Swine Contract Finishing What You Need to Know

by: Garth Ruff-  ANR Educator – OSU Henry County Extension

Napoleon, Ohio — With the new Clemens Food Group packing plant up and running in Coldwater, Michigan there is a need for contract finishing facilities within close proximity to the plant. Northwest and Northcentral Ohio offer tremendous opportunity as Ohio integrators continue to expand their herds in response to the increase in packing capacity. Furthermore, as corn and soy price projections look steady for the foreseeable future, contract swine finishing may be a way to diversify your farming enterprise.

If you have considered or are interested in becoming a contract swine feeder, join OSU Extension on March 1 at the American Legion Annex, 500 Glenwood Avenue, Napoleon. Topics will include barn siting, contract agreements, loan acquisition, manure management, and outlook for the pork industry.

Contact her for Program Flyer

On hand, to present the above topics will be OSU Swine Specialist, Dale Ricker, lenders from AgCredit, Garth Ruff, Henry County Extension Educator, and a panel of Northwest Ohio’s newest swine growers. Plan today to be part of the swine industry tomorrow.

 

Economic Contribution of Agricultural and Food Production Cluster to Ohio Economy – County Level Analysis

 

Contributors: Ben Brown, Ryan Brune, Connor Frame, and Megan Ritter

Click here for the entire PDF Article for the County Level Report

In November of 2017, researchers in the Department of Agricultural, Environmental, and Development Economics released The Economic Contribution of Agricultural and Food Production to the Ohio Economy report with analysis of Ohio’s entire Agricultural and Food Production Cluster. Details of that report are included, but this serves as a parallel analysis of agriculture to each of Ohio’s eighty-eight counties. Key results match initial assumptions in those counties with large concentrations of equipment manufacturing, professional services and diary & milk production led total economic contribution by the production agriculture subsector. In addition, counties containing relatively high food processing see the largest total sector contributions, and that counties with relatively small populations experience a higher percentage of employers involved in food and agriculture related careers. Large population centers within Cuyahoga, Franklin and Hamilton counties produced high economic contributions, but had low total population participation in agriculture. Data obtained from IMPLAN, a North Carolina based economic software company, provided the most recent total values, while the North American Industry Classification System was used to determine the percent agriculture contributed to each sector. The IMPLAN model estimates value added for 536 separate subsectors within Ohio’s economy. Unlike the statewide report, these county level calculations do not include the contribution from restaurants and bars. It also includes Farm Inputs, Equipment and Farm Professional Services in the agricultural production subsector.

Key findings in the statewide report: Ohio’s Agricultural and Food Production Cluster plus Restaurant and Bars account for $1 in every $13 of Ohio’s GSP and 1 in 8 jobs in Ohio. Each county differed in these ratios, but as expected large population counties were negatively correlated with small population counties in economic contribution and percentage of workforce involved in agriculture. The total statewide economic value added contribution of the Agricultural and Food Production Cluster minus Restaurants and Bars was $32.5 billion dollars and accounted for a little over 5 percent of the state’s gross state product. Value added being the sum of sales minus input costs for each sector. Example: corn production minus seed, fertilizer, ext. The sector employed 402,874 Ohioans in 2015 and because of purchases outside the cluster; a multiplier of 1.6 was used for every dollar of valued added making the total contribution $53 billion. Multipliers are a way of capturing the money spent within Ohio made from an agricultural sector that is then used to purchase additional products, like household items, into the economic contribution.

Declining commodity prices for corn, soybeans and milk in recent years have lowered the value added contribution of some counties, especially those that have corn, soybeans and milk ranked in the top three subsectors. Other subsectors including fruit and vegetable production have shown an increase to the value added contribution. Along with decreasing commodity prices, increasing productivity due to technology advancements have correlated with a decrease in employment within agriculture and food production. Ohio’s characteristic as a top agriculture producing state remains strong, but external factors like increasing pressure on land values could be seen as a potential challenge for the production agriculture subsector.

The three main divisions of the Agricultural and Food Production Cluster: Agricultural Production, Agricultural and Food Processing and Food Wholesale/Retail are included in Table 1 with subsectors broken out under their respective division. Different from the statewide report is the inclusion of Farm Inputs, Equipment and Professional Services under the division of Agricultural Production instead of an isolated division.

Table 1: Classification of Sectors

Agricultural Production Agricultural and Food Processing Food Wholesale/ Retail  
Farm Inputs, Equipment and Professional Services Processed Meat, Fish, Poultry & Eggs Food and Forestry Wholesale
Dairy Cattle and Milk Production Dairy Processing Food and Forestry Retail
Beef Cattle Production

 

Processed Food & Kindred Products
Poultry & Egg Production

 

Grain Milling & Flour
Hogs & Other Farm Animals Fats & Oils Processing
Grain Production

 

Beverage Processing
Soybeans & Other Oil Seeds Wood/ Paper/ Furniture Manufacturing
Misc. Crops, Hay, Sugar, Tobacco & Nuts
Fruit & Vegetable Production
Greenhouse, Nursery & Floriculture Production
Forestry, Hunting & Fishing
Sum of Agriculture Production Sum of Food Processing Sum of Food Wholesale/ Retail Total Agricultural and Food Production Cluster

 

Starting with Total Value Added from the Agriculture and Food Production Cluster it is not surprising to see in Figure 1 that the top five counties also match five counties with large population centers. With Franklin, Hamilton, and Cuyahoga counties being the location of Columbus, Cincinnati, and Cleveland respectively, it was expected and found that the contribution of production agriculture in terms of both value added and employment was the smallest division contributor, with food processing being the largest contributing division in Franklin, Hamilton, Butler, and Stark Counties. Food wholesale/ retail was the largest contributing division for Cuyahoga County.  Statewide, the food processing sector was the largest contributing division at $14,986 million and 2.43% of the states’ Gross State Product (GSP).

