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Partners in Agriculture

Author: Karen Hart
July, 2013 Issue

Santa Rosa-based American AgCredit offers a broad range of agricultural loan and leasing services to farmers, ranchers and agribusiness cooperatives across the country.

Every week, you go to the grocery store and load your shopping cart with a variety of foods: fresh fruit, lettuce and carrots, eggs and cheese, a pound of walnuts, a bottle of wine, a few steaks and perhaps a chicken to roast over the weekend. America is the land of plenty. Yet, so often, we give little thought to the inevitable cycles of agriculture that can endanger our food supply or to the farmers and ranchers who help keep our grocery store shelves abundantly stocked.
Agriculture is a major industry in the United States, and the country is a net exporter of food. There are 2.2 million farms, covering 922 million acres, according to a 2007 study. Those farmers and ranchers often need access to credit to operate a business, but particularly when drought, frost, torrential rains, disease or insects compromise our food supply, farm credit is of prime importance.
That’s why, in 1916, Congress established the Farm Credit System (FCS) to provide a reliable source of credit for the nation’s farmers and ranchers. The FCS is the largest single provider of credit to American agriculture, providing more than $191 billion in loans, leases and related services.
“Food is one of our national securities,” says Byron Enix, chief operating officer of American AgCredit. “Agriculture provides that food, and it needs a consistent supply of capital to support this important national value. Farmers and ranchers need to have ready access to credit in an ever-changing landscape of weather and economic changes. Our company was created to support the agriculture industry.”

Money for agriculture

Originally established as the National Farm Loan Association of Santa Rosa in 1916, the lender eventually came to serve Napa, Marin and Sonoma counties. Its name continued to change over the years as a result of mergers and system changes until it was finally rebranded American AgCredit in 2000; the company’s tagline, “Money for Agriculture,” says it all.
Today, American AgCredit operates across the United States, and it’s always been part of the nationwide FCS. Its mission is to provide credit and financially related services to farmers, ranchers and agribusiness cooperatives. The company is the sixth largest farm credit cooperative in the nation, specializing in providing financial services to agricultural and rural customers throughout California, Colorado, New Mexico, Nevada, Kansas and Oklahoma as well as to capital markets customers in more than 30 states across the nation. American AgCredit serves customers from 33 branch offices located throughout the Western and Midwestern states and offers a broad range of agricultural loan and leasing services to winery, orchard, timber, row crops, dairy, grain, cattle and other ag-related industries.

Financial services

The company’s vision is to be the leader in delivering financial services with value. “Our mission is to serve farmers and ranchers in our charter territories and provide a sound, reliable source of funds at competitive rates,” says Ron Carli, president/CEO. “We’re the most efficient and most competitive lender to agriculture in any given area we serve.”
Some of the financial services provided by American AgCredit include production and mortgage financing, short- and long-term loans, equipment and vehicle leasing. In addition, the company offers tailored loan products to meet the needs of farmers and ranchers. Conversions let customers convert from an existing interest rate product to other available products offered by the company. A funds held account may be withdrawn to make loan payments and used for certain other (specified) purposes. Federal and private crop insurance products provide monetary benefits for naturally occurring perils (drought, flood, disease) and price fluctuations, which can threaten invested capital.

A cooperative effort

American AgCredit operates as a cooperative, and its partnership with farmers and ranchers is key. “We’re a single-industry lender,” adds Enix. “There are no divided interests. We’ve capitalized our institution in a way to support agriculture. We’ve customized how our loan products are made, how our credit works and the pricing of our loan products. We’re a cooperative lender, which means we’re owned by the people who borrow from us. Our mission is to serve every aspect of agriculture,” says Enix.
At American AgCredit, clients are shareholders in the business and are referred to as “stockholders.” At the end of the year, according to Terry Lindley, chief marketing officer, American AgCredit may distribute cash dividends to qualified borrowers based upon the strength of the company’s performance and the level of each borrower’s “patronage,” which can lower their effective cost of borrowing money.
For example, if a farmer borrows $100,000, and the going rate for an interest-only loan is 4 percent, the farmer pays $4,000 over the course of a calendar year. At 4 percent, the farmer earns 100 basis points, which equals 1 percent of his or her loan value, and the farmer would receive a patronage (credit) of $1,000 at the end of the year.

