Month: May 2015

Economic Impact of Avian Influenza

By: Sam Custer, OSU Extension Educator, Darke County

Since December 2014, the USDA has confirmed several cases of highly pathogenic avian influenza (HPAI) H5 in the Pacific, Central, and Mississippi flyways (or migratory bird paths). The disease has been found in wild birds, as well as in a few backyard and commercial poultry flocks. The Centers for Disease Control and Prevention (CDC) considers the risk to people from these HPAI H5 infections to be low. No human cases of these HPAI H5 viruses have been detected in the United States, Canada, or internationally.

168 Influenza findings have been reported since December, a majority of which have been turkeys and most recently layers.  The HPAI H5N2 virus strain has been confirmed in several states along three of the four North American Flyways: Pacific, Central and Mississippi. The latest findings can be found at http://go.osu.edu/AIupdate.

The novel H5N2 virus is not the same virus as the H5N1 virus found in Asia, Europe and Africa that has caused some human illness. This H5N2 strain is a new mixed-origin virus that combines the H5 genes from the Asian HPAI H5N1 virus with N genes from native North American avian influenza viruses found in wild birds.

Biosecurity is critical for all poultry producers including backyard flocks.  Consider a review of the recent news release from our college http://cfaes.osu.edu/news/articles/ohio-poultry-owners-advised-increase-biosecurity-virus-spreads-in-western-us.

Allison Sandve, University of Minnesota Extension, recently reported losses in poultry production and related businesses due to avian influenza are estimated at $309.9 million in Greater Minnesota, according to a newly released emergency economic impact analysis from University of Minnesota Extension.

Using economic modeling, analysts determined that for every million dollars in direct losses, the estimated ripple effect leads to $1.8 million in overall economic losses, including $450,000 in wages. Ripple effect losses stem from factors including reduced wage-earner and business-to-business spending.

The Extension analysis put losses of poultry production–both turkeys and egg-laying chickens–at $113 million as of May 11.

“These projections represent where we stand as of May 11,” said Brigid Tuck, Extension senior analyst, who led the study. “If the virus affects more farms, as we have seen since May 11, the impact levels will rise. If barns stay empty for another cycle of poultry production, these numbers could potentially double”

Sandve’s full article can be found at http://blog.lib.umn.edu/umnext/news/2015/05/extension-analysis-economic-impact-of-avian-flu-nears-310-million-as-of-mid-may.php.

Producers are no longer thinking about “if” this will hit Ohio, but “when”.  We hope the disease will miss us this spring but it has been predicted that the level of risk will be high each fall and spring for the next couple years as waterfowl migrate back and forth through our state.

The values of poultry sales in Ohio from the last census is $946,592,000.  If we would experience a 50% loss of production in Ohio, I would estimate a ripple effect would be 1 billion dollars in overall economic losses, including $815,000 in wages.

No poultry in your county – think about the effect on the demand for corn and soybean meal.  If we would lose ½ of our poultry for a 6 month period of time you would reduce corn demand by 27,000,000 bushels, the equivalent of 9% of our state corn production and soybeans would be about a 5,000,000 bushel reduction.

For those with commercial poultry operations much planning and execution is necessary at this time including advanced biosecurity and disaster planning. 

Study Points to Succession Planning Communication Barriers

By: Chris Zoller, Extension Educator, ANR

Over the years I have met with many farm families in barns, fields and around kitchen tables to discuss succession planning and all that it involves.  These can sometimes be very stressful, difficult and emotional visits.  Some families put off these discussions because the topic is one that many don’t like to consider.  However, planning and preparation will be beneficial to all family members involved in the farm business.

Faculty at Penn State University, California State University and Old Dominion University published in the Journal of Extension  the findings of a study they conducted of Pennsylvania farm families on the topic of farm succession planning.  Below is a summary of the research findings.

Introduction:

In addition to growing concerns about how to meet the retirement needs of older farmers, it is disconcerting that few senior operators have decided how managerial control of the farm will be passed to a successor prior to their death. For example, of 106 farm operators studied in California, only half had identified a successor. A similar study of 400 Iowa farmers found less than a third had selected a transferee.

