northwest fcs yields - growing u.s. sugar - summer 2015

Summer 2015

Summer 2015

FEATURE STORY > 3The U.S. is the largest consumer of sugar globally. We’re also

one of the largest sugar importers. Yet our country has the

most highly developed industries in the world to process

both sugar cane and sugar beets into white crystal sugar

On the cover: Cody Bingham, Jerome, ID.

yields

Who we are: Northwest FCS is a customer-owned

financial cooperative providing financing and related

services to farmers, ranchers, agribusinesses, commercial

fishermen, timber producers, rural homeowners and

crop insurance customers in Montana, Idaho, Oregon,

Washington and Alaska. Northwest FCS provides

approximately $13 billion in loans and is a member of the

Farm Credit System, a nationwide network of borrower-

owned lending institutions that provide approximately

$217 billion in loans to rural America.

Board of DirectorsDave Hedlin, Chair, Mount Vernon, WA

Jim Farmer, Vice Chair, Nyssa, OR

Christy Burmeister-Smith , Newman Lake, WA

Susan Doverspike, Burns, OR

Duane (Skip) Gray, Albany, OR

John Helle, Dillon, MT

Greg Hirai, Wendell, ID

Herb Karst, Billings, MT

Dave Nisbet, Bay Center, WA

Kevin Riel, Yakima, WA

Nate Riggers, Nez Perce, ID

Karen Schott, Broadview, MT

Julie Shiflett, Spokane, WA

Shawn Walters, Newdale, ID

About YieldsYields is produced for stockholders of Northwest FCS, an

Agricultural Credit Association. Comments and story ideas

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

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

website: northwestfcs.com

Northwest Farm Credit Services is an equal opportunity

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

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

disabled veteran, Vietnam era or other eligible veteran status.

Article quotes have been edited for content and appropriateness.

Supporting Rural Communities > 9

College Scholarship Winners > 11

Global Economic Trends - Dave Kohl > 12

We are fortunate to live and work in the Northwest, a region known for its diversity in agriculture. Our

customers grow and process hundreds of different crops for domestic and global use. As a financial

partner, serving this unique marketplace helps us diversify our portfolio and spread risk across

multiple industries.

While there are many benefits derived from this portfolio and customer diversity, serving a diverse

marketplace also has its challenges. To be an effective financial partner we must deeply understand

the various industries we serve. In the Northwest we export products to 157 countries. This means

we need to understand not only the domestic marketplace but the dynamic, global markets as well.

As you’ll see in this issue of Yields, this is particularly true for commodities like sugar beets, which are

increasingly impacted by U.S. and global trade agreements.

Our commitment to understanding the many industries and markets we serve sets us apart from

other lenders. Our Knowledge Center teams focus on specific commodities, like row crops, dairy

and timber. They gather and synthesize market information from many different sources including

industry experts and successful Northwest producers. We use this information to educate the next

generation of Northwest FCS employees and to help provide advice to our customers through

industry cycles.

These are exciting times for agriculture. We’re privileged to support our customers in the Northwest’s

food and fiber industries who perform a vital role for consumers in the U.S. and around the world.

UnderstandingUnderstandingthe marketplacethe marketplacePhil DiPofi, President and CEO

yields Summer 2015 | 2

Sugar—nature’s natural sweetener. For centuries sugar has been used to make Sugar—nature’s natural sweetener. For centuries sugar has been used to make

nutrient-rich foods more palatable. It’s a strategic food “stuff” that can add nutrient-rich foods more palatable. It’s a strategic food “stuff” that can add

essential calories to the human diet quicker than virtually any other food essential calories to the human diet quicker than virtually any other food

source. Beyond enhancing flavor, sugar also acts as a tenderizer. It speeds the source. Beyond enhancing flavor, sugar also acts as a tenderizer. It speeds the

growth of yeast, coagulates egg proteins in custards, incorporates air into the growth of yeast, coagulates egg proteins in custards, incorporates air into the

creaming process and regulates gelling for fruit preserves. The U.S. is the largest creaming process and regulates gelling for fruit preserves. The U.S. is the largest

consumer of sugar globally. We’re also one of the largest sugar importers. Yet consumer of sugar globally. We’re also one of the largest sugar importers. Yet

our country has the most highly developed industries in the world to process our country has the most highly developed industries in the world to process

both sugar cane and sugar beets into white crystal sugar. both sugar cane and sugar beets into white crystal sugar.

3 | Nor thwest Farm Credit Ser vices

GrowingGrowingU.S. SugarU.S. Sugar

Worldwide, the U.S. typically ranks sixth in Worldwide, the U.S. typically ranks sixth in

sugar production. Brazil is the world’s largest sugar production. Brazil is the world’s largest

producer. Developing countries like Brazil, producer. Developing countries like Brazil,

India and Thailand rely heavily on sugar India and Thailand rely heavily on sugar

production for jobs and a significant portion production for jobs and a significant portion

of their gross domestic product. It’s no wonder of their gross domestic product. It’s no wonder

foreign governments highly subsidize their foreign governments highly subsidize their

sugar industries. So, how do U.S. producers sugar industries. So, how do U.S. producers

compete? First, they work together and speak compete? First, they work together and speak

with one voice. They embrace change and new with one voice. They embrace change and new

technologies, like bio-tech, that have sharply technologies, like bio-tech, that have sharply

increased yields. When it comes to making increased yields. When it comes to making

sugar, U.S. producers offer the finest quality in sugar, U.S. producers offer the finest quality in

the world backed with the science to prove it.the world backed with the science to prove it.

