Big data and UAVs on the farm? Webinar will address legal issues

by Peggy Hall

OSU’s Agricultural & Resource Law Program is pleased to announce its inaugural webinar, Big Data and UAVs:  Legal Issues for Agriculture, scheduled for Friday, December 12 at 1 pm.  This is the first webinar in the program’s new “Ohio Food, Agriculture and Environmental Law Webinar Series,” offering monthly legal webinars on issues of importance to Ohio agriculture.

The webinar will feature John Dillard, an Associate Attorney with the law firm of Olsson Frank Weeda Terman Matz, PC in Washington, DC and a leading expert on legal issues with technology and agriculture.  With a background in agriculture and experience advising clients in the food and agricultural industries, Dillard will present a practical analysis of the legal issues raised by agriculture’s increasing use of large data sources and UAVs.   Dillard authors a blog, Ag in the Courtroom, on AgWeb.com and Legal Ease, a column in Farm Journal magazine. He has appeared on national television and radio agricultural programs to discuss legal issues that affect agriculture.

Future webinars in the Ohio Food, Agriculture and Environmental Law Webinar Series will feature other national and state experts discussing legal issues of importance to Ohio agriculture.  Topics in the series will include:

The 2014 Farm Bill: Guiding a Client through the New Law, with Bill Bridgforth of Ramsay, Bridgforth, Robinson & Raley LLP, Pine Bluff, Arkansas on Friday, January 9, 2015 at 1 pm. 

Managing Pollutant Discharge Risk on Farms, with Chris Walker and Jack Van Kley of Van Kley & Walker LLP, Dayton/Columbus, Ohio and Tom Mehnke of Mehnke Consulting LLC, Greenville, Ohio on Thursday, February 12, 2015 at 1 pm (tentative).

Introduction to Food Law:  What You Need to Know to Build a Food Law Practice, with Jason Foscolo of Foscolo & Handel PLLC, Sag Harbor, New York on Thursday, March 12, 2015 at 1 pm.

Nursing Home Costs & Medicaid:  The One-Two Punch to the Family Farm with Craig Vandervoort of Sitterly & Vandervoort Ltd, Lancaster, Ohio on Friday, April 10, 2015 at 1 pm.

Rights and Remedies for Protecting Your Water Supply in Ohio with Joe Reidy of Frost Brown Todd LLC, Columbus, Ohio and Peggy Kirk Hall of OSU’s Agricultural & Resource Law Program on Thursday, May 14, 2015 (tentative).

For information on how to access the complimentary webinars and archived recordings, visit the “webinars” tab on http://aglaw.osu.edu.

 

Big data and UAVs on the farm? Webinar will address legal issues

OSU’s Agricultural & Resource Law Program is pleased to announce its inaugural webinar, Big Data and UAVs:  Legal Issues for Agriculture, scheduled for Friday, December 12 at 1 pm.  This is the first webinar in the program’s new “Ohio Food, Agriculture and Environmental Law Webinar Series,” offering monthly legal webinars on issues of importance to Ohio agriculture. 

The Forgotten Variable: Yield and the Choice of Crop Program Option

Carl Zulauf, Ohio State University, and Gary Schnitkey, Jonathan Coppess, and Nick Paulson, University of Illinois at Urbana-Champaign

November 2014

Price is the focus of almost all discussions about the one time irrevocable opportunity to choose among Agriculture Risk Coverage – county (ARC-CO), Agriculture Risk Coverage – individual (ARC-IC), and Price Loss Coverage (PLC).  This article instead focuses on the forgotten variable ▬ yield.  Yield can play an important role in the decision.

Yield Types Impacting Crop Program Choice

►  Program Yield ▬ fixed yield on file with the Farm Service Agency (FSA) used to calculate PLC payments

■    It is either (1) the updated program yield [90% of 2009-2012 FSA farm average yield], (2) current program yield [default yield], or (3) FSA update replacement yield [75% of 2008-2012 average county yield].

►  Yield component of ARC benchmark revenue ▬ 5-year Olympic average [removes low and high] yield per planted acre in county (ARC-CO) or yield per planted acre for ARC-IC farm unit

►  Yield per planted acre in county or farm ▬ component of crop year revenue for county (ARC-CO) of ARC-IC farm unit and thus impacts payment by ARC-CO and ARC-IC, respectively.

