We recently interviewed Katie Epstein, Assistant Regional Manager for Horizon's Chambersburg and York offices. One of the largest hurdles of purchasing a farm or rural property is the down payment requirement that many lenders have, including Horizon. 

In simple terms, what is a down payment and what are the typical requirements from a lender?

A down payment is the amount of cash that a buyer puts towards a transaction. I don’t want to confuse it with the deposit that is often a component when you enter into a sales agreement. The deposit is a nominal amount usually $500 to a few thousand dollars due when a sales agreement is signed and will go towards the larger down payment needed for the purchase.

As an example, most lenders including Horizon Farm Credit require a 20 to 30 percent down payment to purchase a farm. With current land prices in our area, that can be a significant amount, so knowing the down payment requirement of a lender is important to help you plan for future purchases that may be many years down the road.

I will note that Horizon has the flexibility to allow the down payment either in the form of a cash down payment, first lien equity in another property or a combination of both.

Now let’s talk about the importance of down payments. Why do lenders want to see a significant down payment and why can down payments also be beneficial to the borrower?

The purpose of a down payment is multifold to a lender.

First, a cash down payment or equity in another property shows your commitment to the purchase having your own money invested, which brings confidence to the lender and even seller to complete the sale.

The ability to gather the down payment also indicates strong financial management skills, a source of income that will likely support repayment of the loan, and low outstanding debt obligations competing for repayment – all of which are appealing to a lender.

Lenders often refer to loan to value requirements, meaning the amount of a loan they are willing to lend based on the value of the collateral. So the inverse of a 20% down payment is an 80% loan to value. I often find if someone is able to meet the loan to value requirements, they are typically more likely to meet the repayment ratios as well.

All of these things are a strong testament to the management ability of a borrower, which is one of the areas the lender will be assessing in making a loan decision.

A sufficient down payment and lower loan to value is also beneficial to you as a borrower because usually it means more options and better terms from the lender. Not only does the required down payment provide access to the remaining funds needed for the purchase in the form of a loan yet also allows a lower loan amount which in turn saves on interest costs over the life of the loan and makes for a lower payment. Mathematically this equates to higher equity which could free up capital to be used for improvements and/or put you in a position to grow the business more quickly.

It also gives you as the borrower and owner some ability to withstand adversity that might pop up in the future. Specifically, that you are more likely in a position to refinance to lower payments, go interest only for a period of time if cash flow is tight due to a crop failure, or some other reason, or sooner able to take out additional loans to make necessary improvements to the property.

A down payment requirement can be a barrier to entry, especially for young or beginning borrowers. How can farmers overcome this hurdle?

That’s right. It can be hard for those who haven’t had time to accumulate savings or build equity in a property. However, it distinguishes the dedicated individuals who are willing to plan and sacrifice to get in position. It might mean putting off a farm purchase until you build adequate savings or considering alternative approaches.

Horizon partners with various other programs including the Farm Service Agency and state economic development loan programs to alleviate some of this barrier. I will note that one common characteristic for all programs is that cash flow needs to be strong.

The Jumpstart Grant program which Horizon is currently offering will give 10 $10,000 grants to startup farmers, and one of the qualifying ways to use the funds would be as a down payment on a farm property.

As we wrap up, is there anything else you’d like to share with our listeners about down payments?

I would encourage our listeners to see the value in a down payment and embrace the discipline it takes to save for a farm purchase. This level of dedication will serve you well in owning a farm and will often be the difference between dreaming of owning a farm and actually owning one.

On June 1, Horizon launched a new grant opportunity, offering 10 $10,000 grants to startup farmers in Horizon Farm Credit’s territory. We recently interviewed Crystal Standish, Horizon's chief sales and marketing officer. Crystal shared about the grant program and Horizon's commitment to young, beginning and small farmers.

Why did Horizon decide to make this investment to support beginning farmers?

Our board, management and staff see this as an investment in our future. We're doing everything that we can to support the efforts for young and beginning farmers. As you know, farming is such a capital intensive business and it really can be quite a challenge for folks starting their own farm operation.

Could you tell our listeners a bit more about the specifics of the Jumpstart Grant program and what’s involved in the application process?

