Ohio Soybean State of Soy Webinar

The Ohio Soybean Council will be sponsoring a Ohio Soybean State of Soy webinar on Tuesday, June 9 beginning at 10:00 a.m.  Ben Brown, Assistant Professor of Professional Practice in Agricultural Risk Management  in the Department of Agricultural, Environmental and Development Economics at The Ohio State University will be the featured speaker.

During this webinar, Ben Brown will speak on soybean market fundamentals, trade update and assistance programs. There is no cost to attend this program.  For more information, visit

Farm Office Live Webinar Slated for Thursday, June 11 at 9:00 a.m.

OSU Extension is pleased to be offering the a “Farm Office Live” session on Thursday morning, June 11 from 9:00 to 10:30 a.m.  Farmers, educators, and ag industry professionals are invited to log-on for the latest updates on the issues impact our farm economy.

The session will begin with the Farm Office Team answering questions asked over the two weeks.  Topics to be highlighted include:

  • Updates on the CARES Act, Payroll Protection Program, Economic Injury Disaster Loan (EIDL), and Coronavirus Food Assistance Program (CFAP) Update
  • Other legal and economic issues

Plenty of time has been allotted for questions and answers from attendees. Each office session is limited to 500 people and if you miss the on-line office hours, the session recording can be accessed at farmoffice.osu.edu the following day.  Participants can pre-register or join in on Thursday morning at  https://go.osu.edu/farmofficelive 

 

Navigating Direct Support for Ohio’s Farmers and Ranchers Webinar on May 27 at 9:30 am

Join OSU Extension’s Ben Brown and Dianne Shoemaker for a webinar  on “Navigating Direct Support for Ohio’s Farmers and Ranchers” on Wednesday, May 27, 2020 at 9:30 am with special guest, Ohio Farm Service Agency Director Leonard Hubert.  This webinar is generously produced and distributed by Ohio Ag Net.

This webinar is produced and distributed by Ohio Ag Net.

The webinar will be available for viewing at https://farmoffice.osu.edu/, or through Ohio Ag Net’s Facebook Live Video.

Sign up for USDA-CFAP Direct Support to Begin May 26, 2020

Ben Brown, Peggy Kirk Hall, David Marrison, Dianne Shoemaker and Barry Ward
The Ohio State University

Since the enactment of the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020 and the announcement of the Coronavirus Food Assistance Program (CFAP) on April 17, 2020, producers in Ohio and across the country have been anxiously awaiting additional details on how the Coronavirus Food Assistance Program (CFAP) will provide financial assistance for losses experienced as a result of lost demand, short-term oversupply and shipping pattern disruptions caused by COVID-19.

The additional details on CFAP eligibility, payment limitations, payment rates, and enrollment timeline arrived on May 19, 2020, when the USDA issued its Final Rule for CFAP.  In this article, we explain the Final Rule in this issue of News from the Farm Office.

Click here to read the complete article

Starting Tuesday, May 26, 2020, producers can contact their local FSA office and begin to sign up for CFAP.  This bulletin serves as the authors’ interpretations of the Final Rule released by USDA, and FSA interpretation may be different.

OSU Extension and Ohio FSA will conduct a webinar in the upcoming days to outline program materials and answer questions. For information about the webinar and additional information on CFAP, please visit farmoffice.osu.edu.

Information provided on the program by USDA along with a webinar for new FSA program participants is available at farmers.gov/CFAP.

Expect Higher Solvency Rates on Farms in 2020

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

The United States Department of Agriculture Economic Research Service (USDA-ERS) collects and summarizes an incredible amount of data about farm financial conditions.  This article will discuss solvency and solvency ratios of U.S. farms.

Solvency is a measure of the ability of a farm to satisfy its debt obligations when due and is measured using the debt-to-equity ratio and debt-to-asset ratios.  These ratios help determine whether, if your farm were sold, all debts would be paid.

