Tips for Speaking with Your Lender

by: Chris Zoller, Extension Educator, ANR

2019 is upon us and you may be meeting soon with your lender to discuss financial needs for the year. We all know agriculture is suffering from poor economic conditions – and the outlook for many sectors of the industry doesn’t look real promising. A variety of factors are forcing lenders to be more critical of loan applications. Let’s review a few things you can do to assist your lender as they review your loan application.

Financial Forms:

A year-end Balance Sheet is very helpful and provides a snapshot of the assets, liabilities, and net worth of your farm. Get in the habit of completing one each year for your lender to keep on file and for your own reference so you can monitor changes over time. You can get a blank balance sheet from your lender or access one here: https://farmoffice.osu.edu/farm-management-tools/farm-management-resources.

Cost of Production:

Know your cost of production. What does it cost you to produce 100 pounds of milk? What is your per acre or per ton cost to grow and harvest crops? If you need assistance with determining these, please see: https://farmoffice.osu.edu/ for copies of Ohio State University Extension production budgets and https://farmprofitability.osu.edu/business-summariesfor copies of the Ohio Farm Business Summaries.

Goals:

Why are you requesting money from your lender? What is your goal(s)? What are you hoping to accomplish with the money you are requesting? Will you use the money as an operating loan to plant your crops? Are you planning an expansion? Are you wanting to consolidate existing debt? Regardless of the reason, your lender is going to need to know how you plan to repay the loan. A budget and cash flow projections will help everyone understand how the money will be used and how it will be repaid. Research has proven that you are more likely to accomplish your goals if they are written. Be sure your goals are Specific, Measurable, Attainable, Rewarding, and Timed (SMART). See this Ohio State University Extension fact sheet for information about writing SMART goals: https://ohioline.osu.edu/factsheet/node/767.

Tax Returns:

Your lender may request copies of your tax returns. Make sure you categorize income and expenses the same way each year. This allows the lender to compare apples-to-apples when evaluating your historic income and expenses. Also, if you pre-pay expenses or defer income, make sure your lender is aware of this so they can make accrual adjustments.

Communication:

Communication with your lender is critical. Your lender is interested in understanding your farm, knowing how you are progressing, and what your plans are for the short and long-term. Invite your lender to visit the farm for a tour, a ride in the tractor, or to assist with milking!

Business Plan:

Every lender would love to see each client have a written business plan. A business plan is made up of five parts: Executive Summary, Description, Operations, Marketing Plan, and Financial Plan. The University of Minnesota Extension has a template available at the following site: https://agplan.umn.edu/.

Summary: The items discussed in this article are ones you can control. Focus on these areas and make adjustments accordingly to make improvements. Contact the Knox County Extension Office for assistance.

Legal defenses for agricultural production activities

Source: Ohio Agricultural Aw Blog

Whether producing crops, livestock, or other agricultural products, it can be challenging if not impossible for a farmer to completely prevent dust, odors, surface water runoff, noise, and other unintended impacts.   Ohio law recognizes these challenges as well as the value of agricultural production by extending legal protections to farmers.  The protections are “affirmative defenses” that can shield a farmer from liability if someone files a private civil lawsuit against the farmer because of the unintended impacts of farming.  A court will dismiss the lawsuit if the farmer successfully raises and proves an applicable affirmative legal defense.

In our latest law bulletin, we summarize Ohio’s affirmative defenses that relate to production agriculture.  The laws afford legal protections based on the type of activity and the type of resulting harm.  For example, one offers protections to farmers who obtain fertilizer application certification training and operate in compliance with an approved nutrient management plan, while another offers nuisance lawsuit protection against neighbors who move to an agricultural area.  Each affirmative defense has different requirements a farmer must meet but a common thread among the laws is that a farmer must be a “good farmer” who is in compliance with the law and utilizing generally accepted agricultural practices.  It is important for farmers to understand these laws and know how the laws apply to a farm’s production activities.