Yield Consideration I ▬ Updated Program Yield vs. County Average Yield

►  The higher the program yield relative to county average yield, everything else constant; the more attractive is PLC relative to ARC-CO.

►  Farm yield data for farms with a complete set of yield data for the 2009-2012 crop years in the Illinois Farm Business Farm Management (FBFM) program were used to replicate the updated program yield ▬ 90% of the simple average of farm yield from 2009 through 2012.  County yield data from the U.S. Department of Agriculture (USDA), National Agriculture Statistics Service (NASS) Quick Stats data base (http://www.nass.usda.gov/Quick_Stats/) were used to replicate the ARC-CO yield component for the 2014 crop year ▬ Olympic average of yields for 2009 through 2013 for the county in which the FBFM farm was located.  For 11% of the FBFM farms with corn, the replicated program update yield exceeded the replicated ARC-CO yield component (see Figure 1).  The comparable number for soybeans was 29% of FBFM farms with soybeans.  These results for FBFM farms suggest that the ARC-CO yield component will likely exceed the PLC program yield for most, but not all, Illinois farms.  Thus, everything else the same, the level of yield will likely favor ARC-CO for most farms in Illinois.

Yield Consideration II ▬ Growth in Yield

►        Both ARC programs use a moving average of yield whereas PLC uses the fixed program yield.

►  There is no reason at present not to expect that, given normal weather, yields will continue their historical increase through 2018.  As a result, ARC’s yield component and thus benchmark revenue should increase on average through 2018.

►  Yield trends vary by crop (see Figure 2).  Thus, at the aggregate crop level, the method used to calculate ARC’s yield component has the most value for peanuts and corn and the least value for oats and sorghum.

Yield Consideration III ▬ Farm Average Yield vs. County Average Yield

►  ARC-CO and ARC-IC pay on 85% and 65%, respectively, of program base acres.  Thus, for ARC-IC to be a competitive option some factor or factors have to compensate for ARC-IC’s fewer payment acres.

►  One potential compensation is an ARC-IC yield benchmark component that is (much) higher than the ARC-CO yield benchmark component and the PLC farm payment yield.  If 1 program crop and the same percent payment rate for both ARC programs are assumed, the ARC-IC yield benchmark component needs to be more than 30% higher than the county yield benchmark component in order for ARC-IC to pay more than ARC-CO.  Other situations result in a different breakeven yield.  Using the Illinois FBFM farm and USDA Quick Stats county data sets to replicate ARC-CO and ARC-IC Olympic average yields for the 2008-2012 crops, the ARC-IC benchmark yield component exceeded the ARC-CO benchmark yield component by at least 30% on 3% and 5% of FBFM farms with corn and soybeans, respectively (see Figure 3).  This simple analysis suggests a relatively small number of farms may find ARC-IC of interest due to higher farm than county yields.

Other potential compensations are a FSA farm with highly variable production and the planting of fruits and vegetables on the FSA farm.  These compensations are discussed in more detail in the article, “2014 Farm Bill: Making the Case for Looking at ARC-Individual.”

Yield Consideration IV ▬ Variability of Farm Yield to County Yield

►  County yield is usually less variable than individual farm yield because it is an average across the diverse array of agro climates, farm management styles, and production systems in a county.

►  However, the relevant variable for comparing ARC-CO and ARC-IC is the variation in the ratio of farm and county yield to the 5-year average yield used to calculate the ARC revenue benchmark.  Average yield also varies, potentially offsetting some variation in farm and county yield.

►  Figure 4 presents for the 1977-2012 crops, the average absolute variation in yield for an FBFM farm and its associated county relative to the 5-year average for the FBFM farm and county.  Due to availability of data, the average is a simple average and not the Olympic average of yield used by ARC-CO.  Usually the difference between the simple and Olympic average is not large.  For corn, on average, farm yield for a year was 18% different than the 5-year average for the farm for that year.  It may have been lower or higher, but the average difference was 18%.  In comparison, the average absolute difference for corn county yield was 16%, or 11% less variable than farm yield relative to the farm average.  Average absolute difference for soybean county yield was 11%, or 26% less variable than the farm level variability.  These results suggest that on average yield variability is higher for corn than soybeans and for a farm than county.  However, the difference in variability between farm and county is not huge.  Thus, while higher yield variability at the farm level gives ARC-IC an advantage over ARC-CO, especially for corn; the advantage is not sizable in Illinois in general.  Moreover, if more than 1 crop is planted on the ARC-IC farm unit or if the producer has more than 1 FSA farm in a state enrolled in ARC-IC, revenue is averaged over all program crops planted on the entire ARC-IC farm unit, further dampening the difference between variability for the ARC-IC farm unit and the county.

