Last month, we brought you news of the 2008 Enterprise Budgets, and now, for the first time since 2002, we are happy to report the availability of the 2008 Beef Enterprise Budgets.

Authors of this budget include Steve Boyles (Extension Beef Specialist), David Dugan (Extension Educator., ANR, Brown County ), Jeff Fisher ( Pike County ), John Grimes ( Highland County ), and Stan Smith (Extension P.A., Fairfield County ), Barry Ward (Leader, Production Business Management) and Brian Freytag (OSU Extension Intern, AEDE Undergrad).

As with all of the newest budgets provided by the OSU Extension, the 2008 Beef Budgets are in far more detail, as well as being more graphically appealing and user-friendly, allowing users of the Excel format to insert their own production numbers to get a customized report of their returns. The Beef budgets also sport the new color coded cells that indicate what is required of the user for any particular calculation (See 2008 OSU Enterprise Budgets for more information).

These budgets include:

•  Slaughter Steer – Days on Feed: 232 & Days on Feed: 250

•  Slaughter Yearling Steer – Days on Feed: 182 & Days on Feed: 190

•  Slaughter Heifer – Days on Feed 220

The reason for the separate Days on Feed, is to show a different feeding plan. For example, the 232 DOF Slaughter Steer is fed on corn, soybean meal, mineral, and corn silage; whereas, the 250 DOF are fed on corn, DDG, mineral, and hay.  While things are looking good for the crop industry, the rising prices of these commodities is leading to trouble for the beef industry. The ever-rising cost of grains is good for the farmers producing these crops, but also causes an increase in feed for livestock.

The outlook does not look good for livestock farmers as you will see when you first look at the “Returns Above Total Costs” on these new 2008 Beef budgets. With even the best scenarios in place, producers will find it difficult to get out of the red.

It seems that the feeding program you select will greatly influence your profitability in upcoming years as the price of corn and soybeans continue to sky-rocket to unbelievable prices. Using a feeding program that includes a hay-based diet, and avoiding soybean meals and corn silages, will greatly reduce the costs for feeding your steers and heifers.

For options concerning your beef production, you can check out the Beef team website at http://beef.osu.edu or contact your local Extension representatives.

The entire set of Beef Enterprise Budgets in Excel and PDF formats can be accessed at:
http://aede.osu.edu/Programs/FarmManagement/Budgets/beef2008

This analysis provides an analysis of the ACRE provison of the Farm Bill and provides a summary of the breakeven price with traditional corn, soybean and wheat programs.

Click here to read this one page summary aper.

As the age of farm operators increases, transferring the ownership and management of the family business to the next generation will become one of the most important issues farm families will face.
While many farmers dream of seeing their legacy passed on to the next generation, many postpone initiating a plan for the transition of their business for a variety of reasons. Many claim that there is not enough time to discuss these matters. Or if planning does occur, it simply involves the senior generation drafting a will describing how the farm assets should be divided among heirs.

In order to help farms plan for their future, the Ohio Ag Manager Team in 2006 began to develop educational materials, workshops and resources for families as they plan for the transfer of their farm business to the next generation.

There are six major questions that family businesses should ask themselves as they plan for the future. These are:

1. “Do I want to pass my farm operation to my heirs as an ongoing business or do I want to pass it on as a group of assets?”
2. How can you tell if the business is profitable enough to provide for the next generation?
3. Are there enough income and assets to provide for the older generation’s wants and needs?
4. How can you help the two generations get along?
5. What should you transfer and in what order?
6. How can you avoid paying too much income, gift and estate taxes?

It is critical the discussions about the future should take place sooner than later as there are a myriad of decisions which need to be made. If a farm family desires for the next generation to return to the farm, plans need to be made to make sure the younger generation makes a fair wage. Plans should also be made to allow the older generation to slow down and eventually retire.

The OSU Extension transition team is pleased to announce the newly revised Bulletin 862 titled, “Transferring Your Farm Business to the Next Generation” is now available as a resource for families to use as they plan for the future. This 89 page bulletin helps families answer the six major questions when transition planning. This bulletin is one which each generation should read.

This bulletin can be purchased at your local county Extension office for a bargain price of $9.25.

