Horizon Farm Credit recently announced the promotion of Darin Miller to regional lending manager. He is based in the association’s Lancaster, Pennsylvania office.

“I’m looking forward to continuing my career with Farm Credit as our regional lending manager,” says Miller. “Our customers are our top priority, and I am excited about further developing our relationships with them in this new role.”

Prior to becoming the regional lending manager, Miller was a loan officer with Farm Credit for four years. In his new role, he will be overseeing the loan staff in Pennsylvania by helping them meet their sales and training goals, and ensuring each customer’s needs are met.

“We’re excited to have Darin transition into this role,” says Jim Aird, Horizon Farm Credit’s PennMarVa Division Vice President. “He is very familiar with all facets of Pennsylvania agriculture, our customer base, and Farm Credit’s services. We look forward to him continuing to serve our customers as regional lending manager.”

Miller, who grew up on a dairy and poultry farm in Elizabethtown, Pennsylvania, graduated from Millersville University in 2010 with a degree in business administration. He joined Farm Credit as a loan officer in July 2012.

We recently interviewed Phil Taylor. As an ag business consultant, Phil works with farm families to develop contingency plans for their operations. He discusses farm contingency plans including why they are important and what aspects are included in a plan.

There's no doubt that the COVID-19 crisis is impacting agriculture. From your perspective, why is contingency planning important? 

Contingency planning provides a plan of implementation for what we’re going to do in a specific situation. It is a road map for business operators to follow, providing the opportunity to think through the reaction to a future crisis or problem.

A contingency plan allows for a clear communication with employees and family members about what will happen should there be a crisis and which aspects of the plan they are responsible for carrying out. It’s all about being prepared. 

What are the key aspects of a written contingency plan? 

The first part of the contingency plan is identifying the situation. What situation are you in? What specific situations require implementation of a contingency plan?

For example, if you get a phone call from an employee who says they can’t come to work because they are sick, you will need to consider what type of sickness that employee might have. Is it potentially COVID-19 or some other illness? The answer will determine the situation.

Or what if you find out that a delivery driver for a supplier tested positive? You find out that the delivery driver interacted with two or three employees on your farm while making a delivery earlier in the week. That situation would cause a different set of plans.

The second part of a plan is to identify the contacts that you need to alert should a situation arise. Who needs to do something in a certain situation? This could include family members, employees, customers and vendors.

The third critical aspect of contingency plans is identifying the actions. What are you going to do about the situation? What specific actions need to be taken?

From your discussions with farm families in putting together contingency plans, what have been key takeaways for the farm businesses?

This process helps farm families understand the potential harm that could come to people or the business, particularly families with older family members or those who are most susceptible. It encourages thinking through the specific measures that can be taken to reduce the potential for people to become infected such as implementing protocols for cleaning, social distancing and visitor or customer access.

Many farms are frustrated with aspects of the situation that they can’t control and therefore can’t easily plan for. Examples of this include orders to reduce milk shipments and disruptions in the supply chain. Contingency planning helps to minimize the impact of things farms can’t control.

Are there any other final insights you'd like to share? 

By creating a contingency plan and informing your family, your employees and their families, your vendors and customers, it shows that you’ve done some preplanning and it helps instill trust in those people and that you care for their well-being.

We recently interviewed Darrin Youker with PA Farm Bureau on Pennsylvania’s Beginning Farmer Tax Credit, which provides an incentive to lease or sell land, buildings and/or equipment to beginning farmers. The application window for the Beginning Farmer Tax Credit recently opened and is available on a first-come, first-serve basis until funds are expended for the 2020 tax year.

Could you first explain to our listeners some of the key details about the Beginning Farmer Tax Credit including who qualifies and how the tax credits work? 
In terms of who qualifies, it actually is somebody who is defined as a beginning farmer. What is nice is there is no age defined for who is a beginning farmer. Instead, the legislation, or I should say the law, looks at somebody who has been in the business of farming for 10 years or less. That is ascertained by somebody who has not filed a Schedule F for more than 10 years. 

In order to be a qualified beginning farmer, you need to have an application that is filled out and reviewed by the Department of Agriculture and the Department of Community and Economic Development. Once that is finished, you can then start working with a landowner on either selling or leasing. Landowners are the ones who get the tax credit for working with the beginning farmer.

