New Technologies to Combat Rising Energy Prices

Energy prices are sky-rocketing. As we all scramble to minimize our energy costs over the next several months, it might be time to consider alternative means to reduce costs in the long term. Below are links to several fact sheets that outline various alternative technologies that could be useful in reducing long-term farm-energy costs and to minimize exposure to price surges in non-renewable fuel sector.


Agricultural Applications of Solar Energy
Solar energy can supply and/or supplement many farm energy requirements. The US Department of Energy provides a brief discussion of a few applications of solar energy technologies in agriculture. Below is a link to a list of publications that deal.
http://www.eere.energy.gov/consumerinfo/factsheets/da1.html

Geothermal Heat Pumps
The fact sheet (link below) provides an overview of how a geothermal heat pump (GHP) can provide an energy-efficient way to heat and cool homes, farm structures and other buildings. A GHP system can be installed in virtually any area of the country. While residential GHP systems are usually more expensive initially to install than other heating and cooling systems, their greater efficiency means the investment can be recouped in two to ten years. After that, energy and maintenance costs are much less than conventional heating and air-conditioning systems.
http://www.eere.energy.gov/consumerinfo/factsheets/geo_heatpumps.html

Higher initial costs of the system can be a deterrent to adoption. However, the 2005 Energy Bill passed by the US Congress contains tax incentives that can be used to defer the additional cost burden.
http://www.geoexchange.org/incentives/incentives.htm

Is Your Farmstead Secure?

Farm and rural residence security never was given much thought until recent years. Biosecurity was probably the first issue for livestock producers. Then security protecting genetically modified organisms became an issue followed by the threat of terrorism brought to light by the September 11 attack. Recently there is concern of anhydrous theft to made illegal drugs. Rural security has become a necessity to protect not only your investment, but the general public.


There are several good resources available to assist managers in increasing farm security measures. Michigan State University has some information at http://www.pested.msu.edu/BullSlideNews/bulletins/EmergencyFarm.html that can be downloaded and print. Purdue University has a bulletin on rural security planning available at http://www.btny.purdue.edu/Pubs/PPP/PPP-64.pdf . A farm security checklist developed for a farm security workshop help in Wyandot County is also available at http://www.ohioagmanager.osu.edu/resources/Farm_Security_Checklist.pdf.

Fuel Prices and Farm Machinery Costs

William F. Lazarus, University of Minnesota Extension Economist, is known for his work in calculating farm machinery costs. In late August he updated his Farm Machinery Cost Estimate publication with $2.20 farm-level diesel fuel prices, up from $1.65 just last December. That 33% fuel price increase since the beginning of the year alone increases the tractor total cost per hour by 12% on average over all the sizes, or 9% when the combine base units are included. It increases the overall operation (implement plus power unit) total cost per acre by around 4% on average over 119 operations included within his publication. A MS Excel spread sheet is also found on his web site to estimate the impact of higher fuel coasts on specific equipment. The web site is at: http://www.apec.umn.edu/faculty/wlazarus/machinery.html.

Cost Saving Ideas and Innovations in Crop Production – Saving $$$$$'s per Soybean/Corn Acre

“On its surface, efficient market approaches seem to drip with pessimism, but they contain a powerful directive for farmers: since efforts to improve revenue through better marketing will meet with limited success over time for most producers, those who survive for the long term will be those with the lowest cost of production. In other words, a good marketing program starts with a good program for managing and controlling cost of production.”- Carl Zulauf, McCormick Professor of Agriculture Marketing and Policy, OSU Department of Agricultural, Environmental and Development Economics. The following are some tips for saving $$$$$’s per soybean acre:

