RMA Makes Changes in Biotech Endorsement Program and Streamlines Crop Reporting Dates

By: Chris Bruynis, Assistant Professor & Extension Educator, Ross County

Farmers that were able to reduce crop insurance premiums by using the Pilot Biotechnology Endorsement (BE) approved by the Federal Crop Insurance Corporation Board of Directors (FCIC Board) starting with the 2008 crop year (CY), will no longer be able to beginning with CY 2012. The Pilot BE has provided a premium rate reduction to eligible producers that plant certain qualifying corn hybrids. After careful consideration, and in consultation with the pilot submitters, the FCIC Board has concluded the Pilot BE will terminate in the interest of program simplification.

However, RMA will consider an appropriate reduction in the underlying base premium rates for corn in the existing pilot area beginning with the 2012 crop year. Ohio was one of the states in the Pilot BE Program.

The Risk Management Agency (RMA) and the Farm Service Agency (FSA) have established 15 common acreage reporting dates for producers participating in RMA and FSA programs. Before the streamlining, RMA had 54 acreage reporting dates for 122 crops, and FSA had 17 dates for 273 crops.  In Ohio, this change means producers will now have four acreage reporting dates instead of five.

Beginning in 2012 burley tobacco, spring cabbage (planted 3/15-5/31), corn, grain sorghum, hybrid corn seed, spring oats, popcorn, potatoes, soybeans, tomatoes, and any other crops not listed elsewhere will have a July 15 acreage reporting date. Summer cabbage (planted 6/01-7/20) will have an August 15 acreage reporting date.

Beginning in 2013 January 15 will be the acreage reporting date for apples and grapes. December 15 will be the acreage reporting date for fall barley, fall wheat, and any other fall seeded small grain.

Farm Business New Year’s Resolutions

By: Mark Mechling, Extension Educator, OSU Extension, Muskingum County

As we begin 2012, we look forward to new opportunities and challenges. Many of us develop resolutions (lose weight, stop smoking, spend more time with family) yet fail to achieve the impact we wanted. Why? Perhaps our resolutions are too vague or broad, not written down or too difficult to reach.

Resolutions and goals are similar. They are definite statements of how you plan to achieve your vision of the future. In management education they are referred to as SMART goals. They should be Specific, Measurable, Attainable, Rewarding and Timed.  Goals should focus your attention, energy and action on desired results.

Consider the following when making your new year’s resolutions or goals- Write them down, start small, share them with others, keep them in front of you on a daily basis and reward yourself when successful.

Here are a few management resolutions that you might want to consider adding to your list for the new year.

In 2012, I resolve to:

Participate in at least one OSU Extension management education program such as Annie’s Project or a landowner’s program on oil and gas leasing.

Conduct at least two family business meetings to discuss conflict resolution, job descriptions, succession strategies and other long range plans. Read the OSU Extension Fact Sheet by Chris Zoller on family business meetings at : http://ohioline.osu.edu/bst-fact/pdf/3612.pdf for additional information.

Complete a will. Surveys show that over half of Americans do not have a will. If you have one, review and update it with your attorney and family members.

Get to know at least one non-farming neighbor that I didn’t already know.

Convene an advisory group of key business partners- lender, tax advisor, attorney, Extension educator, grain or livestock marketer, feed representative, crop consultant, veterinarian and others- to discuss our current farm business status, marketing plans and future business strategies.

Maintain the farm business records on a regular basis so that decisions can be made using the best available information.

Read the Ohio Ag Manager (http://ohioagmanager.osu.edu), Ohio Beef Newsletter (http://beef.osu.edu), CORN newsletter (http://corn.osu.edu) and Buckeye Dairy News (http://dairy.osu.edu) on a regular basis to stay up to date on the latest Extension research and programming.

Best wishes for a prosperous 2012!

Targeting a Fair Rent or Crop Share Lease Agreement

By Wm. Bruce Clevenger, OSU Extension Defiance County

When farmers and landowners evaluate cropland rental arrangements, questions arise like “Should we continue farming on shares?” “Which is more fair, crop share or cash rent?” “Do we have the right share percentages?” “How do we set a fair cash rent?” “What happens to my risk?”

These are common questions across Ohio and the Midwest. As the dynamics of cropland production changes with market and production forces as well as landownership transitioning to the next generation or owner, cropland leasing and rental arrangements too will evolve.

