OSU Small Farm Programs Announces Conferences– “Opening Doors to Success” and “Living Your Small Farm Dream”

By: Tony Nye, Extension Educator

The mission of the OSU Small Farm program is to provide a greater understanding of production practices, economics of land use choices, assessment of personal and natural resources, marketing alternatives, and the identification of sources of assistance.
We at Ohio State want to help farm families improve economic growth and development on their farms.

To help small farmers become more profitable, the Ohio State University Extension Small Farm Program is pleased to host two conferences in March of 2012 dedicated to assisting small farm landowners.

These intensive conferences will give participants the opportunity to choose from a diverse variety of seminars that can help them be successful in their farming operations.

The first conference is the 4th annual “Opening Doors to Success” Small Farm Conference and Trade Show” to be held March 9 & 10, 2012 at Wilmington College located in Wilmington, Ohio. The conference will feature 30 breakout sessions and a trade show for small farmers.

The conference kicks off on Friday, March 9 at 5:30 p.m. with a session: “Meat Marketing—Front and Center” which will address such issues as, the obstacles to marketing meat, your label and what it means to you and your customer, the meanings of grass-fed, antibiotic free, free range, organic, grain fed, finding the right processor, and pricing my product.

On Saturday, March 12, registration begins at 7:45 a.m. and the day will conclude at 3:45 p.m. The day will feature 30 breakout sessions offered throughout the day and will cover a variety of topics that will include such examples as: Aquaculture; Bee Keeping; Cut Flower Production; Herb Production; Raised Bed Production; Invasive Species Affecting Your Woodlot, Pasture Management; Goat Production; Beef Production; Greenhouse/Tunnel Production; The Organic Process; Poultry Production; Addressing Health Issues for Livestock; Equipment Needs; Food Safety; Agricultural Law Considerations; Tomato Production, Pasture and Hay Production; Local Foods; Social Media Marketing; Financial Management; Livestock Production that will include pasture pork and poultry; Resources – How do I find the Info I Need and so much more.

The program is co-sponsored by OSU Extension Small Farm Program; Wilmington College; Farm Credit Services of Mid-America; and the U.S. Department of Agriculture offices of the Farm Service Agency, Natural Resources Conservation Service, National Agriculture Statistic Service and Rural Development.

Registration is $20 on March 9, $50 on March 10 or $60 for both days. Registration deadline is March 5. For more information, log on to: http://clinton.osu.edu , or contact OSU Extension educator Tony Nye at nye.1@osu.edu or 937-382-0901.

The third annual “Living Your Small Farm Dream” Northeast Ohio Small Farm Conference and Trade Show” will be held on March 31, 2012 at the R.G. Drage Career Center from 8:30 a.m. until 4:15 p.m. in Massillon, Ohio.

The conference will begin with a keynote address, “Top Ten Trends in Local Foods and How You Can Profit from Them,” – Eric Barrett, OSU Extension followed by 23 breakout sessions attendees can pick and choose from.

Examples of breakout sessions at this conference will include: Managing the Woodlot for Profit; Leasing Farmland for Oil and Gas Production; Raising and Marketing Meat Goats; How You Can Profit from Social Media Such as Face book and Twitter; Utilizing High Tunnels to Extend the Growing Season; High Tunnels and Organic Cost-Share Programs; Grape Production and Wine Making; Direct Marketing of Meat in Ohio; Herb and Cut Flower Production; Irrigation Systems for Fruits and Vegetables; Taxes Issues for Small Farms; Pasture Raised Poultry; Rules and Regulations for Direct Marketing Food Products; Maple Production; Oil and Gas Legal Issues; Managed Grazing; Resources Available for Small or Beginning Farmers ; Starting an orchard and much more.

This program is co-sponsored by OSU Extension Small Farm Program; Farm Credit Services of Mid-America; and the U.S. Department of Agriculture offices of the Farm Service Agency, Natural Resources Conservation Service, National Agriculture Statistic Service and Rural Development.