Franklin County had a high food processing contribution due to the beverage processing sector at $916 million. Notable companies in the area include Anheuser-Busch Companies Inc., BrewDog USA, Coca-Cola and others according to the Columbus Economic Development Annual Report. Employment within the Cluster was also largely contributed from the beverage processing subsector. For Hamilton county, the beverage processing subsector was also the largest contribution to the food processing division. Boston Beer Company, the parent company of Sam Adams Beer, and The J.M. Smuckers Co., parent company to Folgers Coffee are major contributors to the subsector. Boston Beer Company produces 20 percent of all Sam Adams Beer within Hamilton County. Cuyahoga County was the lone county in the top five where the top contributing division was Food Wholesale/Retail. Multiple subsectors in this division contributed to the large value, but noticeable was the smaller value for the beverage processing subsector in the Food Processing division. Analysis was not conducted across all 88 counties, but based on the top total value added counties, counties with large beverage processing subsectors had food processing divisions that made up the largest portion of the county’s Agricultural and Food Cluster contribution. While Cuyahoga, Franklin and Hamilton Counties are only 3 out of 88, the population represents roughly 29 percent of Ohio’s population based on U.S. Census Bureau data and make up a large portion of the Cluster’s impact to Ohio.

Figure 1: Top Five Value Added Counties

In Figure 1, counties producing the largest total values of economic contribution from agriculture and food were identified, and it isn’t surprising that counties with relatively large total economies also had the largest contributions of agriculture. However, in none of the top five producing counties was production agriculture the top contributing division. To look at the relative value of production agriculture to a county’s economy we can use the value added from agricultural production as a percent of the counties total economic output and indeed counties with larger agricultural output in regards to the National Agricultural Statistics Service (NASS) do rise to the top.  However, this should not be interpreted as the five counties with the largest total value contribution from production agriculture. The 2016-2017 Ohio Agricultural Statistics Annual Bulletin shows that land use for agricultural purposes in Mercer, Darke, Paulding, Putnam and Union Counties are 93%, 89%, 83%, 99% and 88% respectively, where land use is the sum of cropland, pastureland, and woodland. Figure 2 illustrates where the five counties lie within Ohio.

Figure 2: Top Five Counties

County agriculture contribution profiles for Mercer and Darke counties were similar as both counties had the same two subsectors contributing the majority of value added products to the county economies: Poultry & Egg Production and Pork Production. For Paulding and Putnam counties there was not a specific subsector that stood above the rest, but more of a balanced distribution. Soybeans & Other Oil Crops had relatively high values for both counties. In contrast, Union County had a top contributing subsector of Farm Inputs, Equipment & Other Professional services that made up 9% of the entire counties economy. This subsector made up 90% of the contribution of the Agricultural and Food Cluster.

While one indication of contribution to a county’s economy is through the value added calculation, another indicator is the number of people employed with-in the Cluster. Similar to the total contribution illustration above in Figure 1, counties with high food processing and relatively large populations also have the largest total number of employment in agriculture, but have a low percentage in relation to the entire county population. Figure 3, identifies the five counties with the highest percentage of the population involved in the Agriculture and Food Cluster. As seen above, Franklin County had the largest total value added to the economy and the highest employment at almost 38 thousand people, but represents roughly 4% of the counties workforce. Whereas Jackson County did not make the top five in total value added contribution, but has 25 percent of its workforce involved in the Cluster.

Figure 3: Percent of Population involved in Agriculture and Food

Summary

Understanding components of the statewide economy are important, as trends within the sector help identify strengths and weaknesses. However, county analysis helps those within and around the industry become stronger more informed decision makers in issues relevant to the Agricultural and Food Production Cluster. Not surprising, counties with larger populations had the highest total value added contribution to the county’s economy and the highest number of employees within the work force, but had lower percentages of the county total in values and employees to those counties with small populations. In counties with large value added from the entire cluster, Food Processing was the largest contributing division for the majority of counties in the top five. A strong beverage-processing subsector helped elevate the Food Processing division for these counties.  Isolating the Production Agriculture division including Farm Inputs, Equipment and Professional Services as a percent of the county’s total economy identified five counties that have relatively high land use in agriculture and high total sales from agriculture commodities.

Individual county fact sheets for all eighty-eight Ohio counties are listed here:

https://aede.osu.edu/research/osu-farm-management/agricultural-impact/contribution-agriculture-county

Appendix I. includes a list of counties and their value of total contribution, value of production agriculture contribution, and employment. State rankings are in parentheses.

References:

“Columbus Region: Food and Beverage.” Columbus 2020, 2017.

DiCarolis, Janice. et al. The Economic Contribution of Agricultural and Food Production to the Ohio Economy. 2017.

IMPLAN. 2017. 2015 Ohio state data package. www.implan.com

Turner, Cheryl, and Brooke Morris. Ohio Agricultural Statistics 2016-2017 Annual Bulletin. USDA, National Agricultural Statistics Service, 2017.

US Census. 2017a. County Business Profiles. https://www.census.gov/programs-surveys/cbp.html

