yankee Farm Credit started with a tour of a wide variety of farms including a 2500 cow dairy, a 100 cow dairy, and some new facilities expansions. He not only learned how Yankee evaluates and rates its borrowers but also how they build a working relationship that goes beyond lending money.

Farm Credit Fellow - Andrew Birch

Andrew Birch of Derby, VT spent last week in the Middlebury office as a part of the Farm Credit Fellows program. Andy’s family farm, Maple Grove Farm sold out a few years ago, but Andy and his younger brother continue to raise a few heifers of their own, Andy has a couple of cows that are currently boarded out. This will be his final year at UVM as part of the 2+2 F.A.R.M.S program. Andy is also a member of the UVM chapter of the Alpha Gamma Rho fraternity. This past summer Andy completed an internship at the Hoard's Dairyman Farm in Wisconsin. The Hoard's farm milks 270 Guernsey cows. Andy helped out with herd work, hoof trimming, breeding, and farm tours while on the farm. Andy has not finalized his plans for after graduation yet, but plans to work as a herdsperson somewhere for a few years, with the eventual goal of running his own farm some day.

Relationships

We have been discussing three values on this blog: integrity, competence and entrepreneurship. I am adding a fourth value to this list: relationships.

Yankee Farm Credit has always been a relationship lender. We value our customers as people. Our mission statement says that we will "contribute to prosperous, productive agriculture by enhancing the income and well-being of farmer members...by providing them with a dependable source of sound, constructive, and market-responsive credit and financial services..." Our loan officers and financial services representatives strive to meet the needs of the customer, as well as the association's needs.

Like the other three values, we also apply this value both internally and externally. Relationships are not only important with the customer, but also with each other as employees. Working together, teamwork, cooperation and caring for each other as individuals (and as members of families outside Farm Credit) are important aspects of our culture. Both within the organization and with our customers.

Where does "relationships" fit in the list of values? Integrity is still the #1 value. Relationships come next, ahead of competence. This line from a PricewaterhouseCoopers advertisement says it best: "Customers don't care how much you know, until they know how much you care." (Thanks, John, for suggesting this line.)

The list of values is now: integrity, relationships, competence, entrepreneurship.

Please feel free to share your thoughts in the comments.

Farm Credit Fellow - Coral Kent-Dennis

Coral Kent-Dennis spent her week as a Farm Credit Fellow in our Newport, VT office. Her brief bio is below:

I am originally from Marlboro, VT. I got my first experience working with dairy cows at the Putney School, where I went to high school. I am currently going into my senior year at the University of Vermont. For the past three years while at UVM, I have been a calf feeder at the UVM Dairy farm. In the Fall and Spring 2007 semesters, I did the CREAM (Cooperative For Real Education in Agriculture Management) program at UVM. During the second half of the program, I managed the Ovsync and breeding of the 34 CREAM cows, allowing me to gain valuable experience in reproduction and genetics. In the Spring semester of 2008, I attended the Miner Institute. This summer I worked for Genex as a summer intern breeding cows in Addison and Franklin County. It was a great way to meet producers and get involved working in the dairy industry. I enjoyed seeing the different methods of production used by each of the individuals I met. My future goals are to work in the dairy industry in either dairy cattle nutrition or reproduction. I have really enjoyed my week at the Newport Farm Credit office.

Farm Credit Fellow - Asa Manning

Yankee had the pleasure of hosting four Farm Credit Fellows this summer. Below is a short bio on Asa Manning, who completed a one week internship in the White River Jct. office last week:

This past summer I lived in Oconomowoc, WI and completed an internship on the Koepke Dairy Farm. They are a 320 cow dairy farm that is owned and operated by three Koepke brothers, David, Jim and Alan, and Jim's son John and his wife. I worked on all aspects of the cropping and shop work as well as constructed a new barn to house dry cows in. I spent a great deal of time erecting fences around pastures by the new dry cow barn. I will be graduating this spring from The University of Vermont with a bachelor's degree in animal science and I am also a member of the Alpha Gamma Rho fraternity. I was born and raised in Strafford, VT and grew up on a diversified dairy farm where we generally milk between 30-40 Jersey cows. We also raise pigs, chickens, and turkeys, and have a maple sugaring operation. We enjoy raising oxen to log our land with and I have raised 2 pairs with my older brother. When I finish school, I plan to help run my family's farm part time while exploring options for added expansion to our business and possibly working on another dairy farm close to home. I have enjoyed my week here at Farm Credit and learned a lot about the loan process and the credit world.