Summary Observations

►  Price has received most of the attention in discussions over which crop program option to choose.  However, yield is also a factor.

►  When examining ARC-IC, a consideration is whether yields on the ARC-IC farm unit are much higher than the associated county yields in order to compensate for ARC-IC’s 20% fewer payment acres.  A simple analysis suggests a relatively small number of farms may find ARC-IC of interest due to higher farm than county yields.

►  Diversification is a common strategy when managing uncertainty.  Thus, farmers with multiple FSA farms may want to consider diversifying their farms across programs.  If diversification is desired, yield comparisons can be useful in making the diversification decision.  Everything else the same, ARC-CO is more attractive for FSA farms when county yield is high relative to the FSA’s farm yield and farm payment yield.  PLC is more attractive for FSA farms when farm payment yield is high relative to both the county and farm Olympic average yield.

►  Remember future yield is not known with certainty.  It is not unreasonable to expect that yield will be below trend in at least one of the 2015-2018 crop years.

►  It is not clear that variability of yield relative to its 5-year average is all that much larger on average in Illinois for the farm than for the county.  This finding suggests consideration should be given to how to appropriately assess FSA farm yield variability relative to county yield variability.

►  In sum, the various yields that affect payments by a farm program option matter.  How much weight should be assigned to these different yields and to yield in general depends on the farmer and the farm.  But, to not think about yield is to potentially end up with a misguided farm program choice.

The authors thank the Illinois Farm Business Farm Management (FBFM) program for the farm level data used in this analysis.

Click here to access complete article complete with Figures—Yield and Farm Program Decisions

U.S. Farm Input Price Dynamics, 1981-2013

By: Carl Zulauf, Professor, and Nick Rettig, B.S. Department of Agricultural, Environmental, and Development Economics Ohio State University

The sharp drop in crop prices over the last 2 years has focused attention on farm input prices.  In particular, how closely do farm input prices follow crop prices?  To put this question in historical perspective, this article looks at various aspects of the dynamics of U.S. farm input prices since 1981.  Findings include that, after adjusting for general price inflation, not all farm input prices have increased, that farm input prices do adjust with crop prices, that the adjustment varies by input but is a lag process that becomes larger over time, and that, on average across the inputs examined in this article, the adjustment process appears to reach closure after approximately 5 years. To download the full pdf document Click Here.

GMO Webinar Kicks Off New Agricultural & Food Law Consortium

Ohio State University Extension’s Agricultural and Resource Law Program is excited to announce a new partnership with a group of universities creating a new Agricultural and Food Law Consortium.  The Consortium is a national, multi-institutional collaboration designed to enhance and expand the development and delivery of authoritative, timely, and objective agricultural and food law research and information.

Determining the Market Year Average Price for Farm Bill Program Payments

By: Chris Bruynis, Assistant Professor and Extension Educator

The 2014 Farm Bill uses a market year average price for calculating the revenue guarantee for both the County Agriculture Risk Coverage (ARC-CO) and Individual (ARC-IC) programs. Additionally, the market year average price is used to determine the actual crop revenue for ARC-CO and the price used in calculating potential PLC payments. Because of the importance of this price in the determination of program payments, it is important that producers understand how this number is derived. In Ohio the primary crops that will be insured are corn, soybeans and wheat. This discussion is limited to these crops although there is data for most crops grown in Ohio. 

The market year average is the national average price received by producers during the 12-month marketing year.  The marketing year is different for each crop.  The marketing year for wheat is June 1 to May 31 while the marketing year for corn and soybean are both September 1 to August 31.   The U.S.D.A. determines the market year average price for each commodity using a National Agricultural Statistics Service survey of commodity buyers. This monthly price survey uses data from more than 2,000 buyers nationwide to determine the monthly average price. These prices are weighted across the United States each month and for the 12 month marketing period for the crop.

