Ohio Ag Law Blog – The Ag Law Harvest

Written by Evin Bachelor, Law Fellow, OSU Extension Agricultural & Resource Law Program

Here’s our latest gathering of agricultural law news that you may want to know:

Congress considers bankruptcy code changes with Family Farmer Relief Act of 2019.  Senator Grassley and Representative Delgado introduced companion bills in their respective chambers of Congress that would modify the definition of “family farmer” in the federal bankruptcy code.  The change would raise the operating debt limit for a family farmer from $3.2 million as listed in the U.S. Code to $10 million.  Sometimes a small change can make a big difference.  In chapter 12 of the bankruptcy code, a “family farmer” has special options that other chapters do not offer, such as the power to determine a long-term payment schedule and pay the present market value of the asset instead of the amount due on the loan.  Many farmers had not been able to take advantage of the special bankruptcy provisions because of the low debt limit, but that may change.  For more information on the bills, click HERE for S.897 and HERE for H.R. 2336.

Congress also considers changing the number of daily hours a driver may transport livestock.  The Transporting Livestock Across America Safely Act would instruct the Secretary of Transportation to amend the rules governing drivers who transport certain animals.  The changes would loosen restrictions on the number of hours that drivers may drive, and increase the types of activities that are exempt from counting toward the maximum time.  Travel under 300 miles would be exempt from the hours of service (HOS) and electronic logging (ELD) requirements.  Both chambers of Congress are considering this bill, and both companion bills are currently in committee.  For more information on the bills and to learn about the changes proposed, click HERE for S.1255 and HERE for H.R. 487.

It’s not too late to submit comments to the FDA about its potential cannabidiol rulemaking.  Electronic or written comments can be sent to the FDA until July 2nd, although the deadline to request to make an oral presentation or comment at tomorrow’s hearing has passed.  Click HERE for more information from the Federal Register about the May 31st hearing and submitting comments.

 

Meatpackers face second class-action lawsuit, and R-CALF refiles.  In our last edition of The Harvest, we talked about a new class-action lawsuit filed in Illinois federal court by a number of cattle ranchers, including R-CALF, against the nation’s largest meatpacking companies.  Now, another lawsuit has been filed in Minnesota federal court also alleging a price fixing conspiracy by the meatpackers.  The second lawsuit is being brought by a cattle futures trader, rather than a rancher.  After the second suit was filed, R-CALF voluntarily dismissed its case in Illinois to refile it in Minnesota.  This refiling allows the lawsuits to be heard by the same court.

 

Tyson sues the USDA’s Food Safety and Inspection Service.  Tyson, which is named as a defendant in the class action suits we just mentioned, is a plaintiff in a case against the USDA’s Food Safety and Inspection Service.  The company alleges that a FSIS inspector falsified an inspection of 4,622 hogs, which were intermingled with another 8,000 carcasses, at one of its Iowa facilities in 2018.  The company claims that the false inspection required it to destroy all of the carcasses, and cost nearly $2.5 million in total losses and expenses.  The complaint, which is available HERE, alleges four counts: negligence, negligent inspection, negligent retention, and negligent supervision.  The lawsuit is based on the legal principle that an employer is liable for the actions of its employee.

 

 

Ohio Case Law Update

 

Plaintiff must prove that a defendant wedding barn operator’s breach of a duty caused her harm.  Conrad Botzum Farmstead is a privately operated wedding and event barn located in the Cuyahoga Valley National Recreation Area and on lease from the National Park Service.  The plaintiff in the case was attending a wedding at the barn, where she broke her ankle while dancing on a wooden deck.  The jury trial found that the barn operator was 51% at fault for her injuries, and awarded the plaintiff compensation.  However, the barn operator appealed the decision and won.  The Ohio Ninth District Court of Appeals found that the plaintiff did not introduce sufficient evidence to prove that any act or breach of duty by the barn operator actually or proximately caused the plaintiff to fall and break her ankle.  The case raises standard questions of negligence, but it is worth noting in the Ag Law Blog because the court did not base its decision on Ohio’s agritourism immunity statute.  The case is cited as Tyrrell v. Conrad Botzum Farmstead, 2019-Ohio-1874 (9th Dist.), and the decision is available HERE.

 

Ohio History Connection can use eminent domain to cancel Moundbuilders Country Club’s lease.  A Licking County judge ruled in early May that the Ohio History Connection, formerly the Ohio Historical Society, can reclaim full ownership of land that it had leased to a country club.  The Moundbuilders County Club has operated a golf course around prehistoric Native American earthworks for decades under a long-term lease with the state.  The Ohio History Connection sought to have the lease terminated in order to give the public full access to the earthworks as part of a World Heritage List nomination.  The judge viewed the request as sufficiently in the public interest to apply Ohio’s eminent domain laws.