This program is open to both full and part-time farmers in Horizon's territory which covers 52 counties and central, western and northern Pennsylvania as well as four counties in West Virginia. Farmers must have started farming within the past two years, or they plan to start a farm within the next two years. Altogether we're awarding 10 $10,000 grants and the grant money must be used to help the producer start their farm or use it for agricultural purposes.

Also, we'll be looking for a well thought out business plan. Additionally, grants applicants will need to complete the online educational program called Ag Biz Basics. Ag Biz Basics is a program that we are offering to the grant applicants for no charge.

That's it, we're really only assessing those three criteria - the one-page application, the business plan, as well as the successful completion of Ag Biz Basics.

For the grant applicant’s business plan, we want to make sure is that you put in the time and effort into considering the startup of your farm business. There's no specific page number requirement for that business plan, but we are offering use of our template that we have on our website. We'll also require that the business plan includes financials or projections for the business.

A couple other things to keep in mind are that we have posted a Frequently Asked Questions document. So check that resource out as well. And finally, the grant application deadline is August 31st, and winners will be announced in early October.

Horizon offers a number of other incentives and programs for young, beginning and small farmers in addition to the new Jumpstart Grants. Share some highlights of those programs.

Horizon has been very focused on supporting young beginning as small farmers for many years, but this year in 2021, in addition to offering Jumpstart Grants, we also reworked some of our other programs.

We're doing this to help reach more farmers. And with that, we're offering some additional cost savings and we've modified our credit standards. One significant incentive is we're offering a 25 basis point interest rate reduction on new Horizon loans for eligible young or beginning and small farmers.

We also have a number of other incentives to save young, beginning and small farmers money as they utilize some of our services. A couple of examples include:

• Up to $250 off any loan origination fee
• Up to $500 off Horizon record keeping and tax services
• Up to $500 off Horizon business consulting services.
• Up to $500 off an appraisal completed for a loan or a fee appraisal completed within two years of loan closing
• Horizon may also pay the initial year fee incurred for any FSA or any other governmental loan guarantee.

Then finally we have up to $250 off for educational reimbursements from Horizon. This is to help those young, beginning and small farmers pay for trainings or meetings that you might attend.

Horizon's flagship educational program for young and beginning farmers is called AgBiz Masters, which has held each winter. In 12 years of the program, it’s reached more than 1,500 young and beginning farmers across Pennsylvania and neighboring states with 640 graduates of the two-year program. We'll start promoting AgBiz Masters in August, so watch for more information in the coming months.

As we wrap up today’s episode, share with our listeners what excites you the most about the future of agriculture in Pennsylvania. 

To me growing up on a farm and now after spending over 20 years professionally in an agricultural career, the future of farming is really near and dear to my heart. I truly appreciate how hard farmers work each day to provide food to our tables.

What's really exciting to me is that Pennsylvania is one of the number one states in the country with the number of young ag producers right now. Over 14% of all farmers are less than 35 years old in Pennsylvania.

As I'm working with many young people across our territory, getting started in farming, they're very smart, energetic and have lots of fresh ideas. Even earlier today, I had a chance to work with our summer intern class and they're all very passionate about starting a career in agriculture. I find that really refreshing, and it's very clear to see that the future is bright for agriculture and farming and full of opportunity.

I find it very rewarding to be a part of supporting the ag industry and working with farmers. It feels really great that we're able to give back in a small way, knowing how positively agriculture has shaped my individual life.

We recently interviewed Mimi Thomas-Brooker with the PA Veteran Farming Project. In celebration of Veterans Day, we discussed veterans in agriculture and resources to help them be successful.

Could you start by sharing some information about veterans in farming? How many veteran farmers are currently in Pennsylvania, and why is farming a good occupation for veterans?
There are over 800,000 veterans in Pennsylvania. As Pennsylvania’s Secretary of Agriculture Russell Redding says, “Two percent of Americans serve and two percent feed us.” 

There are about 53,000 Pennsylvania farmers, and it is difficult to know how many are veteran farmers. The PA Veteran Farming Project works with about 300 a year. We know we don't reach all of them, and we believe there are many more veterans in our state who would like to farm. 