Green Mountains, Greener Pastures

Ken Button and Morgan Greenwood participated in the "Green Mountains, Greener Pastures Tour" put on by USDA in the Randolph, VT area on August 19th. The tour's first stop was at Thunder Mountain Maple in Braintree. This was to promote energy efficiency improvements that they have made such as a Reverse Osmosis machine. USDA supports renewable energy and energy efficiency improvements by providing grants and loan guarantees to agricultural producers and rural small business owners through its Rural Development Renewable Energy for America Program (REAP).

The next stop was at Circle Saw Farm in Braintree which is run by Bob and Tay Simpson. The Simpsons have constructed a "bedding recovery unit" which separates the liquid from manure into a storage facility and sends the solids through the recovery unit and is then used as bedding for the cows. This unit has allowed the farm to produce some of their own bedding as well as bring their nutrient management plan into balance.

After a lunch at Allis State Park in Brookfield the tour ended at Neighborly Farms in Randolph Center which is owned by Rob and Linda Dimmick. The farm is an organic dairy and they also make organic cheese. Neighborly Farms is active in Vermont's Agritourism industry which USDA supports through their Rural Development Rural Business Enterprise Grants (RBEG).

Growing Places

"Growing Places" is a class for people interested in starting a farming operation who don't know where to start. Both in-person and online versions of this class will be starting soon. Click here for a registration form.

Growing Places is sponsored by the Women's Agricultural Network (WAgN) but is open to all.

Connecticut Valley Fair

One of the agricultural youth events that Yankee Farm Credit supports is the Youth Dairy Show at the Connecticut Valley Fair in Bradford, VT. This show is organized by Labette Page of North Haverhill, NH.

Thanks for the photo, and keep up the good work!

Empire Farm Days

The following post was written by Senior Loan Officer Marie Guay, of our Chazy, NY office:

The New York State Empire Farm Days were held last week in Seneca Falls, August 5-7. Originally called the Potato Field Days when founded in 1931, this event has undergone many changes including name, location and size. After 75 years, the show has never wavered from its original mission: to bring farmers in the Northeast the newest techniques and equipment available in agriculture.

Yankee Farm Credit in collaboration with Farm Credit of Western New York and First Pioneer Farm Credit, sponsor a booth at this event. The theme of the booth was “Equipping farmers to succeed.” The objectives of the booth were to promote Farm Credit’s commitment to agriculture “Yesterday, Today & Tomorrow.” Especially tomorrow by conveying growth and promise of Tomorrow’s farmers.


Farm Credit displayed three pedal tractors, each with a wagon, plow or cultimulcher. Individuals visiting the booth signed up to win one of the tractors with an implement. One name was drawn daily.

Many farmers from our area attended the event and had a chance to speak with me or one of the other Farm Credit representatives at the booth.

UPDATE: One of the tractor winners was Zachary Swyers of Peru, NY. Here is Zachary with Marie:

FUNDaFIELD

Last week on an airplane I met a woman from California whose 10th grade son helped found a nonprofit called FUNDaFIELD to raise money to build soccer fields in Africa. (It is easy to donate online if you are so inclined.) The slogan on the web site is "kids helping kids." The quote on the web site is from Nelson Mandela:

Sport has the power to unite people in a way little else can. Sport can create hope where there was once only despair. It breaks down racial barriers. It laughs in the face of discrimination. Sport speaks to people in a language they can understand…. [It is] probably the most effective means of communication in the modern world.

Isn't that so appropriate, especially with the Beijing Olympics currently underway?

Tocqueville on China

In an earlier post I wrote about Alexis de Tocqueville and his influential book Democracy in America. Democracy in America was published in two volumes: Volume 1 in 1835 and Volume 2 in 1840. The quotes in my previous post about New York were from Chapter V in Volume 1. The subject of this chapter is the importance to democracy of local administration (e.g., townships and municipal bodies) and the dangers to democracy of central administration.

