Ohio General Assembly passes bill to modify tax on energy projects

Bill makes wind and solar in Ohio competitive with neighboring states

Passed by both chambers of the Ohio legislature early morning on Friday, June 4, S.B. 232 provides tax exemptions for certain sources of new power generation. The bill was sponsored by State Senator Chris Widener and enjoyed bipartisan support. A press release from the Governor’s office makes clear he intends to sign it into law as soon as he receives it.

The new law will eliminate both the tangible personal property tax and the real property tax on new advanced energy projects. Qualified energy sources include wind, solar, and all other renewable energy resources as defined in Ohio Revised Code Section 4928, in addition to clean coal, nuclear energy, and the cogeneration of electricity from waste heat sources.  To qualify, new projects involving wind, solar and other renewables must be under construction by January 1, 2012 and in service by January 1, 2013. All other qualified energy sources must be under construction by 2017.

One impetus for this change in tax treatment is that the current tangible tax rate energy companies pay is not competitive with other states. In Ohio, the tax rate for wind facilities stands at approximately $40,000 per megawatt, while solar is approximately $100,000 per megawatt. This compares to a range of $3,000 to $9,000 per megawatt in neighboring states.

The Ohio Department of Development will certify the exemption and base new payment rates (payment in lieu of taxes) on the number of Ohioans employed in the construction and installation of a qualified facility. Energy companies will have to comply with several other requirements including road repair, first responder training, and the establishment of university partnerships to promote the education, training and curriculum development of renewable energy industries.

The new rates will be as follows:

  • Solar – $7,000 per MW

All other facilities:

  • $6,000 per MW when 75% or more Ohio-domiciled employees are employed during construction and installation.
  • $7,000 per MW when 60% or more Ohio-domiciled employees are employed during construction and installation.
  • $8,000 per MW when 50% or more Ohio-domiciled employees are employed during construction and installation.

The bill also addresses Current Agricultural Use Valuation (CAUV) property and provides that the installation of an energy facility will not cause the remaining portion of a CAUV tract to be ineligible for CAUV.

The new law may signify the beginning of wind development in Ohio’s rural communities. Three wind projects have already received an Ohio Power Siting Board certificate and may be the first projects situated to apply for the new tax exemptions. Information regarding the three approved wind projects and four pending projects can be found on the Ohio Power Siting Board website

Full text of S.B. 232 is available here.

Ohio Farm Custom Rates 2010 – Part 1

A large number of Ohio farmers hire machinery operations and other farm related work to be completed by others. This is often due to lack of proper equipment or lack of time or expertise for a particular operation. Many farm business owners do not own equipment for every possible job that they may encounter in the course of operating a farm and may, instead of purchasing the equipment needed, seek out someone with the proper tools necessary to complete the job. This farm work completed by others is often referred to as “custom farm work” or more simply “custom work”. A “custom rate” is the amount agreed upon by both parties to be paid from the custom work customer to the custom work provider.

The custom rates reported in this article are based on a statewide survey of 242 farmers, custom operators, farm managers and landowners conducted in 2010. These rates, except where noted, include the implement and tractor if required, all variable machinery costs such as fuel, oil, lube, twine etc., and the labor for the operation.

There is no assurance that the average rates reported in this article will cover your total costs for performing the custom service or that you will be able to hire a custom operator for the average rate published here. Calculate your own costs carefully before determining the rate to charge or pay.

Some custom rates published in this article have a wide range. Possible explanations are the type or size of equipment used, the value of labor, the mix of labor and equipment used, different income needs of full-time custom operators versus farmers supplementing their income. Also some custom operations are provided at bargain rates due to family relationships between the parties or due to the fact that custom providers may see an increased probability of eventually securing the custom farmed farmland in a cash rental or other rental agreement.

Charges may be added if the custom provider considers a job abnormal such as distance from the operator’s base location, difficulty of terrain, amount of product or labor involved with the operation, or other special requirements of the custom work customer.

Publications are available that may help in calculating your total costs of performing a given custom operation. Some of the online resources available that may be of assistance include:

Farm Machinery Cost Estimates available at:

http://www.apec.umn.edu/Machinery_Economics2.html

Machinery Economics at farmdoc :

http://www.farmdoc.illinois.edu/manage/index.asp

Estimating Farm Machinery Costs

http://www.extension.iastate.edu/agdm/crops/html/a3-29.html

Before entering into an agreement, discuss all of the details of the specific job with the other party. Fuel prices have an impact on custom rates and rates may fluctuate based on large movements in fuel prices. The approximate price of diesel fuel at the time of this survey was $2.50 per gallon for off-road (farm) usage.