Farming is a great occupation whether you've served a few years or 20 years, because veterans tend to like to be action-oriented, work with their hands and work in the outdoors. For some of them, it's therapeutic and it's a way to continue serving. They've served a country, and now they're serving their communities by feeding them and providing agribusiness and products, and hiring people in some cases. It's a great fit for veterans.

Our veterans are aging just as farmers are here in Pennsylvania. The average age at the national level for farmers is 55. About 25% are 65 years or older, and farm succession is a big deal. Trying to get more younger veterans into agriculture is a huge way to keep our food system secure and to provide them with a solid occupation where they feel that they are serving their community and feeding their family at the same time. 

In our experience with the veterans that we work with, there are some qualities that made them successful in the military and are important for successful farms. Veterans tend to do their homework. Many do lots of research before they even come to me and ask questions. They are prepared; they know about rules and regulations. Even if they're unfamiliar with the food safety regulations, they know how to research and get those answers. They're highly attentive to safety, which is a huge risk management factor on the farms.

Veteran farmers that are successful are committed to the long term. They know that you can't build a farm in a year, and they plan for the future.  Farming is a great opportunity for veterans, and we try to help them.

Tell our listeners about the PA Veteran Farming Project - what are the goals of the project and what types of activities/programs do you host?
We're Pennsylvania's grassroots agriculture network for military veterans and their spouses, whether they be small farmers with a farmstead or a large commercial farm looking for a business connection. Anyone who has served in the military or is married to one is welcome to join our network. 

We're led by a group of advisors, six of whom are veterans themselves and one is a military spouse. They are from all over the state, and they help to drive the programming and help us keep on track of filling a need. We don’t just create a program to say we created it, but to find out what they need and how we can provide the resources. 

Our mission is connection. We've had some great success, especially where we have small farmers who are scaling up. Maybe they're starting a farmstead, like one farmer here in Allegheny Township in the western part of the state. This farmer does pork and some vegetables, but he wanted to grow that, so he connected with some other folks in our network. Now he's stocking veteran-produced maple syrup, selling that on his farm, so he's opened a new network market for that product. He's also selling custom blended tea from The Skirted Soldier in Blue Knob so she can reach parts of the state where she has not previously had a market. 

We connect farmers to mentoring, whether it's through a formal class like our Bee Bootcamp or an on-the-job apprenticeship through our Troops to Tractors program, or a more informal mentoring, where a beginning or entering farmer will call us or email us or message us and say, "Hey, I think I want to get into goats. Do you know somebody who lives near me that I could go visit their farm?" We call that our Ag Allies Program, and it can be helpful. 

We also connect our network to resources. I mentioned other agriculture organizations like Extension, the Pennsylvania Department of Ag, plus a variety of different organizations. We try to help them hone in on priorities and then connect them with resources. Education is a huge part of it. Last year we held our first veteran farming conference in Boalsburg. The conference was successful including making connections and providing speakers. Unfortunately, this year we will need to have a virtual conference due to COVID. However, we still think it's going to be a great and engaging conference. 

We also host regional workshops throughout the year, typically on farms owned by veterans so the attendees can see projects on the ground and learn not just what you did, but how did you do it. Did you find funding sources? Did you use an ag service provider to help? How did you market it? We're big on practical education. 

We provide help searching for grants and funding. In some cases, such as the recent state grant for the Fresh Food Financing Initiative, we helped a couple of our veterans put together their applications. We have a grant writer as a member of our network who can assist with applications. 

The third aspect of our PA Veteran Farming Project is promotion. We do a lot of promotion of veteran agribusinesses. Our organization hosts veteran farm tours. In fact, we'll be hosting one on Friday in Adams County and York County. Two veterans obtained grants from the state to expand their community reach to lower income neighborhoods for fresh food. On the tour we are thrilled to host Pennsylvania’s Secretary of Agriculture Russell Redding and Major General Carrelli from the Pennsylvania Department of Military and Veteran Affairs to visit with those veterans and see how they're serving their communities now.

On our website, troopstotractors.org, we have a veteran farm map with at least 60 veteran farms throughout the state listed by the county and what they produce. Why not buy local and buy veteran? 