  1. Use Lower Seeding Rates where conditions allow. Research shows that seeding rates may be lowered in many field settings. In 7” rows use the following rules of thumb:
    Light colored soils, plants reach knee high to 20” – 225,000 seeds per acre
    Medium soils expected plant height of approximately 30” – 175,000 seeds per acre
    Dark soils with 40” or higher plant height – 150 – 125,000 seeds per acre
    * Similar seed savings can be achieved in 10” and 15” row systems:
    Seed savings of 10% per acre = Savings of $3.60 per acre. (Roundup Ready System)
  2. Consider Roundup Ready System to decrease herbicide expense.
    Net Savings of $11 per acre. (Herbicide Program Savings offsets higher seed costs by $11 per acre. No-till system.)
  3. Consider Generic Crop Chemicals (No-till Roundup Ready System.)
    Herbicide savings of $2.10/acre (10% cost savings)
    Insecticide savings of $0.70/acre (10% cost savings)
  4. Consider Bulk Fuel Purchasing (5000 gallon minimum)
    Diesel cost savings of $0.25 per gallon or $0.85 per acre (Conservation Tillage System). Consider Soy-Diesel which is about the same price as regular diesel. Soy-diesel is also good for your engine, the environment and the price of soybeans.
  5. Use Innoculants wisely in your production system. Every dollar invested in Innoculants gives you an Average Minimum Return of $2.00 per acre over time.
  6. Use Seed Treatments wisely in your Soybean production system.
    Every dollar invested in Seed Treatment means an Average Minimum Return of $1.50 per acre over time.
  7. Consider Bulk Fertilizer Purchase
    Save 10% on fertilizer purchases or $3.20 per acre.
  8. Consider Light Bar/Guidance System Investment – GPS light bar and auto guidance systems can increase net revenues above variable and technology costs by up to $30 per acre. These systems increase overall operating speed and reduce fatigue, allowing up to 10% more acres covered. And they reduce application overlap and skip errors by 5% to 10% over traditional methods. This also directly relates to savings in fuel, labor, and machinery depreciation. Precise driving also means better controlled traffic, reducing compaction for higher yields. This means a potential income increase up to $15/acre.
  9. Early Purchase Discounts. Consult variety performance test data – there may be as much as a 5-10 bu difference in yield among soybean variety entries. Select soybean varieties with resistance to diseases)
    Savings of 8% on seed purchases or $2.88 per acre.(Roundup Ready System)
  10. Decrease Tillage Where Appropriate
    Savings of $11.91 per acre. (No-till versus Conservation till. Combined Machinery Investment, Fuel and Lube, Repairs, and Labor Savings. Net Savings of $3.91 per acre after accounting for increased herbicide expense with no-till production.)
  11. Use correct tire inflation pressure on tractors and combines.
    Fuel savings of up to 8% or $0.37 per acre. (No-till system.)
  12. Consider Group Risk Insurance (GRP) if Your Farm Fits This Program
    Savings of $4.50 per acre. (GRP versus Crop Revenue Coverage (CRC).
  13. Access and utilize the OSU Sustainable Ag Team Website at http://sustainableag.osu.edu/
  14. Subscribe and Follow Recommendations of the Crop Observation and Recommendation Newsletter (C.O.R.N.) at: http://corn.osu.edu/
  15. Subscribe to the NEW Ohio Ag Manager (OAM) at: http://ohioagmanager.osu.edu/

The following are some tips for saving $$$$$’s per corn acre:

  1. Use seed with enhanced traits wisely and only in appropriate settings.
    a. Research shows that Bt Corn Borer Corn is not “economical” in most Ohio fields as Corn Borer populations are usually minimal. Save $5 per acre. In Ohio, Bt Corn is most effective when used in replant or late planting situations.
    b. Research finds “first year corn” does not require protection from rootworm. Therefore Bt Rootworm corn in most fields is not needed. Save $20 per acre.
    c. Glyphosate-resistant corn may be needed only where severe weed pressure and/or perennial weeds limit production capabilities. Save $10 per acre.
  2. Adjust Seeding Rates on a Field-by-Field Basis (Use higher seeding rates if planting in early April and/or No-Till to achieve target populations.)
    a. Lower seeding rates on fields that average 120 bu/acre or less. 20,000 – 22,000 plants/acre will be adequate in most of these fields. Save $6 per acre on a percentage of your corn acres.
  3. Take Advantage of Rotational Benefits
    a. Less nitrogen cost due to soybean N credit. (Average 30 lbs. N savings.)
    N Savings of $8 per acre.
    b. Better weed control and fewer difficult-to-control weeds. Herbicide Savings of $1.20 per acre (5% cost savings) (Conservation Tillage System).
  4. Consider Generic Crop Chemicals
    a. Herbicide savings of $2.40 per acre (10% cost savings)(Conservation Tillage System).
  5. Consider Bulk Fuel Purchasing (5000 gallon minimum)
    a. Diesel cost savings $0.25 per gallon or $1.07 per acre (Conservation Tillage System)
  6. Consider Bulk Fertilizer Purchase
    a. Save $4.10 per acre or 10% on fertilizer purchases.
  7. Consider Anhydrous Ammonia as Nitrogen Source vs. UAN (28%).
    a. N savings of $16 per acre. ($0.26/lb.vs $0.36/lb. on 160 lbs. N/acre.
  8. Consider Side-Dress Nitrogen Application to Save on N-Serv.
    a. Savings of $7 per acre.
  9. Consider Light Bar/Guidance System Investment – GPS light bar and auto guidance systems can increase net revenues above variable and technology costs by up to $30 per acre. These systems increase overall operating speed and reduce fatigue, allowing up to 10% more acres covered. And they reduce application overlap and skip errors by 5% to 10% over traditional methods. This also directly relates to savings in fuel, labor, and machinery depreciation. Precise driving also means better controlled traffic, reducing compaction for higher yields. This means a potential income increase up to $15/acre.
  10. Take advantage of early purchase discounts on seed corn. But first, consult variety performance test data, there may be as much as a 40-50 bu difference in yield among corn hybrid entries. Select corn hybrids with resistance to major foliar blights. Savings of 8% on seed purchases or $3 per acre.
  11. Use correct tire inflation pressure on tractors and combines.
    Fuel savings of up to 8% or $0.63 per acre (Conservation Tillage System).
  12. Decrease Tillage Where Appropriate
    Save $16 per acre. (No-till versus Conservation till. Combined Machinery Investment, Fuel and Lube, Repairs, and Labor Savings. Net Savings of $7 per acre after accounting for increased herbicide expense with no-till production.)
  13. Consider Group Risk Insurance (GRP) if Your Farm Fits This Program
    Save $7 per acre. (GRP versus Crop Revenue Coverage (CRC)).
  14. Access and utilize the OSU Sustainable Ag Team Website at http://sustainableag.osu.edu/
  15. Subscribe and Follow Recommendations of the Crop Observation and Recommendation Newsletter (C.O.R.N.) at: http://corn.osu.edu/
  16. Subscribe to the NEW Ohio Ag Manager (OAM) at: http://ohioagmanager.osu.edu/

