January 22, 2004

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Finance for High-GrowthAg Producers

• January 22, 2004

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Diversity of US Farm Operators
Producer
Total Farms 2,149,684
Gross Farm Sales
Very Large
71,284 (3)
500,000
90,476 (4)
Large Farms
250,000- 500,000
Intermediate Farms
100,000- 250,000
664,619 (31)
1,323,305 (63) 1.14M 10,000- 100,000
Rural Residence Farms
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Market FactsU.S. Farm Production by Gross Farm
Income
9
16
25
14
63
13
17
50
57
30
4 3
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Factors Limiting Your Growth

• General Banking Guidelines
• Risk Bearing Capacity
• Building your Board of Directors
• Who is your Chief Information Officer CIO
• Selecting your strategic partners suppliers
  managers

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The Bankers Flinty Eye
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Risk Bearing Capacity
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Risk Bearing Capacity
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Risk Bearing Capacity
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Source to Fund Growth
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Growth Rate Analysis4M in assets, 60 equity to
assets
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US Bank Consolidation
11,852
7,897
3,953
2,644
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Agricultural Banks
Ag Bank Federal Reserve Definition - ratio of
farm loans to total loans exceeds the average of
the ratio for all banks 14.97 30 Jun 2002
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2,085
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Who provides you Counsel?Who Sits on Your Board
of Directors?
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Building your Board of Directors

• Banker Financial Services Cash Mgt
• 11.8 Financial Relationships

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Things your banker is going to be asking for . .
. .

• A five year business plan
• A funding plan for your growth objectives
• Quality financial reporting and management
  reports where are you making the
• 5 Million of Credit
• Audited Financial Statements
• Strategies to Mitigate Risk

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Building your Board of Directors

• Banker Financial Services Cash Mgt
• Accountant / Legal
• Equity Tax Strategies
• Business Plan 5 Yr
• Entity Structures FSA Limitations
• Marketing Plan / Strategy
• Risk Mgt Tools

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Revenue Assurance vsCrop Revenue Coverage
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Risk Mgt Advisors / Topics

• Revenue and Crop Insurance
• Property / Casualty
• Liability / Medical / Life Insurance
• Cost of Capital Interest Rates
• Leasing vs Asset Ownership (Scalability/Flexibilit
  y)

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Building your Board of Directors

• Banker Financial Services Cash Mgt
• Accountant / Legal
• Marketing Plan / Strategy
• Risk Mgt Tools
• Human Resources
• Chief Information Officer

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Human Resources

• Quality of Lifestyle Employee and Spouse
• Hire the Best People
• Job Descriptions / Performance Reviews
• Profit Sharing
• Competitive Benefit Programs Health / 401K /
  etc
• Business Succession Planning
• Full employment of the resources

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Technology CIOWhat is your Growth Strategy?

• Low Cost Commodity Producer
• Auto-Track Steering
• Lower input costs 10-15/acre (Central-IA)
• Higher Yields 15-22 higher Less Soil
  Compaction (Australia)
• Technology control of the machine substitute
  for labor?
• Sprayer will not apply RoundUp in a non-GMO bean
  field
• Use of seasonal labor supply
• Commodity Traceability
• Starlink
• Bio-Terrorism / Government Mandates
• High Value Attribute ContractorAttribute
  Validation / ISO-9000 Standards / Market Premiums

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Requirements for yourBoard of Directors

• Top Quartile in their respective field /
  expertise
• Hold them accountable and make changes as
  warranted
• Commitment to agriculture and to you Who will
  be there with you in 5-10-15 years
• What Tangible Value do they bring to your
  operation?
• Long Term Staying Power do they have scale?
• Ag Retailers Grain merchandisers Industry
  Innovators

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Input Mfg.
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Customer SatisfactionThe John Deere Experience
98
94
88
90
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James Eiler Vice PresidentAgricultural
Financial ServicesJohn Deere CreditEilerJames_at_J
ohnDeere.com515.267.4188