Month: August 2010

Agricultural zoning case will go to Ohio Supreme Court

Court has agreed to review appellate decision to close winery

A controversial split decision  on agricultural zoning from the Fifth District Court of Appealswill go before the Ohio Supreme Court.  The court has agreed to review Terry v. Sperry, 2010-Ohio-1299 (March 23, 2010), an appellate decision that endorsed a township’s desire to close down a winery in an exurban residential area.  The court agreed with the township’s assertion that Myrrdin Winery could not utilize Ohio’s “agricultural exemption” from township zoning authority because the winery imported more grapes than it grows on the premises and thus does not meet the statute’s definition of “agriculture.”  Because the winery did not qualify as “agriculture,”  the court held that the township could enjoin its operation.  We disagree with the court’s reliance on the definition of “agriculture” because the statute also includes specific exemption  language for wineries that bypasses the agriculture definition.  See our earlier post,  Ohio court allows township to use zoning to prohibit winery.

The Supreme Court’s decision to review the case should result in much needed clarification of township zoning authority over wineries, a recurring issue  in Ohio.   With more and more wineries developing in Ohio, many will be anxious for the Supreme’s Court’s interpretation of the statute.  The court should reach a decision in early 2011.

Biomass for Energy

The Federal Government is attempting to jump start a “cellulosic drop-in” fuel industry by offering 9 million dollar grants to cooperating universities. How interested should farmers be?

First, let’s define this term “cellulosic drop-in fuel”. Cellulosic means we are not using starchy corn as the raw product to make fuel, but plants. Drop-in means what we produce can be used in place of gasoline without changing the way the engine is made or set up. In other words, it is a seamless replacement for gasoline, better than ethanol.

Second, let’s discuss how competitive cellulosic drop-in fuels are with other “advanced” or “renewable” energies. Hydro energy you don’t hear much about, but electric generation by moving water is the least expensive and its use will grow by leaps and bounds in the future.

Wind energy is growing by leaps and bounds and in the right situation is economically viable. Solar energy is the same, even though more government subsidy is allocated to its adoption than to wind or hydro. Nuclear is the other “read to go” technology that is cost competitive, depending on government regulation, red tape and safety requirements.

The “forgotten” renewable fuel is ethanol from corn. Keep in mind that 1/10 of the gasoline burned today is ethanol. Keep in mind that one out of every two bushels of corn produced is used to produce ethanol. This renewable fuel is no longer classed as an advanced fuel but is subsidized, even though not at the level of advanced fuels.

Cellulosic drop-in fuel and clean coal technology are hopes for the future. Their development is highly subsidized by government (our) money, but neither the technology nor the economic viability for these technologies to become mainstream is assured.

However, direct burning of biofuel to make electricity will happen in Ohio, in 2012, right next door, near Wheeling, WV. At the Berger Plant of FirstEnergy, near the town of Sunnyside, in Belmont County, where I-70 crosses into WV, biomass will first be burned to generate electricity.

The reason for burning biomass instead of coal not that biomass is less expensive to make electricity. The reason is that this older plant is no longer allowed to pollute the air to the extent it is. FirstEnergy has decided that with government subsidies and incentives, burning biofuels is more cost effective than upgrading the antipollution equipment and burning coal.

At first, 80% of that burned will be wood without bark or with very thin bark, called “white wood”. The remaining 20% will be mostly perennial grasses, mainly switchgrass and mithcanthus. Switchgrass can be seeded, but yields less biomass. Mithcanthus must be established by “plugging” rhizomes or pieces of its large roots but yields more biomass.

So fewer nutrients will be removed from the field, harvest will be during the winter after the plants die naturally and weathering occurs. Of course, transport, processing and burning will occur year around. FirstEnergy is hoping to pellet the biomass, but if pelleting is too expensive, may try to figure out how to burn directly.

Oil Replacement

This article will focus on primary energy sources, such as natural gas, hydro, wind, solar nuclear and biomass. Natural gas, used now mostly for direct space heating is the lowest priced primary energy source except for hydro.