The U.S. farm sector debt-to-equity (D/E) and debt-to-asset (D/A) ratios are expected to continue increasing. In 2020, ERS forecasts a debt-to-equity ratio of 15.7 percent, and a debt-to-asset ratio of 13.6 percent (Chart 1). These higher ratios indicate that more of the farm sector’s assets are financed by credit or debt relative to owner equity (D/E) and relative to total farm assets (D/A).  While not as high as the ratios experienced during the 1980s, the concern is that these ratios are rising. The impact of this year’s shelter-in-place restrictions due to COVID-19, and associated supply chain issues are not reflected in this ERS data.

Getting Started

The first step in determining the ratios for your farm is to complete an annual balance sheet.  The balance sheet lists all your assets and liabilities.  Subtracting total farm liabilities from total farm assets results in the equity (net worth) of your farm business.  See OSU Extension Fact Sheet ANR-64 (https://ohioline.osu.edu/factsheet/anr-64) for a detailed explanation of completing a balance sheet.

Calculating the Ratios

Debt to asset ratio – compares the amount of debt a farm has relative to total assets owned by the farm and is calculated by dividing total farm debt by total farm assets to arrive at a percentage. For example, a debt to asset ratio of 40 percent means that for every $1 in assets, the farm has 40 cents of debt.  The Farm Financial Standards have identified the following general ranges:

    • Less than 30% is strong
    • Between 30% and 60% is cautious
    • More than 60% indicates vulnerability

However, for many farms, a D/A ratio higher than 40% can be unmanageable if the farm business is not profitable on a long-term basis.

Debt to equity ratio – is simply total farm debt divided by total farm equity (net worth) and compares how much of a farm is owned by the lender vs. the owner. The higher the number, the less likely creditors are willing to lend money.  The desired number is less than 0.43 (43%).  Anything over 1.5 indicates the farm is highly leveraged.

Example Farm

Mitchell Family Farms completed their annual balance sheet on January 1, 2020.  The balance sheet lists the value of total farm assets at $2,475,000 and total farm liabilities of $600,000.  Net worth/equity (assets – liabilities) equals $1,875,000.

To calculate the debt to asset ratio for Mitchell Family Farms, divide $600,000 (total farm debt) by $2,475,000 (total farm assets).  This equals 24%, which is within the “strong” category identified by the Farm Financial Standards Council.

The debt to equity ratio is calculated by dividing $600,000 (total farm debt) by $1,875,000 (net worth or equity).  The debt to equity ratio for Mitchell Family Farms is 32%.  The is within the desired ratio of 43% suggested by the Farm Financial Standards Council.

Based solely on these two measures, Mitchell Family Farms is in a desirable financial position.  However, it is important to evaluate more ratios to determine the overall financial health of the farm business.

Next Steps

After completing a balance sheet and making calculations, refer to the Farm Financial Standards Council benchmarks to compare your numbers with industry accepted standards.  If the ratios are acceptable, continue managing to maintain the numbers and benchmark using these standards https://ffsc.org/wp-content/uploads/2012/06/FarmFinancialGuidelinesRatios1.pdf

If your ratios need improvement, focus on those that are in most need of change.  Here are a few recommendations:

  • Consult with your lender or Extension professional to analyze and discuss your ratios
  • Contact the Ohio State University Extension Farm Business Analysis and Benchmarking Program for a complete analysis of your farm finances (https://farmprofitability.osu.edu/)
  • Develop a plan to address shortcomings
  • Have written goals
  • Monitor progress

Summary

Financial management in agriculture is more critical today than it has been in many years.  Devote time to your farm finances and reach out to professionals who are available to help you be successful.

References

Farm Financial Guidelines and Ratios, Farm Financial Standards Council, https://ffsc.org/wp-content/uploads/2012/06/FarmFinancialGuidelinesRatios1.pdf

Ratios and Measurements in Farm Finances, University of Minnesota, https://extension.umn.edu/farm-finance/ratios-and-measurements#solvency-796061

The Basics of a Farm Balance Sheet, Ohio State University Extension Fact Sheet ANR-64, https://ohioline.osu.edu/factsheet/anr-64

USDA-ERS, Forecast for Higher Solvency Ratios in 2020 Indicates that More of the Farm Sector’s Assets are Financed by Credit or Debt, https://www.ers.usda.gov/data-products/chart-gallery/gallery/chart-detail/?chartId=98316

 

