How Will the Invasion of Ukraine Affect U.S. Agriculture?

by: Ian Sheldon, Professor and Andersons Chair of Agricultural Marketing, Trade, and Policy, Agricultural, Environmental, and Development Economics, Ohio State University and Chris Zoller, Associate Professor and Extension Educator, Agriculture & Natural Resources, Ohio State University Extension – Tuscarawas County

 

Russia’s Invasion of Ukraine: The Global Impact

The shock to global commodity markets following Russia’s invasion of Ukraine is expected to be the largest in the post-war period, and certainly since the oil crisis of the 1970s.  Over the past 30 year, the two countries have become major agricultural exporters, accounting for a quarter of global grains trade in the 2021-22 season (International Grains Council, March 9, 2022).  Across key commodities, they account for a 34, 18, 27 and 75 percent share of volume traded of world wheat, corn, barley, and sunflower oil respectively (International Food Policy Research Institute, February 24, 2022).  With Russia blockading ports on the Black Sea, 16 million tons of grain are currently stranded in Ukraine, USDA forecasting Ukrainian-Russian wheat exports to fall by 7 million tons in 2021-22, Australian and Indian exports only partially filling the gap (USDA/WASDE Report, March 9, 2022)   Also, despite reports of some spring crops being planted in Ukraine, outgoing Agriculture Minister Roman Leshchenko expects total area sown to be reduced by 19 million acres (Reuters, March 22, 2022).

Not surprisingly a market shock of this magnitude has affected both the volatility and level of prices, wheat futures at one point moving above $14/bushel, and eventually falling back to just over $10/bushel, reflecting uncertainty among traders about the invasion.  In turn, the increase in grain prices, are having a significant effect on global food prices and hence food security.  Even before the invasion, several factors were already driving up food prices, including poor harvests in South America, strong global demand, supply chain issues, reduced global stocks of grains and oilseeds, and an input cost squeeze mostly due to rising fertilizer prices.  Adding in the effect of the invasion, global food prices are now reaching levels not seen since the so-called “Arab Spring” of the early 2010s (UN/FAO, March 2022). Continue reading

LLCs for Farm Machinery, Not the Liability Barrier You Might Think.

by: Robert Moore, Attorney, OSU Agricultural & Resource Law Program

A common business strategy for farming operations is to place their machinery in a separate, stand-alone LLC. The idea behind this strategy is that by putting the high-liability machinery in its own LLC the other farm assets are protected. Unfortunately, the liability protection of a machinery LLC is sometimes overstated and may not provide as much protection as intended.

The compromised liability protection of a machinery LLC is not due to a defect in LLCs, but rather it is a result of who is operating the machinery. Typically, the persons operating the machinery are the owners or employees of the farming operation. Many liability incidents involving farm machinery are the result of operator error which pulls the liability back to the farming operation.

Consider the following example. XYZ Farms is a grain operation. To mitigate the liability of having large machinery traveling on roadways, XYZ Farms establishes Machinery LLC and transfers all machinery to the LLC. An employee of XYZ Farms causes an accident while driving machinery on a roadway. Because employers are liable for the actions of employees, XYZ Farms is liable for the accident even though the machinery was held in Machinery LLC.

A machinery LLC does provide some liability protection. If the liability incident is caused solely by an issue with the machine and not the operator, the LLC may prevent liability from transferring to other assets. Again, most accidents are caused by operator error so relying on this liability protection is planning against the odds.

As seen in the example, machinery LLCs do not completely insulate owners and other assets from liability. In fact, no entity used in a farming operation is guaranteed to prevent liability exposure for the owner. Therefore, liability insurance should always be the primary liability management plan for farm operations. Business entities should be used as the backup plan if liability insurance fails to cover liability exposure.

Machinery LLCs do have other beneficial uses. One of the more common uses is to consolidate various machinery ownership among family members. Having one entity own, buy, and sell all machinery is often a simpler plan than multi-ownership. For example:

Mom and Dad, Son, and Daughter each own some machinery. Each time they need to buy a new piece of equipment, it is a challenge to determine how the trade-in is handled and who should be the new owner. Instead, they establish a machinery LLC and put all their machinery in the LLC. They each receive ownership in the LLC in proportion to the ownership in the machinery. For all future purchases, the LLC provides the trade-in and buys the new machine.