Plan to Attend the Fall/Winter Outlook & Policy Meetings

The economic outlook and related policy concerns for farm and horticultural industries are the focus of the recently announced series of OSU Policy & Outlook Meetings set to begin in early November. This year’s program includes traditional outlook discussions on grain, livestock, input costs, policy and consumer factors effecting Ohio agriculture. New this year are three meetings targeting the “Green Industry” and the growing number of firms in the region for nursery production, landscaping, greenhouse production and related services. Several other meetings are arranged that address local communities and their economies. Details on locations, topics and background material are all available through the OSU Policy & Outlook Program website (http://aede.osu.edu/programs/outlook). A direct link to currently scheduled meetings is at http://aede.osu.edu/programs/outlook/2005-06schedule.html.

The Energy Market Situation and Outlook

Although much attention of late has been devoted to the effects of Hurricanes Katrina and Rita on the US energy infrastructure, these price spikes are effects, not causes, of the fundamental supply/demand imbalance in the global energy market. Strong economic growth in the US and developing countries has increased the demand for energy. Production capacity, long neglected in many oil-producing nations, has expanded much less quickly. Global oil consumption is now hovering near production capacity, making crude oil prices much more sensitive to supply shocks. The domestic natural gas market is even tighter, as the high cost of liquification and transportation has discouraged the construction of LNG import terminals in the US, forcing the US to rely on domestically produced natural gas to meet its growing demand. This has made natural gas prices even more sensitive to supply shocks than crude oil, exemplified by the doubling of winter natural gas prices from late 2004 to late 2005. Read the full article at:
http://aede.osu.edu/people/roberts.628/extension/index.htm and click on “Energy Market Outlook (updated 30 Sept 2005).”

OSU Ranked one of Nation's Top 10 Public Research Universities

Ohio State University is now one of the top 10 public research universities in the country, based on rankings just posted by the National Science Foundation, Division of Science Resources Statistics.

The university moved into 10th place among public universities, up from 12th place, and into 15th place among all research universities, public and private, up from 18th place. The report is based on total research expenditures for Fiscal Year 2002-2003, the latest information available.

Through this achievement, Ohio State fulfills a major goal set by the institution’s leadership to earn inclusion into this select tier of public research universities.

“This is a remarkable achievement for the university and a tremendous testament to the work of our research faculty,” said Karen A. Holbrook, president of Ohio State. “Their scholarship and expertise are the reason we are one of the nation’s top research institutions.”

Reaching the top 10 among public research universities is only the latest in a series of milestones that the university has passed in recent years. Last year, Ohio State announced it had passed the half billion dollar mark in total research awards. In FY 2005 its total awards rose to $552.7 million, an increase of 4.7 percent. And Ohio State ranks sixth in the country among all universities for industry-sponsored research, according to the NSF.

“Attaining a spot on the top 10 list is a remarkable achievement considering that the competition for research funding has intensified dramatically in recent years,” said Robert McGrath, senior vice president for research at Ohio State. “OSU moved ahead of MIT (Massachusetts Institute of Technology), the University of California at Davis, and Texas A&M, all highly respected research universities. Ohio State increased its research expenditures by 14.8 percent between 2002 and 2003. During that period only three other top 20 universities had large rates of growth, and the average increase for all institutions outside the top 20 was 10.1 percent.”