To help with the analysis, The Center for Farm Financial Management (CFFM) at the University of Minnesota offers a software called FairRent. Some OSU Extension County offices have the software to assist farmers and landowners evaluate current or future cropland leasing and rental arrangements.

FairRent evaluates both cash rental and share rental arrangements based on expected yields, prices, government program payments, and expenses. The results calculate a break even cash rental rate and help develop a realistic bidding range for cash rental negotiations. The share rent results show whether sharing production and expenses will result in a fair economic return for the operator.

FairRent also has sensitivity tables that show how break even bids change with varying yields and prices. All sensitivity levels interact with government payments to show the price protection provided by LDP and CCP payments. FairRent can also be used to calculate the yields and prices required to break even at a specific cash rental rate.

There are financial and risk factors to consider when selecting a farmland lease agreement. Several pros and cons exist with cash rent and crop share arrangements. Sound financial plans add to the confidence that comes with good cash rent and share crop leasing arrangements. You may contact Bruce Clevenger, OSU Extension Defiance County, clevenger.10@osu.edu, 800-745-4771 to get one-on-one assistance with FairRent for your farmland arrangements.

Biotechnology and Variation in Average U.S. Yields

By: Carl Zulauf, Professor, and Evan Hertzog, Metro High School Junior
Department of Agricultural, Environmental and Development Economics

Introduction: In a previous article, we compared the trend in U.S. average yield per harvested acre for the 1940-1995 and 1996-2011 periods. The year 1996 was the first year that biotech varieties of crops were commercially adopted in the U.S. The analysis included 14 crops, 3 biotech crops (corn, cotton, and soybeans) and 11 crops for which adoption of biotech varieties is limited. This article specifically examines the deviation of average U.S. yield from its trend-line yield. The objective is to provide information concerning the commonly-expressed argument that biotechnology has reduced yield variability.

Analytical Procedures: The data for this analysis are from the U.S. Department of Agriculture, National Agricultural Statistics Service, accessed at http://www.nass.usda.gov/Data_and_Statistics/) during November 2011. The observation period is from 1940 through 2011, with 1940 being the approximate year that average yield began to increase for most U.S. crops.

We will use corn yields since 1995 to illustrate the calculation of yield variation used in this analysis. The yearly corn yield, along with the linear trend line, is presented in Figure 1. We calculated the percent deviation of the actual yield from the estimated trend-line yield for each year. For example, U.S. average corn yield was 160 bushels per harvested acre in 2004. The linear trend yield estimate for 2004 was 144. The percent deviation of yield from its trend yield estimate is +11% ((160/144) -1). In other words, average U.S. yield in 2004 was 11% greater than the trend yield for 2004.

This measure of variation takes into account that yield has trended up over time. A one bushel variation in yield has a different meaning when yield is 150 bushels than when it is 50 bushels. The last step in the procedures was to calculate the standard deviation of the percent variations from trend-line yield during the observation period. Standard deviation is a commonly-used measure of variation.

Discussion: For all 14 crops, the variation from trend-line yield is lower during the recent 1996-2011 period than during the earlier 1940-1955 period (see Table 1 below). The average decline in yield variation was -45%, with a range from -14% (sugar beets) to -67% (peanuts). Moreover, for 10 of the 14 crops, yield variation was smaller in the more recent period with 95% statistical confidence (see last column of Table 1). The four exceptions were barley, soybeans, sugar beets, and wheat. Last, the average decline for the 3 biotech crops was -43%, compared with -45% for the 11 non-biotech crops.

Implications: A decline in yield variability is a universal characteristic of the U.S. crops included in this study. It is not just a characteristic of the biotech crops. Moreover, little difference appears to exist in the size of the decline in yield variability across biotech and non-biotech crops.

While this study cannot preclude biotechnology as an explanation for the decline in yield variability observed for corn, cotton, and soybeans; it suggests more universal factors are likely occurring. One such factor could be that both biotech and traditional breeding methods have been equally successful at creating varieties that reduce yield variation. A second such factor could be that weather was more favorable across the various U.S. production regions during 1996-2011 than 1940-1995.

To the extent that the decline in crop yield variability is permanent and not transitory, it generates benefits for consumers of crops. A more reliable supply reduces the size of stocks that need to be carried to assure an adequate supply of food before the next harvest, thus reducing the cost of food. A more reliable supply also enhances the ability to expand non-food uses of crops. Non-food uses, such as energy production, require large capital investments. Large capital investments are more economically viable when utilized at close to full capacity. A stable input supply increases the odds that a plant can operate closer to full capacity.