Strength in diversity & knowledge

The 97-year-old American AgCredit has nearly 7,000 stockholders, administers 15,000 loans and manages and owns more than $10 billion in assets. The company has grown 40 percent since 2008 and currently employs 420 people nationwide. What keeps the company going strong? CEO Carli credits financial diversity and knowledgeable employees among its strengths.
American AgCredit is part of a nationwide system, which keeps it financially strong as a result of diversity among its agricultural stockholders. “Our portfolio is 100 percent agriculture, so our financial strength is important. It’s how we govern ourselves,” says Enix.
It’s this diversification that helps American AgCredit mitigate risk. “If there’s a drought in a certain state, we can spread the risk and make our system safer and sounder,” explains Enix. The company finances more than 200 different commodities as part of its cooperative. Major market segments include wheat, beef, dairy, vegetables, wine and winegrapes, cotton, field crops, timber and tree fruits and nuts. It also covers some smaller markets such as berries and kiwi fruit.
American AgCredit’s strength also comes from the people it hires. Employees often have a personal connection to agriculture, and therefore speak the language of the stockholders, bring a down-to-earth style to the business and are accessible at every level.
“We hire people who understand agriculture and our top people¾loan officers and underwriters¾understand how to run an agricultural bank. We’re like a family and have exceptional employees with tremendous longevity,” says Carli, who’s been with the company for 34 years. “We have a lot of tenure [among employees], and we have the kind of atmosphere where employees come to work and stay,” he says.

Long-term partnerships

The company’s long-term relationships with clients often span several generations. “We’re a relationship business,” confirms Carli. Kunde Family Estate and Vineyards, for example, has partnered with American AgCredit since the 1950s, when the financial cooperative was much smaller.
“There have been many changes with their company since the beginning. The Kunde family has had a long relationship with American AgCredit throughout the years,” says Jeff Kunde, fourth generation winegrower and chairman of the board at Kunde Family Estate. “We’re proud that both organizations have stood the test of time and multiple generations. The Kunde ranch was originally established in 1904 with 640 acres. Over the years, it’s grown to 1,850 contiguous acres in Sonoma Valley.
“The great thing about American AgCredit is that the people there understand agriculturethe highs and the lows,” he says. “They understand this isn’t so much year-to-year as it is a long-term venture; you could have a catastrophic event, but they understand agriculture and can work with you,” he says.
Kunde points out that part of American AgCredit’s strength is in its relationships with farmers and its commitment to the communities it serves. “American AgCredit has a personal relationship with its customers, and we appreciate how it supports the community in all formswhether it’s at the junior college level, a 4-H Club or Future Farmers of America group, another ag-related endeavor or through its involvement with Redwood Empire Food Bank, the Memorial Hospital trauma center, cancer and diabetes research or any number of local nonprofits, it should be commended,” he says.
Kevin Barr, owner of Redwood Empire Vineyard Management Inc. (REVM) in Geyserville, also has a long-term partnership with American AgCredit.
Barr began working with American AgCredit in 1983 when he set out to start a company. He had a meeting with Terry Lindley, who was working as a loan officer at the time, and asked for help. “I went to Terry with my business plan and told him I needed a startup loan so I could buy a tractor, a pickup and some implements.” Within five years, Barr had 20 clients, 30 full-time employees (and as many as 100 during harvest season) and managed more than 500 vineyard acres between Santa Rosa and Cloverdale.
Today, REVM has more than 60 clients, a fleet of trucks and heavy equipment, and develops and manages vineyards ranging from five to 100 acres. Barr’s clients come from all over the world, and some are mostly interested in buying a second home in the North Bay Wine Country and supplementing their income with a vineyard, which they hire Barr to do. “I always refer potential clients to Terry Lindley,” he says. “Terry gives them a great introduction to American AgCredit and many of my clients have borrowed money from them.”
Why does Barr like working with American AgCredit? “American Ag is in the business of lending money, earning interest and getting the loan paid down,” Barr says. “But along the way, it’s providing guidance to make sure the farmer is successful. And the employees understand ag. I’m in the winegrape business, the alfalfa business and the cattle business. [American AgCredit has] loan officers who understand all aspects of agriculture and ranching. As it’s grown, I’ve grown,” says Barr.
According to Barr, the staff at American AgCredit is committed to its work and its shareholders. “It’s a fabulous company. I can pick up the phone, call Ron Carli—and he’ll talk to me,” he says.
Mark Sanchietti is a fourth-generation Sonoma County farmer and owner of Sanchietti Farming, which owns, leases and manages ranches and vineyards, and will work on all aspects of a vineyard from new development stages to farming established vineyards.  A graduate of California Polytechnic State University in San Luis Obispo, Sanchietti began farming in 2007 and currently farms about 300 acres in the Russian River Valley.
Sanchietti’s family has been part of the American AgCredit family for years. His mother was a loan officer there, and his father has been a customer for more than 40 years. Sanchietti’s first association with American AgCredit started as a young boy, when “I showed market lambs through the 4-H program as a youth, and they supported me at the junior livestock auction, bidding on my lambs,” he recalls.
Like Kunde and Barr, Sanchietti appreciates the fact that American AgCredit understands the language of farming.
He also credits the organization’s conservative approach in the agricultural business for its success. “It’s a conservative group that’s been able to grow during down economic times. It’s been able to grow the business, and that’s comforting.”
Most important, Sanchietti appreciates the personal touch from American AgCredit staff members. “It’s a large business with a local mindset and a personal feel. You’re not just a number or a barcode, the employees personally care about you.”