Registration is $50 per person. Registration deadline is March 22. For more information log on to: http://jefferson.osu.edu, http://clinton.osu.edu, or contact OSU Extension educator Mike Hogan at hogan.1@osu.edu or 330-324-6341.

Fixed and Flexible Cash Rental Arrangements for Your Farm – Newly Revised North Central Region Bulletin

By: Barry Ward, Leader, Production Business Management, Ohio State University Extension

The North Central Farm Management Extension Committee has recently updated three lease bulletins that have been widely used by farm landowners and farm operators to evaluate lease arrangements. This article highlights the bulletin, “Fixed and Flexible Cash Rental Arrangements for Your Farm” (NCFMEC-01).

The purpose of this newly revised publication is to help operators and landowners develop equitable cash-rent arrangements and assist them in making sound decisions based on an equitable evaluation of resources. The first section of this bulletin (Part I) addresses whether a fixed cash-rent lease arrangement should be used. Part II discusses how to develop an equitable fixed cash rental rate. Part III outlines methods for developing a flexible cash rental lease and their advantages and disadvantages. Part IV discusses the importance of putting the agreement in writing. A sample lease form is also included.

This newly revised North Central Region bulletin titled “Fixed and Flexible Cash Rental Arrangements for Your Farm” is available at the “AgLease101” website under the “Document Library” tab at: http://www.aglease101.org/

Agricultural "Outlook" for 2012 Posted Online – Listen to the "Live" Outlook presentations by OSU Extension Economists

By: Barry Ward, Leader, Production Business Management, OSU Extension, Department of Agricultural, Environmental and Development Economics and Bruce Clevenger, Extension Educator, Agricultural and Natural Resources, OSU Extension, Defiance County

Farmers, agribusinesses and others in the agricultural industry had the opportunity to learn more about the current farm outlook at an Ohio State University Extension 2012 Farm Outlook Program in Defiance County on December 20, 2011.

Ohio State University’s Department of Agricultural, Environmental, and Development Economics and OSU Extension made presentations that brought forth the latest outlook on the grain markets, energy, land values and rent, production inputs and farm policy.

You can listen to each of the ‘live’ presentations from that evening linked below. Featured topics and speakers include:

Carl Zulauf, OSU Extension Agricultural Economist, on Farm Policy and the Farm Bill (In Zulauf’s absence, Matt Roberts did this presentation).

Barry Ward, OSU Extension Agricultural Economist, on production economics of farmland values and input costs such as seed, chemical and fertilizer markets.

Matt Roberts, OSU Extension Agricultural Economist, on grain and energy market outlook.

The files are available by accessing the link listed below. Presentations may take a minute to load, but should play well on high speed connections.

http://fairfield.osu.edu/news/farm-outlook-for-2012-is-posted-here

Ohio Beef Cattle Series Providing Management Information

by Mark Mechling, OSU Extension Educator

Ohio beef cattle producers will have the opportunity to participate in the Ohio Beef Cattle School Series this winter. The series of four evening programs will focus on optimizing efficient beef cattle production in a rapidly changing business and consumer environment. The sessions will feature nationally known speakers and will be broadcast “live” at a number of county OSU Extension offices across the state.

Dates and topics of the four sessions include:

Thursday, January 26- Economic Considerations in Beef Cattle Production

Thursday, February 9- Targeted Markets and Marketing Alternatives

Thursday, February 16-Genetics, Reproduction Efficiencies and Calving Season Alternatives

Thursday, March 1- Meat Industry Perspective including Outlook; Choice/Select Spreads

Each session begins at 7:00 p.m. For more information on specific details and locations, go to: http://fairfield.osu.edu/events/ohio-beef-cattle-school-class-1 or contact your local OSU Extension office.

Family Business Meetings–Helping Farms Communicate

by David Marrison

Tommorrow, I will be teaching at the Kentucky Cattlemen’s Convention about communication issues for farms in transition.  Poor family communications are at the center of many farm transition and estate transfer problems.  One way which farm families can improve communication is to hold family business meetings.  Chris Zoller of Ohio State University wrote a nice factsheet on tips for successful business meetings and it can be found at:

http://ohioline.osu.edu/bst-fact/pdf/3612.pdf

What other strategies have you found to improve family communication?