The global dynamics for sugar The global dynamics for sugar

The global sugar industry is vastly different from most com-modities in agriculture. Essentially, the global industry is a managed market with an intricate mix of trade agreements, tariffs and quotas. In fact, U.S. sugar policy can be traced back to 1789 when the first Congress of the U.S. imposed a tariff on foreign sugar.

Today, the U.S. buys more than three million tons of foreign sugar a year, mostly from developing countries. To help support U.S. production and to keep prices in check, the USDA estimates the amount of sugar that will be consumed

by U.S. consumers each year. Eighty percent of this market is allotted to domestic production and the balance is open to approximately 40 other trading partners. Each country is given a certain amount of sugar they can import into the U.S. through a tariff rate quote system so demand and sup-ply are balanced. Yet, it’s never quite that simple.

“The sugar beet market has really struggled the past three years,” says Duane Grant with Grant 4-D Farms in Rupert, Idaho. “We went from all-time highs back to historical lows, prices we were getting back in the ‘70s. It started when Hur-ricane Katrina wiped out most of the sugar cane in the U.S. Sugar prices went up significantly. Then global production ramped up. Mexico was very aggressive. The North Ameri-can Free Trade Act had reached its 10-year phase-in, allow-ing sugar from Mexico to flow unrestricted into the United States. In a grab for market share Mexican sugar companies, many of which are owned by the Mexican government, were selling sugar here far below prices they were willing to sell for in their own country. It turns out that’s against the law. But, it went on for three years and really hurt our industry.”

In 2014, the U.S. sugar industry joined hands and essentially sued Mexico in trade court. An out-of-court settlement is pending. If the trade case with Mexico stands, Mexico will be allowed to backfill any shortage that might develop if domestic producers or trade-partner countries fail to meet their production goals. Sugar production in the U.S. is purposely held below the 80 percent threshold; some years it may be 72 percent. If the industry produces more than 80 percent, and it has happened, they’re required to pay


Duane Grant and Kalvin Miller of Grant 4-D Farms

the price to store it and reduce production the following year. In the agreement, other countries will import about 15 percent of U.S. consumption. The remaining 5 percent will be sourced from Mexico.

“While we don’t want to increase sugar coming into the U.S. through more free trade agreements, whatever we allow into the country can hurt Mexico.” says Cody Bingham, a young sugar beet grower in Jerome, Idaho. “Mexico has agreed to a fair price now. It benefits them as well. Some people might say governments shouldn’t protect their sugar industries. In the U.S. we want free markets.

As farmers and growers we’re okay with free markets too, but it needs to be fair. If we get rid of all our protections everyone else has to do the same. As sugar producers in the U.S. we know we can out-compete globally and we’re much more efficient.”

Sugar co-ops take the reinsSugar co-ops take the reins

Duane Grant’s family has been growing sugar beets in Idaho for more than 50 years. His dad started farming with just six acres and borrowed equipment in 1961 with help from the G.I. Bill. The family grew whatever they could to make a living back then. His parents raised six kids on only 140 acres of farm ground. Back in the day you didn’t get rich being a sugar beet farmer. But, you could always count on beets to pay the bills.

When Duane officially joined the family partnership in 1981, the sugar refining companies in the U.S. were privately owned. Sugar companies controlled beet production capacity for the factories’ needs based on government quotas. They contracted with growers for a certain amount of acres. The government was still involved in managing the price of sugar, but growers always felt the sugar companies were between them and the marketplace.


Cody Bingham and Northwest FCS Relationship Manager Bill Lickley

Duane Grant and Northwest FCS Relationship Manager Rich Fehringer

Everything changed, about 20 years ago, when grower-owned cooperatives began taking ownership of the beet refining industry. Today, four main cooperatives in the country process and sell the majority of sugar to U.S. food and beverage companies. Amalgamated Sugar Company,

“Snake River Sugar,” is the largest Northwest sugar beet processor, serving growers across Southern Idaho, Eastern Oregon and Washington.

Taking ownership of the company hasn’t always been easy for growers. Sugar markets weakened significantly in 1997, the first crop year they took over, and prices stayed low for years. The young company was saddled with debt. In the early years, owner returns weren’t meeting expectations. But, sugar beet growers like Duane Grant and Cody

Bingham could still see the opportunities of buying-in on the ground level of something big.

Grower strongGrower strongCody bought shares in the new cooperative when he was just 15 years old. Bill Lickley at Northwest Farm Credit loaned him the money. Cody grew up watching his dad grow sugar beets and the two bought their first shares in the co-op together. To be a member, growers buy common stock. Then they’re entitled to grow one acre of beets per one acre of additional stock purchased. The initial offering in the co-op was $400 a share per acre with 200,000 shares per acre available.

Since then, Cody has pursued his passion for farming. He has degrees in agricultural

business and technology with a Masters in international business. He still loves to grow sugar beets. He’s now chairman of the Snake River Sugar Beet Research & Seed Alliance, responsible for overseeing research funding and seed approval for Snake River Sugar’s growing regions.

Duane’s family also bought initial shares in the cooperative back in 1996. He borrowed money from Northwest FCS to buy 1,000 shares and nearly tripled annual production in one year. Duane admits in the beginning they struggled to handle the growth. But, this was a turning point in the family business and their lender stood by them. Slowly, over the years the family acquired more shares. Today Grant 4-D Farms grows 7,200 acres of sugar beets and Duane is chair of the Snake River Sugar Company Board.