From the landowner side of things, if you lease or sell your land to a certified beginning farmer, you can get an income tax break, again, depending on the terms of those transactions that you can then apply to your state income taxes. This is a way to help incentivize landowners to work with beginning farmers - the thought being that a beginning farmer might not have the ability to outbid somebody for a piece of ground, either on a lease or a sale, but the benefit is by working with that certified beginning farmer, the landowner is going to get a tax credit on their income, so that's part of the incentivization. 

Again, the nice thing is there's no age attached to it, so if somebody is thinking of a mid-career change or has always wanted to work on a farm and is finally developed some of the capital to make that investment, even if they're 40 or 50 years old, they can take advantage of the Beginning Farmer Tax Credit.

How did the idea for the tax credit program come about, and what has been the response from the farm community and others about the program?
How it started was actually a challenge that was issued to Farm Bureau when we were discussing the state budget back in 2018. We have a deep concern for the preservation of farmland and always will advocate to make sure that farmland preservation is being done because it's the future of Pennsylvania agriculture. In that conversation that we had with a senior lawmaker in Harrisburg, he asked the question to our organization: "Well, preserving farmland is great, but what are you guys doing to preserve the next generation of farmers?" 

I have to admit, I kind of stumbled with an answer and didn't quite know how to respond, but we took that as a challenge: Okay, what can we do to help that next generation of farmers? Preserving farmland is one thing, but if there's not the next generation to come and farm that ground, it's a whole other story.

We started doing some research during the summer of 2018 and found that states like Minnesota, Iowa and Nebraska had a Beginning Farmer Tax Credit. We took what was Minnesota's legislation, made it applicable for Pennsylvania, and in 2019, started working with Senator Elder Vogel on introducing it as a piece of legislation. 

As in a lot of things in life, there’s happenstance and chance, and sometimes the stars align. As we were debuting our Beginning Farmer Tax Credit, the Department of Agriculture and the Wolf Administration was debuting its PA Farm Bill initiative. While they were two separate pieces of legislation, lawmakers saw both of those initiatives as a way to advance some good agriculture policy in the state. 

We're very proud of the fact that working with the Department and Senator Vogel and the leaders in the legislature, we were able to pass a tax credit bill unanimously through the House and Senate, and it is now law.

The response from the agriculture community has been great, a lot of folks asking questions about how to qualify, wanting to know how they can take advantage, either as a beginning farmer or as a landowner to work with this program and take advantage of the tax credit. 

We will know its impact later this year because DCED and the Department of Revenue will be starting to give the tax credits for folks that filed in 2020. Now is when we're going to start seeing the fruits of our labor and the labor of others within the General Assembly. This is a 10-year program that can sunset at the end of 10 years, if, let's say for sake of argument, that the program hasn't been widely utilized.

But it's our hope that as this program becomes widely known and widely used.

As we wrap up today’s podcast, could you tell us what makes you excited about the future of Pennsylvania agriculture, along with any other thoughts you would like to share with our listeners today?
This pandemic has been devastating, but one of the good things that we have seen come out of this time is folks having a deeper appreciation for the work that farmers do and a better understanding of how our supply chain operates. I think when folks started to see scarcity in the grocery store shelves, they started to see the complexity of what happens just trying to get food from farm to the table.

What we heard from our members was that those that had already an existing public-facing interaction, whether they sold bottled milk, had a CSA, had a small retail farm market or were processing their own meat, they started seeing a tremendous jump in consumer interest in their products and that's something that has been sustaining throughout this entire pandemic. 

Local foods were already popular in Pennsylvania, but we think one of the benefits of coming out of this pandemic is it's become more popular because people are looking for alternatives and ways to better secure their food supply, which is a great thing. It's a great thing for consumer education.

What makes us excited about the future of agriculture in Pennsylvania is when you look at our state and the diversity of the agriculture products that can grow here, as well as our proximity to so many major markets, and even small towns and small cities throughout Pennsylvania. Going forward, we can expect to see tremendous growth in farmers selling directly to the public, and I think that's just great for the overall strength of the agriculture economy within Pennsylvania.

We recently interviewed a real estate agent from southern Pennsylvania, Martin Heaps with Howard Hanna. During the interview, Martin shared his perspectives on the pandemic’s impact on farm and land real estate. 

Let’s get started by having you tell us a little about your business. How did you end up in real estate?
Well, it was somewhat by accident. I was in the dairy business. I had a dairy farm. We had cattle and I was into purebreds. I thought it would be a good idea to go to auctioneering school to sell purebred cattle. So I jumped on a plane and I went to Reppert School of Auctioneering in Decatur, Indiana. When I was there in class, they suggested that we go back to our home states and get a real estate license to complement the auctioneering business. 