The consequences of a failure to plan can be severe—if the farm is inherited by multiple heirs, inheritance taxes and other fees may cripple the farm and its new owners. Inadequate farm succession planning may result in heirs becoming owners who are incapable of running the farm business; family conflict among heirs; and partition of family-owned and operated farm business assets to satisfy heirs who simply want to “cash in” their share of the business.

Much is known about farm succession planning, i.e., the transfer of managerial control to the succeeding generation during the life of the owner of the business. Yet relatively little is known about why families wait to make farm transfer arrangements. Delayed planning is a complex, and challenging problem.

Farm families in Pennsylvania were recruited by field staff of Penn State Cooperative Extension and Pennsylvania Farmlink to participate in the study.  The following criteria were used to select families: 1) family farms with annual sales between $100,000 and $249,000, whose operators report farming as their major occupation; 2) families from across the state; 3) families engaged in more than one type of farming (dairy and vegetable); and 4) families with two and three generational configurations.

Forty families meeting these criteria were contacted and provided more detailed information. Ultimately, nine families agreed to be interviewed. Where possible, interviews were arranged so that more than one adult family member, ideally from two or more generations, could be interviewed either simultaneously or separately by a different interviewer. This strategy was used to ensure that the data collected represented several generational perspectives about farm transfer issues. In total, 20 semi-structured interviews were conducted with adult members of these nine families; respondents ranged in age from 22 to 80.

The range of family experience in terms of discussing and acting on farm succession planning issues fits into three categories, as described below.

  1. Extensive experience considering/discussing farm succession issues that leads to action and a developed plan: These families developed their farm transfer plans and took actions to enact them. The families shared the following characteristics. Respective roles were worked out in these relationships. There was clarity in identifying who was considered the most likely successor(s), and how assets would be divided up amongst children. There was also clarity in the underlying rationale for taking action. Family members were aware of the financial implications of holding off transfer decisions. A sense of urgency was conveyed by the older generation by phrases such as “must be done while we’re alive” and “we need to do what we can to keep the farm in the family.” The specific strategies and techniques used by these families varied substantially.
  2. Moderate amount of experience considering/discussing farm succession issues that leads to action and the start of planning: These families began to develop succession plans and ways to implement them. The families ascribed a high level of importance to developing succession plans, although, for various reasons noted in the Findings section, they did not finalize or enact their plans. Young adult members were clear on their parents’ commitment to keeping the farm within the family. However, the specifics of the succession plans were not clear. Questions, such as how assets will be divided up amongst siblings and specific roles and responsibilities for each family member were still undecided. In two of these families, there was a lead candidate for successor, but the identified successor had not indicated whether the successor would take over the farm.
  3. Limited experience considering/discussing farm succession issues and no action toward development of a succession plan: These families had not developed farm transfer plans. In these families, there were more unknowns, particularly in terms of the question about successors, and less of a sense of urgency to figure things out. Various reasons for this were noted by these families.

Findings

Passive Communication:

Many respondents could be portrayed as passive communicators. When responding to questions about how families reached mutual understanding on issues related to family relations and plans for the family farm, respondents placed more emphasis on what was implicitly understood rather than explicitly communicated. The following comments, made by families with limited and moderate levels of experience addressing farm succession planning issues, express a reliance on an intrinsic understanding of respective roles and responsibilities.

“I don’t know if my grandfather ever expected it to be sold but it was kind of a nonverbal agreement between my dad and me (that we would get the farm out of debt and keep it in the family).”  (Father, family with a moderate amount of experience).

“They know what they can do and what they can’t do.”  (Father, family with limited experience).

Delays in Planning Due to Unresolved Issues in the Lives of Adult Children:

Parents of four of the families in the study (44%) made comments indicating significant delays in their families’ succession plans due to unresolved issues or uncertainty tied to the lives of individual family members. The two most common types of personal issues that were seen as inhibiting or delaying efforts to establish/finalize farm succession plans were those related to children’s career choices and their personal relationships.