Proven science transformsProven science transformsthe the industryindustryScience completely transformed the U.S. sugar beet indus-

try when Roundup Ready™ seed was officially introduced

in 2008. Grower-owned cooperatives across the country

started testing the seed in 2002. Both Duane and Cody sup-

ported early trials on their farms. Duane says from 1996 to

2008 the year-on-year yield for sugar beets only increased

about half-ton per acre. Slow and steady. But with Roundup

Ready™ seed, the year-on-year yield increases doubled!

Sugar content in the healthier beets has improved too,

while labor and input costs decreased.

“Before planting Roundup Ready™ seed, the industry put

together an informal council to talk about how the market-

place would receive bio-tech sugar beets,”

says Duane. “We wanted to make sure we

really understood how the transition to GMO

would affect the market. We gathered sugar

samples from around the world, Russia, Japan

and every factory in the United States. We

initiated a third party, blind study using an in-

dependent lab in Paris. The results came back.

They said, ‘we can’t tell you where this sugar

came from, whether it’s bio-tech, organic or

conventional. It’s all sugar.’ Refined sugar has

“Refined sugar “Refined sugar

has no proteinhas no protein

or DNA, so or DNA, so

there’s no there’s no

difference based difference based

on the sourceon the source

of the sugar. of the sugar.

Sugar is sugar.”Sugar is sugar.”


no protein or DNA, so there’s no difference based on the source of the sugar. Sugar is sugar.”

So, how does GMO seed help sugar beets? Simply put, it just helps fight the bullies. Weeds are like playground bul-lies. They grow faster and beat up the plants. Roundup™ controls weeds. Genetically modified seed simply protects plants from Roundup™ applications. Without weeds sugar beets get more sunlight. They stay healthier when they’re not stressed and they grow like crazy.

“The industry knew the value of the technology offered and that the marketplace would accept the sugar,” says Cody. “Based on that knowledge, the entire industry, both U.S. and Canada, independently decided to move forward with rapid commercialization the year regulatory approvals were in place.”

Market acceptance for GMOsMarket acceptance for GMOs

Since the introduction of GMO beet seed, the bulk of U.S. food and beverage manufacturers understand that sugar is simply sugar. They know this isn’t a science-based issue. It’s not a health-driven issue. It’s a social media issue. But, some are beginning to ask if Snake River Sugar can source non-GMO too. Brand managers for example, could be getting calls from moms wondering where the sugar in their kids’ cereal comes from. Is it non-GMO? The non-GMO movement has certainly found momentum.

“Some customers are curious,” says Duane. “They wonder if we can source non-GMO sugar if they ever need it. Of course we say, ‘Yes, we can provide you with non-GMO.’ The next question is at what cost. That’s the real kicker. There is a small group of customers who are willing to pay for non-GMO certi-fication and consumers who are willing to pay the price.”

All of Snake River Sugar Company’s members plant GMO seed varieties, so all the sugar produced is derived from biotech beets. But several years ago, Snake River Sugar formed a marketing venture with one of the world’s largest sugar traders. The French company has refining capacity in Russia, but they also buy and sell sugar globally. Despite the fact that the sugar is the same, if customers ask, Snake River Sugar can source and find some of the best prices for non-GMO certified sugar as well.

Looking to the futureLooking to the future

Global human consumption for sugar is expected to increase by 1.6 percent for 2015-16, continuing the steady upward trend that has taken place for more than a decade. Global production has naturally been more volatile. While worldwide production has declined the past three years consumption has been catching up.

Northwest sugar beet producers like Duane and Cody are

optimistic about the industry’s future. Cody says more

than 65 different seed varieties are now being tested for

approval. The seed alliance has reworked the mathematical

side of the formulas, with entry and exit criteria for

approval, to get the best possible seed for growers. If USDA

can administer the U.S. sugar program the way Congress

intended and the trade case with Mexico sticks, the future

is very predictable for the U.S. industry, Duane says. “We’ll

be able to grow strong, healthy plants, pay our bills and sell

our sugar. When the day is done, we’re farmers.”


The High Risk ofThe High Risk ofHotel Wi-FiHotel Wi-Fi

Just because you’re staying at a nice hotel doesn’t mean hackers aren’t around the corner. Identity thieves may be more interested in what’s going over your hotel Wi-Fi connection than what’s in your wallet. Beware of computer attacks via unsecured hotel hotspots. Travelers are targeted through pop-up windows while establishing an Internet connection in their hotel room. A pop-up window prompts users to update a widely-used software product, such as Microsoft, Adobe Flash, Google Toolbar, or other recognizable software. In an attack scenario, however, the “update,” is really a virus or malware that enables the hacker to take control of the victim’s computer.

In fact, always assume you’re not alone on any public Wi-Fi network. Disable file sharing, turn on your computer’s personal firewall, and never send Social Security numbers, passwords or financial information when using an unencrypted wireless connection.

5 Tips to Block Hotel Wi-Fi Malware5 Tips to Block Hotel Wi-Fi Malware

1. Update Before Leaving

Install the latest application and operating system security updates onto your laptop, smartphone, and tablet before heading out. Also, ensure that updated antivirus software is running on the device and is also fully updated. While surfing the Web via hotel Wi-Fi, ignore all unsolicited software-update offers. If updates are necessary, update software directly from the vendor’s Web site.

2. Block Pop-Ups

Never, ever click on a pop-up window. No major, reputable site requires a pop-up to work or function. Configure your browser to block all pop-ups.

3. Handle Free Wi-Fi with Caution

The FBI advises users to treat all free hotspots with caution.