It was sort of coincidence, and after I got home, a broker approached me. I guess he saw something in me. He suggested that I get a real estate license and go to work for his company and specialize in farm and land sales, because a lot of real estate agents don't specialize in that. They're afraid of it. That was 35 years ago.

I took his advice and I went to class and then went to work with him part-time, because I was still milking a herd of cows. After a brief period of time, I thought, "Well, you know what? This is working out pretty good," so we dispersed the herd and I went full-time real estate with him, specializing in farm sales. 

My very first sale, back 35 years ago, was a 104-acre farm with a stone house on it. I got a taste of farm sales quickly. Then I continued on, and I obtained my broker’s license throughout the years. I was doing auctions, too. I've sold real estate at auction, although not so much now. 

Then I worked as an appraiser for Absolute Real Estate Appraisers in York, PA for a couple of years. I did farm and land appraisals and residential, of course.

Now I manage the office in Shrewsbury, Pennsylvania for Howard Hanna Real Estate Services. We have 19 full-time agents here. We're going to open an office in Maryland, which will give us state number 13. We have over 400 offices in soon-to-be 13 states. 

I sort of got into it by accident, but it's been a 35-year ride so far.

All of us have certainly been through a lot in the last year. During the height of the pandemic, what were the biggest challenges for your team in connecting customers with properties? What technology solutions did your real estate team find that you think will remain past the pandemic?
To say it was awful in the beginning, would be an understatement. Of course, we had representatives, attorneys from Howard Hanna and our York County Board of REALTORS® attorney providing input. 

When we were shut down, we were not allowed to leave our house of shelter, as they called it. So if a sign blew over, we were not allowed to leave our house of shelter and go put the sign up. We certainly weren't allowed to show houses. We could not go into someone's house. We couldn't walk onto the yard. We were absolutely shut down. 

So we were introduced to Zoom. I didn't know what Zoom was a year ago. Now we have Zoom calls every week, it seems like.

We had to come up with a way to sell homes. Interest rates were coming down. People were looking to sell. People were looking to buy. 

Not everybody, but most people, know how to use their cell phones. So we would get people to show us their home via video. We would do the market analysis from our home offices. We would list the home via electronic signatures. We would get the folks to go and take pictures of the inside of their homes themselves. Most people were more savvy than we thought they would be. It worked out very well. 

We sold houses that way. In the month of April last year, we sold 12 homes, sight unseen. People put contracts on them and said, "Well, we'll view it when we can." And, of course, we gave them the right, if they didn't like what they saw inside, to not follow through with it if they didn’t want to. There was only a couple of people who didn't follow through.

We held virtual open houses. We had social media and all the technology tools. I'm one of the older gang here, so this technology was a little bit new to me. The young folks were helping me. We sold a lot of houses through it. 

I think we're going to continue to use a lot of the Zoom. You can talk to your children on the other side of the world via Zoom! It’s unbelievable. We all heard things about going paperless 25 years ago too, but I haven't seen that yet. 

I think real estate is a lot different than some industries. Real estate is still a people business. They like to have the personality of the real estate agent help them and coach them and comfort them and give them confidence that their purchase is a good one.

We'll continue use some of the newer tools, but I want to get back to what we think is normal, and we’re almost there. We still have protocols. We wear the masks. We wipe things down. We're very careful with other people's feelings. Some people are still concerned about coronavirus, and they should be. It is something to be concerned about. 

At the beginning of the pandemic, we didn’t know what was going to happen and were afraid that we might go bankrupt. We didn't know. We'd never been through this before. 

But all in all, we ended December 2020 up 47% in sales over 2019. It's hard to believe. That'll bring the next question up as to why, and we'll get into that later. 

We’ve seen a tremendous surge in land and country properties fueled by a pandemic push to leave cities and move to the country along with a low interest rate environment. Do you see this trend continuing in the future? 
Absolutely, for a while. There are a lot of reasons. 

I had a lady who just came in the office this morning inquiring about a property up the street. Her question to me was, "Why such the surge?" I get that quite a bit, but there are a lot of different things. 

Number one is interest rates. Nobody has ever seen interest rates this low. It's just unbelievable. 

We're seeing a lot of people want to be out in the country, and they're gardening. If you remember last fall, you couldn't even buy canning jars in the store. There was a shortage of canning jars. I think people are going to want to grow their own food.