For the custom rates reported in this article the average is the simple average of all the survey responses. The “Low” and ‘High” rates represent -/+ one standard deviation around the average. (Standard deviation is a measure of the variability of the survey responses and one standard deviation both above and below the average includes approximately two-thirds of all survey responses.)

CUSTOM RATES AVAILABLE HERE -> http://www.scribd.com/doc/32543328/OAM-Custom-Rates

Tips for Evaluating Agronomic Inputs

It is not uncommon for new and non-traditional cropland inputs to enter the U.S. market every year. Additionally, fungicides and insecticides are being applied to cropland by some to intensify the management of diseases and insects. While these products claim improved yields and profits, economic analysis is important by today’s crop production managers. Dr. Seth Naeve, Soybean Agronomist, University of Minnesota Extension , says, “Don’t waste dollars needlessly. Additional products, treatments, coatings and enhancers commonly sold to farmers only rarely increase yields.”

While a maximum yield per acre is the goal for many, maximum profit per acre will keep farms efficiently using business capital. Dr. Greg Schwab, Extension Soil Management Specialist, University of Kentucky , says “it makes little sense or cents to use a product that has little chance to increase profitability.”

When considering the use of non-traditional products or non-traditional applications of a traditional product to cropland, consider these tips:

  1. Study the performance data offered about the product or application. Is the whole data set being shared or just a few selected results? Is the data local or from a comparable region? Did the data come from a statistically validated research design that includes replication and randomization of treatments and non-treated control?
  2. Consider all the costs of the input. (ex: material, application, wheel tracks, labor and management, interest on money used to buy the product and application).
  3. Conduct your own valid on-farm research on limited acres.
  4. Contact your local university extension office for available university data and assistance with on-farm research plots and analysis.

The increased revenue, if one occurs as a result of the input, must cover all additional costs incurred plus leave a reasonable return to labor and management. If the salesperson claims “you’ll at least get your money back,” that should be a clear and early warning not to expect a return to labor and management.

Before a farm manager considers additional inputs in an attempt to improve farm profits, the following are areas to first improve efficient use of farm resources.

  1. Manage soil pH within the appropriate range
  2. Invest in soil drainage where it limits yield, either subsurface or surface drainage.
  3. Select and take advantage of disease resistant varieties.
  4. Eliminate duplicative treatments. Example: insect control from seed treatments, crop transgenic traits and foliar applications.
  5. Control weeds early in the growing season; even if they can be killed when they’re big.
  6. Keep P & K soil test levels in maintenance range.
  7. Use Integrated Pest Management approach (scouting, know action thresholds, taking effective action)

Farm managers can explore a searchable database on hundreds of new, non-traditional products. The database was developed by university agronomists in the North Central Region. It can be accessed at http://extension.agron.iastate.edu/compendium/. Ohio State University Extension Agronomic Crops team also publishes annual on-farm research reports at: http://agcrops.osu.edu/

Ohio Legislature Considers Revising Law on Animals Running at Large

A recurring problem around Ohio may be resolved if H.B. 503 progresses through the General Assembly before the end of the year. Representatives Bubp (R-88th Dist.) and Garrison (D-93rd Dist.) recently introduced the bill to revise Ohio’s “animals at large” law. The proposal clarifies the standards for civil and criminal liability under the law.


The animals running at large law, found in Ohio Revised Code Chapter 951, states that no owner or keeper of horses, mules, cattle, sheep, goats, swine, or geese “shall permit” the animals to run at large on public roads or outside of their enclosures. Many law officers, prosecutors and judges have interpreted the word “shall” as a trigger for automatic liability–if an animal is out, the owner is liable. But in a case before the Ohio Supreme Court, the court stated that the law does not establish automatic liability. The court explained that the law creates the duty to exercise ordinary care to keep animals from running at large and sets up a “rebuttable presumption” of liability. An animal owner whose animals are found running at large has the opportunity to rebut the presumption of liability and prove that he or she exercised ordinary care to contain the animals. Despite the Supreme Court opinion, animal owners have continued to be subject to prosecution under an automatic liability standard.