Our team also has developed eleven short fact sheets that accompany Bulletin 862. These “Building for the Successful Transition of Your Agricultural Business” fact sheets can be accessed at: http://ohioline.osu.edu/bst-fact/index.html or can be received by calling your local OSU Extension office. Some of the topics discussed in this series include: business entities available to Ohio farmers, conducting SWOT analysis, developing the next generation of managers, whole farm planning model, tax characteristics of business entities, and planning for the successful transition of your agricultural business.

Transferring a family farm or farm business to the next generation can be a challenging task. Legal issues, tax laws, and personal differences between family members are some of the issues families must confront when deciding how to transfer the managerial and asset control of a family business. Working together, families can answer the tough questions and develop a transition plan that will provide the opportunity for the farm to be successful for many generations. Let’s prove that Ohio farms are great places for our younger generation.

The grape and wine industry has been a long standing industry of Ohio with more than 2,200 acres of grape vineyards and 100 wineries. A 2007 survey by the Orbitz Worldwide travel company 1 ranked two Ohio regions in its top ten wine destinations ( Grand River Valley at No. 6 and Lake Erie at No. 9).

To date, no comprehensive study has been conducted to determine the economic impact of the grape and wine industry in the Ohio . To help determine the economic value of the industry, three organizations (Ohio State University Extension, Ohio Wine Producers Association, and Lake County Soil & Water Conservation District) collaborated to conduct the Ohio Grape and Wine Economic Impact Study and the Ohio Wine Lover’s Survey. These studies examined demographic data, grape production, wine sales, capital and variable investments, future operational concerns, spending habits of winery visitors and the economic multiplier effect of the grape and wine industry.

In the spring of 2007, the research team developed the methodology and surveys to conduct this comprehensive study. The team developed a fifty-three question survey for the Ohio Grape and Wine Economic Impact Study and a twenty-nine question interview for the Wine Lover’s Survey. Both surveys were pilot tested utilizing input from the Ohio grape industry and reviewed by the Institutional Review Board at The Ohio State University.

The Ohio Grape and Wine Economic Impact survey consisted of fifty-three questions. These questions examined demographic, wine and grape production, expense data, sales, future operational concerns and the economic ripple effect of the industry. One-hundred forty-nine (n=149) vineyard and winery operations were mailed a survey in July, 2007 with a second mailing in October to non-respondents.

Seventy-seven total producers (51.6%) responded to the survey. Sixty-one percent (n=32) of the grower-only group responded and forty-six percent (46.4%) of the winery operations responded. A total of 842 acres of grapes were reported by survey respondents. Sixty-eight percent (68.4%) of the respondents were from operations located in northeast Ohio , nine percent (9.2%) from northwest Ohio , twelve percent (11.8%) from southeast Ohio and eleven percent (10.5%) from southwestern Ohio .

The average age for the principal manager was 52.76 years with fifty-four percent (53.9%) between the ages of 50-69 years old. Forty-five percent (45.3%) of all the vineyard operations were sole proprietor, twenty-three percent (22.7%) limited liability companies, nineteen percent (18.7%) corporations and five percent (5.3%) partnerships. Wineries who own a vineyard were more inclined to use a limited liability company or corporation as their vineyard business structure. The business structure for Ohio wineries was reported as forty-eight percent (47.7%) limited liability companies, thirty-four percent (34.1%) corporations, nine percent (9.1%) sole proprietor, seven percent (6.8%) partnership and two percent (2.3%) responded as not applicable.

Respondents were asked to estimate how many people visit their business each year (winery and/or vineyard). Respondents were asked to select the range of visitors per year. A total of 806,850 visitors were reported by respondents (n=75). The majority of these visitors were reported by winery operations as the grower-only group reported only 17,000 visitors per year. Based on survey response data, it is estimated the total number of visitors to Ohio winery and vineyard operations to be over 1.7 million visitors per year.

It is estimated 724 persons work in Ohio vineyards and 785 persons in Ohio wineries. The grower-only group reported very few benefits for their employees. The only benefit offered by three percent (3.1%) of the operations was stock or ownership options. About one-half of the winery respondents (52.3%) do not provide benefits. However, some wineries offer benefits, Twenty-percent the winery respondents offer medical insurance, nine percent (9%) offer dental insurance, and five percent (4.5%) offer eye insurance.