We have offices in upstate New York, and there are a ton of people coming out of New York City. They're getting bombarded to move to the suburbs. We've even had people call us from New York City here in my Shrewsbury, Pennsylvania office. They just want to get out of the city. 

There's folks that have been boarding their horses, and now, we have people coming in and they want to buy a small horse farm so their daughter or son can ride horses without being around other people. 

We're seeing an uptick in folks wanting swimming pools, because they're going to stay home and vacation in the backyard. I've never seen so many people looking for pools. 

It's going to take people a while to forget the desire to live city life. I would say, the next five years. Eventually, they'll forget about it. The next generation will come on, but I think it's going to take a while.

We have a lot of folks working from home. We're seeing in the commercial business, there's going to be a lot of office space for rent, because more people are working from home.

And one more sector of it, is we have many people are moving back from Florida to be near their grandchildren. 

There’s a pile of reasons for this trend, and I do think it's going to continue for a while.

In your market in southern Pennsylvania, what is the “hottest” property type to sell in 2021?
Well, that's a tough one, because they're all hot. It seems to be that every price range is hot. We've never seen so many houses sell for over $500,000 on a quarter-acre lot. 

One that sticks out to me is the big demand is the one-story living. There are lots folks my age, in their 60s, and they want to get out of that two-story and get away from the steps. They want to get a rancher, especially if it's under $300,000 and downsize. 

The next hottest would be the 10 to 15-acre farmette. People want to get in and over 10 acres to save on taxes with the Clean and Green. 

I deal with a lot of Amish families, also. English folks want to have the small farm, but the Amish as well. I dealt with some of those families 25-30 years ago. They all had 10 children. Now, there are 10 children are looking for farms. I have actually sold the children of previous Amish farm customers.

There seems to be an uptick of police officers wanting to get out into the country. I guess, what they see every day in the city, I'd want to get out of there, too. 

I don't think there's anything that's not hot right now. I had a car dealer friend of mine. I sold him a farm years ago. He sold his car dealerships in Baltimore and he had a funny saying. He said, “There's a behind for every seat.” It kind of goes the same way in real estate. There's somebody who will buy the fixer upper. Somebody will buy the $900,000 home. Somebody will buy the 200-acre farm. There's people out there for everything in between.

What tips can you share with our listeners if they are in the market for land and country properties this year?
I think it goes without saying you have to buy it when you can find it. If you find it, buy it. Take advantage of these interest rates. These interest rates can't possibly stay where they are. 

The other thing is, there's probably never going to be the perfect house or the perfect property. But you can make an almost perfect property into a perfect home with a little bit of foresight and work. So don't be too picky. Take advantage of the interest rates. If you're young and healthy, go ahead and buy. 

We're seeing multiple offers on most all of these properties. Just the other day we had a property with 12 offers, and we had to sit down and go through them. So there were 11 people there that did not get a home bought.

Again, buy it when you find it. Don't be afraid to take the chance and take advantage of these interest rates. 

Two years ago it was normal that a home would sell for about 94% of the asking price. Today, it's 99%. And some of them are going above asking. People are agreeing that if they go $10,000 above asking price and it only appraises for asking price, they will come up with the difference in cash. I've never seen that before. But we are seeing it. It's a frenzy right now.

Get with your real estate agent. Have your real estate agent put you on a drip campaign, where you can see the properties as soon as they hit the market. Don't wait around, because if you don't buy it, somebody else will.

Is there anything else you would like to share with our listeners today?
Again, I'm going to go back to interest rates. I would say probably a lot of these young listeners today have never seen interest rates in the 8, 10, 15% range for home ownership. When I bought my first herd cows, the interest rate was, believe it or not, 18%. I didn't know any different. I just thought, "Well, that's cost of doing business." 

We probably won't see interest rates at 3% or below. In the younger generation of buyers, they often think, "If interest rates went to 5%, I'd be afraid to buy." You know, 5% is still a good interest rate. It's just the times we live in.

I have a funny story for you before we get off the air. There was a guy named Jack. Jack was relatively new to the real estate business, this is back in the '80s. Jack listed a nice brick Cape Cod home outside of Glen Rock, Pennsylvania. I happened to have a buyer who was looking for just that location and that style house, but he couldn't get qualified for a loan because interest rates were at 11% and it came down to 10.5%. Then Jack listed that house. 