Can I Avoid Paying Taxes on Oil/Gas Payments?

By Chris Zoller, Chris Bruynis & David Marrison, OSU Extension Educators & Peggy Hall, Extension Specialist, Agricultural Law

The leasing of land for oil and gas drilling throughout eastern Ohio has provided landowners with substantial revenue.  OSU Extension has received many calls from landowners asking how they can avoid paying taxes on these payments.  The quick answer is that there are very few ways to avoid paying taxes on lease bonus payments or royalty income.  Oil and gas revenue payments are classified as Miscellaneous Income and are subject to both federal income and Ohio taxes (and should be reported appropriately). 

Taxation on Lease Bonus Payments: Cash payments received by the landowner prior to drilling, commonly referred to as lease bonus payments (typically paid on a per acre basis) are considered ordinary income for tax reporting purposes and are subject to ordinary income taxes. These payments might be made on an annual basis each year of the lease’s primary term, or could be made as a lump-sum payment that combines all annual payments into one payment made upon executing the lease.  All lease payments are reported to landowners on IRS form 1099 MISC, Box 1, Rents.  Lease payments must also be reported on page 1 of Schedule E, Supplemental Income and Loss.  This amount then flows to line 17 of IRS Form 1040 and is not subject to any self-employment tax.  Some oil and gas lease agreements will refer to a Delay Rental Payment.  This payment will be made to the landowner to allow the developer additional time to begin drilling activities .  These payments are also considered ordinary income.

Taxation on Royalty Payments: If drilling results in a producing well, you will receive periodic payments for your share of the production in accordance with the terms of the lease. This is known as royalty income , which will continue over the productive life of the  drilling unit Royalty payments are ordinary income reportable on Schedule E (Form 1040) for an individual taxpayer.  The royalty payments are reported in Box 2 of Form 1099MISC. Royalty payments are not subject to self-employment tax and are reported on Schedule E (Form 1040). Royalty payments are reduced by allowable depletion and other related expenses (if any) to arrive at ordinary income to the landowner.

How Much Will I Owe in Taxes for my Lease Bonus Payments? The answer to this depends upon your tax bracket.  These payments are added to other income you receive to determine your tax bracket.  Currently, the highest federal income tax bracket is 35%, for those with an adjusted gross income (AGI) of $379,150 or higher.  The highestOhio income tax bracket is 5.925%, for those withOhio taxable income over $204,200.  When combined, these two equal 40.925%.  However, your actual taxable income will probably be lower because of how the tax is calculated.  Your income tax is calculated separately for each tax bracket you pass through on the way to the 35% rate.  As a general rule, landowners should set aside 35% of the income received to account for their tax liability.

How Can I Avoid these Taxes? Making management decisions to minimize taxes is appropriate.  Evading the taxes due is not a wise management decision and is illegal.  There are some expenses landowners may incur as a result of negotiations or production that may be deducted to help reduce the tax burden.  For instance, in many cases, an attorney is hired to assist in negotiations.  Payments associated with lease negotiation made to the attorney can be deducted.  This expense is reported on Form 1099 MISC,Box 14, Gross Proceeds Paid to an Attorney. 

Because the oil & gas payments are reported on Schedule E there are very few ways to “minimize” the taxable portion of the lease and royalty payments.  However, landowners and farmers should look for ways to reduce their taxable income from Schedule C (small business), and Schedule F (farms).  Many strategies are used by businesses to reduce their taxable income through these Schedules (such as prepaid expenses, Section 179 expensing or Special Bonus Depreciation).  Taxpayers should also examine ways to maximize their 1040 deductions through contributions such as retirement plans and charitable giving.  Landowners who have an operating interest in the production of oil and gas (which are very few)  can deduct intangible drilling and development costs, operating expenses, production taxes, and depletion expenses.