Managers were asked to report ranges for their winery and vineyard capital and variable expenses. Total capital investment for Ohio vineyards was estimated at almost $10 million for the past five years. An additional $7.5 million of capital expenditures will be made during the next five years in Ohio vineyards. It is estimated Ohio wineries made $20.1 million of capital expenditures during the past five years and $12 million will be made in the next five years. Annual variable expenses for Ohio vineyards were estimated at $4.3 million and $13 million for Ohio wineries.

Respondents were also report the percentage of their annual expenditures that are made with Ohio Businesses. Respondents indicated on average they conduct fifty-eight percent (57.6%) of their annual expenses with Ohio businesses. Thirty-three percent (33.0%) of the operations spend over eighty percent (80%) of their annual expenditures with Ohio businesses.

A total of 842.59 acres of grapes were reported by 59 respondents. Respondents reported producing 2,365 tons of juice grapes valued at $511,000. An estimated 4,500 tons of juice and table grapes valued at $1,000,000 are produced each year in Ohio .

Winery operations were asked to report the gallons of wine they produced each year. A total of 592,500 gallons are produced for the respondents with sixty-one percent (60.5%) of the respondents producing less than 5,000 gallons per year. An estimated 1.33 million gallons are produced by Ohio wineries. An average of sixty-two percent (61.9%) of Ohio wines sales are marketed retail.

Ohio wine sales are estimated at $43.50 million, $1.45 million for gift sales, $1.2 million for special events, $33,000 for lodging, and $1.44 million for other non-wine sales. An additional $15.84 million is estimated to be spent on food and restaurant sales each year.

What is the Ripple Effect of the Industry

OHFOOD, an acronym for Ohio food, is a sophisticated input-output model developed by Dr. Tom Sporleder from The Ohio State University’s Farm Income Enhancement Program. This model is based on the IMPLAN estimation procedure developed by the U.S. Forest Service. By utilizing the OHFOOD multipliers, estimations can be made of the ripple effect on Ohio ‘s economy from the Ohio grape and wine industry.

Multipliers utilized for this study were output, gross state product, income and for employment. The output multiplier measures the total change in output generated by a $1.00 change in final demand. Gross state product (GSP) is a measure of the final market value of goods and services produced by labor and property located in a state. It is the state counterpart to the nation’s gross domestic product (GDP). The income multiplier measures the total change in personal income resulting throughout the economy from a one dollar change in a sector. The employment multiplier examines the ripple effect to employment in the state. This multiplier examines the number of full time employee positions which are generated in jobs outside of the grape and wine sector as a result of this industry.

The following table shows the results of placing the different sectors of the Ohio grape and wine industry into the OHFOOD model. This table shows the ripple effect this industry has on each sector of Ohio ‘s economy. An annual economic output of $64.4 million dollar results in a $105.5 million impact on Ohio ‘s output, $133.4 million to its gross state product and $151.7 million to Ohioan’s income. In addition, 198 jobs are created in non-grape and wine businesses as a result of the Ohio grape and wine industry.

OHFOOD Multiplier Impact of the Ohio Grape & Wine Industry

Assumes no decline in other sectors of Ohio ‘s economy due to grape & wine economic impact

Our stated in another manner, every $1 change in the Ohio grape & wine industry will have a $2.35 impact on the income of Ohioan’s, $2.07 on gross state product, and $1.64 on the state output. In addition, 198 jobs are created in non-grape and wine businesses as a result of the northeast Ohio grape and wine industry. Every $1 million dollar increase in the northeastern Ohio grape & wine industry will create 3.07 full time jobs in other sectors

What a confusing year to work in agriculture. The grain farmers who have crops above water, must feel pretty good about $7.00 corn, at least until the fertilizer and fuel bills come. The elevator manager feels pretty good because he bought the farmers’ corn for $5.00 a few months ago. Now the poor manager can’t sleep because the margin calls keep him up at night. How about the livestock industry? That’s so bad that we dare not even joke about it. Lastly, we have the ethanol industry, standing all by itself and shouldering the blame for everything. Something has to give.

Remember way back (24 months ago) before the commodity markets realized that we could potentially use more corn than we were growing. Until that point, the ethanol industry was just using surplus grain. After all, that’s why the ethanol industry expanded. At that point, corn was a great value to the end user. Now everyone is scrounging for corn. It’s capitalism at its best or worst depending on which side of the market you are standing.