4. Read Hotel Wi-Fi Directions

Fake Wi-Fi access points are designed to look just like real hotel Wi-Fi networks. These “Evil Twins” may even contain a variation of your hotel’s name. Avoid connecting to fake hotspots by verifying which network actually belongs to the hotel. If you do connect to the wrong hotspot, the hacker could see all of your Internet activities, including your log-in information and passwords. A great option is using your phone via 3G/4G as the connection point rather than Wi-Fi.

5. Don’t Be Afraid to Hibernate

If your computer has signs of infection, put it in hibernate or sleep mode until you can get expert help in repairing or restoring the system. Take the system offline as fast as possible to prevent further data exfiltration and damage.


The Farm Credit System’s mission to support rural America

means more than simply providing reliable, consistent credit

and financial services to farmers and ranchers. Agriculture

relies on infrastructure to be globally competitive –

including dependable and affordable power, water and

communications services. Farm Credit is a longtime source

of financing for these vital industries, providing the financial

resources they need in order to thrive.

One of Northwest Farm Credit Services’ partner institutions,

CoBank, has a rural infrastructure portfolio totaling over

$16 billion. In addition to acting as the funding bank

for Northwest FCS, CoBank serves rural electric co-ops,

communications providers and water systems in all 50

states. CoBank is also a major agricultural lender to farmer-

owned cooperatives and other agribusiness companies.

Many of CoBank’s infrastructure customers operate in

Northwest FCS’ five-state territory. Take Clearwater Power

Company, in Lewiston, Idaho, which has been providing

power to northern Idaho, western Washington and

northwest Oregon since 1937. Clearwater gets most of its

power from hydroelectric dams on the Snake and Columbia

rivers, operated by the Bonneville Power Administration.

Some of those dams are 75 years old or more. Much of

the financing that Clearwater receives goes into regular

maintenance to keep its customer-members consistently

supplied with power. In particular, CoBank has helped

refinance some of the co-op’s debt, saving hundreds of

thousands of dollars in interest costs, and freeing up money

for capital improvements.

CoBank began working with Clearwater in 2010, when the

bank helped the co-op secure a $5 million line of credit. That

has meant upgrades to poles, lines and basic infrastructure.

Farm Credit: Helping to Power the Farm Credit: Helping to Power the Northwest’s Rural CommunitiesNorthwest’s Rural Communities


Cordova, Alaska


“We even started financing some bucket trucks with vehicle

loans in 2014,” observes John Donner, CoBank’s relationship

manager with Clearwater.

Having access to those improvements is a big deal in

northern Idaho, where the Great Recession lingered much

longer than it had in the rest of the nation. “I would say

that 2014 was the first year since the recession that our

area saw new construction turn around and

increase from the prior year,” says Dave Hagen,

Clearwater’s general manager.

In that sort of environment, Clearwater is

eager to help support its local community

any way it can. The co-op supports such

organizations as the Clearwater County

Economic Development Association, the Latah

County Economic Development Council, and

the Northwest Intermountain Manufacturers

Council. As a good corporate citizen, the co-

op takes pride in not just providing electricity

to its customer-members, but in the overall

economic growth of the area. “We’re finally seeing some

positive movement,” says Hagen.

There’s a similar story up in Alaska, where Cordova Electric

supports its namesake fishing community, a town of 2,316

located at the southeastern end of Prince William Sound.

After the area was decimated by the Exxon Valdez oil spill

in 1989, the community, which had historically relied on

diesel fuel for its power, began searching for cleaner forms

of energy.

CoBank helped Cordova Electric finance two hydroelectric

dams, the Humpback Creek and Power Creek projects.

Humpback Creek became operational in 1991 and was

refinanced in 1999. Power Creek, with nearly five times the

capacity of Humpback Creek, joined it in 2001. Together, the

two hydro plants now supply 70 percent of

the power to the city of Cordova.

Both plants were built with sustainability

in mind, minimizing the impact on the

environment – especially the salmon that

spawn in the creeks – and taking into account

the needs of Cordova’s residents now and in

the future.

“Alaskans have a very independent spirit,”

said Clay Koplin, CEO of Cordova Electric.

“Energy security and independence are

important to us, and we wanted to harness

our local resources to provide that. We are able to protect

and preserve this beautiful place and still support a strong

local economy and the standard of living our members

want and deserve – made possible by locally powered and

delivered energy.”

Without financial support from Farm Credit, these

organizations would be less able to serve their communities,

and the agricultural occupations they support would be in

serious trouble. Life in a rural area relies on more than just

the ranching or farming or fishing, and these infrastructure

projects help sustain a way of life throughout the rural areas

of the Pacific Northwest.

“Good infrastructure is critically important to the U.S. rural

economy and the overall quality of life in rural America,”

says Tom Halverson, CoBank’s chief banking officer.

“Our customers make a huge difference in their local

communities, and we’re proud to serve them and support

their borrowing needs.”

Cordova Electrics’ Humpback Creek Dam project

Agriculture relies Agriculture relies

on infrastructure on infrastructure

to be globally to be globally

competitive competitive

– including – including

dependable dependable

and affordable and affordable

power, water and power, water and

communications communications

services.services.


Northwest FCS Awards 64 Scholarships Northwest FCS Awards 64 Scholarships Totaling $128,000Totaling $128,000Sixty-four scholarships were awarded to sons and daughters of Northwest FCS customers and employees; eight high school students and four college students from each state received scholarships. In addition, eleven college scholarships open to all students were awarded, including eight scholarships for students at land grant universities and three students were chosen as Minority Scholarship winners. All scholarships are $2,000.