To learn more about Ohio’s affirmative defenses for agricultural production activities, view our latest law bulletin HERE.

Agriculture Improvement Act (Farm Bill) of 2018: Summary

Source: Carl Zulauf, Emeritus Professor, and Ben Brown, Program Manager – Farm Management Ohio State University, Department of Agricultural, Environmental, and Development Economics

Some information is beginning to come out regarding the new Farm Bill.  The complete farm bill is 807 pages.  Click on the following link to read the complete 9 page summary compiled by Dr. Carl Zulauf and Ben Brown  Farm Bill-196wwqa

What effect will cold temperatures have on pests and pathogens?

Source: the Bulletin, University of Illinois

Many in the Illinois agricultural community are wondering what effects the recent extreme cold might have on pests and pathogens. While it would be nice if the cold temperatures we are experiencing could help to reduce our potential for pest damage, past experience tells us that the most serious pests we deal with are unlikely to be impacted much by these conditions.

Many of the pathogens and insect pests that commonly affect field crops in Illinois are well adapted to survive our winter conditions.  In many cases, pathogens produce recalcitrant survival structures (e.g. cysts in soybean cyst nematode, oospores in Phytophthora, sclerotia in white mold).  These structures allow the pathogen to survive extreme conditions including cold, drought, and flooding. Different species of insects overwinter in different life stages, including eggs (for example, western corn rootworm), larvae (Japanese beetles), pupae (corn earworm, though they do not survive the winter in most of Illinois), or adults (stink bugs). The overwintering stage has characteristics that help these insects to survive the winter, either by adjusting its physiology to better survive the cold, seeking out an overwintering site that protects it (such as soil, tree bark, or leaf litter), or both. The overwintering sites that insects find mean that they are not experiencing the same temperatures that we are when we venture outside. Wind chill has little effect for this reason (even though it has a major, unpleasant effect on us).

Extreme cold temperatures can impact some insects and plant pathogens, particularly those that may not overwinter as well (e.g. powdery mildew).  When cold weather pushes into the Southern regions of the country it can push certain diseases, such as rusts, further south, delaying disease onset in Illinois and other regions further north. The same is true of migratory insects, such as black cutworm and fall armyworm, which do not usually overwinter in Illinois; colder temperatures during winter often delay the arrival of these insects, and may ultimately lead to lower numbers. The opposite is also true – warmer than normal temperatures during the winter can allow these migratory insects to become a problem earlier in the season.

Although cold temperatures may not impact most of the diseases we encounter in Illinois field crops, fluctuation between conditions of cold and warm may have a negative impact on some diseases.  Dormancy by fungican be broken by environmental conditions such as higher temperatures.  This is similar to what occurs in plants, where warm weather may result in trees flushing out buds and flowers.  Consequently, the wide swings in temperature that we have experienced during the 2018/19 winter may negatively impact some diseases. While some insects (such as stink bugs) can also break dormancy during brief warm periods, many of our most serious pests will stay “hunkered down” until the spring and avoid these fluctuations. Unfortunately, insects and plant diseases are unlikely to suffer as much from the recent cold as we have.

The New Tax Law and the New Business “Qualified Business Income” Deduction

by: Barry Ward, Director, OSU Income Tax Schools & Leader, Production Business Management

The new tax law known as the Tax Cuts and Jobs Act (TCJA) was signed into law on December 22, 2017 and will affect income tax returns for all of us for 2018 (to be filed in the next few months). The headline pieces of the new tax law include new tax brackets, higher standard deductions, elimination of personal exemptions and a new corporate flat tax rate of 21%. This will amount to lower total federal income tax for the large majority of taxpayers and C-corporations. Parts of the new tax law will make tax preparation simpler while parts will add complexity to the process.