Throughout the month of November we are focusing on highlighting veterans, from hop growers, beer brewers, wine makers, distillers to even a veteran who does custom-blended teas. Our organization partners with the statesvisitpa.com to get recognition through their newsletter, and that's on our website as well. You can download a map and descriptions of all those. 

Our goal is to help people who have served and who are now operating agribusinesses or owning farms, to be successful and sustainable, both in a conservational way and economically. Anything we can do to provide the tools to empower them to grow their farms is what we want to try to do. 

Because we're an independent organization and not part of a larger institution, we are malleable. We can meet needs as they arise. We're nimble and our board of advisors is an engaged and clever group who always come up with great ideas for new programming. 

What do you see as the greatest needs for veterans getting started in farming today?
We've asked veteran farmers, and what they've told us are two things which will surprise no one; access to land and finances. 

Part of the financing problem is realistic business plans. We partner with many organizations in this area, Horizon being one of them. We work with USDA, Small Business Association and the new Agricultural Center of Excellence for the Small Business Development Centers. These organizations assist veterans (or anyone) with business planning. 

If the veteran farmer has a concept, how can they bring concept to launch? That’s a big part of getting financing. Then once they get beyond that initial stage, marketing is a big need. How do they get their products to market? Related to regulatory compliance, how do they manage risk for both themselves and their consumers? 

Are there any other thoughts you would like to share with our listeners today?
Please visit troopstotractors.org or find us on Facebook and Instagram at @PAVetsFarm to see some of our veterans who are farming and learn about our programs. I hope that you will refer veteran farmers to us to see if we can be of assistance. In some cases they could be veterans providing assistance as mentors, so we would like to get involved with anyone who farms in Pennsylvania and has served. 

We are not for profit, fiscally sponsored and seek grants each year for beginning farmers. We also host many programs, including Bee Bootcamp for veterans who want to learn basic hive management. That was supported by Disabled American Veterans, and we're going to expand this year with the help of the State Veterans Trust Fund. That's an area we would like to see grow so if there's interest in that, please reach out to us.

“My wife likes to say my entire life has been about food,” laughed Marlin Wampler, Franklin County, owner of Conococheague Stainless LLC. “My passion is safe, high quality food.”

Marlin’s pursuit of his passion began at an early age, bottling honey with his family. Later, he and his brother operated a dairy farm and a landscaping and lawn service. Eventually, the landscaping business became the brothers’ focus and they sold the cows. 

In 2000, dairy equipment dealer Agri-Service asked Marlin to join their team. “I became a milking equipment service technician with the company,” Marlin shared. “Fixing equipment is what I loved about farming and it was a perfect fit.”

Two years later, Agri-Service promoted Marlin to service manager, followed by food processing product manager. As he helped grow that segment of the business, projects included new processing equipment design and custom equipment design for the artisan and specialty foods industry. 

With his years of equipment experience, Marlin launched Conococheague Stainless, LLC last year.

“When customers come to us, they have ideas,” explained Marlin. “They want to add value to their milk or make something. While we don’t conduct market research, we do help teach them what they need to know about executing a processing project, such as navigating the red tape of regulation.” 

Once customers firm up their plans, Conococheague Stainless provides equipment lists and estimates to help customers with their business plans. “We want to build quality products that will last a long time,” he continued. “And yet be economical so that customers can afford it.”

“Our draftsmen design the equipment and model it in 3D for customers so they can visualize their custom piece of equipment,” Marlin noted. 

As processing equipment is a specialized industry, many electricians and plumbers are unfamiliar with the equipment’s unique requirements. When Conococheague Stainless presents customers with their final set of plans, included are notations for electricians and plumbers, allowing those vendors to understand the project and develop their own budgets.

With a customer’s project approval, the equipment build begins from scratch. Marlin’s team cuts and forms the stainless steel, builds the equipment, polishes it, and finally, passivates it, a process that lifts off any contaminants from the stainless steel, before installation. 

Marlin describes two markets for his equipment. Approximately 50% are dairy farmers who want to process butter, milk, cheese or ice cream from their milk. The remaining 50% are customers who focus on food processing, purchasing milk from other farmers. 