College WinnersWashington

Emily Beebe

Pullman, WADavid and Denise BeebeWashington State University

Grace den Hoed

Grandview, WAArchie and Mari den HoedDordt College

Alyxandria Hanson

Elk, WATravis and Lori HansonOklahoma State University

Joel McClure

Walla Walla, WADaniel and Sarah McClureUniversity of Washington

Oregon

Jaimee Brentano

St. Paul, ORJohn and K’Lyn BrentanoOregon State University

Samantha Brentano

Corvallis, ORThomas and Janis BrentanoOregon State University

Garrett Kitamura

Ontario, ORGrant and Carole KitamuraOregon State University

Idaho

Dillan Henslee

Hagerman, IDMark and Brenda HensleeUniversity of Idaho

Ryan Luttmer

Hagerman, IDScott and Sandi LuttmerBrigham Young University-Idaho

Kevin Permann

Rockland, IDAlan and Donna PermannBrigham Young University-Idaho

Montana

Nicole Wemhoff

Grangeville, IDRoger and Annette WemhoffUniversity of Great Falls

Morgan Beckett

Broadview, MTGlenn and Colleen BeckettMontana State University

Dallas Briese

Loma, MTKim BrieseMontana Tech

Dan Johnson

Dillon, MTJeff and Tami JohnsonKansas State University

Brittney Steele

Valier, MTGlenn and Stacey SteeleSheridan College

Katelyn Michaels

Days Creek, ORTroy and Holly MichaelsUniversity of Northern Colorado

Nolan Henry

Camas, WADarin and Monica HenryUniversity of Notre Dame

Hanna Peters

Prosser, WARobert and Frances PetersBrigham Young University

Jordan Sherfey

Chehalis, WAJustin and Debrah SherfeyPacific Lutheran University

Jillian Nielson

Adrian, ORBret and Jennifer NielsonBrigham Young University-Idaho

Quincy Pendergrass

Adrian, ORMichael and Elisa PendergrassBlue Mountain Community College

Meagan McKinney

Wasco, ORBryan and Kimberly McKinneyOregon State University

Alena Zurcher

Mesa, WAEdward and Heather ZurcherUniversity of Washington

Oregon

Jake Fessler

Woodburn, ORRichard and Melanie FesslerOregon State University

Lee McElligott

North Powder, ORMatt and LaDonn McElligottUtah State University

High School WinnersWashington

Benjamin Azevedo

Othello, WALisuarte and Guiomar AzevedoUniversity of Washington

Melody Davidson

Othello, WAMichael and Dana DavidsonBrigham Young University

Dylan Day

Cashmere, WADaniel and Deborah DayUniversity of Washington

Elizabeth DeReu

Greenacres, WABill and Michelle DeReuUniversity of Montana-Missoula

Riley VanderVeen

Sedro Woolley, WALarry and Beth VanderVeenWayne State College

Matthew Warren

Dayton, WABill and Kristine WarrenUniversity of South Carolina

Emma Franklin

Seattle, WADave Franklin and Ruth SolnitNorthwestern University

Maria Thompson

Diamond, ORDavid and Ramonda ThompsonBerklee College of Music

Idaho

Ashlyn Aardema

Kimberly, IDMichael and Sarah AardemaUniversity of San Diego

Madison Behrend

Aberdeen, IDNicholas and Kristin BehrendIdaho State University-Pocatello

Hank De Vries

Buhl, IDGregory and Julie De VriesCalifornia Polytechnic St. University


Cierra Lamey

Wise River, MTCory and Kari LameyMontana State University-Billings

Tylynn Rettig

Rudyard, MTShawn and Tiffany RettigCarroll College

Amy Riley

Volborg, MTMike and Margie RileyUniversity of Montana-Missoula

Andrew Roluffs

Tigard, ORMark and Sue RoluffsOregon State University

Karen Montes

Hermiston, ORMiguel Montes and Maria Del CarmenOregon State University

Maria Navarro

Toppenish, WAClemente and Maria NavarroWashington State University

Grace Wilkins

Great Falls, MTDan and Diane WilkinsCarroll College

Graduate

Hannah Mamer

Caldwell, IDMarc and Diana MamerUniversity of Idaho

Minority

High School WinnersWashington

Whitney Fredrickson

Troy, IDJames and Wendy FredricksonBlue Mountain Community College

Jonathan Isham

Howe, IDJeffery and Kelly IshamIdaho State University-Pocatello

Caleb Johnson

Blackfoot, IDRobert and Dana JohnsonBrigham Young University-Idaho

Travis Field

Pendroy, MTPatrick and Diane FieldMontana State University-Northern

Kourtney Simonson

Loring, MTMatthew and Heather SimonsonRocky Mountain College

Kendra Starkel

Ronan, MTRoger and Kathy StarkelArizona State University

Sidney Hathaway

Denton, MTKraig and Jodi HathawayMontana State University

Land Grant

Travis Chase

New Plymouth, IDMike and Donna ChaseUniversity of Idaho

Stephanie George

Pullman, WASteve and Ann GeorgeWashington State University

Jenica Hagler

Pullman, WARod Nettinga and Patty HaglerWashington State University

Heidi Jamison

Garfield, WARusty and Sandy JamisonUniversity of Idaho

Veronnaka Klamert

Billings, MTGene and Ronna KlamertMontana State University


Theresa O’Leary

Paisley, ORMike and Mary O’LearyOregon State University

Riane Towery

Salem, ORScott and Julie ToweryOregon State University

Marni Wade

Volborg, MTGary and Linda WadeMontana State University

Newly ElectedNewly ElectedBoard MembersBoard MembersJim Farmer, Susan Doverspike and Duane (Skip) Gray were newly elected to the

Northwest FCS Board of Directors in March. Each will serve a five-year term.