  Agriculture Production Value Added Ag Production % of Employment Total Cluster Value Added Total % of Employment
Adams $26,132,407 (72) 10% (5) $56,773,236 (77) 14% (13)
Allen $78,125,934 (19) 2% (65) $319,126,539 (24) 7% (64)
Ashland $74,074,340 (24) 5% (36) $184,902,491 (48) 10% (38)
Ashtabula $46,313,267 (52) 3% (56) $170,069,071 (50) 8% (59)
Athens $10,832,931 (82) 2% (63) $84,474,544 (69) 6% (74)
Auglaize $71,793,513 (25) 4% (39) $265,307,529 (34) 10% (33)
Belmont $48,773,321 (50) 3% (58) $145,203,550 (55) 8% (54)
Brown $32,761,777 (68) 7% (20) $61,715,467 (76) 11% (28)
Butler $49,768,789 (48) 1% (81) $1,323,431,575 (4) 6% (73)
Carroll $27,087,761 (71) 6% (22) $52,115,212 (78) 10% (37)
Champaign $41,533,589 (62) 5% (28) $106,563,182 (65) 11% (30)
Clark $49,500,983 (49) 2% (69) $287,447,821 (29) 7% (62)
Clermont $38,145,667 (65) 2% (70) $290,746,554 (27) 6% (75)
Clinton $53,920,762 (42) 4% (42) $132,673,146 (57) 8% (51)
Columbiana $56,804,685 (35) 3% (54) $264,737,172 (35) 9% (41)
Coshocton $60,830,386 (31) 7% (17) $187,589,390 (47) 15% (7)
Crawford $56,705,986 (37) 4% (40) $94,785,325 (67) 8% (57)
Cuyahoga $97,944,901 (9) >1% (86) $2,870,230,295 (3) 4% (88)
Darke $239,806,461 (4) 8% (12) $301,799,993 (25) 12% (23)
Defiance $74,738,470 (21) 5% (33) $132,202,917 (58) 9% (43)
Delaware $71,115,273 (26) 1% (78) $414,656,942 (15) 5% (81)
Erie $40,597,271 (64) 2% (62) $168,143,020 (51) 6% (68)
Fairfield $57,092,509 (34) 2% (64) $286,483,386 (30) 7% (66)
Fayette $41,430,653 (63) 4% (44) $203,165,951 (45) 13% (19)
Franklin $163,203,968 (5) > 1% (87) $4,233,913,386 (1) 4% (86)
Fulton $74,574,695 (22) 5% (34) $195,829,037 (46) 10% (32)
Gallia $15,592,444 (77) 6% (27) $37,233,957 (81) 8% (49)
Geauga $56,208,056 (38) 3% (61) $237,554,367 (40) 7% (63)
Greene $43,688,591 (56) 1% (77) $215,452,629 (43) 4% (83)
Guernsey $20,965,101 (75) 6% (26) $74,530,511 (72) 10% (35)
Hamilton $111,589,093 (8) >1% (88) $3,094,701,906 (2) 4% (85)
Hancock $56,118,896 (39) 2% (67) $385,962,349 (18) 9% (46)
Hardin $82,800,471 (14) 8% (13) $138,666,355 (56) 15% (11)
Harrison $10,621,659 (83) 7% (18) $28,975,047 (84) 13% (16)
Henry $54,239,652 (41) 6% (24) $334,766,774 (21) 18% (3)
Highland $45,616,926 (55) 9% (9) $76,818,531 (71) 13% (18)
Hocking $6,799,259 (87) 5% (32) $47,538,393 (79) 12% (22)
Holmes $132,411,907 (7) 7% (16) $385,876,069 (19) 22% (2)
Huron $89,862,265 (11) 5% (37) $324,490,460 (22) 11% (26)
Jackson $22,937,105 (74) 4% (47) $239,977,669 (39) 25% (1)
Jefferson $9,879,886 (84) 2% (71) $79,391,785 (70) 6% (69)
Knox $50,521,887 (47) 5% (30) $122,081,622 (62) 10% (34)
Lake $82,942,001 (13) 1% (80) $630,592,252 (10) 6% (76)
Lawrence $6,325,381 (88) 4% (41) $40,616,956 (80) 8% (55)
  Agriculture Production Value Added Ag Production % of Employment Total Cluster Value Added Total % of Employment
Licking $80,959,369 (17) 3% (57) $290,176,991 (28) 7% (61)
Logan $47,525,570 (51) 4% (45) $129,164,871 (61) 8% (58)
Lorain $75,209,443 (20) 1%  (73) $376,334,667 (20) 5% (78)
Lucas $65,557,760 (29) >1% (84) $745,401,227 (9) 4% (87)
Madison $69,435,722 (27) 4% (38) $113,507,126 (64) 8% (53)
Mahoning $43,627,477 (57) 1% (82) $413,002,404 (16) 5% (80)
Marion $82,089,222 (16) 3% (50) $261,902,767 (36) 10% (36)
Medina $67,362,783 (28) 2% (72) $492,849,630 (13) 6% (67)
Meigs $12,179,096 (81) 9% (6) $22,478,977 (87) 13% (17)
Mercer $287,020,607 (2) 7% (15) $486,428,489 (14) 16% (5)
Miami $41,628,715 (61) 3% (59) $320,490,163 (23) 9% (44)
Monroe $13,856,148 (79) 12% (2) $21,979,543 (88) 15% (12)
Montgomery $53,434,618 (43) >1% (83) $965,102,826 (8) 4% (84)
Morgan $13,011,573 (80) 9% (8) $23,902,013 (86) 14% (14)
Morrow $42,743,432 (59) 9% (7) $70,494,294 (73) 12% (20)
Muskingum $30,721,596 (70) 3% (55) $272,726,649 (33) 8% (47)
Noble $8,823,935 (85) 10% (4) $29,242,985 (83) 16% (6)
Ottawa $42,511,100 (60) 4% (43) $89,869,973 (68) 8% (56)
Paulding $54,709,543 (40) 12% (1) $66,561,674 (75) 15% (9)
Perry $14,860,292 (78) 8% (14) $30,646,479 (82) 12% (24)
Pickaway $58,449,378 (33) 5% (29) $104,937,335 (66) 9% (42)
Pike $20,526,229 (76) 4% (48) $69,036,918 (74) 11% (25)
Portage $33,902,467 (66) 1% (75) $282,939,009 (31) 5% (79)
Preble $52,009,567 (46) 9% (10) $171,486,943 (49) 15% (10)
Putnam $145,093,953 (6) 10% (3) $299,022,297 (26) 13% (15)
Richland $60,865,434 (30) 2% (66) $241,549,299 (38) 6% (72)
Ross $33,267,855 (67) 3% (52) $281,600,791 (32) 10% (39)
Sandusky $74,346,534 (23) 3% (53) $212,843,255 (44) 8% (48)
Scioto $24,304,785 (73) 3% (51) $117,445,217 (63) 7% (60)
Seneca $56,748,780 (36) 6% (25) $153,350,740 (52) 10% (31)
Shelby $80,446,033 (18) 3% (49) $226,462,435 (42) 9% (45)
Stark $82,669,192 (15) 1% (79) $1,225,863,198 (5) 7% (65)
Summit $53,052,421 (44) >1% (85) $1,086,245,523 (6) 4% (82)
Trumbull $46,191,278 (54) 1% (74) $256,092,067 (37) 6% (77)
Tuscarawas $52,437,891 (45) 3% (60) $227,995,907 (41) 8% (52)
Union $459,647,601 (1) 7% (21) $549,639,730 (12) 9% (40)
Van Wert $89,276,531 (12) 7% (19) $131,848,326 (60) 11% (27)
Vinton $8,559,330 (86) 8% (11) $27,107,972 (85) 17% (4)
Warren $46,224,334 (53) 1% (76) $552,430,711 (11) 6% (70)
Washington $30,966,222 (69) 4% (46) $132,119,584 (59) 8% (50)
Wayne $283,008,467 (3) 5% (31) $1,002,275,825 (7) 15% (8)
Williams $43,262,519 (58) 5% (35) $145,407,816 (54) 11% (29)
Wood $97,920,671 (10) 2% (68) $387,193,635 (17) 6% (71)
Wyandot $60,516,234 (32) 6% (23) $149,052,657 (53) 12% (21)