Serving customers across North and South America, Conococheague Stainless experienced the ripple effects of the global pandemic this spring. “In one day, we went from six months of booked projects to three weeks of booked projects,” remembered Marlin. 

That same day, a vendor called Marlin with an opportunity to make hospital beds. “We spent four weeks on that project, making frames that shipped to various states preparing for pandemic needs,” Marlin said. “It helped buy us time as some smaller projects moved forward and keep our employees working.”

Given his business experiences, Marlin offers this advice to people thinking about their own value-added ventures.

“Talk to other people in the business first,” he explained. “Take vacation time and visit. There will be all kinds of ideas. Let your imagination run and ask questions.”

“When I decided to go into business myself, I talked to other people from my church,” Marlin continued. “Don’t try to do it on your own. Get enough varied opinions and don’t pick the person that agrees with you!”

“Finally, if you’re going to start a business venture, make sure you have enough collateral,” said Marlin. “Get approved for more money than you’ll need, and use these numbers in your business plan. If your project doesn’t go as planned or goes over budget, you’ll be OK.”

As Marlin reflects on this challenging year, he is thankful for Horizon, a lender that is flexible during agricultural industry cycles such as low milk prices. “It makes you feel better when you lose six months of work in one day.”

We recently interviewed Thad Taylor, director of agribusiness lending and forest products specialist with Horizon. Rising real estate prices are all over the news, with reports of homes selling well above asking prices.

While not in the news as much, the same phenomenon is happening to farmland and timberland tracks, impacting many farmers and forest products operators.

At the same time, we're experiencing record high lumber prices, causing challenges across the industry, especially with construction projects. Thad discussed these issues along with their impacts.

First, let’s talk about real estate and the rising cost of farmland and timberland in recent months. From your perspective, why is this happening and why should buyers be concerned? 
It all comes down to supply and demand. Some of the changes in historical demand forces and supply dynamics are some of what's causing this. Buyers should be aware, instead of concerned, with what's going on right now. Buyers need to be aware that if they participate in the market right now, they'll be paying more for a given property, than they did two years ago.

Some of the supply-related forces and demand-related factors that you see right now are because there's a lot of businesses that have learned to cope with employees working from home, and home can be a lot of different places. It doesn't necessarily need to be at the office. People have more flexibility now as to where they live. That's causing a little bit of change in demand in certain areas, where maybe there wasn't as much before.

The other factor is supply, or the things that make properties come onto the market and cause sellers to decide to list with a real estate agent. Some of those things maybe haven't changed very much, and if that supply tends to trickle in at a given rate, historically speaking, it really doesn't change. If there's any uptick in demand for additional listings, that can change pricing, at least in the short-term. 

That’s an oversimplified way to cover it, but one of the things we know about the pandemic is that there have been businesses that have been hurt and individuals financially impacted. But like with any other beneficial or painful economic event, not all sectors are always impacted symmetrically. Not all individuals are impacted exactly the same way across the entire economy.

There are businesses out there that are doing well and looking to expand. There are individuals who've been less impacted and maybe have significant savings that they want to deploy or need to move, for one reason or another. Those things all conspire to have an impact on real estate market. 

Another couple of things worth mentioning are the Dow is up year-over-year, about 34%. For people who directly or indirectly participate in the equities market, it makes people feel a little bit more wealthy and a little bit more competent.

Additionally, advertised 30-year mortgage rates are very affordable with rates between 2.75% and 3%. That allows people to be confident with bid behavior when they're acquiring real estate. 

Lastly, the Federal Reserve liquidity facilities issued in 2020 are about $542 billion. That's a large injection of liquidity in the US economy. 

So a combination of additional liquidity, a lot of which has made its way into the US equity markets, the Dow being up 34% year-over-year and fairly affordable interest rates, all allow people to go into the real estate market, who want to acquire real estate and do so with some competence.

The parallel to that is those things that create that competence, they can also go away in a hurry too. 

Those are some of the economic or supply and demand forces I see in this real estate market.

What are the impacts of the current market conditions for individuals who want to finance their land purchase? 