The liability protection provided by machinery LLCs may not be as thorough as sometimes expected but they can still be a valuable component of a business structure plan. They do provide some liability protection and are useful in other ways such as consolidating ownership. Before establishing a machinery LLC, be sure to have a thorough discussion with legal counsel to fully understand it’s benefits and limitations.

Reminder – It’s a good time for a farmland leasing update Webinar

By: Peggy Kirk Hall, Associate Professor, Agricultural & Resource Law

Winter is a good time to review farm leases, and current information is critical to that process.  That’s why our Farm Office team is offering its Ohio Farmland Leasing Update, a webinar on February 9, 2022 from 7 to 9 p.m.   I’ll be joined for the webinar by co-speakers Barry Ward, Leader of Production Business Management for OSU Extension, and attorney Robert Moore.

On the legal side, we’ll share legal information to help parties deal with addressing conservation practices in a leasing situation, using leases in farmland succession planning, Ohio’s proposed new law about providing notice of termination, and ensuring legal enforceability of a lease.  On the economic side, Barry Ward will provide a current economic outlook for Ohio row crops, research on cash rent markets for the Eastern Corn Belt, and rental market outlook fundamentals.  We’ll also overview farmland leasing resources.

There is no fee for the webinar, but registration is necessary.  Register at https://go.osu.edu/farmlandleasingupdate.

ARC/PLC Program Election and OSU Extension Decision Tool

by: Chris Zoller, Extension Educator, ANR, Tuscarawas County

Introduction

The 2018 Farm Bill reauthorized the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) safety net programs that were in the 2014 Farm Bill. Producers must enroll in ARC/PLC for the 2022 crop year through their local Farm Service Agency office. The signup period for the 2022 crop year is open now, and the deadline to enroll and make amendments to program elections is March 15, 2022.

If changes are not made by March 15, 2022 deadline, the election defaults to the programs selected for the 2021 crop year with no penalty.

 ARC/PLC Program Options

Producers again have the option to enroll covered commodities in either ARC-County, ARC-Individual, or PLC. Program elections are made on a crop-by-crop basis unless selecting ARC-Individual where all crops under that FSA Farm Number fall under that program. ARC program payments are made when crop revenue falls below a guaranteed level, while PLC payments are made when a crops specific effective price is lower than its reference price.

Reference Prices

While the 2018 Farm Bill does allow for reference prices to change, indications are that we will not see any changes in 2022.  The established reference prices are: corn $3.70; soybeans $8.40; and wheat $5.50.  Unless we experience significant reductions in yield and/or price, it is unlikely any ARC/PLC payments will be made this year.

Decision Tool

OSU Extension has a newly updated software program to assist producers with evaluating ARC/PLC scenarios and options.  This tool is available by contacting your local Extension Educator or by accessing it on-line at: https://farmoffice.osu.edu/farm-management-tools/decision-aids

An Agricultural Employer’s 2021 Tax Obligations: A Series

By: Jeffrey K. Lewis, Attorney and Research Specialist, Agricultural & Resource Law

As we settle into 2022 and regroup after a busy holiday season, one of things an agricultural employer should be thinking about is taxes, more specifically, have they met their obligations when it comes to federal and state employment taxes.  In this two-part series, we discuss the federal and state taxes that an employer is required to withhold from employees’ wages and the tax obligations that an agricultural employer is solely responsible for.  This series covers the taxes and obligations an employer has because of the wages paid to employees.  This series does not cover the business income or personal income tax reporting obligations of agricultural employers.

The first part of this series focuses on federal taxes and an employer’s obligations when it comes to social security, Medicare, federal income, and federal unemployment taxes. We also discuss when to pay the taxes and how to pay them.  The information contained within this series is not meant to be legal and/or tax advice.  Agricultural employers should seek out the counsel and guidance of an attorney or other tax professional to help them ensure they are compliant with their obligations under federal tax law.

Social Security and Medicare Taxes.  Generally speaking, an employer must withhold social security and Medicare taxes from the wages it pays its employees.  However, there are special rules for agricultural employers.  The $150 Test or the $2,500 Test will help determine if an agricultural employees’ wages are subject to social security and Medicare taxes along with federal income tax withholding requirements.