 

Ohio State Researchers: Milk Date Labels Contribute to Food Waste

Written by Tracy Turner; Sources by Brain Roe and Dennis Heldman

COLUMBUS, Ohio — Got milk?

If so, you may be among the majority of consumers who throw that milk out once the date on the carton or jug label has passed.

But Ohio State University researchers say not so fast — that pasteurized milk is still good to drink past its sell-by date.

Scientists in the College of Food, Agricultural, and Environmental Sciences (CFAES) say that arbitrary date labels on food contribute to significant food waste because the date labels serve only as an indicator of shelf life, which relates more to food quality than safety.

Brian Roe, a CFAES professor of agricultural economics, co-authored a new study examining consumer behavior regarding date labeling on milk containers. The goal of the research is to help consumers reduce food waste through improved food labeling systems and consumer education.

The study, which will appear in the June 2018 edition of Food Quality and Preference Journal, surveyed 88 consumers who were asked to sniff half-gallon jugs of milk that were 15, 25, 30 and 40 days past the date they were bottled. Some milk samples were dated and some were not dated.

The study found that 64 percent of respondents said they would throw the milk out that had a date label, while only 45.8 percent of respondents said they would throw the same milk out if they didn’t know the date label of the milk.

“Date labeling doesn’t tell you when a food will spoil,” said Roe, who also leads the Ohio State Food Waste Collaborative, a collection of researchers, practitioners and students working together to promote the reduction and redirection of food waste.

“Consumers often view dates as if they indicated health or safety, but those dates are really just about the quality of a product determined by manufacturers,” Roe said. “There’s a difference between quality and safety.

“Pasteurized milk is safe past the sell-by date unless it has been cross-contaminated. While it may not taste as good — it can go sour and have flavors that people don’t like and may make them feel nausea — but it isn’t going to make them sick.”

Roe said the study focused on milk because it is one of the most wasted food products in the United States, representing 12 percent of consumer food waste by weight. And past research suggests the date label is a critical reason why milk is discarded, he said.

“Innovations in date labels and explaining what the date labels mean will allow more consumers to save money by keeping milk longer and reducing food waste, which has social implications as well,” Roe said. “It’s very resource intensive to produce milk — from the land needed to grow feed for the cows, to the water used for cows to produce the milk, to the energy that goes into housing cows and to processing and transporting the milk.

“Not to mention the retailers, who spend a lot of time managing the milk case at the grocery store as well.”

Confusion regarding food label dates leads to significant food waste nationwide, with the average American household spending more than $2,000 annually on wasted food, according to a study by the Natural Resources Defense Council.

So what do the date labels on food mean?

According to the U.S. Department of Agriculture, the:

  • “Best if used by/before” date indicates when a product will be of best flavor or quality. It is not a purchase or a safety date.
  • “Sell-by” date tells the store how long to display the product for sale for inventory management. It is not a safety date.
  • “Use-by” date is the last date recommended for the use of the product while at peak quality. It is not a safety date except when used on infant formula.

“If we make changes to the date labeling, we have to make sure the regulatory system understands how the changes will impact their regulations,” said Dennis R. Heldman, a CFAES professor of food engineering, a member of the Food Waste Collaborative and a study co-author.

Heldman is also studying the effect on consumers of an indicator that would be attached to containers of perishable foods to monitor their shelf life. The indicator would gradually change color during storage and distribution of a food or beverage.

So a change in color, say, from blue to red, would tell consumers that the product has reached the end of its shelf life.

“Using this method, consumers can be confident as to when the product should and shouldn’t be consumed,” he said.

 

Values on Agricultural Land Are Expected to Decline by 11.2%/ acre on Average

Ani Katchova, Associate Professor and Farm Income Enhancement Chair

Robert Dinterman, Postdoctoral Researcher in the Department of Agricultural, Environmental, and Development Economics

There are two types of tax values that are on the minds of farmers: market value (the value per acre for highest and best potential use) and current agricultural use value.  Farmers who farm more than 10 acres and participate in the Current Agricultural Use Value (CAUV) program typically benefit from lower tax bills because tax is calculated based on below true market values.  The program began in 1973 with the intention of leveling the playing field for farmers by computing farmland values based on crop yield, soil conditions, interest rates, and crop prices that have proven to be volatile.

Projections just released by agricultural economists in the College of Food, Agricultural, and Environmental Sciences (CFAES) forecast that agricultural land is expected to see a decline of around 11.2% from 2017 values that averaged around $1,153.  The projected average 2018 CAUV value is expected to be $1,023 per acre for the 24 counties in Ohio receiving either reappraisals or adjustments to their properties’ assessed value.

Ani Katchova, Associate Professor and Farm Income Enhancement Chair, and Robert Dinterman, Postdoctoral Researcher in the Department of Agricultural, Environmental, and Development Economics are releasing their projected CAUV values months before the Ohio Department of Taxation will release the official CAUV values.  They say the reduction will help farmers lower their expenses and help stabilize declining farm incomes.