Ohio Ag Law Blog – Here comes the sun: understanding important solar lease terms

Ohio Ag Law Blog – Here comes the sun: understanding important solar lease terms

Written by Evin Bachelor, Law Fellow, OSU Extension Agricultural & Resource Law Program

With all the rain and delayed planting that Ohio farmers have experienced this spring, signing a solar lease has been a very appealing prospect for many farmland owners. While this may be the right decision for a farm, it is very important that the farmland owner understand exactly what he or she is signing. Once an energy developer offers to pay you to enter into an agreement, and you sign that agreement, its terms will be legally binding.

In our recent blog post on solar leasing, we discussed some of the early documents that a farmland owner is likely to receive from an interested solar energy developer. Further, we gave some general advice on what farmland owners should do if an energy developer wants to discuss leasing his or her land. One of our main suggestions was to take the time to fully understand what the farmland owner is getting into, and that is where this post comes in.

In this blog post, we highlight some of the important provisions of a solar lease that you as a farmland owner should look for in your solar lease, and understand what they mean. A good solar lease will be very thorough, and include a lot of legalese. Our upcoming Ohio Farmland Owner’s Guide to Solar Leasing, due out in the next month, will go more in depth than this blog post on the terms below and more. It would also be a wise decision to consult with an attorney to ensure that your understanding of your solar lease reflects what the documents say.

For now, here are a few provisions to be on the lookout for in your solar lease:

The term. How long does this lease last? Most solar leases last for 20 to 30 years. This is the time during which solar energy is being collected and sold. Solar energy developers like this multi-decade duration because it allows them to use of the solar panels for their expected productive lifespan.

Thirty years is a long time. Many careers are retirement-eligible after that period, and many farms will transition to the next generation in that amount of time. This long of a term is not necessarily a bad thing. It just means that a farmland owner should look back and look ahead. Think back 30 years to 1989. What all has changed on your farm? What would it have looked like to not be able to use this ground for the past 30 years? Now look ahead. What do you expect your needs and those of your family to look like when this lease ends in 2049? Only you can determine if not being able to use your land for that long is a good thing.

Phases. How is this lease broken up? We just explained that most solar leases will last for 20 to 30 years, but that clock usually starts ticking once construction has started on the project. Solar energy developers will often reserve a year or two during which they can conduct their final feasibility studies and obtain necessary permits. Some leases structure this pre-construction phase as merely an option phase, meaning that the energy developer will pay a small amount of rent to keep its option alive for that one or two-year period, but it does not necessarily have to commence construction.

Further, toward the end of the term, the energy developer may have written in an option to renew for another 5 or 10 years. These renewals are often structured as a right that the energy developer may exercise merely by giving notice to the landowner. Additionally, in the middle, if there is a natural disaster that puts the operation out of service for any period of time, a solar lease may stop the clock from ticking until the project is operational again and solar energy is being collected.

The important take-away for the phases is being able to know when each phase begins and ends. When all of the different phases are combined, instead of just a 30-year lease, you could be looking at a 42-year agreement. The only way to know how long it could last is to thoroughly read the entire lease.

A description of the premises. Every solar lease will contain a description of the premises. If an entire parcel is being leased, then this part is fairly easy. However, if only a portion of the parcel is being lease, the farmland owner will want to make sure that the lease provides an adequate description so that the leased portion can be easily determined on the ground. Often, this will include a survey and maps. Knowing the boundaries is important because these leases are often exclusive, such that the farmland owner has little or no use or access of the leased land throughout the term.

Easements. What rights are being granted to the solar energy developer? Solar leases include a series of easements that give the solar energy developer the right to use your land. Some of the common easements include a:

• Construction easement: a right to cross over portions of the farmland owner’s property in order to construct the solar facility
• Access easement: a right to cross over portions of the farmland owner’s property to reach the solar facility
• Transmission easement: a right to install power lines, poles, and other equipment to transmit the energy produced by the solar panels to the grid
• Solar easement: a right to unobstructed access to the sun without interference from structures or other improvements
• Catch-all easement: a general right to do whatever is necessary for the benefit of the project

Solar energy developers want their easements to be as broad and generous as possible in order to maximize their flexibility with the project. This is not always to the advantage of the farmland owner. If the lease is general enough to allow the solar energy developer to sub-lease to another entity such as a telecommunications company, the landowner will have a difficult time preventing the solar energy developer from doing so. The farmland owner wants to make sure that the easements being granted are specific enough to not result in any surprises.

Landowner obligations and rights. What does the lease require of you as the farmland owner? Usually private solar energy developers include a non-interference provision, a quiet enjoyment provision, and an exclusivity provision. All combined, these provisions are a promise by the farmland owner to not enter the solar facilities without prior permission, not interfere with the solar facilities, and not allow anyone else to do so for the duration of the term.