H.B. 503 removes the possibility of interpreting the animals at large law as a strict liability law and lays out two different standards for civil and criminal liability. An owner or keeper of animals who “negligently” permits animals to run at large is liable for all damages caused by the animal, and an owner or keeper who “recklessly” permits animals to run at large is guilty of a fourth degree criminal misdemeanor. Under Ohio law, “negligence” is the failure to exercise ordinary care, while “recklessness” is acting with indifference to consequences and with disregard to a known risk.


H.B. 503 would alleviate the problems many animal owners in Ohio have faced–potential criminal liability when natural disasters, vandals, pranksters or neighbor disputes, rather than the owner’s action or inaction, caused the release of the animals. A disturbing increase in such incidents led the Ohio State Bar Association and its Agricultural Law Committee to work with H.B. 503 sponsors to develop the revisions. The bill’s sponsors provided testimony on the proposal to the House Agriculture and Natural Resource Committee on June 2, 2010. However, if the bill does not pass before the end of the legislative session on December 31, 2010, it will expire and must be reintroduced next year.

2010 OSU Used Farm Machinery & Equipment Survey: U.S. Farmers' Attitudes and Opinions about Sales via Auction, Dealer, Classified Ad and the Internet

Little is known about how farmers buy and sell used farm machinery and equipment (FME), particularly for topics such as internet transactions of used FME or farmer opinions of key players in used FME markets such as dealers or auctioneers.  Understanding these issues is critical for several reasons.  First, used FME is crucial asset on many farms throughout the U.S..  Second, the quality of used FME is highly variable and difficult for buyers to assess in many sales formats.  Third, given increasing rural internet availability and decreasing numbers of auctions and dealers, more information about the experiences of those using internet-based venues is important to determine the potential desirability of internet markets for used FME.

To fill this informational void, we asked more than 5,200 U.S. farmers about used FME markets during early 2010.  More than 2,500 (48%) responded and gave us information about recent used FME transactions, ratings of different ways to buy and sell used FME and attitudes and opinions regarding local FME dealers and used FME auction venues.

We found that U.S. farmers were active in used FME markets with 69% purchasing and 40% selling (not including trade-ins) used FME within the past 5 years.  Most buyers of used FME bought from dealerships (55%), while other popular purchasing venues included auctions (16%) and classified ads (10%).  Less than 5% bought from auctions or ads over the internet.  Most buyers felt they paid fair market value (83%) and felt certain about the quality of the item before they took possession (94%).  Internet buyers were less likely to say they got a fair deal but were similarly certain of the quality of items.

Most sellers of used FME relied upon personal contacts or simple for-sale signs to sell their equipment (43%), with auctions (22%) and classified ads (22%) being the next most popular mode of sale.  Less than 5% of these non-traded used FME items were sold via internet.  Most sellers (87%) also felt they received fair market value for their items, including those who sold via internet.  Furthermore, when asked about the degree of satisfaction they had with all components of the selling process, those who had sold via internet classified ads reported the greatest satisfaction.

All respondents then rated five different ways of buying or selling used FME: dealership, auction, internet auction, classified ad and internet classified ad.  Prospective buyers had the most favorable impressions of dealers and the least favorable impressions of internet auctions, while prospective sellers had the most favorable impressions of classified ads and the least favorable impressions of internet auctions.  Despite these unfavorable impressions of internet venues, 55% of prospective buyers and 71% of sellers might consider using internet classified ads in the future.

We also asked about the number of local FME dealerships that farmers had done business with during the past 5 years and the quality of the relationship the farmer had with the dealership that was most integral to current farming operations.  More than 80% had done business with at least two dealerships while 26% had done business with four or more dealers.  However, there were regional differences, with farmers in the South and West listing fewer dealer relationships than farmers in the East or Midwest.  Most farmers were pleased with the repair and parts service provided by the local dealer (88%) and with how they were treated during sales and trade-ins (77%).  However, nearly one in four farmers felt that the business relationship they have with their closest dealership could be in jeopardy if they ‘shopped around’ to other dealers to get a better price.