With the new lower tax rate for corporations (specifically C-corporations) of 21% (a flat 21% rate) this replaces the old graduated tax brackets for C-corporations that started at 15% and topped out at 35%. The new lower tax rate for C-corporations may have created a decidedly uneven playing field if the new tax law hadn’t included a new deduction for all other businesses. This new Qualified Business Income Deduction (QBID) (sometimes referred to as the Pass-Through Deduction) is a 20% deduction of a businesses’ Qualified Business Income (QBI). Without this, businesses across the U.S. would have been strongly considering a change to a C-Corp structure for income tax purposes. With this QBID, the playing field between the different tax entities is mostly re-leveled. There may be inequalities that show up with the new tax law as it relates to business entity selection but it may take some time for these inequalities to reveal themselves.

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Conservation Tillage Conference: March 5-6 in Ada

A world-renowned scientist will be the keynote speaker on the first day of this year’s Conservation Tillage Conference (CTC) in Ada.  Christine Jones, an Australian Soil Ecologist, will be giving the keynote of the annual event with the topic “Building New Topsoil Through the Liquid Carbon Pathway for Long Term Production and Profit.”  The annual conference is scheduled for March 5thand 6th at Ohio Northern University.  The McIntosh Center and Chapel on campus will once again be the location where about 60 presenters, several agribusiness exhibitors, and approximately 900 participants will come together to learn about the latest topics in crop production.

Farmers will be able to choose from four concurrent rooms that will host a variety of speakers from several land grant universities as well as agricultural agency and industry personnel.  Tuesday, March 5th there will be Corn University; Nutrient Management; Precision Agriculture and Digital Technologies; Cover Crops, No-Till, and Soil-Health speakers in each of these rooms.  Wednesday, March 6ththere will be Cover Crops: Issues and Benefits; New Tri-State Fertilizer Recommendations; Soybean School; Water Quality Research and Best Management Practices; Soil Balancing – Is it Important to Manage the Calcium: Magnesium Ratio in Soils?; and Identity Preserved Crops.

The conference fee is $85 for both days ($65 for one day) if paid online by February 21; registration afterwards and day of the event is $80 for one day or $105 for both days.  Registration includes lunch and break refreshments during the day.  Registration information and a detailed program schedule may be found at http://ctc.osu.edu. The detailed program also includes information on continuing education categories for each presentation.  Certified Crop Advisers (CCA) will be able to receive seven hours of continuing education credits each day.  Hours will be offered in all categories, including hard to get categories of Soil and Water Management and Nutrient Management.

Grain Marketing Webinars Offered

Do you want to do a better job of pricing your corn and soybeans? Is grain marketing a confusing and daunting task? If so, this webinar is for you!

Ohio State University Extension is offering a two-session webinar focused on helping farmers become better grain marketers. Participants will have a better understanding of risk, marketing tools, and the development of written marketing plans. These workshops are funded through a North Central Risk Management Education Grant.  Additional information can be found at http://go.osu.edu/grainplan.

Participants will learn to identify their personal risk tolerance and their farm’s financial risk capacity. Both of these are important in developing a successful grain marketing plan. Participants will also learn how crop insurance products effect marketing decisions and effect risk capacity. Grain marketing consists of understanding and managing many pieces of information. Information on the different grain marketing contracts will be presented. These include basis, hedging, cash, futures, and option contracts.  Additionally, participants will be provided an example of a grain marketing plan and the fundamental principles that should be included.

The courses will be offered on two consecutive Tuesdays, starting on March 12, 2019.  For specific times, as well as program registration instruction, go to http://go.osu.edu/grainwebinar. Cost for the program is $30.00.

To request additional information or have questions answered, contact Amanda Bennett at 937-440-3945 or at bennett.709@osu.edu

Ohio Agricultural Law Blog–In the Weeds: Taking a Closer Look at the Lake Erie Bill of Rights

Evin Bachelor, Law Fellow, Agricultural and Resource Law Program

If You Are Involved in Agriculture – You Need to Read This!!

Lake Erie once again made headlines when the Ohio Supreme Court recently decided that a “Lake Erie Bill of Rights” (LEBOR) initiative could be placed on the Toledo ballot on February 26, 2019.  The decision raised alarm in Ohio’s agricultural community and fears that, if passed, the measure will result in litigation for farmers in the Lake Erie watershed.

