December 2013

A Lender’s Perspective on Managing Risk

Ryan D. Castle, Ag Industry SpecialistAdam G. Hartmann, Sr. Ag Industry SpecialistWells Fargo Bank, N.A.

Bank’s Role in Your Operation Part of Your ‘Team’

Banker Agronomist Farm Business Instructor Grain Merchandiser

Responsibilities Managing/Mitigating Risk vs. Avoiding Risk

Interest Rates Where are Rates Headed?

The Lender’s Perspective:Inputs & Outputs

Input Costs: Cost of Production Rent Increases Seed Cost Fertilizer/Chemical Costs What is your Cost Of Production?

Outputs: When to Sell Developing a Sound Marketing Plan Does your Lender Understand Your

Marketing Plan?

Mitigating Risk: Tools of the Trade

What Should Lenders Look For? Marketing Plan: Grain Contracts

Cash Contracts HTA’s Futures Options

Crop/Hail Insurance Determining the Appropriate Type/Coverage Level Example:

2013 Spring MPCI Corn Price: $5.65/bu Fall Harvest Price: $4.39/bu 185APH x 85% RP Coverage: $888.46/ac in coverage 175bu/ac harvest w/Harvest Price: $768.25/ac Indemnity Payment: $120.21/ac

Switching Gears: Something to Think About…

Shanghai1990

Shanghai 2010

Global Impact: Who’s in the Driver’s Seat?

China’s Impact on Net Trade

Billions of dollarsPartner 2007 2008 2009 2010 2011 2012

China and Hong Kong 2.6 6.5 9.1 13.8 16.1 22.1European Union-25 -5.9 -4.6 -5.2 -4.5 -5.3 -5.7Latin America -6.3 -1.0 -5.9 -6.6 -7.6 -7.3Middle East & North Africa 7.2 8.9 6.1 8.5 10.8 8.0North America -7.9 -3.4 -1.7 -3.2 -2.0 -2.6Other 6.7 10.4 10.7 11.1 11.2 7.9

World Total -3.5 16.8 13.0 19.1 23.2 22.5

Net Ag, Fish and Forest Trade

Where is the Money Going?

Product 2006 2007 2008 2009 2010 2011 2012Jan - Jul

2013Pct of 2013

Soybeans 2,533 4,119 7,261 9,195 10,866 10,539 14,879 3,913 32%Cotton 2,133 1,525 1,670 910 2,249 2,640 3,456 1,745 14%Tree Nuts 151 233 401 735 815 1,044 1,636 406 3%Hides & Skins 973 1,025 1,076 751 1,145 1,354 1,480 1,164 10%Corn 18 16 6 54 285 850 1,315 367 3%Pork & Pork Products 125 271 689 390 463 910 885 509 4%Poultry Meat & Prods. (ex. eggs) 399 662 864 857 816 953 771 394 3%Distillers Grains - - 2 101 504 337 617 565 5%Other Intermediate Products 233 280 249 302 447 402 463 280 2%Dairy Products 126 162 195 146 251 383 442 364 3%Fresh Fruit 217 173 218 257 338 411 408 227 2%Beef & Beef Products 15 36 43 85 160 238 341 369 3%Soybean Oil 59 160 160 46 420 133 265 116 1%All other 707 820 995 1,289 1,608 2,010 2,301 1,821 15%

Agricultural Products 7,689 9,482 13,829 15,118 20,367 22,204 29,259 12,240

China and Hong Kong Agricultural Exports in Millions of USD

Future Outlook

2007 2008 2009 2010 2011 2012 2013 fcst (5)

-

5

10

15

20

25

US Net Trade in Agriculture, Fish/Forestry

Total USChina/Hong Kong

In BillionsUSD

Questions? Ryan Castle

Regional Ag Industry Specialist Ryan.D.Castle@wellsfargo.com PH. (507) 316-8109 (Cell)

Adam Hartmann Regional Senior Ag Industry Specialist

Adam.G.Hartmann@wellsfargo.com PH. (507) 951-5417 (Cell)