Further, solar leases often include a confidentiality provision that courts will enforce as legally binding. These provisions allow the solar energy developer to control the flow of its proprietary information, and also prevent landowners from talking with one another about topics such as rent rates. It is important to understand:

• What information is protected
• If there are any exceptions
• When consent might be granted
• If specific penalties apply
• How long confidentiality lasts

The solar lease may also include a provision about farmland owner improvements. These explain if and when the landowner needs to obtain prior approval of the solar energy developer in order to build a structure or plant something that may interfere with the solar project.

Property maintenance. Who is going to mow? Ohio landowners have a legal duty to cut noxious weeds, and a well drafted lease will cover which party to the lease bears responsibility for keeping the leased land clear. Usually, the solar energy developer will take this responsibility, but it helps to have this in writing.

Cleanup terms. Cleanup involves a lot of questions. Does the solar lease require the solar energy developer to restore the land to its previous state? If so, how is this measured? Will all stakes and foundations be removed? Will all improvements, like roadways, be removed? How will the solar energy developer guarantee that it will be able to pay for this cleanup in 30 years? Does it post a security, and if so, when? A thorough lease will answer these questions.

Tax and conservation penalties. Tax and conservation also involves a lot of questions because constructing and operating a solar facility will make the property ineligible for the full benefits of CAUV and most conservation programs. Does the lease require the solar energy developer to cover real estate taxes? Does the lease require the solar energy developer to cover the three-year lookback penalty for removing land from CAUV? What will the solar energy developer do toward the end of the lease so that the land can be put back into production and made CAUV eligible again? Similar questions must be asked for conservation programs.

Compensation. It’s not that we saved the fun and best part for last. We just wanted to make sure that compensation is not the first and only thing considered when deciding whether or not to enter into a solar lease. While it certainly is important, some of the issues discussed above must be just as carefully understood.

The solar leases that we have seen involve cash rent that increases over time based upon a fixed escalator. The escalator is a percent increase. If the escalator increases at a rate greater than inflation, then the farmland owner will receive more bang for his or her land. However, if the escalator increases at a rate lower than long-term inflation, then the solar energy developer will have to pay less over time.

Another point of compensation to consider is how damages will be calculated for harm to property and crops. When the solar energy developer decides it is time to start construction, its option and easements grant it the right to begin construction even if there is a crop already in the ground. This makes it in a farmland owner’s best interest to have this issue addressed up front. These damages will often be calculated my multiplying the number of acres by the average county yield for that crop by that crop’s commodity future price with the Chicago Board of Trade for a given date. This provides an objective calculation for damages.

Verbal promises. A note of caution: if the solar energy developer makes you a verbal promise, ask for that promise to be included in the written lease. If there is a conflict between what a representative of the solar energy developer tells you and what is written in the lease, the terms in the written lease are likely to prevail.

The activity we are seeing across Ohio right now with solar reminds us of the early stages of the recent wind and shale energy booms. Some of the biggest regrets that we hear about are from landowners who thought they were getting a better deal than they actually did. Reading through, understanding, and thinking about the lease is an essential part of calculating whether or not the lease being offered is actually a good deal for a farmland owner and his or her family. Don’t be afraid to reach out to your team of professionals in this process. Your attorney, tax professional, extension educator, and others can be a great resource.

Corn vs. Soybeans in a Delayed Planting Scenario – Profit Scenarios

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

Wet weather and planting delays throughout much of Ohio and the eastern Cornbelt have many producers thinking about switching corn acres to soybeans or the taking the prevented planting option of their Multiple Peril Crop Insurance policy. Ohio had 9% of intended corn acres planted by May 19th which is far behind the 5 year average of 62%. Farms with pre-plant nitrogen or herbicides applied for corn production may have no option to switch to soybeans. Seed availability may also limit choice for some. Other factors, such as strict adherence to a crop rotation or landlord considerations may limit farmer choice when it comes to switching from corn to soybean plantings in a given year. Farm leases may contain specifications on crop rotations or even what crops may be grown. There may also be unwritten agreements between parties that limit the possibility of growing soybeans in successive years.