I went to work one day and, of course, we didn't have computers back then, nor cell phones. We got a call from our lender and the interest rate dropped to 9.75%. I got on the phone, and I said to this guy, "Get up here and bring your checkbook. You've got to get a contract written and you have to get it locked in tonight."

"Tonight?" he asked. "Can't we wait until tomorrow?" 

I said, "No, you've got to get up here tonight." We locked him at 9.75%. He was ecstatic. 

If you're thinking about buying and interest rates do go back to 4.5% or 5.5%, it's not the end of the world, that's for sure.

Dan Brogdon, a former Horizon loan officer who now serves as a lender development coach, addresses many common questions we’ve received about the Small Business Administration’s Paycheck Protection Program (PPP) and the loan forgiveness process.

The PPP Flexibility Act was signed into law on June 5, 2020 and offered a number of changes to the SBA PPP program. One key change was expanding the covered period from eight weeks to 24 weeks. Could you help our listeners understand the advantage of the 24-week covered period, and if there are instances when borrowers could still use the eight-week covered period. 
If the borrower had their PPP loan in place prior to June 5, choosing between an eight-week covered period or a 24-week covered period is the borrower’s choice, and they should select the one that best fits their individual situation.

Some of the advantages to choosing the 24-week options include:

• It allows more time to use the funds towards eligible payroll and non-payroll expense. This is especially helpful for restaurants or businesses that we shut down for an extended period of time by government order.
• The documentation is simplified. Most borrowers can use payroll to achieve 100% loan forgiveness. This eliminates the need to submit documentation for non-payroll expenses.   
• The first payment will not be due until 16 months from loan origination. There's plenty of time to apply and if you receive 100% forgiveness, you will owe no interest. With the new program terms, Horizon will extend deferred payment for loans originated prior to June 5.     

The PPP loan was based on 10 weeks of the borrower’s payroll. Borrowers now have 24 weeks to use up 10 weeks of payroll, which should be easy to do. Using payroll for all of the forgiveness avoids using eligible, yet somewhat gray area, non-payroll items such as: inter-company rent or loan/utility/lease agreements that are in the owners (not the business) name, to name a few.     

There are instances where the borrower may prefer the eight-week covered period. They may choose this if they don’t want the loan on their books and want to get it forgiven as soon as possible. Many borrowers had prepared for an eight-week period so they might not want to wait. Rest assured that how fast you apply has no impact on the amount that will be forgiven. The funding is already in place for PPP loan forgiveness, so there’s not a rush.

One thing that’s important to remember is that any PPP loans originated after June 5 automatically have a covered period of 24 weeks.

Another change introduced in the PPP Flexibility Act was the option for the EZ PPP Loan Forgiveness Application. Could you share about the EZ application and what borrowers may be eligible to use this form?
The EZ Loan Forgiveness is a shortened application where the borrower can do fewer calculations and provide less documentation. It still gives the option for an eight-week or 24-week covered period, so it doesn’t matter for the length of your covered period.

There are three different situations where borrowers may use the EZ application: 

• Sole proprietors or partnerships with no employees
• Businesses who did not reduce FTEs (Full Time Equivalents) or pay rates 
• Businesses who were shut down due to government order

If you fit that criteria, we’re encouraging borrowers to use the EZ application because it a simpler process.

Another common question we get from borrowers is when they should apply for loan forgiveness. What’s your recommendation? 
In general, we recommend waiting about one month after the borrower’s covered period ends to apply for loan forgiveness. Under PPPFA, the borrower actually has up to 10 months after the covered period to apply, so there’s plenty of time. As I mentioned before, you will get the same amount of forgiveness whether you apply one month after your covered period or 10 months after. Of course we encourage you not to wait until the very end.

You might be asking if you can apply before the covered period ends. Yes, there are instances when you could apply before the end of the covered period, but you should fit one of these two categories:

• Sole proprietors and partnerships with no employees who choose the 24-week covered period. Their forgiveness has been pre-determined based on 2019’s net self-employment income.   
• The borrower used up the PPP funds and is satisfied they have achieved maximum loan forgiveness and are certain that they have not/will not reduce FTE’s or any individual employees pay rate.

Are there any other thoughts you'd like to share with our listeners today?
The PPP program has helped many businesses during this time, but it has been a challenge for all of us to keep up with all of the program changes. Forbes magazine compared it to a roller coaster ride at Disney World. As new information is released, we’re doing our best to review the details and share that information with you.

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.