Waiting for Children to Make Career Decisions:

Fathers of several families were interested in working their children into their farm businesses, but felt they had to wait until their children made their decisions to stay on/return to the family farm. A father of a family with moderate experience stated, “I want to let it up to his decision. I don’t want me forcing him to come back.” Another father from a family with moderate experience said, “I would like for both boys to be able to take it [the farm] over, but right now, [name of son] seems to be the more interested one.” Even in a family with an extensive amount of experience working on their succession plan, there was uncertainty tied to the son’s career decision. The father of this family stated,

“Right now it’s kind of like to see if [eldest son] wants to keep on farming down here… He’s going to have to let us know… I guess that’s what we were doing… sitting back waiting ’till this three year is done.”  [“Three year” refers to a 3-year plan the father worked out with his son: his son rents the farm and progressively buys equipment, cows, etc. and takes on increased ownership responsibilities.]

Concern About the Stability of Successor’s Family/Marriage:

The following comments made by parents indicate a concern about personal relationship issues in the lives of their children.

“I’d like to make sure that if he gets married the marriage is stable before we go ahead and start getting him involved in the business and then have a divorce or messy situation like that.” (Father, family with moderate experience).

“I was going to set up an agreement between him [oldest son] and me but I was kinda waiting. I didn’t trust her [his wife] and here last month she picked up and moved out. So I’m glad in that respect [e.g. waiting]; otherwise she would have had half of this.” (Father, family with limited experience).

“I mean they’re interested and [son’s name] is certainly interested in what’s going on around here but as far as [my son] ever getting a part of it, help manage it, or help own it or anything else I just don’t see it. One reason is his wife wouldn’t have too much to do with the farm.” (Father, family with limited experience).

The father of a family with a moderate amount of experience summed up the challenge of dealing with such personal issues with the following comment: “It’s easier to talk about farm issues than family issues.”

Efforts to Incorporate Children’s Perspectives into Conversations About the Farm:        

Although it was understood by almost all parents that farm succession planning cannot be driven unilaterally by the senior generation, there was variation in how they went about asking for or accommodating children’s perspectives and concerns.

Some parents tried to be subtle in their efforts to exert influence with their children. For example, a father of a family with a moderate amount of experience said, “I whisper in their ears.” A father with limited experience described how he and his college-aged son make decisions: “It’s like the old Abbott and Costello routine—’Who’s on first?’ Who’s in charge? I try and avoid telling ’em what to do.”

The parents quoted below had clearer notions about how to involve and communicate with their children about succession planning.

“I don’t think I want to come to them with ‘this is the will’. I want to come to them with a skeleton of what the will would look like to see if I (can better) appreciate their opinions.” (Father, family with a moderate amount of experience).

“Sometimes I think still looking back it would have been better off sometimes sitting the whole family, everybody saying we’re going to do it this way. I think that is the best way to go… I think as a rule [having frequent family conversations about farm succession issues] is important if you want your children to stay and take the farm on… Better to get them involved to get them to take an interest in it. I think that’s important.”  (Father, family with extensive experience).

A surprising finding was that in half of the families, respondents felt unable to make immediate progress with farm succession planning due to unresolved issues or uncertainty tied to the lives of individual family members. Findings of personal disappointments and strained relationships are consistent with the literature, where many families experience high stress levels when considering and discussing farm planning issues.

Intra-familial communication dynamics indicated heavy reliance on implicit understandings and expectations regarding other family members’ intentions, roles, and responsibilities. This passive orientation toward communication, together with the sense that some families were in a “wait and see” pattern (regarding the career and relationship decisions of children), left key issues unresolved, e.g., who would be the successor and how would other family members be compensated.

Much of the discussion within the farm succession planning literature seems to be framed from within a power-holder centered perspective; much of the attention is on how current operators chose and groomed their successors and passed on management control. In contrast, our findings indicate that there are issues in the lives of the successor generation family members, beyond the “control” of older generation members that can delay or derail the succession planning process.

Accordingly, we posit that intergenerational transfer of ownership and management can be helped by being inclusive of younger generations in key discussions and decisions about the future of the farm. Family members need opportunities to share individually held views, to explore common goals and values, and move forward, together, in establishing shared visions for farm and family.