Finally we asked farmers why they attend auctions and how much trust they would place in the quality of items sold in various auction formats.  U.S. farmers were most attracted to auctions for reasons of gauging local market conditions and networking with other farmers and community members rather than as a means of getting better prices or a fairer deal.  Farmers also said they were more likely to trust the quality of items being sold at local auctions more than those sold at regional auctions or internet auctions.

These results paint a first picture of U.S. farmers’ engagement in used FME markets and suggest that the internet currently plays a minor role in actual transactions within this key asset market.  While few buyers and sellers of used FME currently use the internet, those who reported selling via internet feel they received fair market value and feel a high level of satisfaction with the selling process and many buyers and sellers report they would consider internet venues for future used FME transaction.  However, in order for the internet to grow into a viable venue in this market, buyers will have to be convinced that they are receiving fair market value and more potential sellers must become aware of the low commissions charged by internet auction sites.

For more information, including the full report and copies of the surveys go to:

http://aede.osu.edu/people/ roe.30/FME.htm

Current Agricultural Use Value (CAUV) Assessment 2010

Large increases in the Current Ag Use Value (CAUV) of farmland throughout Ohio are a major concern to many landowners and have resulted in higher property taxes (some have seen significant increases) for most farmland owners.

A couple of factors have led to much of this increase in ag use valuation. Higher crop market prices and a lower capitalization rate due to lower interest rates have been the primary drivers behind this increase in the CAUV for Ohio farmland. The Ohio Department of Taxation annually publishes an explanation of the CAUV valuation method complete with the measures used to calculate CAUV and examples of the calculations for certain soil units for the present year. This year’s document is titled “2010 Current Agricultural Use Value (CAUV) of Land Tables – Explanation of the Calculation of Values for Various Soil Mapping Units for Tax Year2010” and is available online at:

http://tax.ohio.gov/divisions/real_property/documents/CAUV_Memorandum_2010.pdf

or

http://tax.ohio.gov/divisions/real_property/cauv.stm

Further background information on CAUV in Ohio may be found in the OSU Extension Factsheet, “Current Agricultural Use Value Assessment in Ohio” available online at:

http://ohioline.osu.edu/cd-fact/1267.html

Strategic Planning Using Systems Thinking

Keeping the farm business going in the right direction is not as easy as following the yellow brick road to the Land of Oz. Although strategic planning can easily get a bad reputation, especially if one has had a poor experience with it, and ended up with pitfalls such as:

•  Getting bogged down and debating terminology or the strategic planning process itself.

•  Approaching it as a linear process, having to complete step one before proceeding to step two.

•  Completing a strategic plan to meet someone’s criteria and not using the process to communicate goals and objectives only to have the document collect dust on the shelf.

Dwight D Eisenhower probably summed it up best by saying “Plans are nothing. Planning is everything.”

One method of setting business direction is to use traditional strategic planning ideas to create the road map of the business future. Strategic planning differs from other types of planning because of the detailed evaluation of both external and internal business conditions. A strong understanding of forces shaping the agricultural industry is critical for strategic, and the most effective plans are brief and focus on a few key concepts for the business. In general, strategic plans are guides that assist in decision making and not a detailed list of specific activities.

While there are a variety of approaches to strategic plan development, these factors are generally present:

•  Define the mission and vision for the business

•  Understand the internal and external environment often referred to as a SWOT analysis

•  Defining a few key areas that are likely to enhance business success based on the SWOT analysis, available resources, and other factors important to the business (labor availability, management capacity, etc).

Another method of strategic planning is to use a systems thinking approach. A systems thinking approach avoids the earlier mentioned pitfalls and makes strategic planning what it should be; an important, interactive, and adaptive process. This approach really centers around five steps, each represented by a critical question. They are:

•  The Future Situation: Where do we want to be?

•  Key Success Measures: How will we know when we get there?

•  The Current Situation: Where are we now?

•  The Journey: How do we get there?

•  The Shifting Landscape: What will/may change in our environment in future?

Is it that simple? It gets a bit more complicated as we move from strategic planning into business, operational, and financial planning and then to implementation but the secret is to bring as much simplicity as possible to these complex processes. While there is a range of formats for strategic planning, the trick is to keep it simple and readable in the final form. A few strategic business directions and the values might be sufficient. If the plan is short, clear, and allows flexibility to meet changing conditions, it is more likely to be used. For more reading on strategic planning components go to http://ohioagmanager.osu.edu/resources and select the following fact sheets under Farm Transition Planning Fact Sheet Series: Whole Farm Planning Model; Developing a Useful Mission Statement for Your Agricultural Business; Developing Goals for the Agricultural Business; and Conducting a SWOT Analysis of your Agricultural Business.