Click here for PDF version of the article (with graphs)

Biotechnology and U.S. Crop Yield Trends

by: Carl Zulauf, Professor, and Evan Hertzog, Metro High School Junior
Department of Agricultural, Environmental and Development Economics

Introduction: Biotechnology varieties first became available for commercial use in the U.S. in 1996. By 2011, they accounted for 88%, 90%, and 94% of the acres planted to corn, upland cotton, and soybeans, respectively (U.S. Department of Agriculture (USDA), National Agricultural Statistics Service (NASS), Acreage, http://www.nass.usda.gov/Publications/index.asp, 6/30/11). For other crops, adoption of biotech varieties has been limited or nonexistent. Given that 15 years have passed, this article compares the trend in U.S. average yield since 1995 with the trend that existed from 1940 through 1995, a period that predates commercial biotech varieties. The year 1940 approximates when the average yield of most U.S. crops began increasing, due in part to traditional breeding methods.

Analytical Methods: Yields per harvested acre were obtained for corn, all cotton, soybeans, and 11 crops for which adoption of biotechnology varieties is limited or non-existent. Source of the data is USDA, NASS, http://www.nass.usda.gov/Data_and_Statistics/, 11/2011. Linear yield trends were estimated for 1940-1995 and 1996-2011 using regression analysis. The estimated yield trends are tested statistically to determine if they exceed zero at the 95% confidence level. Also, the 1996-2011 yield trend is compared against the upper value of the 95% confidence range around the pre-1996 trend. This test provides an indication of whether the trend is statistically higher since 1995.

Findings: The yield trend is estimated in the crop’s quantity unit per harvested acre. For example, the estimated yield trends for corn are 1.86 bushels per harvested acre for the earlier 1940-1995 period and 2.02 bushels per harvested acre for the later 1996-2011 period (see Table 1 below).

For 13 of the 14 crops, the yield trend estimated for 1940-1995 exceeds zero with 95% statistical confidence. The exception is sugar cane. The time-trend R2 exceeds 0.78 for each of the 13 crops, implying that the time trend explains at least 78% of the variation in yield over time. This is a high degree of explanation for a single variable. For 1996-2011, 9 of the 14 yield trends exceed zero with 95% statistical confidence. A lower number is expected because the number of observation years is smaller. For the same reason, it is not surprising that R2 also is lower.

For only 7 of the crops analyzed in this study is the estimated yield trend higher during 1996-2011 than 1940-1995. The 7 crops are barley, corn, cotton, peanuts, rice, soybeans and sugar beets. For each of these 7 crops, the 1996-2011 yield trend exceeds the high end of the 95% confidence range for the 1940-1995 yield trend (see Table 2 below). This finding suggests that, for these 7 crops, the 1996-2011 yield trend exceeds the 1940-1995 yield trend with 95% statistical confidence.

Implications: This analysis finds that, while the yield trend increased for all 3 biotech crops after 1996, the yield trend increased for less than half of the crops (4 of 11) for which biotech varieties are of limited importance. This finding does not prove that biotechnology is the reason for the higher yield trend for corn, cotton, and soybeans. It only reveals that the evidence on linear yield trends is not inconsistent with such a conclusion.
Over 10 years, the higher yield trend translates into a harvest yield that is 1.6 bushels, 0.6 bushels, and 69.1 pounds higher for corn, soybeans, and cotton, respectively. This addition to yield is 1.0%, 1.4%, and 7.9% of the highest harvest yield observed for corn, soybeans, and cotton, respectively. Thus, for corn and soybeans, the increase in yield trend since 1995 is not large.

These implications are subject to change with more years of data. Also, the analysis does not address what the yield trend would have been for corn, cotton, and soybeans if biotech varieties had not been introduced.
Click here for PDF version of article (complete with graphs)

Understanding Current Prices: Lack of a U.S. Corn Yield Trend since 2003

by: Carl Zulauf, Professor, and Evan Hertzog, Metro High School Junior
Department of Agricultural, Environmental and Development Economics

Introduction: Growth in demand tops most lists of causes of the post-2005 run-up in the price of farm commodities. The growth in demand has two primary sources: (1) world-wide growth in income and the associated demand for food and (2) increased use of farm commodities for biofuels. However, supply factors also have a role in explaining current prices. This article highlights a seldom-discussed explanatory factor: lack of a trend in average U.S. corn yields over the last 9 years (see the graph below, constructed using data obtained from the USDA, National Agricultural Statistics Service, accessed October 17, 2011 at http://www.nass.usda.gov/Data_and_Statistics/).