USDA Coronavirus Food Assistance Program

by: Chris Zoller, Extension Educator, ANR, Tuscarawas County &  Mike Estadt, Extension Educator, ANR, Pickaway County

The United States Department of Agriculture (USDA) Coronavirus Food Assistance Program (CFAP) is part of the Coronavirus Aid, Relief, and Economic Security Act, the Families First Coronavirus Response Act, and other USDA authorities to provide $16 billion in support to farmers impacted by the coronavirus pandemic.  The program is available to all farmers, regardless of size, who suffered an eligible loss. Included in the program is $3 billion that will go toward purchases of commodities for distribution by food banks and faith-based programs through the Farmers to Families Food Box Program. USDA announced $1.2 billion in contracts for that program last week.

CFAP will provide direct support based on actual losses where markets & supply chains have been impacted.  The program is also designed to assist farmers with additional adjustment and marketing costs from lost demand and short-term oversupply for the 2020 marketing year caused by COVID-19.

Although sign-up has not started, there are a few things you can do now to be ready, including:
Gathering documentation of recent sales and inventories

  • Having your Tax Identification Number (TIN)
  • Determining your operating structure (sole proprietor, LLC, etc.)
  • A record of your Adjusted Gross Income (AGI)

An additional article on CFAP can be accessed at: https://u.osu.edu/ohioagmanager/2020/04/21/usda-announces-coronavirus-food-assistance-program-cfap/

Your local Farm Service Agency office will be handling the application process and all interested farmers are encouraged to call to schedule an appointment and have questions answered.  Additional CFAP information is available at https://www.farmers.gov/cfap

Ohio Corn, Soybean and Wheat Enterprise Budgets – Projected Returns for 2020

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

COVID-19 has created an unusual situation that has negatively affected crop prices and lowered certain crop input costs. Many inputs for the 2020 production year were purchased or the prices/costs were locked in prior to the spread of this novel coronavirus. Some costs have been recently affected or may yet be affected. Lower fuel costs may allow for lower costs for some compared to what current budgets indicate.

Production costs for Ohio field crops are forecast to be largely unchanged from last year with lower fertilizer expenses offset by slight increases in some other costs. Variable costs for corn in Ohio for 2020 are projected to range from $359 to $452 per acre depending on land productivity. Variable costs for 2020 Ohio soybeans are projected to range from $201 to $223 per acre. Wheat variable expenses for 2020 are projected to range from $162 to $198 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 2020 crop enterprise budgets are $3.20/bushel for corn, $8.30/bushel for soybeans and $5.10/bushel for wheat. Projected returns above variable costs (contribution margin) range from $109 to $240 per acre for corn and $179 to $337 per acre for soybeans. Projected returns above variable costs for wheat range from $152 to $262 per acre.

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 -$48 to $72 per acre in 2020 depending on land production capabilities. Returns to land for Ohio soybeans are expected to range from $65 to $214 per acre depending on land production capabilities. Returns to land for wheat (not including straw or double-crop returns) are projected to range from $70 per acre to $173 per acre.

Total costs projected for trend line corn production in Ohio are estimated to be $759 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 $75 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 $67 per acre. Details of budget assumptions and numbers can be found in footnotes included in each budget.

Total costs projected for trend line soybean production in Ohio are estimated to be $517 per acre. (Fixed machinery costs: $59 per acre, land charge: $187 per acre, labor and management costs combined: $46 per acre.)

Total costs projected for trend line wheat production in Ohio are estimated to be $452 per acre. (Fixed machinery costs: $34 per acre, land charge: $187 per acre, labor and management costs combined: $41 per acre.)

Current budget analyses indicates favorable returns for soybeans compared to corn but crop price change and harvest yields may change this outcome. These projections are based on OSU Extension Ohio Crop Enterprise Budgets. Newly updated Enterprise Budgets for 2020 have been completed and posted to the Farm Office website: https://farmoffice.osu.edu/farm-mgt-tools/farm-budgets

 

 

Being and Maintaining an Economically Resilient Farm

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

The word “resilience” is used often in the agricultural press.  What does this mean?  Merriam-Webster defines resilience as:

  1. The capability of a strained body to recover its size and shape after deformation caused especially by compressive stress.
  2. An ability to recover from or adjust to misfortune or change.