Yes, as the price of oil rises, so will the price of natural gas, to the point that it becomes a limited resource such as oil has become.  However, hydro is the lowest cost source of electricity. Few are aware of the drastic increase in requests and approval of hydro power electric generators, many of them along the Ohio River. Another advantage of hydro is water flows all the time in a river, as opposed to the wind or sun. Many of the facilities route water around locks, so environmental amendments are kept to a minimum.

Solar power is also on the rise, in large solar farms, in larger building applications on businesses and public buildings and in individual residences. Ohio and Federal grants and subsidies and legislation have provided sufficient subsidies and incentives so that photo voltaic panels are today economically viable, especially for businesses and larger public buildings.

Ohio provides outright grants for photo voltaic solar. There are investment tax credits available through the Federal Government and public utility companies (not municipal power or rural electric

cooperatives) are required to pay producers of sustainable renewable energy credits for the energy produced.

Wind power has also increased dramatically. In states to our west and in northwestern Ohio the generation of electricity by wind has also become economically viable, but in this case only on wind farms and not generally for residences. For residences solar is economically viable and wind not, due completely to more incentives and subsidy for solar than for wind.

Nuclear energy is the wild card and its acceptance and adoption is determined by public opinion and government policy. I have no idea how big of role nuclear will play, but feel sure it will play a larger role in the future in providing much needed energy.

Among future primary energy sources, clean coal and biomass are those sources where technology must be developed. These are just not there yet, even though the government is investing significant dollars for their development.

Direct burning of biomass is slated to begin at the Berger Plant in 2012, in Ohio but near Wheeling, WV. The reason is the plant could not continue as is because of air pollution restrictions. However, the economical technology to convert switchgrass and other biomass to ethanol or other fuels has not yet been developed, even though big bucks are being invested. Clean coal technology is in the same boat, in the developmental stage.

All of the above technologies and primary fuel sources will likely play a role as we reach peak oil and there just isn’t enough to go around. Other technologies may also play a role, such as algae, wave action and others. Government policy and public opinion about global warming will also complicate our fuel transformation, as the two are intricately linked.

Reflections on Energy Future

Abstract: Our energy and global warming future and outlook will affect decisions we make on durable goods, such as tractors, cars, etc. Several articles will be forthcoming to help predict and understand our energy and global warming policy decisions. Hopefully this will help position our business and personal lives to take advantage of the pending changes. This first article is on general outlook, the second on primary energy sources, such as solar, wind, hydro, nuclear and biomass and the last on biomass and its competitiveness with other primary fuels.

Reflections on Energy Future

Accept the following as an OSU Extension Educator’s slightly informed insights about our energy future. First, even though many are doubters, global warming is slowly but surely being accepted as real by Ohio, U.S. and global legislators. Even if you don’t accept global warming as reality, our policy makers in government do. This means that public money will be spent to slow global warming. The real winners in public funding will be those practices that address both global warming and dependence on foreign oil.

Why do I say foreign oil? I say foreign oil not only because of the universal concern about our dependence on other nations and sending our money away from the U.S., not all of whom think well of the U.S.; but also because our very being and economy is so dependent on foreign oil.

Keep in mind that the industrial revolution and life as we know it today is oil based, from the products produced such as the automobile industry to modern agriculture to transportation to and from work. We are about 100 years post industrial revolution today and one is hard put to spend a day, where we are not directly dependent on oil.

Granted, we currently have the technology to be oil independent, but just like it took 100 years to develop a society, industry and life style so dependent on oil, it will take another 100 years to wean away our dependence on oil and replace all the industrial, personal and public equipment that runs on gasoline and oil.

So, how will this transition evolve? First, there will be many changes and modes that interplay as oil becomes more expensive and limited, the price goes up and we wean from it’s use. Natural gas is perhaps the easiest primary fuel to replace oil. It’s price will trail oil, but it too will become more expensive as we transition from oil.