If a person is going to buy today and borrow a significant percentage of their purchase price for real estate, there's a chance that the comparable sales that are used for appraisals will lag today’s market because appraisals are depended on historical comparable sales. If comparable sales from 2019 and 2020 are being used for the construction of an appraisal or the analysis to make an appraisal today, those historic sales prices are going to be what drive appraised values today, and a buyer needs to be aware of that.

It may cause their lender to not want to lend upon the entire purchase price, but possibly a more conservative evaluation, which is going to rely on the appraisal. 

Therefore, a buyer should be prepared for putting cash down to cash fund a bigger portion of their purchase today as compared to a few years ago because today's appraisals might not support today's asking prices.

There usually is a lag between when real estate sales occur at an elevated or depressed price and when the appraisal comparable sales ultimately catch up with that market trend.

Next, let’s talk about the sky rocketing lumber prices, which are significantly adding to the cost of any building project. What’s your perspective on this increase and what can we expect for future lumber prices?
I'll start with some of the facts and then I'll get into some observations of mine. Like any kind of discussion of economics, a lot of that is subject to interpretation and assumptions, but I'll start with the facts here.

The most recent southern lumber prices for softwood are about 192% above where they were a year ago. That's a significant rise in softwood lumber prices, and softwood being the material that's used to frame and build houses. Hardwood lumber, on the other hand, is used for molding, flooring and trim in most residential construction. We'll stick just to softwood lumber because it drives construction costs for houses, barns, second homes, cabins, etc. Those prices are up about 192% year-over-year, which impacts the quoting cost and the construction cost for any new project.

That increase in price has to do with a lot of things. Now we'll get into some of the economic discussion and the assumptions. 

Ultimately, this comes down to supply and demand as well, and the supply is not so much driven by the amount of softwood standing timber in the United States. It's driven by the weakest link in the supply chain, no matter how many softwood trees are standing in the United States. The various links in the supply chain include mill capacity, trucking capacity, warehousing capacity, planing mill capacity and kiln drying capacity. All of those various things have to work in sync in any supply chain, in order for the industry to deliver what's demanded on time. In this case, those things cannot be changed in a hurry. 

What can be changed in a hurry is consumer behavior. If we have consumers who stockpiled in their mind and in their bank accounts over various projects that they would like to do, they can deploy that pent up demand fairly quickly. It's just a matter of deciding to do the project and getting your checkbook out. 

What can't be deployed fairly quickly is a 25% increase in mill capacity, a 28% increase in trucking capacity or a 40% increase in planer mill capacity. Those things cannot be deployed as quickly as the swaying human demands and decisions to get a checkbook out and deploy some liquidity into the construction market.

So those are some of the things that are impacting lumber pricing right now. I think we're going to see lumber pricing come down a little bit in the coming year, as some of the additional supply response has come online, like I mentioned about mill capacity. 

Mill capacity can be added, but it's simply not the flick of a switch. It might take anywhere from 12 to 18 months for additional mill capacity to come online or for a given mill to be able to add a shift or additional hours in the economy. Where folks have struggled running businesses here in the last several months is getting incremental labor to run their facilities.

Nonetheless, I think we're going to see some of the demand slack off just a little bit, and it doesn't have to slack off too much in order to impact pricing, and I think we're going to see a supply response.

It might take a little bit of time, but I think we'll start to see lumber prices start to fall back in line with historical levels, somewhere around 12 to 18 months from now.

As we wrap up, is there anything else you would like to share with our listeners today?
If a buyer in today's market has the ability to be patient with this market, there could be some benefits to waiting just in case this recent increase doesn't have a lot of legs and might be fleeting. If a person can afford to be patient, there might be some benefit there. 

On the other hand, if a person does need to move quickly and can't afford to potentially lose out on an opportunity, it certainly makes sense to participate in this market especially if they don’t have other alternatives. 

However, in this market, given the speed with which the market has risen and given some of the overall economic liquidity factors that seem to be behind some of this, there might be some benefit to being patient with this market.

For Rodney and Cathy Carson of Martinsburg, Bedford County, there was never a question of their life's dream. "We wanted to farm," said Cathy. "Rod always enjoyed farming."