We often see resilience used in agriculture when discussing climate and weather.  There is documented evidence of weather changes that have impacted agriculture, and farmers have done their best to adapt to these changes.  Examples include building soil health, managed grazing, the use of cover crops, water management strategies, technology adoption, and more.

Resilience can also be used when discussing the economics of agriculture and the resulting effects.  It is no surprise to anyone in agriculture that people are strained, are experiencing stress, and are trying to adjust to new and different ways of operating.

Strategies to Be Economically Resilient

  • Mission statement

A mission statement is a short description of the fundamental reasons your business exists – its critical purpose.  The statement aligns what the business says it does, what it actually does, and what others believe it is about.  The statement reflects the underlying values, goals, and purposes of the business.

Example mission statement:

“The mission of Brown Family Farms is to produce high-quality crops in sufficient quantity and quality to provide a good standard of living for our family and employees.  We believe a farm is the perfect environment to raise a family and strive to have the farm remain a viable business for future generations.”

  • Set Goals

An acronym commonly used to describe goals is SMART.  Goals must be Specific, Measurable, Action-oriented, Realistic, and Timed to be useful management tools.  As you develop goals, it may be helpful to divide them into personal, production, and operational categories.

Goals should be:

Specific – and focus on a specific problem or need

Measurable – to have some means of tracking achievement

Action-oriented – action is the pathway to achieving goals

Realistic – aim high, but keep goals within the realm of possibility

Timed – to include a realistic completion date

  • Know Your Cost of Production

Do you know the true costs to produce every acre of a crop, every pound of milk, every ton of hay, and each pound of meat?   Are there some crops or livestock that make more money than others?  Are there some acres that could be converted to a use that provides a higher net return?  How does your farm compare with the established farm financial ratios?  An in-depth financial analysis can help answer these and other questions.

Visit the Ohio State University Extension Farm Profitability Program (https://farmprofitability.osu.edu/) for additional information or to enroll in the Benchmarking Program.

  • Postpone Major Capital Investments

Most everyone is already doing this, but it is a good idea to assess what investments are necessary, how urgent these needs are for your farm, and the cost of these investments.  Do you really need to buy a new piece of equipment?  Could you accomplish what is needed by hiring someone or renting the equipment?  If you need to make a major capital investment, consider not only the initial cost, but the associated “DIRTI 5” – Depreciation, Interest, Repairs, Taxes, and Insurance that must be accounted for after the purchase.

  • Restructure Debt

Discuss with your lender opportunities to refinance or restructure debt.  Do you have short-term liabilities that could be moved to intermediate notes to improve cash flow?

  • Evaluate Expenditures

Analyze your expenses to see where you might be able to trim costs without sacrificing production.  For example, can you reduce your seeding rates to reduce costs?  Ohio State University Extension has been conducting on-farm research to evaluate corn and soybean seeding rates.  Contact your Extension educator or review the trials reports here https://digitalag.osu.edu/efields/efields-reports.  Dairy farms will find helpful information and cost-control considerations here https://dairy.osu.edu/.

Talk with your nutritionist, agronomist, Extension educator, and other experts to evaluate inputs and expenditures.  Do you need every ingredient in your ration?  Do you need a seed variety with every available trait?

  • Reduce Family Living Expenses

The Bureau of Labor Statistics data from 2018 indicate average family living expenses equaled $61,224 annually.   A February 2019 article published by the Center for Farm Financial Management at the University of Minnesota show a family of three averages almost $64,000 annually in family living expenses before paying income taxes or making other non-farm capital purchases and investments.  Are there “extras” that are costing too much?  Evaluate what you want versus what you need as a family.

  • Consider Non-Farm Income

The current pandemic may make finding off-farm employment more difficult, but there are opportunities.  Look in the local newspaper, conduct online searches, let family and friends know you or a family member could use help finding employment.  Calculate how much you need to earn at an off-farm job.

  • Seek Opportunities to Be Entrepreneurial

 Challenging times might not seem like the opportunity to get creative and extend the current workload further, but there likely are tangential opportunities to your existing business that meet the needs of the community. Maybe that is offering storage facilities, tree trimming, bookkeeping, or other enterprises. This can reenergize someone in a time when it is easy to feel down and creates a productive diversion. Some of the best creative work in this country came from a less than opportune economic environment.