Ohio Ag Manager New Website, Features Launch in July, 2010

The Ohio Ag Manager team is pleased to announce that Ohio Ag Manager will have a new look starting July, 2010.  In addtion to the new look we’ll also be providing additional ways for connecting….

Comments – the new Ohio Ag Manager website will allow for full commenting on articles. We’d love to hear from you and encourage you to share your thoughts via comments.

Facebook – Find us on Facebook! If you are a Facebook’er and want to connect with us visit

facebook.com/ohioagmanager

Twitter – Twitter is one of the fastest growing social networking sites and we now have a presence there too.  Be sure to follow us at

twitter.com/ohioagmanager

These are just a few of the many new features that you’ll see with the new website!  See you in July with a new look!

2010 Outlook for Hispanic Labor

Immigration-Related Legislation

Issues, policies and legislation seem to be sprouting faster than a spring planting. Many states are at various steps of analyzing and addressing their own local/regional situations, but the nation’s attention is focused on Arizona and its home-grown effort to deal with illegal/undocumented immigration. Coverage is all over radio, television, magazines,

internet and, certainly and vociferously, through word-of-mouth. Here is a primer on the Arizona legislation, SB 1070:

The Immigration Policy Center has developed a Q&A Guide to Arizona’s New Immigration Law . This guide provides key answers to basic questions about Arizona ‘s law – from the substance of the law and myths surrounding it to the legal and fiscal implications. As other states contemplate similar legislation, knowing the answers to basic questions about Arizona ‘s law will prove to be critically important in furthering the discussion.

Ohio has also been looking at its own legislation on immigration issues. SB 35 and SB 150 relate to using local law forces and resources to deal with immigration enforcement.

SB 238 would prohibit undocumented workers from receiving workers’ compensation. As for Ohio mimicking SB 1070, the Ohio Governor and some Ohio legislators are at odds for adopting copycat immigration legislation. As Arizona goes, so goes… Ohio?

For employers and labor alike, the focus on immigration legislation is on its influence on labor availability and production, not on its political implications. Labor will still come, despite risk and lack of financial resources, but Ohio anti-immigrant/pro-enforcement legislation may prove a negative, in the long run. A significant portion of the labor force is often cited as consisting of undocumented labor. Labor that can be/will be lost.

Ohio Weather… Ohio Labor…2010

If you can’t plant it, you won’t need them. Corn got planted this spring, then, some of it got plastered by wind and hail. May and June, the villain has been heavy rain, enough to interfere with vegetable planting. And if you can’t plant your crop, you won’t need your labor…to help plant, block, hoe. Labor seems to be arriving in sufficient numbers, only to find lack of work due to the excess of rain and wet fields. Some employers did plant tomatoes, cabbage, and peppers in between the raindrops. Peach, pear and apple crops are also being pruned. Hopefully, dryer times are just around the corner. Managing and moving labor resources across the state is crucial for maintaining a labor force within Ohio borders when downtimes occur. Other factors include adequate licensed housing and resourcing agency programs and services. So, labor is here and sunshine is coming. Not a bad forecast.

(Read: Immigrant exodus: Lack of jobs has Mexicans headed home

http://www.fayobserver.com/articles/2010/05/23/996860?sac=Home )

Cover Crop Economics

Farmers want to grow cover crops but say it costs too much and they do not see an economic return. They cite high seed costs, extra labor, chemicals, extra machinery trips to plant and kill the cover crop and lack of knowledge on how to manage cover crops as factors that prevent cover crops establishment. However, farmers are experimenting and starting to overcome some of these perceived problems.

Cover crop seed may cost as little as $5 to more than $50 per acre. On the low side, oats, bin run wheat, and soybeans can be used. On the high side, legumes (cowpeas and winter peas) used for homegrown nitrogen cost $.80 to $1.20/pound and at 40-50 pounds/acre, it gets a little pricey. Innovators are finding ways to reduce seeding rates and seed costs to $15 to $25/acre. Innovations with drilling seed, broadcasting with fertilizer, airplane or helicopter applications, and crop inter-seeding is making cover crop establishment less risky. As with any crop; understanding the life cycle, the limitations and benefits of each plant, and experience helps in growing a successful cover crop.