The couple moved to the Morrison's Cove area, rented a farm, saved money and eventually purchased their own farm in 1990. Today, their 107-acre farm includes a 120-head Holstein herd, milked in a parlor, three times a day. Through the years, they've also added a free-stall barn, an alley scraper, a trench for silage and new equipment.

After graduating with a degree in agribusiness management from Penn State in 2011, Jake, the youngest of the Carsons' children, knew he wanted to continue in the family business. "While I earned the degree, Penn State also opened opportunities to travel in the US and even other countries," Jake noted. "I saw different styles of diaries and applied the ideas I liked to our farm."

With the addition of Jake and his wife Kim to the business, Rod said, "We wanted to develop a transition plan and someone recommended Lacey Coleman, an Horizon accounting officer."

"We talked to a lot of people before we met Lacey," explained Jake. "It's a real jungle. There are 1,000 different ways to form an LLC. We needed someone to fill in the blanks."

From the Carsons' LLC research and experience, Jake thinks Horizon meshed both the accounting and legal areas of expertise. "Some folks were strong on the legal aspects of LLCs and forgot about accounting and vice versa. That's where Lacey worked for us, understanding both sides," he said.

"Once we decided on the LLC, it took some time to work through the structure," Cathy explained. "Lacey was very patient with us. She was at the farm a lot to make it happen."

For Lacey, reviewing the farm's financials with both generations was a key first step. "This allowed the entire family to set realistic short- and long-term goals based on financial feasibility. It helped bridge the gap of how and why certain management decisions are made," Lacey said.

Lacey notes that every farm has its own unique set of circumstances and an LLC structure isn't for all businesses. "After taking the time to consider their options and understand the LLC structure, the Carson family made a smooth transition into operating as a family farm entity," she explained. "They are fortunate to have a second generation that loves the farm as much as the first generation."

Since Rock Ridge Dairy LLC was established in 2014, Lacey continues to help the Carson family with any tax consequences or record keeping ramifications associated with their new LLC structure. "Her expertise definitely helped us through it," noted Jake.

Lacey also prepares their monthly records and provides payroll support, tax planning and tax preparation. "Working with the Carson family is an absolute pleasure!" Lacey said.

"We like our relationship with Horizon because everyone has a farm background," said Cathy. "They understand us."

As we prepare to welcome a new group of interns to our team this summer, we are celebrating National Internship Awareness Month. Let’s catch up with a few former interns who joined us as staff members after graduation.

They will share their experiences on their path from intern to employee. Introducing Danielle Ciccolini, who worked with our Susquehanna Valley credit and appraisal teams in 1999.

What have you been up to since your internship?

I interned in the summer of 1999, graduated from Cornell University in December 1999 and began working at Horizon on Jan 3, 2000, which was the official first day for the Horizon association.  I have been an Horizon employee as a credit analyst, portfolio manager, credit leader and credit manager and currently as the field operations manager. 

What was the most beneficial aspect or most important thing you learned during your internship?

The most beneficial aspect for me was observing a new organization forming. I rode with loan officers on field visits but also completed independent appraisal sale study work. (My husband would say it was helpful for me to learn to read a map.)

What did you take away from your intern days?

I built relationships during my internship that helped me move into a full-time role after graduation.

One word to describe my internship experience:

Adventurous

What advice do you have for young adults?

Take each opportunity you get to shadow more experienced folks in the workforce. Many of them are willing to share their contacts and help you start your career.

Rick Allen owns and operates Crabapple Valley Farms, a 78-acre farm. He serves as a director on the Fayette County Holstein Board and co-chair of the Fayette County Fair dairy show committee. We asked Rick a few questions about what inspired him to join Horizon. Check out his answers below, and be sure to say hello at our next event!

One fun fact about your business or career:
I developed an agri-entertainment business in 1980 out of necessity to supplement the dairy farm. Today, the Haunted Hayride is the main enterprise at Allen-Hill Dairy.

Why did you choose to work with Horizon for your financing needs? 
My father was a Farm Credit customer. I never considered another lender. 

Why did you decide to run for the Board of Directors? 
I serve on local and state boards with other agriculture organizations. When the opportunity came to run for the Horizon Board, I wanted to serve. 

