by Jennny Rees, UNL Extension
As winter meeting season has begun, I've had conversations with famers having appointments with their bankers. The following is an article from Tina Barret, executive director of Nebraska Farm Business, Inc. and a program manager in the UNL Department of Agricultural Economics. She does a nice job of sharing what to consider during this time.
"Shortly before Christmas, I was watching a Christmas movie with my family about a farm family who was in jeopardy of losing the operation if they didn't come up with the required payments by Jan. 2. You can guess, as well as I did, that it was a Christmas miracle and the necessary funds were found on Christmas Eve. While the story was predictable, it made me wish the struggles of the real farm economy could be fixed in less than two hours, with no family arguments and the only unknown being how it would be solved, not if.
The reality is that some operations are going to be faced with the real issue of foreclosure this year. Others will need to look hard at restructuring debt, switching lenders, making major changes to their operation or living, and maybe even selling off excess assets. So how can you make your operation be the best it can be through a stressful renewal season? Here are a few things to consider before you go into your renewal appointment:
Be prepared. Come into your renewal appointment with a plan. Have detailed estimate of your costs for the coming year, a cash flow that makes sense and is grounded in reality (no $7 corn sales), and include reasonable spending for family living. If your cash flow shows significant changes from previous years, come with an explanation. For example: "My family living spending is down 20 percent from last year. We have a monthly budget and a commitment from our family to stick to it. We will send monthly accountability reports to show we are serious." If you just reduced family living to make the cash flow work without a plan on how to make that change actually work, it's not believable.
Be honest. Being honest with yourself is just as important as being honest with your lender. Take a hard look at your operation and figure out why your operation is having a tough time at renewal. It isn't just because commodity prices are down. If that were the case, every operation would be experiencing this stress and they are not. So what's different about your operation? What costs have changed in the past five to six years? Where can you make different choices about your costs?
Be accountable. This is your farm operation. You get to make the choices about how the money is spent. Many times I hear, "We just don't have a choice on how much we spend." The reality is you make choices every day. You can choose a different seed variety or a different seed vendor (or any other input). You can choose to operate older equipment instead of having the latest and greatest technology. You can choose between buying a $60,000 family vehicle or a $30,000 one. You may have to make unpleasant choices, but they are still your choices to make. The choice of whether or not a bank continues to finance you may not ultimately be yours, but the choices that led to that decision were yours. Being ready for your appointment may only be half the battle, but it will show you have a commitment to turning your operation around.
If your bank does deny continued funding, there are other options to consider. Your current bank is not the only one who can finance your operation. You can go back to the "drawing board," get even more organized and prepared, and try another bank or two. If you are unable to obtain credit elsewhere, you may qualify for a loan from the USDA Farm Service Agency (FSA). The funding for these loans can change from year to year and is set by the government so there may be first come-first served access to these loans. More information about these loans can be found at: htps://www.fsa.usda. gov/Internet/FSA_File/fsa_br_01_ web_booklet.pdf.
Consider liquidating some assets. It may seem like you can't operate without all of your equipment, but it may be a good time to rent some of those larger assets such as a combine or have your harvest done by a custom harvester. If you sell some equipment so you can retire debt, you may be able to put yourself into a position where you can service the remaining debt while continuing to farm. You also may need to liquidate some land to keep going. Don't forget to hold back some proceeds for income taxes.
Bankruptcy may be a word that comes back into normal conversation. Our office is preparing to dust off old books and take classes to prepare for potential questions from farmers hoping to avoid or best navigate through the potential reality of bankruptcy. While avoiding bankruptcy will be ideal, the laws exist for a reason and may be a good tool for you to use so your operation can continue. Unfortunately, bankruptcy is complicated and the services of a good attorney and accountant will be necessary to complete the process.
Regardless of the outcome, going through a stressful renewal is tough on everyone. I don't know a single lender who got into the business with the goal of putting farmers out of business and I don't know a single farmer who wanted their business to end with a liquidation. Using your management team is going to be important. It may seem silly to be paying professional fees when you are trying to cut costs, but many of these issues are very complex and require detailed expertise. It is also stressful for your family. Consider professional counseling to protect those relationships, your marriage, and your mental health. Talking about financial struggles is never fun, but keeping it to yourself could cause even bigger consequences."
Nebraska Extension has developed a team of educators trained to help producers improve their financial literacy. For more information, contact your local extension educator. A financial literacy workshop is being held in Clay Center today (Thursday) or check out: http://extension.unl.edu/statewide/fillmore/Programs/FinHealthWorkshopFlyerCC17.pdf for more information. The State of Nebraska also has the Farm and Ranch Hotline ready to provide immediate help. Call 1-800-464-0258 to find financial, legal and counseling services and referrals. For more information on farm financial management, see farm management information in http://cropwatch.unl.edu, published by Nebraska Extension, and on the Department of Agricultural Economics website. You can find sample budgets to help with figuring out your current cost of production at: http://cropwatch.unl.edu/budgets.