The benefits of growing cover crops vary tremendously from farm to farm depending on soil type, climate, and past management. Farmers want to know does it increase my yields or does it lower my costs? Unfortunately, crop yields and higher returns may be slow to improve until problems with soil management (drainage, soil compaction) improve. That’s why the cover crop’s perceived value varies from farm to farm.

Cover crops work best on farms that work closely with Mother Nature. Cover crops and no-till farming mimic the nature cycle of keeping plants growing year round. Cover crops feed the microbes which feed the following crop. Farms that grow more plants year round (livestock farms, hay, pasture, or wheat fields) will respond faster than a typical corn-soybean farm that only grows a cover crop once every 5 years. Livestock farms benefit economically from using cover crops as supplemental feed and manure benefits the soil.

Farms that plant only corn and soybeans, use conventional tillage, and a large amounts of commercial fertilizer and pesticides (herbicides, insecticides, fungicides) may react slower to the benefits of using cover crops because they are less reliant on microbial life for supplying nutrients to their crops. The reliance on chemical inputs comes at a price because the efficiency of commercial fertilizer decreases as the microbial life declines in the soil. So, while cover crops may not directly increase crop yields initially, they increase nutrient efficiency and decrease your input costs..

A common myth among farmers is that corn benefits directly from fertilizer. Most corn fertilizer is recycled through microbes first, so farmers actually fertilize the microbes and indirectly fertilize their corn. As fertilizer and fuel cost increase, cover crops and no-till are economical because tillage, fuel consumption, and chemical inputs (fertilizer and pesticides) become more expensive. Cover crops improve farm economics through:

Better drainage : If you are considering splitting your tile lines to improve soil drainage, plant a cover crop for several years. Let’s say it cost $800 per acre to split your tile lines on 40 foot spacing. Takes the interest on that money ($800 per acre @ 4% interest or $32 per acre) and invest it in cover crops that decrease soil compaction. Water can not flow vertically or horizontally to tile lines in compacted soils and cover crop roots create macropores to move excess water to your existing tile.

Decreased Soil Compaction: Deep rooted and/or fibrous grass cover crops break up vertical and horizontal soil compaction. Farmers typically deep rip their soils costing $30-$35 per acre. Spending the same money annually on cover crops adds soil organic matter and increases soil productivity. Research is showing that soil compaction is due to a lack of living roots in the soil.

Nutrient recycling : Soil compaction and poor drainage may account for 40 to 60 percent nitrogen losses through denitrification in silty clay soils. Cover crops improve microbial growth and nutrient recycling which accounts for the majority of nutrients supplied to crops. Cover crops act like an elevator to move nutrients from the subsoil and keep the nutrients recycling in the topsoil. Economically, every one percent soil organic matter is worth about $600 in soil nutrient (N, P, K, S). A good cover crop may add .05 to .1 percent SOM every year or $30 to $60 in stored nutrients. Several years of continuously growing cover crops may lower your fertilizer bill by 25 percent.

Pesticides: There are two ways to fight weeds. One is to try to kill weeds with herbicides; the other way is to compete with the weeds for sunlight, nutrients, and water by planting cover crops. Crop diseases like phythium, phyphthora, and rhizoctonia thrive where the soil is poorly drained due to soil compaction. Growing cover crops improves drainage and reduces soil compaction. Some insect infestations (cutworms, army worm, slugs) may increase initially with cover crops. Long-term no-till farmers with cover crops report cutting annual herbicide costs by one-third and reduce root disease problems but insect pest costs may increase slightly until natural predators are restored.

Environmental Cover Crop Benefits : If farmers start no-tilling with cover crops; less fuel, less tillage, and less machinery investment are needed which saves money. Cover crops reduce soil erosion and result in less nutrient runoff and less flooding. Increased soil organic matter increases the water holding capacity of soil which is an insurance policy against drought. Crops yields do increase with cover crops, however; the increased yields generally do not generally occur until the soil management problems (soil compaction, poor drainage) from excess tillage are corrected. In the long run, cover crops make farmers money by saving input costs, improving efficiency and eventually increasing crop yields.