Discussion: Statistical analysis finds no statistically significant time trend in average U.S. corn yields since 2003. Thus, the increase in consumption of U.S. corn from 10.2 billion bushels to 12.6 billion bushels between the 2003/04 and 2011/12 crop years, has largely been met through an increase in planted acres of 13.3 million (from 78.6 million acres to 91.9 million acres).

It is important to note that it is not uncommon to find no statistically significant trend in U.S. average yield over a 9 year period. Of all 64 9-year periods starting with the 9 years that begin in 1940, less than half had a statistically significant upward trend in corn yields. This may seem surprising since the average annual increase in U.S. average corn yields since 1940 is 2.2% per year.

The lack of a yield trend since 2003 underscores that other factors, such as weather and changes in acres both within and among states, may offset the importance of genetics over not just one or two years but also over intermediate lengths of time. While the identification and role of these other factors for 2003-2011 requires additional analysis, this recent history contains useful implications.

► Assumptions about yield trends need to be made with caution, especially in regards to whether long-term trends will exist over short and intermediate lengths of time. This need for caution applies to strategic planning and management of risk by farms and agribusinesses, as well as the design of public policy, such as the farm safety net.
► While demand has been at the center of discussions over current high prices, supply factors should not be overlooked.
► Resumption of the long-term upward trend in average U.S. corn yields would temper and might end the crop boom even if demand remains strong. For example, a U.S. 2012 yield of 165 bushels/acre and 85 million harvested acres (both plausible) equal U.S. corn production of 14 billion bushels, over 1 billion bushels more than projected 2011/12 consumption. Lower prices will be needed to absorb this large of an increase, especially if yields for other U.S. crops and crops in the rest of the world are normal to above average.

Click here for a PDF version of this article

IRS Announces 2012 Standard Mileage Rates

WASHINGTON — The Internal Revenue Service on December 9 issued the 2012 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2012, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
• 55.5 cents per mile for business miles driven
• 23 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

The rate for business miles driven is unchanged from the mid-year adjustment that became effective on July 1, 2011. The medical and moving rate has been reduced by 0.5 cents per mile.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical or charitable expense are in Rev. Proc. 2010-51.
Notice 2012-01 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

Source: IRS

Insurability of Crops Following Cover Crops

SPRINGFIELD, Ill., December 1, 2011 – An announcement made by the Risk Management Agency (RMA) outlines changes that will provide producers more flexibility when insuring a crop that follows a cover crop in the states of Illinois, Indiana, Michigan, and Ohio.

Heavy spring rains last year delayed planting in parts of the Midwest raising concerns about the impact a cover crop may have on the insurability of a subsequent spring crop. Restrictions limited insurance coverage on crops that followed a cover crop that was harvested or reached the budded stage in the same crop year.

For 2012, crops planted following a cover crop are insurable as long as the cover crop is killed on or before June 5th. Whether the cover crop has headed, budded or has been harvested no longer effects insurability. These changes affect corn, popcorn, sweet corn, hybrid seed corn, pumpkins, soybeans, grain sorghum and processing beans. The cover crop practice is defined as a crop planted within twelve months of planting the insurable crop and is recognized as a sound agronomic conservation practice for the area.

Brian D. Frieden, Director of the Springfield Regional Office, RMA, said that this change recognizes the importance of crop insurance in protecting a producer’s livelihood and conservation in protecting the soil.

For more details on how cover crops may impact your crop insurance policy, contact a crop insurance agent. Winter is the perfect time to review your crop insurance needs for 2012. Information on cover crops can be found by going to the Information Browser link at the Risk Management Agency website at http://www.rma.usda.gov/ . Producers can get the specifics by entering the crop and county where the farm is located and looking at the Special Provisions.

The Ohio State University announces the 2012 Southern Ohio New and Small Farm Colleges

by: Tony Nye, Extension Educator

Are you a small farm landowner wondering what to do with your acreage? Are you interested in exploring options for land uses but not sure where to turn or how to begin? Have you considered adding an agricultural or horticultural enterprise but you just aren’t sure what is required, from an equipment, labor, and/or management perspective? Are you looking for someplace to get basic farm information? If you or someone you know answered yes to any of these questions, then the OSU Extension Small Farm College program may be just what you are looking for.