McGrath cited prior State of Ohio investments in R&D and the Third Frontier program as major factors in expanding the university’s overall research programs.

“For every million dollars the state invests, Ohio State leverages another $8 million from federal and industrial sponsors,” McGrath said. “OSU’s half-billion-dollar research program supports more than 15,000 local jobs, according to a study by the American Association of Universities. We can add to this a healthy number of high-tech, high-paying jobs that are created as new research technologies move into the commercial marketplace.”

The university’s attainment of “top 10” status among American public research universities has a direct effect on recruiting both top quality new faculty and excellent students to the institution.

“We know that the best teachers and researchers want to be part of the best institutions,” said President Holbrook. “And when they are here, they attract the best and brightest students to campus, who learn from world-class experts in more than 100 academic fields.”

“Ohio State University’s undergraduate research program gives our students the opportunity to be part of the discovery process for new advances and innovations,” Holbrook said. “By doing research, they contribute to the university’s success in discovery.”

The NSF annually looks at more than 620 research institutions that receive more than $150,000 in grants and contracts for research and development in science and engineering to determine this ranking. It is considered one of the major measures of excellence in ranking university research.

Plan Ahead: Make Income Tax Estimates Now

October/November is not only harvest season, but a great time to estimate the years income tax liability. With nearly two months remaining in 2005, adjustments for income and expenses may still be made with significant effects on tax liability. After January first, there is little room to maneuver these adjustments, other than choosing depreciation options or a contribution to an IRA. Some expenses, however, may not be pre-paid. Rent payments, for example, made in advance may only be deducted in the year to which they apply. The following is extracted from a Purdue tax management publication by George F.Patrick.

“Most farmers use the cash method of accounting. Farm expenditures are normally deductible when paid. Receipts are generally reported as income in the year in which they are received. As a result, farmers have the opportunity to review their year-to-date receipts and expenses, and make potentially money-saving adjustments for taxes. But that window of opportunity closes for all practical purposes with the end of a farmers tax year. So now is the time to review and adjust if necessary.

One’s tax management goal should be maximizing after-tax income or wealth over time, not minimizing taxes in any one year. Some people get so concerned about saving a few dollars in taxes this year that they miss the big picture. Because of the new Section 179 expensing and additional first-year depreciation deductions, many farmers may simply assume that they will not have a tax problem, instead of viewing each year as a tax-planning opportunity.

Keeping taxable income relatively stable year-to-year has been a key to effective income tax management in the past, because of the progressive nature of income tax rates. Recent tax law changes have “flattened” tax rates, reducing the progressiveness of income tax. Wide swings in taxable income are likely to result in higher taxes, although farm income averaging may help. The amount of income that is “tax free” because of personal exemptions and the standard deduction has increased due to law changes and inflation. One should plan to report at least this “tax-free” amount of income each year. Self-employment taxes are larger than income taxes for many farmers and may be more difficult to manage because of limited exemptions and deductions.

As a minimum, individuals should tally their receipts and expenditures before the end of the tax year. This allows year-end tax planning. Depending on the income situation, additional sales may be made before December 31, 2005 or delayed into 2006. A part of the 2006 direct payments from the government for corn, soybeans, and wheat can be collected in 2005 or after January 1, 2006. Section 179 and additional first-year depreciation elections can have a major impact on taxable income, and these decisions can be made after the close of the tax year. However, the depreciable assets must have been purchased before the end of the year. December purchases of feed, fertilizers, and chemicals to be used in 2006 can also affect the taxable income. Although delivery of inputs purchased before December 31 is not required for a tax deduction, a purchase rather than just a deposit must be made in order to claim a deduction for prepaid expenses. This means that the invoice should list specific products, and quantities and the arrangement should not pay interest to the purchaser.

Deferral of income and income taxes can still be an effective tax management strategy. If income taxes are deferred, even for a year, this is an interest-free loan from the government. Although the estimated tax payments required to avoid penalties have been increased to 90 percent of the tax liability, farmers continue to have an exception. If two-thirds or more of gross income is from farming, farmers can pay the tax due by March 1 and avoid estimated tax penalties. Although farmers must pay by March 1, the due date of their return for many other purposes, such as retirement plan contributions, is April 15.

Tax implications of major decisions should still be considered before the transactions are finalized. Installment sale contracts often have tax benefits because the taxable gain on the sale is spread pro rata over the tax periods in which the contact payments are received, with certain exceptions. Tax-free or like-kind exchanges, such as the trade-in of machinery and equipment, may reduce taxes, but farmers need to consider both income and self-employment tax impacts. Because of the complexity of the tax laws and regulations, competent professional tax advice is generally a very worthwhile investment.”