“It is good news for farmers because it will reduce their tax bill,” says Katchova. “Adjustments to assessed values occur once every three years and this represents a 26.3% decrease from the 2015 average CAUV value of $1,388 which had been the assessed value for the past 3 years for counties receiving an update in 2018.”

Dinterman explains further, “these same 24 counties saw their taxes rise in 2014 due to rising commodity prices and a falling capitalization rate.”

He furthers that CAUV values are anticipated to be even lower in the future, because we still have the phase in process and the CAUV formula is based on seven-year averages of several inputs.  CAUV has undergone significant changes to its formula in the past few years – mostly by changing its formula for the capitalization rate – which impacts the OSU agricultural economists’ projections for the 2018 CAUV values.

To calculate the projected values, Dinterman and Katchova used official Ohio Department of Taxation and USDA data, and data on non-land costs.  The Ohio State agricultural economists anticipate that the decline in CAUV values for 2018 will be a continued trend for at least the next 3 years.

Even though the average value of CAUV is expected to decline by 11.2%, not all soil types will decline by the same percent.

“CAUV is calculated for each of over 3,400 soil types in Ohio,” Dinterman clarifies. “And the factor that differentiates the soil types is how much corn, soybeans, or wheat the soil is expected to produce. Farmland with higher expected yields will be more affected by these CAUV changes than farmland with lower productivity.”

Katchova and Dinterman caution that their projections are not the official Ohio Department of Taxation estimates. They claim it is possible for the average CAUV value to decline by as much as 20.6% while it is also possible for the average CAUV value to rise by over 20.6%. However, an increase is viewed as unlikely.

Review of “Constructed wetlands for water quality improvements: Benefit transfer analysis from Ohio”

by N.B. Irwin, E.G. Irwin, J.F. Martin and P. Aracena

Bodies of water provide many benefits to residents through recreation and use but run-off from agriculture and urban areas can impair water quality. While Ohio has worked on improving water quality in its rivers and large streams, with 80 percent meeting aquatic life goals, less than 13 percent of its lakes meet such a standard. A possible solution to this problem is the construction of treatment wetlands to remove excessive nutrients from water bodies. Constructed wetlands utilize the natural environment as a form of water treatment and act as a filter to remove excessive nutrients and pollutants in runoff water.  Compared to other forms of water treatment, wetlands deliver water quality improvements with significantly smaller lifetime operation and maintenance costs.

This study examines the feasibility of using constructed wetlands to improve water quality in sample of 24 inland lakes from Ohio. Using water quality data collected from the Ohio Department of Natural Resources and the Ohio Environmental Protection Agency, data on population, housing prices and incomes from the U.S. Census, and information on recreational visitors, the total cost of creating and operating free surface water wetlands to improve water quality by 10 percent through the removal of phosphorous is estimated. Additionally, the study derives the willingness-to-pay for a 10 percent water quality improvements by both homeowners and recreation users. Nearby residents benefit from improved water quality through higher house prices while recreation users value the changes in water quality through an expansion of possible outdoor opportunities.

The total cost of constructing wetlands for all 24 lakes is over $107 million, with size and surrounding land cost for each lake differing greatly. The willingness-to-pay estimates for both the surrounding homeowners and recreation users averages over $606 million, depending on the model specification. The most conservative estimates indicate that constructed wetlands could provide a lifetime cost benefit ratio of 1:2.92 or a $2.92 return for every $1 invested. The average per capita benefit per resident or recreation user would be $68. These results indicate that wetlands are clearly an effective means of both reducing nutrient loadings in surface water and providing positive economic returns to homeowners and recreational users.

The study also examines the cost implications for constructed wetlands to be used as a strategy to meet hypothetical statewide standards for phosphorous concentrations in lakes at 50 µg/L and 25 µ/L per lake. At the lower standard of 50 µg/L the estimated cost is $870 million, whereas at the stricter standard of 25 µg/L costs would exceed $2.7 billion and require 0.5% of all arable land in Ohio. Using wetlands for achieved phosphorus reduction goals is not a cost-effective strategy. Instead, a comprehensive approach to nutrient reduction and water quality is necessary.

To read the complete article follow the link: https://www.sciencedirect.com/science/article/pii/S0301479717310460

 

Summarized by Ben Brown, Program Manager: Farm Management Program

Grain Storage in the United States and Abroad

by Ben Brown

Click here to Access article Grain Storage in the U.S. and Abroad (has graphs)

Happy Grain Bin Safety Week! That right, February 18th through the 24th is national Grain Bin Safety Week. Grain bins are certainly nothing to play chicken with as the grain inside, while used to make the food that nourishes our bodies, can also be a quicksand-like hazard. Taking extreme caution and having at least one other person around while inside a grain bin is highly recommended.  In fact, since some grain bins are located on the edge of the field without a readily known mailing address, making sure the address is posted somewhere visible is just an added layer of preparedness in case emergency help is needed. Grain bin safety is important! In honor of Grain Bin Safety week here is a quick review of the grain on hand both in the United States and internationally.

There should be little surprise that stocks, both domestically and abroad, have been on the rise the last five years as world prices for corn, soybeans, and wheat declined after their peaks in 2012/13. Five straight years of above trend yield for worldwide grain production have contributed to the abundant stocks. An example of trend would be if a football team won six games one year, seven the next, and eight the following. Given trend, one would expect that in the fourth year, the team would win nine games, but instead they won fourteen. This would be an above trend year. Arguments can be made whether the exceptional world yields were products of good weather globally or technological advancements in seed. Lower prices for grains have encouraged producers to retain larger portions of their crop on farm or in storage at local elevators in the hope for an upward bounce in price.

Starting with domestic soybeans, 2017 was another solid year for soybean production. The National Agricultural Statistics Service will make the county yield estimates for 2017 official later in February, but early estimates are for 49 bushels per acre. This is slightly down from the previous year of 52 bushels per acre. However, planted acres for soybeans have steadily increased the last few years and the increased acreage more than compensated for the decrease in yield. Soybean production in the U.S. totaled a record 4.39 billion bushels in 2017. Luckily there has been an increased use for crushed soybeans, soy protein and soybean oil. Figure 1 shows domestic stocks and the percent of total use.