OSU Extension is offering a program targeted at the new and small farmer. The Southern Ohio New and Small Farm College is an 8 week program that introduces new and even seasoned farmers to a wide variety of topics. The program will teach participants how to set goals, plan, budget, and where to find resources available for them if they chose to start a small farming operation. The courses will layout how to manage financial and farm records. Extension Educators will illustrate over 15 different enterprises that can be profitable on land as small as one acre. The educators will show the benefits and pitfalls of each enterprise so that the participant will be able to pick and chose what may work best for them and what suits their interest. To round out the experience, a bus tour will be held around area farms so that participants can see first hand how small farm life works, and also make contacts of practicing farmers in the area.

The Small Farm College was originally conceived as a way to help southern Ohio’s tobacco farmers make the transition away from that crop as government subsidies were phased out. OSU Extension Educators soon realized such programming also could benefit rural landowners who own small acreage in the countryside. Since 2005, past regional New and Small Farm Colleges have helped over 500 individuals representing 400 farms from 46 Ohio counties improve the economic development of their small family-owned farms. This program can help small farm landowners and farmers diversify their opportunities into successful new enterprises and new markets. And, it can improve agricultural literacy among small farm landowners not actively involved in agricultural production.

Many program participants don’t expect to make a living off the land, but do want to recoup something, said organizer Tony Nye of OSU Extension in Clinton County. First time farmers want their interaction with their land to be productive.
“They like living in the country, getting their hands dirty,” Nye said. “That has been their motivation for buying land.”

The New and Small Farm College will be conducted at two locations this year. The first college will be held in Morrow County at the Cardinal Center, 616 State Route 61, Marengo, Ohio on Tuesdays, beginning January 10, 2012. Classes run from 6:30 – 9:00 p.m. The Morrow County Extension office can be reached 419-947-1070.

The second location will be conducted in Pike County at the OSU Endeavor Center, 1862 Shyville Road, Piketon, Ohio on Tuesdays, beginning January 17, 2012. Classes run from 6:30 – 9:00 p.m. The Pike County Extension office can be reached at 740-289-4837.

Limited to the first 50 registrations per location.

The cost of the course is $150 per person, $50 for an additional family member. Along with the vast resources and knowledge gained, participants will receive a notebook of all resource materials, a soil test, refreshments, and the bus tour. Registrations are now being accepted. Individuals interested in the program may contact Tony Nye, OSU State Coordinator for Small Programs at the Clinton County Extension office at 937-382-0901 or E-mail at nye.1@osu.edu.

Registration brochures for the program can be found at www.clinton.osu.edu, www.pike.osu.edu, and www.morrow.osu.edu and are available in area Ohio State University Extension Offices.

2011 Farmer’s Tax Guides Available at OSU County Extension Offices

by David Marrison, OSU Extension Educator

Do you need a resource to answer those tough farm tax questions? If so, farmers can receive a free copy of IRS Publication 225, the 2011 Farmers Tax Guide, at their local county OSU Extension office. The 2011 Farmer’s Tax Guide is an 89 page publication which explains how the federal tax laws apply to farming. This guide can be used as a guide for farmers to figure taxes and complete their farm tax return.

Some of the new topics for the 2011 tax year which are included in this publication are: standard mileage rate, start-up costs back to $5,000 in 2011, increased section 179 expense deduction dollar limits, special depreciation allowance, self-employed health insurance deduction, lower self-employment tax rates, maximum self-employment net earnings, and new medicare tax rates. More information can be found at the IRS website at: http://www.irs.gov/publications/p225/index.html

Part I of Schedule F (Form 1040) has been revised for 2011, and the line numbers for reporting farm income are not the same as in prior years. The payments reported on lines 1a and 2a for specified sales of resale or raised products are those received through a merchant card or a third-party network. These generally will be reported to the farmer on Form 1099-K, Merchant Card and Third Party Network Payments. Merchant cards include, but are not limited to, Visa® and Master-Card®. Third-party networks include, but are not limited to, Paypal® and Google Check-out®. The IRS instructions for Schedule F (Form 1040) state that merchant card and third-party network transactions are to be reported on line 1a or 2a even if a Form 1099-K is not received. Other sales of commodities are reported on lines 1b and 2b.

The Rural Tax Education Site has an example Schedule F on their web site to help producers as they complete their Schedule F. The sample return can be found on web site at: http://ruraltax.org/

Click here to find the location of the OSU Extension County Extension offices.

Click here to access the 2011 Farmers Tax Guide

Click here to access the Form 1040-Schedule F for 2011