The OSU Extension Agricultural and Resource Law Program took a close look at LEBOR.  Specifically, we wanted to know:

  • What does Toledo’s Lake Erie Bill of Rights petition mean?
  • What does the petition language say?
  • What happened in the legal challenges to keep the petition off the ballot?
  • Have similar efforts been successful, and if not, why not?
  • Who has rights in Lake Erie?
  • What rights do business entities have?

We examine all of these questions, plus a number of frequently asked questions, in a new format called “In the Weeds.”  While many of our readers know of our blog posts and law bulletins, explaining this issue required something different.  Using “In the Weeds” is a way for us to dig into a current legal issue more in depth.

For answers to the questions above and more, CLICK HERE to view the new “In the Weeds: The Lake Erie Bill of Rights Ballot Initiative.”

The LL-GT27 soybean – what’s legal?

Source: Dr. Mark Loux, OSU Extension

We are starting to see the availability of soybean varieties with more than two herbicide resistance traits, which can expand the herbicide options, improve control, and allow multiple site of action tank mixes that reduce the rate of selection for resistance.  One of these is the Enlist soybean, with resistance to glyphosate, glufosinate, and 2,4-D.  As of this writing, full approval for the Enlist soybean is still being held up by the Philippines (because they can apparently).  The other is the LL-GT27 soybean, which has resistance to glyphosate, glufosinate, and isoxaflutole (Balance).  There is no label for use of isoxaflutole on this soybean yet, but it is legal to apply both glyphosate and glufosinate.  In Ohio, as long as neither label prohibits applying a mixture of two herbicides labeled for a specific use, it’s legal to apply the mixture.  So, it’s also legal to apply a mixture of glyphosate and glufosinate to the LL-GT27 soybean.  There is no label that actually mentions or provides guidance for this mixture, which does not affect legality, but could affect who assumes liability for the recommendation to apply a mixture if that matters to you.  Some seed companies are making the recommendation for POST application of the mix of glyphosate and glufosinate to the LL-GT27 soybean in printed materials.  Our interpretation after discussion with ODA, is that these materials are essentially supplements to labels, and so the seed company would assume some liability for the recommendation.

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Soybean Seed Quality Considerations for 2019

Source: Carl Bradley, University of Kentucky; Daren Mueller, Iowa State University; Damon Smith, University of Wisconsin-Madison; Shawn Conley, University of Wisconsin-Madison; and Kiersten Wise, University of Kentucky.

Seed quality from the 2018 soybean harvest was below average across the majority of the soybean-producing areas of the United States. Several factors led to poor-quality soybean seed, but some of the most important were wet conditions throughout the fall and subsequent delayed harvest.

The wet conditions delayed harvest and created the right conditions for several seed diseases, including:

  • Phomopsis seed decay (caused by the fungus Diaporthe longicolla, formerly known as Phomopsis longicolla)
  • Purple seed stain (caused by the fungi Cercospora kikuchii and Cercospora flagellaris)

Seeds affected by Phomopsis seed decay can be cracked, shriveled, and have a chalk-white color on the seed surface.

Seeds affected by Purple seed stain are covered in purple blotches, or the entire seed may be purple.

While some areas harvested high-quality soybean seed in 2018, many U.S. seed suppliers have reported that soybean seed for the 2019 crop is frequently testing positive for the Diaporthe fungus that causes Phomopsis seed decay. This is resulting in lower than normal seed germination rates, and could translate to lower than average germination rates in 2019.

While it is impossible to predict 2019 soybean planting conditions, if soil conditions are wet and cool during planting, then it is likely that both seedling survival and plant population will be diminished in fields planted with low-quality soybean seed. This means farmers need to decide now on how to manage low-quality soybean seed to minimize the impact of poor seed quality, low germination, risk for reduced stands, and lower yield in 2019.

Ways to Minimize the Impact of Low-Quality Soybean Seed Continue reading