Conclusions: For landowners who lease their oil and gas rights there is the potential for significant income.  While a landowner can’t avoid paying taxes on oil and gas income, the landowner can use strategies to manage the taxes.   To do so, a landowner should seek the assistance of a qualified attorney and accountant before, during and after the negotiations to fully understand and utilize all available tax management strategies.

Financial & Tax Implication of Oil & Gas Leases Meetings to be held

by David Marrison & Clif Little, OSU Extension Educators

OSU Extension is pleased to offer Financial & Tax Implication workshops in selected counties during the winter of 2012. These workshops will help landowners understand the financial and tax implications of oil & gas leases/royalties.

These meetings will help participants become more aware of the potential tax implications of leases and royalty payments. Don’t get caught blindsided by the taxes which will be due. Learn which payments are subject to ordinary income taxes versus capital gain; about the percentage depletion deduction; and how signing a lease may affect your CAUV status. Learn how the IRS handles oil & gas payments. Learn what questions to ask and receive financial planning tips for managing the potential income from these wells.

The following meetings have been scheduled:

Thursday, January 19, 2012
Ashtabula County Extension office
9:30 to 11:00 a.m.
This class is already sold out.

Thursday, February 16, 2012
Mid East Career & Technology Center in Buffalo, Ohio (Guernsey County).
6:00 p.m.
For more information: contact Clif Little at 740-489-5300 or 740-732-5681.

Tuesday, February 21, 2012
Trumbull County Extension office
9:30 to 11:00 a.m.
More information can be obtained by calling 440-576-9008 or click here for the Tax Implications of Oil & Gas Meeting Registration Form

Thursday, February 23, 2012
Ashtabula County Extension office
9:30 to 11:00 a.m.
More information can be obtained by calling 440-576-9008 or click here for the Tax Implications of Oil & Gas Meeting Registration Form

Wednesday, March 14, 2012
Geauga County Extension office
6:30 to 8:00 p.m.
More information can be obtained by calling 440-576-9008 or click here for the Tax Implications of Oil & Gas Meeting Registration Form

More classes will be added throught out the year, so contact David Marrison marrison.2@osu.edu  or Chris Bruynis bruynis.1@osu.edu to see if there will be calss scheduled near you.

 

Computerized Farm Recordkeeping Workshops

Wm. Bruce Clevenger, OSU Extension Educator, Defiance County

Pencil and paper is still the way most farmers keep records. As farm size, income or debt increases, many farmers and lenders look for computer programs that allow fast data entry, have internal checks for accuracy and allow summarizing of data. Most farmers begin their search by asking “Is there a simple computer program that will keep my records like the farm account books?”

Ohio State University Extension and other land grant colleges have recognized the computer software Quicken® as a computerized farm recordkeeping system.  Users can record transactions of both the farm and family and categorize them based on farm enterprises income and expenses as well as family living expenses.  Its popularity is due to the ease of data entry and to its low price of $60 to $100. This single-entry system is essentially an electronic checkbook. It allows users to track loans, write checks,   reconcile the checkbook with the bank statement and quickly create reports for the farm business, family, and tax purposes.

OSU Extension is offering a Computerized Farm Recordkeeping Workshop with Quicken® that will focus on setting up accounts, categorizing income and expenses, hands-on data entry, running tax reports, and preparing farm production reports.  Workshop will utilize a computer laboratory with Quicken® software installed to be used by participants during the workshop.

Workshops will be held:

January 30 & February 6 at OSU Extension Van Wert Co. (1:00pm—3:30pm)

January 31 & February 7 at OSU Extension Defiance Co. (6:30pm—9:00pm)

February 3 & February 10 at OSU Extension Hancock Co. (9:30am—12 noon)

Pre-Registration $35.00 per farm business (2 people) is required and includes two-sessions and a workshop training manual.  Please RSVP by January 18th. Space is limited.