More specifically buyers are asked for the total number of bushels purchased of each commodity and the total dollars paid for those bushels. NASS the divides the total dollars paid by the total quantity purchased to determine the average price for the month.  These average prices are then weighted by month to reflect the percent of crop sold that month.  An example would be that if 20% of all corn was delivered in November then the November average price would make up 20% of the market year average price.

Additionally there are some definitions used by NASS that helps understand the calculation of the market year average price. 

  • Point of Sale is when the buyer takes ownership of the grain and payment is made.
  • Commodity quantities are on dry or shrink basis and based on standard moisture.
  • Forward contracts and deferred payment contracts are reported in the month the purchaser takes ownership.
  • Basis, minimum price, and options are reported the month the grain is delivered.
  • Delayed pricing will have the price determined in the month when the price is determined.
  • Pooled grain is reported in the month when the major portion of payment is made.

Let’s examine how the market year average price is used in ARC-CO. The county benchmark revenue is the 5 year Olympic average of the higher of market year average price or the reference price times the 5 year Olympic average of the higher of historical county yield or 70% of the county transitional yield. Basically the market year average price is the price side of the revenue unless it would fall below the reference price which is $3.70 for corn. Secondly the market year average price is used to calculate the current year actual crop revenue. This calculation is the actual average county yield times higher of the market year average price or national loan rate (which is ~1.95 for corn).

For the PLC program the market year average price is compared to the reference price. Soybeans have a reference price of $8.40 and if the market year average is above the reference price, there is no payment.  If the market year average price is below the $8.40 reference price and above the national loan rate, there would be a payment for the difference between those prices on the program acres and program yields.    

Since the market year average price is used in calculating program payments for all three new farm bill programs offered to crop producers, it is critical for producers to understand how it is calculated. Improper assumptions on how this number is calculated can affect estimated program payments and potentially effect program choice.  Having the correct understanding of the market year average price will allow producers to make a better decision on which program choice is best for their farm business.

 

MarketMaker Links Producers and Potential Buyers

By: Brad Bergefurd, Extension Educator

There are nearly 8,000 farmers markets in the U.S., an increase of more than 150 percent since 2000.  Direct-to-consumer agriculture sales produce $1.2 billion in annual revenues. To be successful in your agricultural business an important thing is to have a good marketing plan. The Ohio State University South Centers leads Ohio’s Direct Agricultural Marketing program and has many resources available to assist producers with resources and educational opportunities to assist with their direct agricultural marketing plans.

Launched in 2008, one very important resource is Ohio MarketMaker which currently hosts one of the most extensive collections of searchable food industry-related data in the country. The web based program contains demographic, food consumption, and business data that users can search to find products to buy, or find a place to sell their products.

MarketMaker currently links producers and consumers in 19 states plus the District of Columbia.  As the exclusive licensee, Riverside Research plans to invest in additional research and development to expand MarketMakers capabilities to new markets and regions, both nationally and globally.  States that are currently participating include:  Alabama, Arkansas, Colorado, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Michigan, Mississippi, Nebraska, New York, Ohio, Pennsylvania, South Carolina, Texas, Washington, D.C. and Wyoming. 

At the beginning of 2014, MarketMaker contained almost 700,000 businesses in categories of AgTourism, Farmers/Ranchers, Fisheries, Farmers Markets, Wineries, Eating & Drinking, Wholesalers, Food Retailers, Food Banks, and Other.  In 2013, users posted 442 advertisements in the Buy & Sell Forum which were viewed over 36,000 times. 

If you don’t have an online profile, you can set one up in less than 10 minutes at  www.ohiomarketmaker.com. There is no fee to register; it is totally free to both consumers and producers.  Your profile is easy to maintain and manage, and allows you to connect with local, state and national customers and buyers.  Some of the features available are: indicating which farmers’ markets you’ll be participating in, which restaurants you sell to, which grocery stores carry your products and your affiliation with local food organizations.