Producers that don’t have these limitations may be considering the option of switching acres to soybeans and it will likely come down to expected profit. Field by field budgeting is recommended and with delayed planting the yield expectations change as we move later into the growing season. What will be the likely yields for a given farm for the two crop choices? A recent article, “Delayed Planting Effects on Corn Yield: A “Historical” Perspective” is a good starting point in evaluating potential yield loss due to late corn planting: https://agcrops.osu.edu/newsletter/corn-newsletter/2019-12/delayed-planting-effects-corn-yield-%E2%80%9Chistorical%E2%80%9D-perspective

A recent article highlighting faculty in the College of Food, Agricultural and environmental Sciences always provides valuable insight into the possible yield swings related to late plantings of corn and soybeans: https://cfaes.osu.edu/news/articles/late-start-planting-might-not-hurt-yields-much

Looking at some simple scenarios may get your budgeting process moving for your own fields. These scenarios are based on the 2019 crop enterprise budgets available online at: https://farmoffice.osu.edu/farm-management-tools/farm-budgets

Scenario 1 – Yield prospects remain unchanged, new estimated revenue based on today’s markets:

Corn – 170.2 bu/a & 4.00/bu

Returns Above Variable Costs     $293

Soybeans – 51.5 bu/a & 7.90/bu

Returns Above Variable Costs     $207

Price changes in the last 3 weeks have been favorable to corn and shows some advantage to corn with these assumptions using OSUE Enterprise Budgets.

Scenario 2 – Corn yield 13% lower (per OSU Agronomy Guide, planting date 5-22 through 5-27), soybean yields remain unchanged, new estimated revenue based on today’s markets:

Corn – 148 bu/a & 4.00/bu

Returns Above Variable Costs     $227

Soybeans – 51.5 bu/a & 7.90/bu

Returns Above Variable Costs     $207

The choice becomes closer as we see corn still outperforming soybeans (barely) in Returns Above Variable Costs.

Scenario 3 – Corn yield 13% lower (per OSU Agronomy Guide, planting date 5-22 through 5-27), soybean yields 5% lower, soybean seed costs higher due to higher seeding rate (additional 30,000 seeds per acre planted) for late planted soybeans, new estimated revenue based on today’s markets:

Corn – 148 bu/a & 4.00/bu

Returns Above Variable Costs     $227

Soybeans – 48.9 bu/a & 7.90/bu

Returns Above Variable Costs     $175

This choice again favors corn as the lower soybean yield due to late planting and additional seeding costs make the choice of corn somewhat stronger compared to Scenario 2.

The recent announcements of another round of Market Facilitation Payments and changes to Prevented Planting Coverage due to the pending Disaster Aid Bill may add further complexity to this choice.

As planting is delayed further into June the potential lower yields of both corn and soybeans due to a later planting window will tend to favor soybeans. These simplified scenarios are just examples and farmers should budget for the different yield, price and cost combinations based on their own numbers.

 

 

 

 

 

 

 

Prevented Planting Decision Tools

by Sam Custer, OSU Extension Educator

We have reviewed two prevented planting decision tools that can serve as a resource in your decision making process with your crop insurance agent. Both tools also provide resources for determining replant decisions.

In a recent Farmdocdaily article Schnitkey, G., C. Zulauf, K. Swanson and R. Batts. “Prevented Planting Decision for Corn in the Midwest.” farmdoc daily (9):88, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, May 14, 2019 they highlighted their decision tool.

The farmdoc tool can be used to make calculations for expected returns from three options: 1. Take a prevented planting payment and not plant a crop to be harvested or grazed. 2. Plant corn. 3. Plant another crop.

The farmdoc Prevented Planting Module is used to aid in making calculations for each alternative. The Prevented Planting Module is part of the Planting Decision Model, a Microsoft Excel spreadsheet within the FAST series available for download on farmdoc (here). The specific spreadsheet is available (here).

Iowa State also has an article and tool that can be found at https://www.extension.iastate.edu/agdm/crops/html/a1-57.html.

The Iowa State model can be used to determine three options also: 1. Go ahead and plant the original crop. 2. Plant an alternative crop 3. Abandon the acres, and plant a cover crop.

The Iowa State model is designed specifically for Iowa but allows you to use your numbers. The farmdoc model contains Ohio data but also allows you to use your specific numbers.

Prevent Plant…What’s That Again?

Eric Richer & Chris Bruynis, OSU Extension Educators

Wet conditions in Ohio and the Eastern Corn Belt has slowed (halted?) planting progress for Ohio producers. According to the May 20th Crop Progress Report by USDA National Ag Statistics Service, Ohio had only 9% corn planted. Surprisingly that was ‘double’ what was planted the week before and well behind the 5-year average of 62% planted. In 2018, Ohio was 69% planted by this report date.

Certainly, the Prevent Plant (PP) crop insurance tool has become a hot topic this year. Many of you have had the chance to attend prevent plant meetings or speak with your crop insurance agent. If not, we will try to briefly summarize your options and strongly suggest you talk to your agent or utilize one of the calculators (see associated “Decision Tools” article by Sam Custer) to determine which option best suits your farm operation.