In figure 1, we see that the stocks to use ratio for U.S. soybeans has increased the last four years largely contributed to strong yields across the Midwest and increased acreage. Due to profitability of corn and soybeans per acre, the United States Department of Agriculture has projected that soybean acreage will continue to increase in the years to come. The U.S. exports a little over 2 billion bushels of soybeans each year, which is almost half of the total use of domestic production.

Moving to “King” corn, the same story roughly applies. However, this time record corn yields across the Corn Belt were counteracted with a decrease in harvested acreage. Not all of the increase in soybean acreage for 2017 came from corn acreage, as wheat and sorghum were also contributors. Especially in Kansas, Nebraska and the Dakotas. However, with a national yield of 177 bushels per acre, 2017 beat the previous record yield. Total production in the U.S. came in at 14.6 billion bushels, down 4 percent from 2016.

At 20 percent, the stock to use ratio for corn has increased in six consecutive years. Another strong yielding year or a decrease in the demand for corn products could put even more downward pressure on corn prices. Ethanol production uses about 5.5 billion bushels and corn used for animal feed makes up about 5.6 billion bushels. These two categories make up the largest segments of U.S. corn use. Currently the World Agricultural Supply and Demand Estimates are projecting a 2017/18 marketing year average price of $3.30, which is below Ohio’s average breakeven price and $0.40 below the reference price created in the Agricultural Adjustment Act of 2014 for Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) payments at $3.70.

For wheat, one of the bright spots is that the U.S. stocks to use ratio has started to decrease after a historic high last year. However, the downside for wheat is that there has not been the large driver for demand like in corn and soybeans with ethanol and protein respectively. Since 1996, the total use for wheat has remained relatively flat with slightly decreasing production on reduced acreage. Until demand for wheat picks up, wheat acreage will continue to decrease. The 2018 wheat planning was down 1 percent from 2017 and down 10 percent from 2016 coming in at the second lowest projected planting on record. The WASDE projected price for 2017/18 is $4.60 also below the reference price of $5.50. Figure 3 shows the quantity of U.S. wheat use. The majority of wheat use is in foodstuffs like bread, cookies and pasta.

Putting all three crops on the same graph, Figure 4 compares the stock to use ratios for all three U.S. commodities.

However, the U.S. is not the only place with large ending stocks in storage. World supplies of corn, soybeans and wheat have also been on the increase the last few years as referenced by Figure 5. Corn and soybeans stocks to use ratios have both showed a decrease on stronger demand and a growing drought in South American crops specifically Argentina causing reduced yields.

International trade is a topic of popular discussion in America right now as the renegotiation process of the North America Free Trade Agreement just finished its sixth round of negotiations. Canada and Mexico are importers of U.S. corn and soybeans with China remaining as the largest importer of U.S. soybeans. A strong U.S. dollar relative to international currencies weakens the market share of U.S. goods in the international markets. In the last few years, Brazilian soybeans have chipped away at the U.S. export market to several of the world’s largest importers of soybeans. Exports remain vital to the U.S. as large portions of both corn and soybeans production rely on international trade.

Summary:

Stocks in the United States and globally have grown in the last few years on larger than expected yields. Large stocks suppress grain prices as grain comes to the market out of private storage when market prices tick up. It is unlikely to see large movements in future prices for the coming growing season without a weather related shock. However, local elevators will probably fluctuate their delivery price based on their need for grain. Ethanol plants in Ohio have already started to do this when needing more corn. Large stocks internationally will continue to hurt U.S. trade internationally as a strong U.S. dollar makes U.S. products more expensive. Some countries like China have reversed domestic commodity price supports to work down their stockpiles of corn. As stocks decrease, the expectation is to see larger swings in markets from weather related events both domestically and abroad. Happy National Grain Bin Safety Week!

Ben Brown
The Ohio State University Department of Agriculture, Environmental, and Development Economics
614-688-8686 (Office)  660-492-7574 (Cell)
brown.6888@osu.edu

Farm Management Series to be held in Fulton County in February

by Eric Richer, Extension Educator

Ohio State University Extension-Fulton County will again be offering its Farm Management Series on Tuesdays in February.  The series is for any farmer who raises commodity grain and livestock. This year’s program will focus on farm succession, financial and production planning. Additionally, the series will help farmers look at options for taking your farm a different direction to complement commodity production. This year the series is offered as a daytime program from 9:00 am to 3:00 pm and includes lunch. Each session will feature guest speakers and content relevant to today’s farm management. The series, which runs February 6, 13, 20 and 27, is taught by a combination of Extension Educators and state specialists and private sector individuals.

On Tuesday, February 6, the series will emphasize transition and estate planning (farm succession).  Topics will include working together to develop your farm’s business plan, answering 9 key succession planning, legal structures, getting your financial affairs in order and family communication.

Tuesday, February 13th will focus on financial planning.  Time will be spent reviewing key farm financial statements and strategies including an Ag Lender/Professional panel at lunch.  The afternoon will address ways to reduce family living expense and financial stress as well as taking a hard look at the value of enterprise analysis on your farm.

February 20th will be spent looking at key production planning areas of farm management.  Speakers will address the outlook for inputs, best management practices for leasing or buying, and calculating your cost of production.  Additional sessions will focus on the CAUV property tax production formula and converting your farm to natural gas.

The final session of the series on February 27 will conclude with a day full of guest speakers who will offer options for “taking your farm a different direction” to complement commodity production.  The buffet of topics will include transitioning to organic, swine production, agri-tourism, barley production in Ohio, and non-GMO grain opportunities.