In that same chapter, Tocqueville wrote a footnote about China. Because of my trip to China last fall, I found this footnote interesting. I quote it here in full:

China appears to me to present the most perfect instance of that species of well-being which a completely central administration may furnish to the nations among which it exists. Travellers assure us that the Chinese have peace without happiness, industry without improvement, stability without strength, and public order without public morality. The condition of society is always tolerable, never excellent. I am convinced that, when China is opened to European observation, it will be found to contain the most perfect model of a central administration which exists in the universe.

Tocqueville wrote during the Qing Dynasty. Volume 1 was published seven years before the first Opium War with Britain. (Brief history of China: through Mao and after Mao.)

To read the above passage in context, go here. The text to which the footnote is attached is on p. 77 and the footnote itself is on p. 89.

One World One Dream

The 2008 Summer Olympics open in Beijing on 8/08/08 at 8:08:08 PM Beijing time. That is 8:08:08 AM our time, also on 8/08/08. The Chinese are fond of symbolism, as I wrote about in this post last year. That post was about the Olympic emblem (Dancing Beijing) and the Olympic mascots (Beibei, Jingjing, Huanhuan, Yingying and Nini).

The number 8 is also symbolic to the Chinese. It is associated with prosperity and confidence.

I wish confidence, prosperity, good luck and good sportsmanship to all the athletes, and to China as the host of the Games of the XXIX Olympiad. May the Games be a success, and help to improve relationships between all people.

2008 Dairy Farm of the Year

Congratulations to Brian and Bill Rowell, owners of Green Mountain Dairy in Sheldon, on being named the Vermont Dairy Farm of the Year for 2008! Click here for a link to an informative press release about the Rowells and their entrepreneurial farm operation.

UPDATE: The Vermont Dairy Farm of the Year is also the Vermont winner of the New England Green Pastures Award. Below is the official photo (courtesy of Glenn Rogers):

From the news release dated 9/24/08 accompanying this picture: "Green Mountain Dairy of Sheldon, Vermont, was recently selected as the 2008 New England Green Pastures Dairy Farm award winner for the State of Vermont. Pictured left to right are: Tammy Rowell, Matthew Rowell, Megan Rowell, Brian Rowell, Dave Lane, deputy secretary of the Vermont Agency of Agriculture; Nancy Rowell and Bill Rowell. The family received its award at the Sheraton Hotel in Springfield, Mass., during The Big E. The New England Green Pastures award is given every year to an outstanding dairy farm for each of the New England states. Celebrating over eight decades, The Big E is the region’s largest fair, with an outstanding lineup of agricultural competitions, exhibits and entertainment for all ages. The Fair continues through September 28 in West Springfield, Mass. For more information on The Big E, visit www.TheBigE.com." Yankee Vice President Mike Farmer also attended this reception.

Farm Credit Fellow - Andrew Wood

Last week Andrew Wood of Concord, Vermont was hosted by Mike Farmer and the St. Albans staff as part of the Farm Credit Fellows program:

Every Farm Credit Fellow is required to spend a week in an association office in the northeast. Each Fellow is introduced to the Farm Credit System and the daily activity in the office. Fellows are given hands-on experience in everything from meeting customers to analyzing financial data to real estate sales analysis.

This summer Andrew is working on his family’s 50 cow dairy in Concord. Andrew is part of the VT F.A.R.M.S. 2+2 Program. He attended Vermont Technical College for 2 years and is entering his senior year at UVM as an Animal Science major. He is a member of the Alpha Gamma Rho fraternity at UVM. Last summer Andrew completed an internship with the Lynwood Management Group on Synergy Dairy, a 1700 cow farm in western New York. On the farm Andrew managed fresh cows and served as a relief feeder. As of yet Andrew is undecided as to which direction he would like to take after graduation, but would like to run his own dairy someday.

This post was written by Kelly Langmaid. See also this earlier post for a description of the role that Kelly plays in the Farm Credit Fellows program. Thank you, Kelly!