Your first option is to plant the corn crop by June 5, the final plant date for corn (or June 20 for soybeans). Up until the final plant date, you are eligible for your full guarantee at the level you have selected. For example, 80% coverage x 170 bu/ac APH x $4.00 = $544/acre. If you elect to plant corn after June 5, you will incur a 1% reduction in your guarantee up through June 25, at which time you can choose not to insure your corn crop or you can insure for the same guarantee as your prevent plant amount. For example, if you plant corn on June 8, the guarantee formula (170 APH, 80% coverage) would be: 80% x 170 bu/ac x $4.00 x 97% = $528/acre. Planting dates need to be recorded, as these rules apply on field-by-field and acre-by-acre basis.

Secondly, you can elect to switch your intended corn acres to soybean acres. You will not have the option to file a prevented plant claim (unless you arrive at June 20 unable to plant soybeans). You will be charged for the soybean insurance premium, not the corn premium. The decision tool referenced earlier will be helpful here as this is not an easy decision. June weather (local and regional), supply/demand economics, trade policy and input options increase the complexity.

Your last option is to file for Prevent Plant, assuming you did not get corn planted by June 5. The mechanics of prevented plant deserve a review to ensure understanding. Prevent plant covers Yield Protection (YP), Revenue Protection (RP) and Revenue Protection with Harvest Price Option policies and references the February new crop corn pricing period (aka projected price). The projected price for 2019 corn is $4.00/bu and $9.54/bu for soybeans. A corn policy has a 55% Prevent Plant guarantee (buy-up available to 60%) and soybeans a 60% guarantee (with buy-up available to 65%). In order to further be eligible for Prevent Plant, at least 20 acres or 20% of that unit must not get planted (the lesser of the two). Prevented Plant does not affect your yield history as long as you do not plant a second crop. So a quick example (80% coverage, 170 bu/ac APH) for prevented plant corn would be: 80% x 170 bu/ac x $4.00 x 55% = $299/acre.

To be sure, there are costs besides the premium that are associated with Prevent Plant. Are there ‘restocking fees’ associated with returned seed or other inputs? What are the year-long weed control costs? If utilizing cover crops, what will their cost be? What are my land costs or how do I address my land costs? Do I need to pay labor & management costs even though the land wasn’t ‘farmed’? And finally, are their opportunity costs (marketing) missed because of taking Prevent Plant? We do not have space in this article to address these but they are things to be considering.

The reporting of Prevent Plant acres-should you elect that option-is quite simple. First, the total acres of Prevent Plant corn that you can file in 2019 can be no greater that the greatest number of acres of corn you reported in any of the previous four years (2015-2018). To report Prevent Plant acres, you would first need to turn in a notice (starting June 6) to your insurance agent. Then report your Prevent Plant to USDA Farm Service Agency to get it on your acreage report. Then you will need to work with your adjuster to finalize the claim, which will generally be paid within 30 days.

Prevented planting insurance payments can qualify for a 1 year deferral for inclusion in income tax. You can qualify if you meet the following criteria:

  • You use the cash method of accounting.
  • You receive the crop insurance proceeds in the same tax year the crops are damaged.
  • You can show that under your normal business practice you would have included income from the damaged crops in any tax year following the year the damage occurred.

The third criteria is the sometimes the problem. Most can meet the criteria, although if you want reasonable audit protection, you should have records showing the normal practice of deferring sales of grain produced and harvested in year 1 subsequently stored and sold in the following year.

There are many additional questions that we could address in this article but these are the basic options to guide your thought process…unless Mother Nature just won’t cooperate!

2019 Dairy Margin Coverage Program – Sign up coming soon

by: Dianne Shoemaker, Extension Field Specialist

Click here to read entire article (complete with graphs & figures)

Occasionally it is nice to catch a break…and breaks have been hard to find in the cow-milking business for a while now.  So, put on your mitt because it is nearly time to play ball.  The Farm Service Agency plans to open the sign-up period on June 17th for the newly renovated Dairy Margin Coverage (DMC) Program, re-named and re-configured in the 2018 Farm Bill.  The changes you will see in the DMC Program attempt to fix some of the problems that rendered the Dairy Margin Protection Program largely ineffective until initial adjustments were implemented early in 2018.

Two of the biggest changes that will positively impact farms of all sizes include 1) adding 3 new margins, $8.50, $9.00 and $9.50, at reasonable premiums, and 2) allowing farms with base production of more than 5 million pounds to make a second margin election for pounds over the first 5 million.

There are also opportunities to recover program participation net losses from 2014, 2015, 2016 or 2017.  Repayment can be received either as cash (50% of the net loss), or by applying it to premiums for participation in the new program (75% of the net loss).  What does this mean?  If a farm purchased $6.50 margin coverage in 2016, paid a premium of $3,500 and received a total indemnity payment of $500, they had a $3,000 net loss.  The farm can now choose to receive half the difference, or $1,500 as a cash payment.  The other option is to receive $2,250, or 75% of the amount, as a credit toward premiums for Dairy Margin Coverage Program participation.  If you participated in any or all of those years, you will receive notification from your Farm Services Agency office with your amounts and options.