The total cost for the series is $60 or $20 per day session if pre-registered by February 1.  Registration after the deadline will still be accepted but the cost goes up to $70 for the series or $25 per session. Registration includes materials and lunch.  Support for this series is provided in part by Farm Credit Mid America, Farmers & Merchants State Bank, Metamora State Bank, Sherwood State Bank and Ag Credit.  The farm management series will be held at the Robert Fulton Ag Center, 8770 State Route 108, Wauseon, Ohio 43567.  The registration form can be downloaded at www.fulton.osu.edu or call 419-337-9210 or email richer.5@osu.edu for more information.

 

 

Completing the Farm Balance Sheet

by: Eric Richer, OSUE Fulton County & Diane Shoemaker, OSUE Field Specialist, Dairy Production Economics

It is never too late to complete your farm’s balance sheet. The balance sheet is a “snap shot” in time of your farm’s financial position, including what assets you own and how they are financed. The balance sheet is also known as the net worth statement. When completed accurately and in a timely manner, the balance sheet and corresponding ratios are a very valuable tool to evaluate farm financial health. The balance sheet objectively measures farm business growth, liquidity, solvency, and risk-bearing capacity.

Categorizing Balance Sheet Items

The assets and liabilities on the balance sheet (including the financing of the assets) are used to determine the equity, or net worth, of the farm owner. The owner’s equity is used by lenders and insurers to determine a farm business’ value.  Calculation of  owner’s equity, or net worth is simple. Simply subtract the total liabilities from the total assets:

Assets – Liabilities = Owner’s Equity

Terms of Assets and Liabilities

Beyond the broad categories of assets or liabilities, a balance sheet categorizes items into “time compartments” or terms of useful life. Useful life is a term for the amount of time an item can be utilized for the farm business. Depreciation allocates the cost of this asset over its useful life. Both assets and liabilities can be categorized into current, intermediate, and long, or fixed, terms of useful life.

Assets – Current assets can be converted to cash in one year or less. Common current assets are cash, growing crops, harvested crop inventory, market livestock, accounts receivable, and other similar items. Intermediate assets have an assumed useful life or depreciable value of one to ten years. Common intermediate assets are breeding livestock, machinery and equipment, titled vehicles, and not-readily-marketable bonds and securities. Long term, or fixed, assets are typically permanent items with value—depreciable or not—for more than ten years and include farmland, buildings, farmsteads, and other similar items.

Liabilities – Current liabilities are obligations that are due and payable in the next twelve months. Most common current liabilities include accounts payable (bills), credit card bills, operating lines of credit, accrued interest, and the current portion of principal on loans due in the coming year. Intermediate liabilities are obligations that are due to be paid back within two to ten years and are usually associated with intermediate farm assets on the left side of the balance sheet. Common intermediate liabilities are the principal remaining on machinery and equipment loans or breeding livestock purchases. Finally, long term, or fixed, liabilities are debts with terms greater than ten years like the principal balance remaining on a farmland or building mortgage.

Assets: Market Value vs. Cost Value

Market value – Today’s market values minus selling costs are used to determine market value. For example, a fully depreciated 15-year-old tractor certainly has a current market value greater than zero. A realistic current market value for this tractor can be obtained with an appraisal, or by looking at current sales of similar tractors online. Similarly, farmland bought 30 years ago likely has a different current market value today. In general, lenders prefer the use of current market values in a balance sheet for asset valuation.

Cost value – The net book value, or the cost of the item minus accumulated depreciation, is the cost value. For example, a fully depreciated 15-year-old tractor may have a cost value of $0 in a cost-based balance sheet. No appraisal is needed; only record the cost minus accumulated depreciation. Farmland (a non-depreciable, long term asset) purchased 30 years ago has a balance sheet value of the purchase cost.  In general, accountants prefer cost value balance sheets as a more clear reflection of business success, based on business decisions rather than inflation, depreciation, or appreciation of investments.

In an accurately completed balance sheet, the cost value and the market value columns usually produce different total asset values.

Keys to Completing the Balance Sheet

Several keys can help farmer improve their accuracy, effectiveness, and efficiency when completing year-end balance sheets.

  • Complete the balance sheet on the same date each year, usually as of December 31st. The information will never be more accurate than immediately after the end of the year.
  • Inventory all assets, including standard weight and measure units (ie. lbs, head, bushels, bales, etc).
  • Utilize current market prices for crop and livestock inventories.
  • Calculate cost value for growing crops such as wheat, new hay seedings or cover crops.
  • Include government payments and insurance indemnities yet to be received in accounts receivable.
  • Apply conservative breeding livestock values, avoiding large year-to-year changes.
  • Maintain a separate, easy-to-update depreciation schedule for depreciable assets.

Balance Sheet Tools

 

 

Balance Sheet Ratios to Evaluate Financial Health

A balance sheet is an accounting statement needed by a farmer to evaluate his or her financial health. An income statement and a statement of cashflows are also needed to provide the entire financial picture. These three statements can be used with the Farm Finance Scorecard available from the University of Minnesota’s Center for Farm Financial Health at https://www.cffm.umn.edu/Publications/pubs/FarmMgtTopics/FarmFinanceScorecard.pdf.

The scorecard uses these three accounting statements to determine financial ratios and measurements to benchmark a farm operation against acceptable industry standards.

An annual comparison of the same farm, referred to as a vertical analysis, can be used to evaluate the health of a balance sheet. With vertical analysis, one year’s balance sheet totals can be added to a spreadsheet with entries from previous years for comparison. Additionally, the spreadsheet would be used for upcoming years to continue the vertical analysis. This analysis does not benchmark a farm against the industry but, instead, shows the growth achieved and trends developed by the farm over time.  This analysis is one of the features provided for farms that participate in the Ohio Farm Business Analysis and Benchmarking Program.  Contact Dianne Shoemaker at shoemaker.3@osu.edu for more information about this program.

References:

Hachfeld, G. A., D.B. Bau, C.R. Holcomb. 2016. Balance Sheet. Farm Financial Series, #1, University of Minnesota Extension.

Langemeier, M. R. 2011. Balance Sheet—A Financial Management Tool. MF-291, Department of Agricultural Economics, Kansas State University Extension. Available online at: www.agmanager.info

 

Ever Consider Solar Panels to Power Your Farm?