All cash wages that an employer pays to an employee during the year for farmwork is subject to social security, Medicare, and federal income tax withholding requirements if either of the following tests are met:

  • The $150 Test.  An employer pays cash wages to an employee of $150 or more in a year for farmwork.
    • This includes all cash wages paid on a time, piecework, or other basis.
  • The $2,500 Test.  The total that an employer paid for farmwork (cash and non-cash wages) to all employees is $2,500 or more during the year.

Continue reading

It’s a good time for a farmland leasing update

By:Peggy Kirk Hall, Associate Professor, Agricultural & Resource Law

Winter is a good time to review farm leases, and current information is critical to that process.  That’s why our Farm Office team is offering its Ohio Farmland Leasing Update, a webinar on February 9, 2022 from 7 to 9 p.m.   I’ll be joined for the webinar by co-speakers Barry Ward, Leader of Production Business Management for OSU Extension, and attorney Robert Moore.

On the legal side, we’ll share legal information to help parties deal with addressing conservation practices in a leasing situation, using leases in farmland succession planning, Ohio’s proposed new law about providing notice of termination, and ensuring legal enforceability of a lease.  On the economic side, Barry Ward will provide a current economic outlook for Ohio row crops, research on cash rent markets for the Eastern Corn Belt, and rental market outlook fundamentals.  We’ll also overview farmland leasing resources.

There is no fee for the webinar, but registration is necessary.  Register at https://go.osu.edu/farmlandleasingupdate.

“Planning for the Future of Your Farm” Workshops offered by OSU Extension

By: by: David Marrison, OSU Extension-Coshocton County, marrison.2@osu.edu
To kick off 2022, OSU Extension will be offering “Planning for the Future of Your Farm” workshops to help farm families actively plan for the future of their farm business. The workshops are designed to help farm families learn strategies and tools to successfully create a succession and estate plan which can be used as the guide to transfer the farm’s ownership, management, and assets to the next generation. Learn how to have the crucial conversations about the future of your farm.

Topics discussed during this series include: Developing Goals for Estate and Succession; Planning for the Transition of Control; Planning for the Unexpected; Communication and Conflict Management during Farm Transfer; Legal Tools & Strategies; Developing Your Team; Getting Your Affairs in Order; and Selecting an Attorney.  This workshop will be taught by members of the OSU Farm Office Team.

Families can choose to attend the workshop virtually or in-person at regional workshops which will be held across the state. These sessions being offered include:

Virtual “Planning for the Future of Your Farm” Workshop

A virtual version of this workshop will be held on January 31 and February 7, 21 & 28, 2022 from 6:30 to 8:00 p.m. via Zoom. Because of its virtual nature, you can invite your parents, children, and/or grandchildren (regardless of where they live in Ohio or across the United States) to join you as you develop a plan for the future of your family farm.

Pre-registration is required so that a packet of program materials can be mailed in advance to participating families. Electronic copies of the course materials will also be available to all participants. The registration fee is $75 per farm family.  The registration deadline is January 25, 2022. More information and on-line registration can be obtained at go.osu.edu/farmsuccession

In-Person “Planning for the Future of Your Farm” Workshop

In addition to the webinar series, 3 regional in-person workshops will be held in February and March of 2022. Each of these programs will be held from 9:00 to 4:00 p.m.  The base registration cost for each of these meetings is $85 for 2 attendees, lunch and 1 notebook.  Additional participants can attend for a $20 fee and extra sets of the course material can be purchased for $15. Registration is due 1 week prior to each event.

The locations for each for the meetings are:

February 10, 2022 in Greene County

Location: Greene County Extension Office

100 Fairground Road, Xenia, Ohio

On-line registration can be made at go.osu.edu/greenefarmfuture

More details can be obtained at corboy.3@osu.edu or 937-372-9971

 February 25, 2022 in Wayne County

Location: Fisher Auditorium

1680 Madison Avenue, Wooster, Ohio

More details can be obtained at zynda.7@osu.edu or 330-264-8722

 March 4, 2022 in Wood County

Location: Wood County Fairgrounds- Junior Fair Building

13800 W Poe Road, Bowling Green, Ohio

More details can be obtained at eckel.21@osu.edu or 419-354-9050

Specific details about each of the workshops can be found at: go.osu.edu/farmsuccession