So why should you step up to the plate?  Just like 2018, when sign-ups were re-opened for the updated program, sign-ups for 2019 will open well after January, but participation will be retroactive to January 1.  When the sign-up period opens on June 17th, we will know exactly what the margins will be for January ($7.99), February ($8.22), March ($8.85), and April.  Signups will end September 20th, so you could wait and know what the actual margins are through at least July.  As USDA announces new monthly margins, you can find them posted at https://www.fsa.usda.gov/programs-and-services/Dairy-MPP/index

No need to wait

For farms with up to 5 million pounds of base production, indemnity payments for January through March more than cover the premiums at the highest ($9.50) margin.

Example:

Base milk: 5,000,000 lbs (about 200 cows)

Farm elects to cover 95% of their base, 4,750,000 pounds, or 47,500 cwt.

Coverage level selected: $9.50 margin costing 15¢ per cwt

The program assumes that production is equal across months, or 47,500/12 = 3,958 cwt per month.

Because we know the January, February, and March margins, we can calculate the current indemnity payments.  These payments are made on the difference between the purchased margin coverage level ($9.50 in this example) and the announced margin, times the monthly cwts covered:

Jan       $1.51 x 3,958 cwt = $5,977

Feb      $1.28 x 3,958 cwt = $5,066

March $0.65 x 3,958 cwt = $2,573

Total payments                 = $13,616

Less

6.2% Sequestration     = $     844

Administration fee      = $     100

Premium                     = $  7,125

Difference                   = $  5,547 paid to the farm

Since the signup is retroactive to January 1, we know that not only will the known indemnity payments cover all program costs; we also know there will be net positive dollars to help pay a few bills.

How many total net dollars for 2019 is unclear and changing.  Two weeks ago, projections indicated that there would be announced margins less than $9.50 well into the summer.  If recent milk market rallies hold and show up in milk checks, then there could few or no further indemnity payments.  We all hope that that will be the case!

Second election for base pounds over 5 million

A major change that impacts farms with more than 200 cows, is the opportunity to make a margin selection for the first 5 million pounds of base milk, and a different margin selection for any base pounds over 5 million pounds.  The Tier 2 premiums for the > 5 million pounds are substantially higher than premiums for the first 5 million pounds (Table 1).  To be allowed to make a second selection, the farm must purchase coverage at $8.50, $9.00, or $9.50 for the first 5 million base pounds (Tier 1 milk and premiums).

Tier 2 premiums are the same as Tier 1 premiums for $4.00, $4.50, and $5.00 margins (Table 2).  The premium for the $5.50 Tier 2 margin costs more than three times as much as the corresponding Tier 1 premium, with premiums increasing exponentially until they reach $1.813 for the $8.00 margin.  The higher coverage levels quickly become cost prohibitive and are unlikely to make sense for most farms.

However, with the new 2-election option, farms with base production of more than five million pounds should seriously consider maximizing coverage in Tier 1 and electing the $4.00, $4.50, or $5.00 margin coverage on their Tier 2 base pounds for 2019.

Long-term commitment = 25% off premiums

Another option for farmers to consider as they sign up this year is the 25% premium discount option.  There is a large string attached to the 25% discount, as you have to commit to your election for 5 years.

 Decision Tool

How to make a decision? Particularly if you are considering the five-year commitment, use the decision tool developed by Mark Stephenson and crew at the University of Wisconsin.  The new DMC Decision Tool, which incorporates the changes legislated in the 2018 Farm Bill is now up and running at https://dairymarkets.org.  This is a very handy tool that allows farmers to enter their historic production (still starts with the highest of 2011, 2012, or 2013 production – verify your current production history with your FSA office) and explore the cost and potential returns of different coverage percentages and levels.  It will lay out your costs for 2019 participation, expected payment, and also lay out the premium with the 25% discount and total 5-year cost if you want to consider that option.

There is also a button to plug in your MPP Premium Repayment amount supplied to you by your FSA office.  It will tell you how much you could receive as a cash payment and how much of your current selection’s premium would be covered if you chose that option.  The decision tool’s milk and feed price data is updated nearly daily, so you may receive different “expected payment” results depending on what the markets are doing.

OSU Extension and FSA offices will be working together and offering educational programs before and early in the sign-up period to review the changes and options for farmers.  Look at the options for your farm.  Batter up.

 

 

Transition the Farm Business to the Next Generation

by Rory Lewandowski, OSU Extension Educator

Passing the farm business on to the next generation is not automatic. Failure to plan is a plan for failure. Successful farm transition requires preparation and planning. It takes time, effort, communication between family members and legal assistance. The Wayne County Extension office is offering a two-part farm transition workshop on Friday July 19 and Friday July 26 to help farm families with the farm transition process.