Jim Farmer was re-elected to the Northwest FCS

board and now serves as vice chair. Jim and his

brother operate a 2,000 acre irrigated row crop farm

with operations in Idaho and Oregon. Together they

produce onions, wheat, field corn and dry edible beans

for seed. They also operate a fresh onion packing shed

that markets approximately 1,000 onions annually. Jim

has been a Northwest FCS customer for 33 years. He is

a member of the American Institute of Certified Public

Accountants, the Idaho-Oregon Fruit & Vegetable

Association and the National Onion Association.

Susan Doverspike owns and operates a cattle ranch

together with her husband in the high desert near

Burns, Oregon. They own about 30,000 acres and

manage another 100,000 acres of federal grazing

permits. The cow/calf/yearling operation markets

natural, non-hormone treated, age source verified,

GAP 4, non-GMO cattle. She has been a Northwest FCS

customer since 1994 and served on the Redmond Local

Advisory Committee. Susan serves on the board of

Harney District Hospital, the Oregon Beef Council and is

a member of the Oregon Cattlemen’s Association.

Duane (Skip) Gray is CEO and President of a diversified

crop production business in Oregon that produces

vegetable and flower seeds, processed vegetables,

peppermint, hazelnuts and grass seed. In a typical

year, the operation grows 50 to 60 different crops on

approximately 1,350 irrigated acres. Skip has been

a Northwest FCS customer for 34 years and served

14 years on the Salem Local Advisory Committee.

He is treasurer for the Specialty Seed Growers of

Western Oregon and serves on the Government Affairs

Committee of the Albany Area Chamber of Commerce.

Land Grant


One of the enjoyments of my relationship with Northwest Farm Credit Services is working with local farmers, ranchers and team members at various educational venues. I have observed the rural, northwestern region of the U.S. as unique because of the general awareness of global trends and how they impact economic well-being, a direct result of this region’s dependence on exports and global markets. Similarly, producers outside the U.S. exhibit the same understanding of consumer trends, value of currency, geopolitical risk and how each of these impact businesses and personal lives. In my travels across the country, I often encounter producers who believe world trends and economics revolve around domestic agricultural production. With 95 percent of global consumers living outside the U.S., we must make ourselves as marketable as possible. By 2050, world demand for food, fiber and fuel will increase by 70 percent beyond current needs, so the ability to think on a global scale and then adjust your operation accordingly has never been as important.

How do global economic trends impact your business? First, examine the central banks abroad and the U.S. Federal Reserve. As a result of the great recession in 2009, the U.S. Federal Reserve developed a very accommodative, easy money policy. This in turn lowered the value of the dollar which encouraged agricultural exports and lowered interest rates. Some economists estimate up to 40 percent of the increase in commodity prices and land values was the result of Federal Reserve action. Today, central banks in Europe, Japan and even China are embarking on an easy money strategy to boost their export potential and assist in increasing equity values. This global change has challenged industries exporting goods and services abroad because of

the strong dollar. These worldwide central bank short and long-term strategies are creating a strong “king” dollar. The duration of the strong dollar will be a global headwind to many in the agricultural industry.

Another global trend is geopolitical risk. Mr. Putin decided that Russia needed to invade Ukraine. In response, Western nations placed economic sanctions on Russia. In retaliation, Russia limited agricultural imports which impacted commodities ranging from wheat to dairy. Because of the basic need for food, fiber and fuel, agricultural exports are historically the first political tool of persuasion in foreign policy. Thus, agriculture is one of the first industries to feel the impact of risk associated with political and military actions.

Recently, I moderated a panel that included dairymen from Ireland and Germany. Elimination of milk quotas in the European region, a significant milk-producing area, is one of the factors currently impacting dairy profits.Today, one in seven days of milk production in the U.S. is exported. This is a significant increase from past years. If the European region expands production and the Irish meet their mandate to increase production by 50 percent by the year 2020, there will be an increase in supply. This can influence prices as well as profits for the dairy industry in the Northwest and throughout the United States.

The West Coast port strike had a devastating impact on the bottom line of those producers that depend on exports. One producer that exports hay to Asia found prices down 50 percent as a result of the strike because his alternative market was the California dairy and beef cattle herds.


Global Economic Global Economic Trends: Trends: Think Think Globally & Act LocallyGlobally & Act LocallyDr. David Kohl

Professor Emeritus, Virginia Tech


The long-term viability of a market can also be hindered because of an interruption in the supply or supply chain of that product, impacting overall trust in the marketplace. In summary, whether it is a Russian invasion, European market changes, or a Washington state worker strike, each of these events impact agriculture as well as producers’ ability to move their products.

In my educational venues I suggest that producers follow consumer and regulatory trends in the European region because they will likely emerge in the U.S. within a decade. Close observation of Asia is also prudent because this region is so close in proximity to the Northwestern region. Whether it is banking, regulation, food issues, or other challenges, watching both Europe and Asia will be imperative to one’s success.

There is no doubt that the economic growth of the emerging nations, also known as the BRICS and KIMT nations (Brazil, Russia, India, China, South Africa and South Korea, Indonesia, Mexico and Turkey), helped create the recent commodity super cycle which resulted in high profits and asset appreciation for many in the agricultural industry. Subsequently, the slowdown or moderation of growth in the emerging nations is causing economic stress in some agricultural industries. No matter where, once an economic event happens, it can trigger a domino-like effect worldwide.