For more information on the meeting, contact your OSU Extension office or OSU Extension Defiance County at (800) 745-4771, clevenger.10@osu.edu, or log on to http://defiance.osu.edu

2011 Farm Business Analysis – The time is now!

by: Dianne Shoemaker, Field Specialist, Dairy Production Economics shoemaker.3@osu.edu      

 Grain prices rocked in 2011 (if you were selling!), and milk prices were pretty nice too, but net farm income will vary from outstanding to poor depending on a number of factors.  Were you selling grain or buying feed being one of the major factors.  How did your farm do?  You surely have a general sense…you were either pre-paying to manage income tax liabilities or that wasn’t an issue…but how did it do by the numbers?

Direct costs, total costs, and net returns per acre, per bushel, per ton of crops grown.  Total cost of production per cwt, feed cost per cwt, net farm income per cow.   These are important numbers for every farm as they monitor individual enterprise profitability, develop and monitor risk management plans, and look for opportunities. 

What was the return on assets? Return on equity?  What were the Farm Financial Standards Council “Legal 21” financial measures?  How did your farm do this year compared to last year? How does your farm stack up against all of your competition?  Against all farms your size?  Against the top 20% of both groups? 

Need help answering all of these questions?  Completing your farm’s financial analysis for 2011 using the FINAN with enterprise analysis program is an organized and effective way of getting those answers done each year…with the added benefit of a growing state, regional and national database for benchmarking.

Through grant funding from the National Farm Benchmarking project, we are able to offer a full 2011 FINAN financial analysis, including enterprise analysis to 100+ farms.  Field crop, dairy, livestock, poultry and horticultural crop farms are welcome to participate.  Analyses will be completed by either Extension or Farm Business Consultants who previously worked with the Farm Business Planning and Analysis program. 

Participants in the project will work with their Extension Educator or Farm Business Consultant to complete their farm’s analysis by May 2012.  Maintaining each farm’s confidentiality is critical and farm analyses are coded before submission to the database where data is only shared as group data so individual farms are never identifiable.

In July,Ohio’s farms are invited to participate in a meeting to reviewOhio’s farm business summary and learn how to use their individual farm’s analysis,Ohio’s data and the national database to enhance their farm’s financial and risk management.

We invite and encourage you to participate inOhio’s 2011 Farm Business Summary.  This is a prime opportunity with the benchmarking grant covering the $600 per farm cost of analysis.  Questions?  Contact Dianne Shoemaker at (330) 533-5538 to discuss this opportunity. 

Extension and Financial Analysis Consultants who can help you with this project include:

Dianne Shoemaker MahoningCountyExtension 330-533-5538 shoemaker.3@osu.edu
Ann Gano McCleary Keeping Tabs, Inc 330-339-7511 agano@bright.net
Thomas Weygandt Farm Consulting 330-465-8019 tweyg@embarqmail.com
Don Garrett Ag Data Solutions 937-286-0407 don@agdatasolutions.com
Tom Ackerman Farm & Sm Bus Consulting, LLC 937-382-4760 tackerman32@gmail.com
Eric Barrett WashingtonCountyExtension 740-376-7431 barrett.90@osu.edu
Chris Bruynis RossCountyExtension 740-702-3200 bruynis.1@cfaes.osu.edu
Bruce Clevenger DefianceCountyExtension 419-782-4771 clevenger.10@osu.edu
Jeff McCutcheon MorrowCountyExtension 419-947-1070 mccutcheon.30@osu.edu
Heather Neikirk PortageCountyExtension 330-296-6432 neikirk.2@osu.edu
Jon Rausch UnionCountyExtension 937-644-8117 rausch.7@osu.edu

 

Tree Harvesting on Your Land: Legal Liability Issues and Precautions

By: Peggy Kirk Hall, Director of Agricultural Law, OSU Agricultural and Resource Law Program

Imagine that you have a number of dead and downed trees on your property and someone asks for permission to harvest the trees.  Typically, that person seeks an exchange:  removal of the trees at no cost in exchange for rights to the wood.  If you grant permission and the person suffers an injury while removing the trees, will you be liable for that person’s medical bills and other costs?   Are there any actions you could take to protect yourself from the potential of liability?  These are important questions a landowner should address before allowing someone to harvest dead and downed trees.  Click here to read the firewood liability factsheet.