Young, beginning and small farmers

Aside from lending money to established farmers and ranchers, American AgCredit’s young, beginning and small farmer/rancher program (YBS Program) is designed to provide diverse and accessible financing options, alternate financing and guarantee options for farmers and ranchers who are just getting started as well as small or part-time operations. “We don’t concentrate on just one type of agriculture,” says Enix.
American AgCredit is also dedicated to educating the next generation of farmers and ranchers. Its AgYouth program provides training and education to 4-H and FFA participants (ages 9 to 18) in the financing aspects of agriculture by providing interest-free loans toward the purchase of a project animal.
What’s more, each region within American AgCredit’s territory offers a minimum of $10,000 in scholarships to students planning to study or work in agriculture, including high school seniors, junior college students transferring to four-year universities and college juniors and seniors. Most scholarships are allocated through a local Farm Bureau, trade organization or university agricultural department.

The future of American AgCredit

What’s ahead for American AgCredit?
“We keep an eye on the trends,” says Enix. “As agricultural companies grow, we have to grow as well. Estimated numbers tell us the story of the trends.” According to Enix, 85 percent of the nation’s food supply today comes from 15 percent of the producers.
That said, it appears that the latest business trend is either to be a small or larger farmer or rancher. “The middle segment is getting thinned out,” he says. “Middle-sized operations either get squeezed out or get larger or smaller. The smaller operations are often getting income from other sources. We want to be an effective lender for all these segments.”
In 2016, American AgCredit will celebrate 100 years in business. “We’re financially sound and will continue to grow through acquisitions and organic growth,” says Carli. “We’re in a stable position to grow the company.”
Currently, the company is building a 55,000-square-foot office on Airport Boulevard in Santa Rosa, which should be finished in the next few years. It’s also working with other leaders in the industry to create a possible agricultural center in Sonoma County to bring all agriculturally minded groups together under one roof.
“The growth of American AgCredit directly represents the growth of agriculture in Sonoma County and in our other territories,” says Lindley. “By working together with other ag-related organizations, we hope to build on the strength of this community’s agricultural base and encourage collaboration.”
As for the business of lending, American AgCredit plans to continue doing what it does best¾partnering with farmers and ranchers to support agriculture. “We have competitive rates, we have access to funding directly from Wall Street, where we sell bonds and then create customized products that fit our shareholders’ needs,” says Enix. “That’s why our customers stay with us for generations.”




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