MarketMaker has many unique features that allow the consumers and producers to present themselves to other MarketMaker users.  Using the business connection feature, market managers, consumers and producers can link with one another and other organizations that have also developed MarketMaker profiles, including grocery stores, restaurants, and schools. The link serves the mutual benefit of identifying users of local food sources. Businesses you connect with on MarketMaker appear on your business’s detail page to let users know more about your operation. You may want to connect with a variety of businesses, including: retailers or farmers’ markets that carry your product, businesses where you source product, and other local food businesses.

Another unique feature is the connection of industry affiliations.  Buyers and sellers can select their current affiliations.  These affiliations help to build credibility with customers.  Some of these could include: Ohio Proud, CIFT, Ohio Grocers Association, and others.

In today’s world, social networking plays a huge factor in marketing.  MarketMaker also has the feature of connecting your Facebook and Twitter social links to your profile.  Connecting your profile to these sites helps to build your audience and customer base while networking with others in the industry.

Farmers markets may also create a profile in MarketMaker.  Farmers market managers can easily create profiles with location, web site, contact information and produce available. The advanced directional mapping tools allows customers to easily find the market and view the types of products that the market has for sale.  This feature brings buyers to the market, and saves the buyers time on locating the products they need.  

MarketMaker is supported by several state and national sponsors.  These sponsors are the USDA, Farm Credit, Ohio Wines, Ohio Farm Bureau, the Agricultural Marketing Resource Center, and the Ohio State University.

For further information on Ohio MarketMaker or Direct Agricultural Marketing visit the following Ohio State University Direct Marketing web site at http://southcenters.osu.edu/marketing/overview-programs/marketmaker.  If you would like to be added to the Ohio Direct Marketing list serve to receive direct marketing updates and educational opportunities contact Interim OSU Direct Marketing Team leader Brad Bergefurd, Bergefurd.1@osu.edu or Ohio MarketMaker Program Coordinator Charissa McGlothin mcglothin.4@osu.edu or call the OSU South Centers 1-800-860-7232 or 740-289-3727 extension #132.

Should I Give my Tenant Power of Attorney for 2014 Farm Bill Decisions?

By: Chris Bruynis, Assistant Professor and Extension Educator

There are multiple decisions that need to be made in regards to the 2014 Farm Bill. Some of the decisions have been designated as the land owner’s responsibility and other have been designated the farmer’s/tenant’s responsibility. This division of decision responsibilities adds another level of confusion and leads to the question on the validity of previously signed power of attorney documents on file with FSA.

Specifically the yield update and the base acre reallocation decisions are the land owner’s decision to make. When the land owner is not the farmer, there may be a disconnect between the person charged with making the decision and the person who has the information needed to make the decision.  Landowners have several choices at this point. 

First, they can choose not to update their farm yields and/or reallocate their farm’s base acres. It is estimated that updating yield will increase the program yield for approximately 80 to 85 percent of the farms in Ohio. While the updated yields are only important for the Price Loss Coverage (PLC) program election, there is speculation the higher yield might be useful in future farm bill legislation. Base acre reallocation is less straight forward but some people who have studied the potential program payments believe that corn, wheat, and then beans are the value order of the base acres.

Secondly, land owners can work with their farmers to retrieve the necessary information in order to make these decisions. This could require a significant amount of time and multiple visits to make sure the information is accurate. Even though the documentation is not necessary at the time of updating yields  and base acres, if spot checked, the person verifying the information would need to produce sound evidence of the updated yields and planted acres for the appropriate time periods.

Finally land owners might consider signing a power of attorney to allow their tenant to handle all the 2014 Farm Bill program decisions. Allowing the tenant farmer to make the decision may provide for the most accurate and defensible information.  The program choice decision, ARC – IC, ARC –CO, or PLC, are by legislation already designated to the person who has risk in growing the crops.  In a cash rent situation, this person is the tenant.

Questions have been asked at meetings about the validity of an existing Power of Attorney, signed by the land owner which are on file with Farm Service Agency.  FSA personnel have indicated the current FSA-211, Power of Attorney, is valid for the ARC/PLC program if Section A and B are marked as follows: Section A, item 2, “All current and ALL future programs” and Section B, item 1, “All Actions.”  Tenants should check with their local FSA office to make sure the FSA-211 is current before making decisions. Regardless if  the power of attorney is current or not, this would be a good opportunity to have a discussion between the land owner and the tenant on what would be the proper way of handling the farm bill decision for the farm.