Demographics is also another major global trend. For example, Japan, Europe and, to some extent, China have aging populations. Contrast this to Mexico where people under 25 years of age number are 45 percent of their population. The agriculture industry and producers in general need to have a keen understanding of demographics, specifically the impact of the millennial generation (18 to 34 years of age). It is this generation that will move consumer, economic, political and social trends worldwide.

Recently, I asked a number of Mexican bankers to name their biggest challenge. The response was dysfunctional government. Does this sound familiar? Almost any professional will list government under their top points of frustration. The message here is to make an effort to understand the challenges and concerns other countries face. You may know how to grow three hundred bushels

of corn per acre, but if you do not understand Indonesia’s increased need for feed and infrastructure, you may miss the opportunity to participate in that market. Today’s producers must stay apprised of global economic events because, as demonstrated, they will likely impact producers’ operations and profits.

Perhaps, there once was a time when everything a producer needed to know to grow and sell a crop was within a few miles from his home. Today, the United States and all its production is only a piece of the multi-faceted and intricate system through which the world is fed and fueled. The agriculture industry is an amazing demonstration of continued progress and production. However, no matter how much we improve technology or production practices, global factors will always impact agriculture’s success. In order to excel in today’s agricultural environment, one must think globally and act locally.

How can you prepare your How can you prepare your business for global impact? business for global impact? • First, educate yourself on global cultures and issues.

Encourage young people in your life to work or study abroad. Experiencing a foreign culture is just as important as understanding a foreign language.

• Second, read international publications. The Economist and the Financial Times are good publications to start with. Both publications discuss world trends and issues from an international perspective.

• Third, do not rely solely on one international market in business planning. Market availability can change rapidly as a result of political, military or regulatory actions. Scenario planning which includes an alternative market is critical in your ability to take advantage of global trends and opportunities.

• Next, participate in an agriculture group that promotes an international business environment. State leadership groups, educational programs and student exchanges can often be valuable in developing a connection or understanding of global components of the economy.

• Finally, acceptance of new paradigms will be critical for success in global markets. New technology, ideas building upon past practices, and connecting with people inside and outside your business as important resources will be imperative in the wild world of global economic trends.


MarijuanaMarijuanaFinancingFinancing

The state-level industries of marijuana production

have created a new challenge for lenders. The crop is

federally illegal and the budding industry is unproven.

Three of the four states who have voted to legalize

production are within Northwest FCS territory. Lending

for marijuana production or marketing, under current

law, could create risks for Northwest FCS.

“We’re a federally chartered entity regulated by the

Farm Credit Administration, an agency of the federal

government,” explained Craig Crider,

Northwest FCS Senior Vice President

of Customer Solutions. “Involvement

in financing marijuana businesses

could result in negative actions against

Northwest FCS and impair our ability to

effectively serve customers.”

Northwest FCS loan documents, for

example, contain provisions stating the

borrower must comply with all present

and future laws. Operating a marijuana-

related business would cause the borrower to be out of

compliance with these provisions on the federal level.

While marijuana laws may have changed on the state

level, they remain subject to enforcement under the

federal Controlled Substances Act.

“There is no established law that says whether or not

marijuana is a crop,” said Terry Schmidt, Northwest FCS

Assistant General Counsel. “The marijuana industry has

little legal or regulatory history. Lenders are concerned

about the effect of tax laws, the level of due diligence

necessary to comply with federal law to extend credit to

the industry and the application of forfeiture laws.”

From a lending standpoint, marijuana production creates

a whole host of risk management concerns beyond the

fact the plant is federally illegal to grow. Flood or crop

insurance is not available to marijuana producers. Since

marijuana lacks specific farm product status and licenses

do not transfer freely, there is no guarantee a lender could

collect in the event of a loan default.

“From a credit standpoint, this is a new

and unproven industry lacking production

history, marketing channel performance

and price history, “said Crider. “If you step

into a new agricultural business where

you don’t have a track record, industry

performance records provide a level of

confidence until the grower can establish

his or her own production and profitability

performance.”

Financing marijuana is a substantial risk both legally and

as an unproven business. If marijuana were legalized at

the federal level, Northwest FCS would re-evaluate this

position. Currently, the best choice is to refrain from

financing marijuana production on any level.

“To do otherwise would put ourselves at risk and

our customers at risk, as stockholders/owners of the

association” said Crider.

“From a credit “From a credit

standpoint, this is a standpoint, this is a

new and unproven new and unproven

industry lacking industry lacking

production history, production history,

marketing channel marketing channel

performance and performance and

price history.“price history.“

IDAHORobert Ball HamerJeff Bartschi MontpelierCody Bingham JeromeJeff Blanksma, Jr. HammettAdrian Boer JeromeRay Carlson BlackfootConnie Christensen BlackfootCraig Corbett GraceCade Crapo St. AnthonyRon Elkin BuhlCarl Ellsworth LeadoreBruce Foster AberdeenDavid Funk HansenLeRoy Funk BurleyBrent Griffin RupertJackie Hillman HamerBrian Huettig HazeltonJoshua Jones TroyBrent Lott Idaho FallsKaren Lustig CottonwoodMarty Lux NezperceDan Mader GeneseeRay Matsuura BlackfootKyle Meyer RathdrumRon Mio FruitlandGreg Moss KetchumLisa Patterson HeyburnGreg Payne CaldwellErick Peterson MoscowRoyce Schwenkfelder CambridgeKirt Schwieder Idaho FallsScott Searle ShelleyTodd Simmons TerretonRobert Swainston PrestonRyan Telford RichfieldBernie Teunissen CaldwellDale Thomas GoodingCamellia Thurgood NampaJustin Tindall BruneauRitchey Toevs AberdeenSteven Toone GraceJames Udy American FallsTodd Webb DecloShane Webster RexburgPete Wittman LapwaiMatt Wolff Boise