  • Don’t Be Afraid to Ask for Help

To say that operating a farm business in today’s environment is a challenge is an understatement!  There are plenty of people who want and are available to help you sort through the complexities, answer questions, and provide guidance to help you succeed.

References

Bureau of Labor Statistics, Consumer Expenditures – 2018,  https://www.bls.gov/news.release/cesan.nr0.htm

Characteristics of Financially Resilient Farms, University of Nebraska, https://cropwatch.unl.edu/2018/characteristics-financially-resilient-farms

Developing Goals for the Agricultural Business, Ohio State University Extension, https://ohioline.osu.edu/factsheet/anr-45

Family Living Expenses Add Up, Center for Farm Financial Management, University of Minnesota, https://finpack.umn.edu/family-living-expenses-add-up/

Whole Farm Planning Model, Ohio State University Extension, https://ohioline.osu.edu/factsheet/anr-52

Farmers and 1099 filers might qualify for new COVID-19 unemployment benefits program

by: Peggy Kirk Hall

Farmers aren’t traditionally eligible for unemployment benefits, but that won’t be the case when Ohio’s newest unemployment program opens.   We’ve been keeping an eye out for the opening of the Pandemic Unemployment Assistance (PUA) program, which will provide unemployment benefits to persons affected by COVID-19.  The program is targeted to persons who are not eligible for regular unemployment benefits, such as self-employed and 1099 filers.   PUA is yet another economic assistance program generated by the Coronavirus Aid, Relief and Economic Security (CARES) Act recently passed by Congress.

PUA will provide regular unemployment benefit amounts to qualifying individuals, plus an additional $600 per week for the period of March 29 to July 25, 2020.   Qualification doesn’t include a minimum income requirement, but a person must not be eligible for Ohio’s regular unemployment benefits and must not be currently receiving vacation, sick or other paid leave.  The applicant must also be unable to work due to one of the following situations:

  • The applicant has been diagnosed with COVID-19 or has symptoms and is seeking medical diagnosis;
  • A member of the applicant’s household has been diagnosed with COVID-19;
  • The applicant is providing care for a family or household member who has been diagnosed with COVID-19;
  • The applicant cannot work due to caring for a child whose school or other facility has closed due to COVID-19;
  • The applicant has become the primary support for a household because the head of the household has died due to COVID-19;
  • The applicant has quit his or her job, was laid off, or could not begin a new job as a direct result of COVID-19;
  • The applicant’s place of employment is closed because of COVID-19.

Applications should open by mid-May, on the Ohio Department of Job and Family Services website.  Self-employed individuals will have to submit proof of employment, such as earnings statements that reflect profit and loss, payroll deposits, or a 2019 tax return.  The unemployment benefits will be retroactive to the date of eligibility and will last for no more than 39 weeks, up to December 26, 2020.  PUA may also provide an additional 13 weeks of benefits for those who’ve exhausted regular unemployment benefits.  To learn more or apply for PUA, visit https://unemploymenthelp.ohio.gov/expandedeligibility/.

Farm Office Live Session Slated for Thursday, May 14 from 9:00 to 10:30 a.m.

OSU Extension is pleased to be offering the a “Farm Office Live” session on Thursday morning , May 14 from 9:00 to 10:30 a.m.  Farmers, educators, and ag industry professionals are invited to log-on for the latest updates on the issues impact our farm economy.

The session will begin with the Farm Office Team answering questions asked over the ten days.  Topics to be highlighted include:

  • Updates on the CARES Act, Payroll Protection Program, Economic Injury Disaster Loan (EIDL), and Coronavirus Food Assistance Program (CFAP) Update
  • Corn and soybean budgets
  • Supply and demand balance sheets
  • Other legal and economic issues

Plenty of time has been allotted for questions and answers from attendees. Each office session is limited to 500 people and if you miss the on-line office hours, the session recording can be accessed at farmoffice.osu.edu the following day.  Participants can pre-register or join in on Thursday morning at  https://go.osu.edu/farmofficelive