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the Horse's Mouth, by Duane Lienemann,
If you look out in the stalk fields where cows are now grazing, not only do you see electric fences, water tanks and cattle, you will also see lick tanks or tubs.
Many people have no idea what is in those tubs, including some people who actually use them. Actually many producers utilize these tubs and tanks as a tool to increase productivity within their herd. Some of those tanks contain natural protein sources, but many contain something call NPN (Non-protein Nitrogen).
I might ask, if you could get the same productivity out of your cattle for less cost, wouldn't you consider it? Use of protein supplements containing NPN can be an economically smart alternative for healthy, mature ruminants. Use of NPN-containing supplements is a long established, successful practice. But many misconceptions exist.
I think it would be beneficial to explore how this tool works and give an explanation on what makes it a viable and relative cheap source of nutrition.
First we need to realize that NPN or non-protein nitrogen refers to a source of nitrogen that is not derived from protein as we normally think of it. Urea is the most common source of NPN in livestock feeds. Urea utilized in livestock feeds is a synthetic compound manufactured specifically for feed and fertilizer use. I have had people tell me that they understood it is harvested from urine of slaughtered animals.
It is not!
Some believe it does not work the same way as natural urea works in the rumen. Actually synthetically manufactured urea functions in the same way within the rumen as naturally occurring urea.
We need to realize the rumen microbes break down most protein consumed and ammonia is produced as a by-product. Ammonia can be utilized in one of two ways. Microbes can use it to form microbial protein or, if ammonia levels exceed the microbes ability to utilize it, ammonia is absorbed into the blood stream where it is carried to the liver. The liver detoxifies ammonia and converts it into urea to be excreted into urine. A portion of urea is recycled back to the rumen through saliva. Enzymes in the rumen rapidly break down urea back into ammonia which can then be used by microbes or absorbed. Rumen microbes use ammonia as a part of their diet. It doesn't matter if it originates from true protein or NPN.
Other necessary nutrients for microbial growth are carbohydrates and minerals. It is essential that ammo nia be released simultaneously with available energy for ammonia to be converted into microbial protein. Also, phosphorus, sulfur and trace minerals must be present within the rumen environment in order for microbes to manufacture essential amino acids. The cow receives beneficial protein for its own needs when the bacteria and protozoa pass from the rumen to the abomasum and intestines where the microbes themselves are digested.
Let us now look at some advantages of non-protein nitrogen.
The primary advantage for use of NPN is cost savings. Use of supplements containing NPN can help you stretch your feed supply. Addition of urea or other NPN sources to a feed supplement allows the effective crude protein level to increase for relatively low cost. Because microbial protein actually utilized by the ruminant animal is the same whether NPN or true protein is utilized, animal performance is maintained. Research has documented that proper use of urea or other NPN sources in healthy, mature ruminants does not result in a decrease in production and in cases of protein deficiency, production is actually increased.
However; while NPN can be a great tool for cost savings there are some disadvantages to consider.
If fed incorrectly, NPN can be toxic. Toxicity results when ammonia released from NPN exceeds microbes' ability to convert it into protein. Excessive amounts of ammonia enter the blood stream, overloading the liver's ability to detoxify. Rumen pH rises and normal rumen function eventually ceases altogether and death can follow.
NPN should not be utilized with lightweight calves, as their rumen microbe populations may not be adequate to properly utilize NPN. Also, calves less than a year old shouldn't receive NPN as a major portion of their diet because the quality of microbial protein formed may be inadequate for their requirements.
It also goes without saying that non-ruminants such as horses, pigs, etc. should not receive NPN.
The key thing here is that you just need to use NPN properly.
Supplements containing NPN offer an economical solution to increase effective protein in poor quality forages for less cost than all natural protein supplements. But there are some precautions.
I suggest only using one type of protein supplement containing NPN at a time. If you must use more than one type, be sure to balance the ration so that no more than 25 to 30 percent of the total crude protein in the entire diet comes from NPN sources to avoid possible toxicity problems.
When utilizing free-choice protein supplements containing NPN make sure that consumption is regular and controlled so that cattle don't over consume. Urea or other NPN sources are best consumed in small amounts over a constant period. Slow release of ammonia is preferred.
Refrain from feeding NPN to sick cattle that have impaired rumen function (recovering from acidosis or bloat). Also, avoid feeding NPN to weaned calves less than one year old. Do not feed supplements containing NPN to starved cattle, especially starved cows with calves at their side. Starved cows may try to consume greater than recommended levels, plus since milk production will be poor, calves may be forced to consume supplement as a substitute and receive too much NPN.
Mature cows in good flesh receiving adequate forages can safely and effectively utilize NPN-containing supplements, even with calves at their side and good milking cows keep calves from ingesting NPN.
Do not feed urea-containing supplements to shipped in cattle that have been starved for several days. Give them a chance to overcome the stress of shipping and fill up on all natural protein supplements before introducing NPN-containing supplements.