The role of coal and clean coal technology will be governed by government regulation, clean air legislation, carbon tax or credits and greenhouse gas emission legislation. Suffice it to say that just as the transition from oil will take time, so too will be the transition from coal. We in Ohio are especially dependent on the burning of coal in plants along the Ohio River to produce the low cost electricity we use.

Electricity will become increasingly important in the future.

Electricity is not primary energy, just an energy transport, and will become increasingly important in the future. Electricity goes to every home, business and even gasoline station. Plug-in electric cars are in our future, first as plug-in hybrids, next as electric only commuter cars and later as all electric primary cars. In the future, every gas station will also be a plug-in recharging station. Once batteries in cars are commonplace, a smart grid will draw down those batteries during peak demand and recharge them during low demand.

The Color of Money Management

One might think the only color related to managing money is GREEN…and lots of it! However, money management is complex and related to our individual personality. Those who have been through Real Colors® personality style training understand that there are four colors related to personality styles, Gold, Blue, Green and Orange. Each of these colors has a specific set of personality characteristics that describe them. This is true of many personality tests; the important thing to realize is that money management is tied to our personality and to our emotions. Managing money is not always as easy as black or white.

Money is often linked to our sense of self worth, perceived power, control, security, or success to name a few. This linkage demonstrates the emotional connection. If who we are is tied to the amount of money we have, this can have an affect on the financial decisions we make. For example, if a feeling of security is important to an individual, then they will be more likely to plan and save for the future. If security isn’t as important to an individual, then they are less likely to save for the future and will concentrate more in the moment.

Let’s take a few minutes to look at money management through the Real Colors® perspective. The Gold personality has a need to plan, organize and feel secure, so this personality will be more likely to develop family budgets, and seek input from financial advisors to get a retirement savings plan in place. Gold personalities will also be more likely to judge others and the way that they handle their money. This makes it a little more challenging to come to a compromise with golds when managing money in partnership.

Blue personalities tend to be more emotional, concerned about others’ feelings, and not focused on the details, but rather the big picture. This personality may be more likely to spend money to make them feel better if they are having a bad day. They will be thinking about and planning for the future, but sometimes falling short because of the lack of attention to the details of the planning. Communicating about money issues with blues will be an open, easy conversation, unless there is conflict involved. If a blue feels the other party involved does not agree with them, they will avoid having the money conversation at all costs.

Green personalities prefer to deal with issues without emotion; they use logic and are also very good researchers. This personality will be good at determining what options are available and will have the best long term return all mapped out for their retirement savings. They will not spend money on what they would think of as frivolous; just the basics are good enough for them.

Orange personalities tend to be more carefree and living in the moment. They will think about and plan for the future when someone tells them they must do it. They are more willing to take risks and will probably have riskier investments then the Golds & Greens who are more conservative. Oranges are also more likely to spend now and save later.

Even with these very brief descriptions, you can begin to see there is a relationship between our individual personality and how we handle money. The challenge comes when we are working together with a personality of a different color to manage our money together. More than likely, compromises will have to be made by both parities involved. Understanding your own money personality, your values and your goals becomes very important when working with a spouse, business partner or family member to mange your joint business and personal accounts and plan for the future. You must understand yourself before you can communicate your goals to someone else. The first step is to spend some time getting to know yourself, how you feel about money and what your goals are.

There are several quizzes and websites that can help you understand your money management personality by looking at your spending habits, your saving habits, your goals and values, and other aspects of money management. Googling ‘money personality’ or checking out one of the many bank websites with financial information is a good starting point for determining your money personality. Each site has different names for the personality types, but personality descriptions are very similar from quiz to quiz. Spending a little time getting to know your money personality will help you as you make financial decisions, plan for the future, and maybe correct some of the current mistakes you might be making.