The location for the July farm transition workshop is the Secrest Arboretum Welcome Center located at 2122 Williams road, Wooster, near the OARDC campus.  The workshop will run from 10:00 am until 3:00 pm each day.  By attending the workshop, farm families will learn steps necessary for a successful farm transition, get a start on developing a transition plan for the future, discover ways to increase family communication regarding farm transition, and learn strategies on how to transfer management skills and the farm’s business assets to the next generation.

Thanks to support from our sponsors, Farmers State Bank, Wayne Savings Community Bank, Farmers National Bank and Farm Credit Mid-America, the registration fee for the workshop is only $25 for the first two persons from a farm business and $10 for each additional person from the same farm business when sharing a resource notebook.  Registration is limited to the first 50 persons with a registration deadline of July 12th.  Registration includes refreshments, lunch and a resource notebook.

An informational brochure that includes workshop instructors and agenda topics along with a registration form is available on the Wayne County Extension web site at http://go.osu.edu/2019WoosterFarmTransition.   Direct questions or requests for more information to the Wayne County Extension office at 330-264-8722.

USDA Announces Enhancements to Livestock and Dairy Insurance Programs

WASHINGTON, April 22, 2019 – USDA’s Risk Management Agency (RMA) announced today several enhancements to insurance programs that will provide a more efficient level of coverage for livestock and dairy producers. These program improvements to the Dairy Revenue Protection (DRP), Livestock Gross Margin (LGM) and Livestock Risk Protection (LRP) programs take effect July 1, 2019.  “These changes to livestock and dairy programs strengthen risk management options and provide peace of mind in times of unpredictable market fluctuations,” said RMA Administrator Martin Barbre.

Livestock Gross Margin:
LGM provides protection against loss of gross margin or the market value of livestock minus feed costs. The Bipartisan Budget Act of 2018 removed the livestock capacity limitation, which allowed the LGM program to remove the individual capacity limitation under the cattle, dairy and swine program. Prior to the revised legislation, the Federal Crop Insurance Act limited the amount of funds available to support livestock plans of insurance offered by RMA to $20 million per fiscal year.

Livestock Risk Protection
LRP protects livestock producers from the impact of declining market prices. RMA offers LRP insurance plans for fed cattle, feeder cattle and swine.

Beef producers electing the LRP insurance plan for fed cattle may choose from a variety of coverage levels and insurance periods that correspond with the time the market-weight cattle would normally be sold. Likewise, the LRP plan for feeder cattle allows beef producers to choose from a variety of coverage levels and insurance periods that match the time feeder cattle would normally be marketed (ownership may be retained).

LRP insurance for swine gives pork producers the opportunity to choose from a variety of coverage levels and insurance periods that match the time hogs would normally be marketed.

LRP improvements include:

  • Expanded LRP coverage for swine, fed and feeder cattle to all states;
  •  Increased LRP subsidy from the current 13 percent for all coverage levels to a range from 20 percent to 35 percent based on the coverage level selected;
  • Updated the Chicago Mercantile Exchange trading requirements to allow for more insurance endorsement lengths to be offered for producers to purchase;
  •  Increased per head and annual head limits – fed cattle and feeder cattle: 3,000 head per endorsement and 6,000 head annually; swine: 20,000 per endorsement and 75,000 annually; and
  •  Modified the Price Adjustment Factor for Predominately Dairy cattle to 50 percent for both weight ranges, which allows dairy cattle to reflect market prices more accurately.

RMA has also enhanced risk management options for dairy producers.

Dairy Revenue Protection
DRP is designed to insure for unexpected declines in the quarterly revenue from milk sales compared with a guaranteed coverage level. The expected revenue is based on futures prices for milk and dairy commodities and the amount of covered milk production elected by the dairy producer. The covered milk production is indexed to the state or region where the dairy producer is located.

Improvements for the 2020 crop year:

  •  Modified the minimum declared butterfat from 3.50 to 3.25 pounds, making the range 3.25-5 pounds, and the minimum declared protein range is expanded from 3.00 to 2.75 to 2.75-4 pounds, affording greater coverage flexibilities for dairy producers;
  • Removed the declared butterfat test to declared protein test ratio to simplify the process for dairy producers; and
  •  Adjusted the coverage levels – removal of the 70 and 75 percent coverage levels.

Additionally, the Agriculture Improvement Act of 2018 allows producers to enroll in LGM-Dairy or DRP and simultaneously participate in Dairy Margin Coverage, a program administered by the Farm Service Agency.

For more information and answers to frequently asked questions on livestock and dairy risk management options, visit www.rma.usda.gov or contact an approved insurance provider.