How has the Cooperative changed through the years? 
In my 10 years, I witnessed a strong desire and commitment by management to help improve the lives of all Horizon customer-owners.

Advice you’d share with other customer-owners considering running for the nominating committee or a board seat in the future?
Make your intentions to serve known to a nominating committee member in your region. If the committee nominates you, research the history of the Farm Credit System. It is truly amazing how much this cooperative has done in the past 100 plus years!

Horizon has the pleasure of working with a dynamic Board of Directors that helps to provide strategic direction and oversight. Interested in becoming more involved with Horizon?

Dr. David Kohl, Professor Emeritus Agricultural and Applied Economics, Virginia Tech University

The COVID-19 black swan event has three phases. At first, it was a dirty bird causing mass disruption in economics, businesses, households and personal lives. Then, a nasty, angry bird will rise during the second phase. Countries will point fingers and the blame game will result in disruption of commerce and trade with extreme market volatility. The angry bird will create widespread social, political and economic anguish. The third phase will be the phoenix stage. This is the mythical bird that rises from the ashes of destruction. The phoenix is more powerful, innovative, agile and resilient than before. 

Through these three stages, how can farms and ranches best navigate the white waters, whirlpools, waves and torrents in the wake of this sudden-impact event? 

Get your financials in order and monitor them on a monthly basis. Document your losses if government and financial assistance is received. Compare these losses to the last three years to determine what changes were beyond your control. Maintain good communications with your lender. 

What is your liquidity position and equity depletion rate? Start your analysis by calculating the burn rate on both your working capital and equity. Divide your losses into working capital. Working capital is a measure of financial liquidity calculated by subtracting current liabilities from current assets. To calculate the burn rate on equity, divide your losses into your total equity.  

Before liquidating any assets, conduct an analysis of potential deferred taxes. Deferred taxes on low-basis assets or fully depreciated assets can create tax liabilities. In some cases, the amount of deferred taxes can be burdensome. 

Seek financial and emotional help, if needed. Do not be ashamed. Many individuals and businesses are in a similar situation. 

Finally, good, old-fashioned outside the box thinking with other positive and realistic businesspeople, inside and outside of agriculture, can set the stage to rise stronger and smarter like the powerful phoenix. 

Dr. David Kohl, Professor Emeritus Agricultural and Applied Economics, Virginia Tech University

A management mindset will be a critical element for success in the decade of the 2020s in agriculture. The COVID-19 pandemic has accelerated change and created disruptions in markets, consumer trends and how one navigates everyday life. While some will equate the disruption as a negative, others will view it as an opportunity.

For example, let's delve into the mindset of Producer “A” and “B” from the viewpoint of an agricultural lender. Producer A engages the lender and wants to know how their performance compares to others. Producer A seeks out what others are doing, is inquisitive, never quits and is always striving for improvement. This producer has balance and focus on the immediate operations, but also thinks longer-term with an eye on the horizon. They have a “glocal” mentality, meaning that they think globally about the variables that influence their decision-making, but have the ability to filter this information to their specific business and lives.

On the other hand, Producer B has the mindset of hoping to survive another year and wondering if their lender will provide financing. They often expect the lender to fill out the financial statements and have little understanding or motivation to know what the numbers are telling them. Producer B is waiting for commodity prices to save them financially. The “magic silver bullet” or the next big moneymaker is their hope and dream.

Contrast this to Producer A who is very process oriented, proactive and adaptive to the situation as the economic climate changes. Producer A often utilizes an advisory team, which is analogous to assistant coaches for input and perspective in the decision-making process. Producer A takes a proactive approach in preparing the next generation in alignment with their abilities, skills and passions. They believe that transition management is more than asset and equity transfer, but a new management team that often adds energy and foresight. Producer A creates a culture of sweating the small stuff and following the Five Percent Rule, coined by Dr. Danny Klinefelter, Professor Emeritus at Texas A&M. The Five Percent Rule means being 5% better in many areas of the business when compared to peers.

Finally, Producer A finds methods to challenge the status quo to maintain a competitive edge. The 2020s will be a decade of economic and financial divide for those that see disruption as an opportunity, rather than making excuses and not taking responsibility.