One thing that probably won’t change, at least short-term, is demand for ethanol. Even though it is a small percentage of our country’s total petroleum usage, it is a vital part. It’s not only vital as an oxygenater, its also part of the fragile petroleum supply which can no longer meet our growing demand without ethanol in the equation.

One variable that might change is the feedstock that supports the biofuels industry. The ethanol industry was built on the assumption of $3.00 corn. When expansion was at fever pitch, many ethanol plants were so profitable that some plants would have given away the distillers grain which is a bi-product of the fermentation process. Now, without the sale of distiller’s grain, no corn ethanol plant can operate in the black. Only $4.00 gasoline and considerable investment in infrastructure have kept ethanol plants operating in this period of record corn prices. Suddenly, economics are forcing the biofuels industry to expedite its search for alternative feedstocks.

Ever since the corn ethanol industry began rapid expansion, rumors have circulated that cellulosic alcohol would replace corn alcohol in short order. Admittedly, the idea of using non-crop land to produce a fuel that can transport us down the highway is very attractive to everyone from environmentalists to cattle feeders, but can we do it? The answer is no. Commercial scale cellulosic alcohol production is at least five years away and unfortunately, some industry observers say that it’s been 5 years away for the last 20 years.

That’s not to say that cellulose based fuels have not made progress on the research front. In fact, some of the largest obstacles to cellulosic alcohol production have seen great advancements in recent years, but with the progress comes the realization that no one is equipped to handle that immense quantity of low value product that cellulosic alcohol production would involve. Cellulose will be a viable biofuel feedstock at some point, but it will not compete with corn ethanol in the immediate future.

The one alcohol feedstock that could have an immediate impact is sugar cane.

Even the staunchest critics of ethanol will admit that sugar cane is a sustainable feedstock for ethanol production. In Brazil , ethanol production from sugar cane has supplemented domestic oil production enough to make Brazil self sufficient or at least a zero net importer of petroleum.

The obvious problem with sugar cane production in the US is the limited growing region.

Sugar cane can only be grown in the states bordering the Gulf of Mexico as well as Hawaii . Even though domestic sugar production could be increased substantially, sugar cane could not take the place of corn as the major feedstock for ethanol even if every potential acre were planted.

The reason that sugar cane is preferable to grains for alcohol production is that nature has already done some of the manufacturing process for us. When making corn alcohol, a great deal of energy is required to convert the starch of the grain into sugar before bacteria can convert the sugar into alcohol. The energy saved in this step makes sugar based ethanol much more efficient than grain ethanol in terms of net energy return.

The other major sugar crop in the US is sugar beets which can be raised in many crop growing regions of our country. Historically, beets have been grown in the cool climate of the Great Lakes and Red River Valley regions as well as Colorado and California . Ohio was a sugar producing state until fairly recently when the local processors ceased operations. Like Ohio , many states would be suitable for beet production should the demand increase substantially. The sugar beet industry as a whole is poised for expansion, but at this point, demand for granulated sugar is strong enough to secure the industry. In other words, sugar is too expensive to be a viable feedstock for the ethanol industry.

A 2006 report from the USDA entitled “The Economical Feasibility of Ethanol Production from Sugar in the United States ” concluded that the cost of producing ethanol from sugar crops was about twice the cost of corn ethanol. It is important to note however, that this report was released in July of 2006, just months prior to the unprecedented rise in grain prices. If this report were released in July of 2008, the production cost of ethanol from sugar would be very similar to ethanol from corn.

Two huge obstacles are limiting the production of sugar based ethanol in the US . First, the infrastructure would be quite expensive, even more than the infrastructure of the corn ethanol industry which is already in place.

Secondly, the demand for sugar in this country is strong already. Any increase in demand would undoubtedly increase the price of sugar much as it did in the corn market. The demand shift that is evident in the current corn market, is being tolerated by the ethanol industry only because the plants are already built. At this juncture, the sunk cost on new ethanol plants keeps them producing even with a negative margin. With this in mind, raising money to finance sugar ethanol production could prove to be a difficult task considering the industry could follow a similar pattern.

Corn ethanol has secured its place in history as our country’s first legitimate attempt to produce a biological alternative to petroleum on a commercial scale. Through all of the recent criticism, it will always be the biofuel that cleared the path for the other biofuels to come. Higher corn prices may eventually diminish the use of corn as a fuel source, but for now, corn ethanol remains our nation’s most important biofuel.