Beginning in January, a six-part series of webinars will inform participants about Photovoltaic (PV) solar system design and the key considerations for conducting a financial analysis. The webinar is based on the Solar Electric Investment Analysis Bulletin Series and will be taught by Eric Romich, statewide energy specialist for Ohio State University Extension and John Hay, an energy specialist with University of Nebraska Extension. Hosted by Michigan State University Extension, the webinars are once a week starting Jan. 18 through Feb. 22. Each of the six webinars starts at 7 p.m. EST and is 60 minutes long. Time for question and answers will follow each session. Registration fee is $10 per session or $40 for all six sessions.
Registration information can be found at:
https://events.anr.msu.edu/event.cfm?eventID=A687E78FABE63A79
For more information, contact Charles Gould at 616-994-4547 or gouldm@msu.edu.

What are Lenders Looking For?

Source: Amanda Douridas

During my farm management school in December in Urbana, I invited a panel of ag lenders to answer questions about what they are looking for in a potential client and what can clients do to build stronger relationships with their lenders. The panelists were Greg Kinght with Civista Bank in Urbana, Paul Lensman with Agri Business Finance in St. Paris and Rudi Perry with Farm Credit Mid-America. Here are the questions asked and a summary of their responses.

Q: What characteristics do you look for in a potential client?
A: Character is a big part of the lending decision. Is the person honest? Trustworthy? Do they have the responsibility, knowledge and experience to be successful?

Q: How does the current economic outlook for agriculture affect the lending decision?
A: The big questions is: what is the producer doing to protect themselves? We don’t see crop prices increasing anytime soon. Having a contingency plan is a great way to show us that they are planning for future and not taking each day as it comes.

Q: What about debt re-structuring? What does that look like and what are the options?
A: It is very situational dependent. We are proponents of constructive credit but sometimes it does not make sense. Replenishing working capital through selling assets or spreading debt out over several years can also be an answer. FSA guarantee loans may be an option or restructuring loans on longer terms can work for some farm operations.

Q: What land value, dollar per acre, are you willing to finance?
A: We mostly prefer not to put a dollar figure on land value and look more at loan to value. That figure has been reduced somewhat from 5 years ago and the borrower will likely have to make a larger down payment or add more equity than in recent years. Overall land will be a good long-term investment.

Q: What is your first impression of the new tax law and how it might impact agriculture?
A: It likely will not have an effect on lending but there is a concern about the overall increase in the deficit. Legislature could look to make the deficit up in the Farm Bill by cutting farm programs.

Q: Do you have programs for young and/or beginning farmers?
A: Farm Credit has recently created a Young and Beginning Farmer program. Some benefits include up to 85% loan to value and not quite 50% equity for loans. It also has a 2-day farm finance educational program. Lenders also work with FSA guarantees and are willing to work with new farmers.

Q: What information do you need from niche or specialty crop producers?
A: We want to make sure the producer has a very good understanding of producing and marketing that product. If the farmer knows what they are doing and can back it up with data, we will definitely consider it for a loan. The farmer just needs to be prepared to educate their lender. If the equipment being used as collateral is very specialized, it will likely have a lower loan to value ratio because it is a lot harder to move that equipment. Diversification can be a good thing!

Q: How do you determine the operating line of credit for a farm?
A: We want the customer to establish that number based on their farm and cash flow.

Q: How do you determine the value of collateral?
A: We use several different sources such as local sales, online equipment listings such as tractorhouse.com, Hot Line Farm Equipment Guide and even some outside appraisers. When using real estate as collateral, we always use an appraiser.

Q: What about if I’m putting it on my balance sheet?
A: Farmers can do it as cost less depreciation but most lenders prefer the market value using recent sales. We just ask that the farmer is consistent from year to year and if changes are made, be prepared to tell the lender why the value was increased or decreased.

Q: Where do you see farmers making errors on their balance sheets?
A: Missing pre-paid expenses on the assets side and missing accounts payable to go with them. Credit card debit is also often left off. Remember that long term loans have a portion that is due each year and that portion of the loan needs to be moved up to current liabilities. Accrued interest is another that can be missed.

Sole proprietorships have assets and liabilities for non-farm assets that need to be reported on the balance sheet or create a second balance sheet for the non-farm portion. We start looking into everything after meeting with the borrower. It is better for the borrower to bring up everything rather than us find it in our research afterwards.

It is important to the lender to know what the ownership structure is: LLC, sole proprietorship, corporation, etc. If you are making some risk separation business decisions using these entities, it can help us make a lending decision in your favor.

Q: How often would you like customers to communicate with you?
A: It depends on the situation but definitely when major life events occur and it is always better to share something with your lender before we hear it from someone else. It is also nice to hear from the farmer when they are considering purchasing a new piece of equipment, making changes to planned crops, or what their marketing plan might be.

Q: If a farmer participates in the FINPACK program, does that add value?
A: We are impressed when someone uses the program. It shows that they have attention to detail and discipline in record keeping. The benchmarking piece also allows them to discuss with us areas where they excel and where they would like to make improvements.

Q: What should a client bring to a meeting?
A:
• Entity paperwork such as articles of incorporation, bylaws, partnership operating agreement, LLC setup, etc.
• 3 years of tax returns, these are not always needed but if they are, we have them and don’t need to contact you to follow-up.
• A current balance sheet is a must and multiple year-end balance sheets are even better.
• We don’t always need to see your insurance information upfront but we may need it so have it ready.
• For new or expanding enterprises, we need to see a business plan.
• Cost of production and cash flow or budgets

They summed up the panel by asking the audience what they can do for the farmers. Lenders want to make loans so how can they serve farmers better? There are very few problems you can’t work through with your lender if you have a good relationship.

Greg Knight can be reached at 937-653-1165 or gpknight@civistabank.com
Paul Lensman can be reached at 937-663-0186 or pelensman@agribusinessfinance.net
Rudi Perry a regional vice president for Farm Credit and recommends contacting your local office to speak with a lender.