Ohio Corn, Soybean and Wheat Enterprise Budgets – Projected Returns for 2019

by: Barry Ward, Leader, Production Business Management, College of Food, Agricultural and Environmental Sciences- Ohio State University Extension

Production costs for Ohio field crops are forecast to be largely unchanged from last year with slightly higher fertilizer and interest expenses that may increase total costs for some growers. Variable costs for corn in Ohio for 2019 are projected to range from $356 to $451 per acre depending on land productivity. Variable costs for 2019 Ohio soybeans are projected to range from $210 to $230 per acre. Wheat variable expenses for 2019 are projected to range from $178 to $219 per acre.

Returns will likely be low to negative for many producers depending on price movement throughout the rest of the year. Grain prices used as assumptions in the 2019 crop enterprise budgets are $3.60/bushel for corn, $8.20/bushel for soybeans and $4.25/bushel for wheat. Projected returns above variable costs (contribution margin) range from $150 to $308 per acre for corn and $144 to $300 per acre for soybeans. Projected returns above variable costs for wheat range from $102 to $202 per acre (assuming $4.25 per bushel summer cash price).

Return to Land is a measure calculated to assist in land rental and purchase decision making. The measure is calculated by starting with total receipts or revenue from the crop and subtracting all expenses except the land expense. Returns to Land for Ohio corn (Total receipts minus total costs except land cost) are projected to range from $23 to $182 per acre in 2018 depending on land production capabilities. Returns to land for Ohio soybeans are expected to range from $84 to $254 per acre depending on land production capabilities. Returns to land for wheat (not including straw or double-crop returns) are projected to range from negative $2 per acre to a positive $143 per acre.

Total costs projected for trend line corn production in Ohio are estimated to be $753 per acre. This includes all variable costs as well as fixed costs (or overhead if you prefer) including machinery, labor, management and land costs. Fixed machinery costs of $66 per acre include depreciation, interest, insurance and housing. A land charge of $187 per acre is based on data from the Western Ohio Cropland Values and Cash Rents Survey Summary. Labor and management costs combined are calculated at $69 per acre. Returns Above Total Costs for trend line corn production are negative at -$120 per acre.

Total costs projected for trend line soybean production in Ohio are estimated to be $518 per acre. (Fixed machinery costs – $52 per acre, land charge: $187 per acre, labor and management costs combined: $45 per acre.) Returns Above Total Costs for trend line soybean production are also projected to be negative at -$76 per acre.

Total costs projected for trend line wheat production in Ohio are estimated to be $488 per acre. (Fixed machinery costs: $52 per acre, land charge: $187 per acre, labor and management costs combined: $39 per acre.) Returns Above Total Costs for trend line wheat production are also negative at -$137 per acre.

These projections are based on OSU Extension Ohio Crop Enterprise Budgets. Newly updated Enterprise Budgets for 2019 have been completed and posted to the OSU Extension farmoffice website:

https://farmoffice.osu.edu/farm-management-tools/farm-budgets

 

2018 Grape Pricing Index Survey Being Conducted

The Ohio State University Viticulture Extension Team in conjunction with the Ohio Grapes Industries Committee is conducting a state-wide survey of grape prices to better understand the distribution, harvest yield, and price of Ohio-grown grape cultivars from the 2018 season. Please take the time to fill out the 2018 Grape Pricing Index survey at the link below.

To facilitate survey marketing and distribution throughout our industry, the information we obtain will be available in aggregated form to Ohio grape growers and vintners through Ohio Grape Industries communication networks.  As grape prices will be averaged by variety and across regions, all individual responses will remain anonymous and confidential.

Your participation in this study is voluntary and involves minimal risks to you. If you refuse to participate or decide to stop participating in the study, there will be no penalty or consequences. Your decision to participate will not affect your future relationship with The Ohio State University. There is no cost to you except your time.

By clicking the link, you are consenting to take this survey. This survey may be exited at any time and takes approximately 5 minutes to complete.

We will work to make sure that no one sees your survey responses without approval. But, because we are using the Internet, there is a chance that someone could access your online responses without permission. In some cases, this information could be used to identify you.

If you have any questions regarding this survey, please email Maria Smith at smith.12720@osu.edu or call 330-263-3825.

For questions about your rights as a participant in this study or to discuss other study-related concerns or complaints with someone who is not part of the research team, you may contact Ms. Sandra Meadows in the Office of Responsible Research Practices at 1-800-678-6251 or hsconcerns@osu.edu.

Thank you for your time,

-The OSU Viticulture Extension Team

Please click on the following link to begin the Ohio grape pricing survey

https://osu.az1.qualtrics.com/jfe/form/SV_6RMGgGw7miB5v5r