Tocqueville on New York

Yankee Farm Credit does business in three states. Few will dispute that New York is the most bureaucratic of those three states. I was amused to learn recently that New York's reputation in this regard goes back at least 175 years.

In 1831-32 a young Frenchman named Alexis de Tocqueville toured the United States, visiting 17 of the then 24 states, including New York. (Itinerary here.) Upon returning home, he wrote the influential book Democracy in America. "It has been claimed that Alexis de Tocqueville wrote the best book ever about democracy and the best book ever about America." (source) This book is still widely studied and quoted today.

On the subject of bureaucracy in New York, Tocqueville had this to say:

In some States (and that of New York has advanced most in this direction) traces of a centralized administration begin to be discernible.

Tocqueville thought that too much centralized administration was a grave danger to democracy:

...I am convinced that democratic nations are most exposed to fall beneath the yoke of a central administration...

That was in the 1830s. I wonder what he would think today. Please feel free to share your thoughts in the comments.

To read the above passages in context, go here. The first passage is on p. 69 and the second is on p. 83.

Knoxland Farm

Last of four posts about farms visited on the farm tour in the upper Connecticut River Valley on Friday, July 18.

Our last stop was Knoxland Farm in Bradford, VT, owned by Paul Knox. This is a large dairy farm, one of the many dairy farms that make Vermont the most productive dairy state in New England. This was the only one of our four stops in Vermont.

Some years ago Paul sent Dean a bill for training Mike Farmer. I hope Paul doesn’t send me a bill for training the whole bus load! He did a good job with Mike, though, and we enjoyed listening to him talk about his operation (note that Mike is still paying close attention):

Handling the tires that are used to hold down the plastic sheeting on bunker silos is a tedious job. To make the job easier, Paul made tire carriers that attach to a front end loader on a tractor (in the background in the photo below):

All four of the farms that we toured are examples of interesting and successful entrepreneurial operations. Some think of entrepreneurship only in terms of starting a new business, or taking an existing business in a new direction. That description fits Hatchland Farm, Pete & Gerry's Organic Eggs and River House Hanoverians. They are certainly entrepreneurial operations, and very good ones. I think entrepreneurship also includes taking an existing business—for example, the business of producing milk that is of high quality but nevertheless still a commodity—and simply making that business better. That description fits Knoxland Farm, and the tire carriers are an example of Paul's entrepreneurship.

Two farming veterans, who were successful entrepreneurs before most of the people on the tour were born, Alfred and Paul’s father Les:

Thank you, Paul, for the tour and also for letting us park cars at your farm for the day.

River House Hanoverians

Third of four posts about farms visited on the farm tour in the upper Connecticut River Valley on Friday, July 18.

Our third stop was River House Hanoverians in Piermont, NH, owned by Verne Batchelder and Jeanie Hahn. We were first treated to a scrumptious lunch, arranged by April and Ruchel, with assistance from Verne and Jeanie:

Verne and Jeanie raise, import, sell and train German Hanoverian dressage horses—the type of horse in the Olympics. There are stalls for 30 horses, but most of the horses were away at a show. Here Verne explains the operation:

And Jeanie displays one of the horses who stayed behind:

The facility includes an indoor riding arena with rubber footing made from shredded tires:

Thank you, Verne and Jeanie, for taking time away from the horse show to give us a tour of your farm.

Pete & Gerry's Organic Eggs

Second of four posts about farms visited on the farm tour in the upper Connecticut River Valley on Friday, July 18.

Our second stop was Pete & Gerry's Organic Eggs in Monroe, NH. Gerry Laflamme and his son Jesse gave us a tour of the operation:

Pete & Gerry's organic eggs come from hens which are fed organic grain, are not treated with antibiotics, and which are housed in cage-free barns (with access to the outdoors when conditions are appropriate). It requires considerable automation to feed the hens and collect the eggs:

And it requires more automation to wash and sort the eggs and package them for sale:


The Laflammes obviously enjoy their work, and we enjoyed their sense of humor—which is also evident throughout their web site. I was particularly amused by the "chicken chat" section at the bottom of this page. I can attest that their hens are quite chatty!

Thank you, Gerry and Jesse.