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.
Friday, November 14, 2008
Thursday, November 13, 2008
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.
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.
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.
Monday, November 10, 2008
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
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.
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.
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
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.
Yankee Farm Credit is a Silver sponsor of the event and is proud to have Jean represent us.
Tuesday, November 4, 2008
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.
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.
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.
Monday, November 3, 2008
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.
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.
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