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

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

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

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

1215 Pier View Dr.Idaho Falls, Idaho 83402(208) 552-2300

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

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

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

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

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

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

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

1001 West Oak StreetFarm Credit Building, Suite 200Bozeman, Montana 59715(406) 556-7300

519 South Main StreetConrad, Montana 59425(406) 278-4600

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

501 1st Avenue SouthGlasgow, Montana 59230(406) 228-3900

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

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

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

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

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

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

OREGONMonet Allen Montague, CAReed Anderson BrownsvilleRoben Arnoldus CoveGlenn Barrett BonanzaAlex Blosser DundeeJohn Boyer HainesGreg Brink JosephRon Brown Milton-FreewaterGeorge Bussmann SixesWarren Chamberlain ValeJason Chapman Klamath FallsTim Dahle The DallesDan Dawson RoseburgPaul Denfeld HillsboroKarl Dettwyler SilvertonMike DeWall HarrisburgRod Fessler MadrasTom Fessler Mt. AngelJoe Finegan CorneliusBruce Ford HermistonJavier Goirigolzarri RoseburgDennis Harmon Grants PassMatt Insko LaGrandeKenneth Jensen ValeKyle Kenagy RoseburgAlan Keudell AumsvilleDiane Kunkel PortlandLeland Lage Hood RiverSharon Livingston Mt. VernonBill Martin RufusScott McClaran JosephRon Meyer TalentGreg Myers TillamookDavid Neal TangentLarry Parker HelixAlan Parks Silver LakeAmy Doerfler Phelan AumsvilleJohn Reerslev Junction CityStephen Roth BrothersShannon Rust EchoMarc Staunton MerrillAnna Sullivan HerefordSteve Walker StanfieldEric White Nyssa

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

2345 Northwest Amberbrook Drive, Suite 100Beaverton, Oregon 97006(503) 844-7920

650 East Pine Street, Suite 106ACentral Point, Oregon 97502(541) 665-6100

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

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

308 Southeast 10th StreetOntario, Oregon 97914(541) 823-2660

12 Southwest Nye AvenuePendleton, Oregon 97801(541) 278-3300

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

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

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

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

WASHINGTONDave Allan WapatoLoren Beale PomeroyJeff Bosma OutlookRuss Byerley TouchetRoger Canfield OlympiaBill Clark ChelanMike Cobb EphrataBill denHoed GrandviewRichard DeRuwe DaytonFrank DeVries LyndenScott Eschbach YakimaPatrick Escure QuincyKevin Filbrun PascoSteve Fish Sitka, AKStacy Gilmore PascoAlan Groff WenatcheeLori Hayles PascoIan Jefferds CoupevilleCris Kincaid PullmanJim Klaustermeyer, Jr. OthelloTristan Klesick StanwoodChris Kontos Walla WallaSteve Krupke ReardanDavid Lange ColfaxJosh Lawrence Royal CityPoppie Mantone BingenDan McKay AlmiraJohn Miller ToledoPat Murphy ChehalisJerry Nelson BurlingtonBrian O’Leary Kodiak, AKEric Olson Anchorage, AKJeff Raap EllensburgSara Rolfs WenatcheeJason Salvo SeattleDerek Schafer RitzvilleJeff Schilter OlympiaDanielle Scrupps RitzvilleBen Smith SequimJerry Smith Benton CityJim Stone LakewoodLori Stonecipher Walla WallaMark Tudor GrandviewJake Wardenaar Royal CityAndy Werkhoven Monroe

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

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

224 North Main StreetColfax, Washington 99111(509) 397-2840

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

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

2157 North Northlake Way, Suite 120 Seattle, Washington 98103(206) 691-2000

1515 South Technology Boulevard, Suite BSpokane, Washington 99224(509) 340-5600

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

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

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

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

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

local


Take Your Best Shot - Win $100Win $100 2016 Photo Calendar Contest

Help us fill our 2016 Photo Calendar with agricultural imagery

that illustrates Northwest Farm Credit Services’ purpose:

To serve the people of Northwest farming, ranching, forestry

and the commercial fishing industries.

If your photo submission appears in the 2016 Calendar you earn a $100 cash prize!

Contest EntriesContest EntriesAll entries must include a Northwest FCS customer with their family or a

customer with a staff member. Customers can be photographed eyes to

camera or in a candid presentation. Photos should capture an authentic

image of the operation:

• Planting, timber, irrigation, livestock or harvest scenes.

• Industry shots of vineyards, commercial fishing, dairy farms, orchards, vegetable operations, nurseries, greenhouses, etc.

• Action shots in fields, forests, barns or docks.

• Seasonal photos, such as holiday decorations, 4th of July events,pumpkins, winter scenes, etc.

• County fairs, roadside markets or farmers markets.

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

New address?Please notify your local Northwest FCS office.

This institution is an equal opportunity provider and employer.

For rules and submission instructions visit:

northwestfcs.com/photocontest

Submit Your Winning Photo Today Submit Your Winning Photo Today The deadline for photos is September 30, 2015.

northwest fcs yields - growing u.s. sugar - summer 2015

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