Thomas H. Truitt, Jr., President/CEO, MidAtlantic Farm Credit
On July 17, 1916, President Woodrow Wilson signed the Federal Farm Loan Act to increase the availability of credit to farming families by establishing 12 Federal Land Banks and the Farm Credit System. And as Farm Credit co-operatives celebrate the 100th anniversary of this historical moment, MidAtlantic Farm Credit is looking forward to a new generation of farmers who are making a significant impact on the agricultural industry.
As one of the largest agricultural lenders on the East Coast – with 17 branches in Maryland, Delaware, Virginia, Pennsylvania and West Virginia – MidAtlantic Farm Credit’s President and Chief Executive Officer Thomas H. Truitt recalls why Farm Credit was initially established and says that the reason still resonates today. “With the United State’s involvement in World War I looming, the country saw a need to be food independent for national defense reasons. For farmers, the obstacle had always been that capital flow was unreliable, and there needed to be a system in place to ensure consistent access to capital and credit,” Truitt says. “The cyclical nature of farming still exists today, and Farm Credit still plays a pivotal role.”
One of the most significant changes Truitt sees in the marketplace is the different approach farmers are taking to their industry. “One of the challenges in agriculture is the changing face of today’s farmer – it’s no longer ‘The Waltons’ or the couple from ‘American Gothic.’ There has been a shift from primarily small family farms to small businesses that farm. Many farmers today see themselves as business people, who need strong management and financial skills, and who just happen to farm,” Truitt says. “In Maryland, there are fewer farms today, but we see the same amount of output because there are now larger, more sophisticated farm operations. That affects our business model as well, as they are looking for more sophisticated services from their Farm Credit cooperative.”
Truitt says this shift is also reflected in the employees MidAtlantic Farm Credit is hiring. As many baby boomers eye retirement, MidAtlantic Farm Credit’s newest hires are younger, and many – unlike their more seasoned colleagues – do not have a direct agriculture background.
“Historically, we hired people with an agriculture background – they had a dairy science degree, for example – and then we taught them business, finance, credit and sales skills to be a loan officer. One of the biggest challenges, though, is that there are more job openings in agriculture than applicants and tens of thousands of jobs go unfilled each year. We are now hiring the best people with great customer service skills, empathy and passion, and we can teach them the business and the agriculture industry,” Truitt says. To illustrate this point, Truitt says that he has one employee who grew up in Anne Arundel County, played lacrosse at Salisbury University and had no farming experience whatsoever, and yet he is now one of MidAtlantic Farm Credit’s best poultry loan officers.
Changing Times, Changing Needs
With the changing demographics in agriculture, MidAtlantic Farm Credit has witnessed a change in what its members want from Farm Credit. “Convenience has become increasingly important … ‘ease of effort’ is a phrase we use a lot here. Everyone wants services to be faster and easier, whether it’s a large poultry farm, a large apple orchard or a part-time farmer who has a W-2 type of job and two acres for his horses or so that his daughter can show at the local 4-H farm festival,” says Truitt.
Truitt, who has been with the Farm Credit System since 1993 and became CEO in 2016, says that one of the key initiatives for MidAtlantic Farm Credit is its outreach to young, small and minority farmers. “Unlike our members who have been farming for generations, a lot of young, small, urban and minority farmers did not grow up on a farm so they are unaware of the Farm Credit System. We have to introduce ourselves to this new market, as they are our next customer base. When we get involved with a new member, we look at it as a long-term business partnership – we want to be doing business with them for generations. For urban farmers, one of the challenges for us is exposure – we are one of the best-kept secrets out there, and those in Baltimore City may not be aware of our services. Every jurisdiction has its own rules and regulations, and we can help with navigating the permitting process.”
As Farm Credit introduces itself to this new crop of farmers, Truitt acknowledges that there is a learning curve involved. “Most of their financial experiences have been more transactional – credit cards, car loans, etc. – however, we provide more than just loans. We can help them develop a business plan, put them in touch with government agencies that can provide services and really help them succeed,” he says. To foster success, MidAtlantic Farm Credit taps into one of the principles of the cooperative model – educating its members.
“We have a program called AgBiz Masters where we partner with academia from mostly land grant universities – Virginia Tech, University of Maryland and Penn State – to provide distance learning through video conferencing. It’s a two-year program to learn how to write a business plan, marketing, sales and other business skills,” Truitt says. “As prospective farmers become more educated, it makes our job easier, too, as they make better credit decisions and provide us with better financial documents when applying for a loan.”
This unique partnership for success is also critical when dealing with second-career farmers – those interested in growing hops to sell to breweries, for example. “This is seen as a great entry into agriculture as there is relatively low capital needed in the beginning. However, once they become successful, their costs increase and some will automatically turn to credit cards. We can help them take what was once a hobby and make it a true business,” Truitt says.