To learn more about this topic and other financial risk management topics a new workshop will be offered this winter for women in agriculture. This workshop will provide a more in-depth study of the financial risk related to agriculture and teach tools to increase women’s risk management skills. The program is inspired by the recent Annie’s Project Workshops and organized much like those workshops. Unlike the Annie’s Project Workshop, this class will focus only on one area of risk management, financial risk.

Workshops will consist of four evening classes during the winter of 2011. Each session will be three hours from 6pm – 9pm. The workshops will be very hands on and interactive. More information will be available in the coming months and will be advertised in local publications. There will also be an opportunity to learn more at the upcoming Farm Science Review in London, Ohio. Women in Agriculture programming will be a featured OSU Extension program in the Firebaugh Building. Presentations and information will be available all three days of the review. The Farm Science Review will be held September 21 -23, 2010. For more information visit the website at http://fsr.osu.edu. To learn more about the financial workshops or the Farm Science Review you can also contact the OSU Extension Office in Erie County.

Kohl: A Goal is a Dream with a Deadline

Dr. David M. Kohl, Virginia Tech Professor Emeritus, was the capstone speaker for the Ag Credit Building and Protecting Your Farm — Risk Management Series on August 14, 2010 in Perrysburg, Ohio. Dr. Kohl is an energetic and highly engaging speaker. On this day, Kohl was speaking to about 150 beginning and young farmers on the subject of positioning the farm business for the next generation.

David Kohl

Kohl (left) visits with farmers prior to his capstone.

“There will be more business opportunity in agriculture in the next 10 years than anytime in the past 50 years,” Kohl stated to start the capstone session.  But, he cautions that there will be also more opportunity to fail.

Kohl pointed out that there is a movement in America to challenge large agriculture through local, organic food systems. But he was quick to point out that going all local and organic would leave hungry people in this world.  There is a place for organic, but there is still a great need for an efficient food supply and distribution system that requires use of modern technology.

Kohl discussed a few major themes:

  • water will replace oil as a critical resource
  • special interests group will have a big impact (bigger impact) on agriculture and food business models than any politician
  • ADVOCATE! I was very pleased to hear Kohl strongly encourage participants to get on twitter, facebook and advocate!
  • global, global, global; instead of checking weather first thing in the morning, check foreign currency rates

World growth is changing the local face of agriculture, as pointed out by pressure on farm equipment demand due to world growth. Kohl highly encouraged each participant to have a plan for a black swan event (uncertain, unplanned) on a global scale.

The BRIC (Brazil, Russia, India and China) nations account for 18% of the world’s economy and half of the world’s growth. Kohl pointed out that corn and soybeans are doing well because of the BRIC nations demand. But as the BRIC nations go, so go the rest of the world.  This is particularly true with China. If Chinese growth: >9% = good for agriculture prices, 5% = flat for agriculture prices, 3% = world economy suffer and double dip recession.

Short summaries from Kohl:

Oil

Oil is the black swan for agricultural economic health and world economy. Specifically, 80% of farm related expenses are directly related to oil. Since most of the world’s oil is produced in military sensitive parts of the world, it is likely that oil prices will remain volatile, unpredictable.

Land

In 80 of the past 100 years, land appreciated in value. When positioning your business for the next decade, Kohl warns to be cautious of land value growth.  Don’t get caught in the cheap money trap: it is not about ‘cheap money’, it is about the ability to pay money back.

Federal Debt

Due to the size of the federal debt, it is critical for farm producers to give their bottom line a shock test for next year. Examine the bottom line with a 2% increase in rates, then examine the bottom line with a 4% increase in rates. Make adjustments where necessary.

Golden Rules

  1. Working capital needs to be 20-25% for the oncoming generation of farmers.
  2. Position yourself as a margin manager.
  3. Generate $40,000 – $70,000 net. Can the son or daughter come back into the farm? Yes, just be sure you can generate $40,000-$70,000 net.
  4. Your most precious commodity is time management.

Finally, Kohl ended the capstone with emphasizing the importance of goal setting and writing down goals for the farm business and beyond.