MidAtlantic Farm Credit also works closely with farmers who have been in business for generations but are looking to diversify their business. “Take a dairy farm that decides to open up a creamery to sell ice cream to the public. That’s successful, so then they decide to add a corn maze, and then they open up a couple of rooms in the farmhouse to run as a B&B or make the farm available as a site for weddings or concerts. Are they still in farming or have they transitioned to hospitality? We can help them navigate this process to maximize their success,” says Truitt, who also points to MidAtlantic Farm Credit’s staff’s expertise as a key. “If they are considering a significant change to their business plan, we will challenge them by making sure their projections are reasonable. One of the benefits we have is our in-depth knowledge of the financial world for farming. We know what the typical production is for a soybean farm, for example, and we can share this business knowledge with them.” MidAtlantic Farm Credit also utilizes its membership to connect farmers to each other who may be experiencing the same challenges.
Many traditional farmers are also diversifying to sell products directly to the consumer and restaurants, a more profitable model than going through a processor. “One of our members, Woodbine Farm Market in Virginia, is a sixth-generation farm, and through the urging of the grandchildren, they created a website and have now diversified their operations with new revenue streams to sell their products directly to the consumer beyond a farmers market. It’s been very successful for them,” he says.
MidAtlantic Farm Credit also assists with succession planning for its multi-generational farming members. “Those can be tough conversations to have in families where you may have three generations working on the same farm, but it has to be addressed. It’s a critical service we can provide,” says Truitt. “We will ask, ‘Do you want to slowly transition to another family member? Do you need to keep an income stream? Do you want to gift the farm to a relative or do you want to get out of the business all together, sell the farm and retire?’ We can put them in touch with an attorney and accountant who specialize in farm succession and bring in a family attorney so that there are no surprises.”
Knowing Your Customer
While it may be a sometimes-overused adage in the business world – “We know our customers’ needs” – at MidAtlantic Farm Credit, it rings true. “Farming is a small community, and we deal only with farmers,” Truitt says. “A lot of times in banking – say, when you are getting a car loan – there is not a real need to know your banker intimately. However with our customers, it’s different – it’s not transactional … it’s their livelihood. Our core belief is that in good times and bad, we are here and we are not going anywhere. Agriculture has been thriving for the last seven years, but it’s not always going to be great and the industry is cyclical in nature. In tough times, we are not going to drop agriculture and suddenly switch to commercial real estate.”
Plus, Truitt brings an extensive agriculture background to his job every day. In addition to being with Farm Credit for over 20 years, he grew up on the Eastern Shore, just south of Berlin, Md., on a farm. “It was about as stereotypical farm experience as you can get – grew up in the middle of a cornfield with a two-story white farmhouse and two chicken houses out back.” Truitt is not alone in this experience. “Most of our loan officers grew up with our members in the communities we serve,” he notes.
By design, agriculture is a specialized business, and traditional lenders can get into trouble with agriculture if they don’t understand the nuances of the industry. “Cash flows fluctuate, for example, and we know the right questions to ask our members when dealing with an expansion effort or an equipment loan,” Truitt says. “Plus, with the co-op model, our board of directors are our customers, so they have skin in the game and want to see Farm Credit succeed as it has a direct effect on our members,” he says.
MidAtlantic Farm Credit’s patronage program is an example of this “skin in the game.” Similar to a dividend program for a company, members receive patronage distributions based on the amount of interest earned on each member’s loan … the more business a member does with MidAtlantic Farm Credit, the larger the potential patronage return. As an owner, members share in the profits of the cooperative, which can significantly reduce interest rates on loans. As an example, if a member paid $10,000 in interest and MidAtlantic Farm Credit declares a 20 percent patronage distribution, $2,000 will be distributed to the member, which lowers the effective interest rate and gives the member cash back. “This creates buy-in, and members have a rooting interest in the success of the organization,” Truitt says.
Another service Farm Credit offers is its Farm Credit EXPRESS program, which provides point of sale financing for farming equipment. “It’s all about convenience, and farmers are no different than anyone else – they want it to be easy. For example, we have a John Deere dealership near our Westminster headquarters. At the dealership, a member can be approved for financing on a $50,000 tractor in about 15 minutes,” Truitt says.
As a way to give back to the agriculture community, MidAtlantic Farm Credit launched The Farm Credit Foundation for Agricultural Advancement earlier this year, which will award a total of $100,000 in scholarships to students who are planning to attend or are currently enrolled as full-time students and planning to pursue a career in agriculture in any capacity, whether it’s as an accountant for a farm business, production engineer or to start their own farm. For more information, visit www.FCFoundationforAg.org. I95