Summary

While not easy, it’s important that farm families have discussions about the transfer of management and ownership to the next generation.  Involving Extension professionals, lenders, veterinarians or other trusted advisors can help start and keep the process moving.

(Source: Journal of Extenison, http://www.joe.org/joe/2009octobera8.php)

Large Dairy Relocations – Water Dominates the Decision

By Christopher Wolf (Michigan State), Marin Bozic (U. Minnesota), Mark Stephenson (U. Wisconsin) and Katie Behnke (Blimling and Associates)

With dramatic drought headlines dominating western headlines, farmers in water-reliant sectors such as dairy may be reconsidering their location decisions.   In late 2013 a team of researchers surveyed more than 100 large-scale dairy producers from throughout the country and asked them about the factors most important to them for locating modern dairy operations.  Perhaps not surprisingly, the top tier of factors all revolve around water.  These include the availability of local forages, the cost of feed and the availability of water.  In their recent article in the magazine Choices, the researchers go on to discuss all the factors that these large-scale dairy producers consider important in location decisions and put dairy relocation factors and trends into perspective.  The read the article go to Where the Grass is Always Greener: Dairy Farmer Location Preferences

 

AEDE Faculty at OSU: Three Goodbyes and One Hello

In 1980 Doug Southgate, Cam Thraen and Carl Zulauf each started academic careers as Assistant Professors in OSU’s Department of Agricultural Economics and Rural Sociology.  Thirty-five years later, each is retiring from OSU’s Department of Agricultural, Environmental and Development Economics (AEDE), leaving remarkable individual legacies in teaching, research and public engagement.  Readers of this website (and previous off-line versions) will be no stranger to the work of Cam Thraen and Carl Zulauf, who are both frequent contributors to this forum, while former students of OSU and other institutions of higher education may have relied upon one or more of Doug Southgate’s books in the classroom.

The co-author of six books, Dr. Doug Southgate has influenced many students through his contributions to classroom favorites including the The World Food Economy and Agricultural Economics and Agribusiness, while engaging more general audiences with titles such as Globalized Fruit: Transnational Firms, Tropical Entrepreneurs and Governments, and Independent Banana Development.  Doug’s extensive research portfolio occurs at the interface of development economics and environmental economics with a strong focus on Latin America.  Doug was a recipient of a Fullbright Fellowship to Ecuador and has served the University and Department in many important service roles ranging from the Department’s Undergraduate Director to Director of the University’s Center for International Studies.  His engaging style and lively banter will be missed by students across the OSU campus.

 

Dr. Cam Thraen has provided readers of this forum with important insights into the dairy market dynamics and worked to help readers penetrate the policy implications of proposed and enacted dairy provisions in various farm bills.  Cam’s ability to collaborate and organize efforts with other dairy economists across the country to develop effective and highly demand educational programs in response to risk management and policy needs in the dairy sector has resulted in multiple awards from American Agricultural Economics Association.  Work with his Ph.D. advisee John Newton was also influential in guiding dairy policy discussions in Washington, DC.  Cam has also regularly shared his abilities and enthusiasm for number crunching with OSU students during regular offerings of quantitatively demanding courses that prepare students for the next phase of their careers.

Dr. Carl Zulauf has provided readers of this outlet unique insights into U.S. farm policy and the program options available to U.S. farmers, which is not surprising given Carl’s role in influencing federal agricultural commodity policy and his role as policy advisor to Senator John Glenn during the 1985 Farm Bill cycle.  In 2008 Zulauf developed a conceptual framework that became the basis for the Average Crop Revenue Election (ACRE) program, which was crafted into legislation and introduced to the 2008 Farm Bill debate by Senator Sherrod Brown of Ohio and Senator Richard Durbin of Illinois. The ACRE program was eventually secured as policy in the 2008 Farm Bill (Food, Energy and Conservation Act of 2008).  OSU students will also miss Zulauf’s unique and demanding Socratic teaching style, which has garnered Zulauf numerous local and national teaching awards throughout his years at Ohio State.

With more than 100 years of experience engaging classroom and outreach audiences among them, these three scholars will be missed by their colleagues in the department though, luckily for the department and OSU students, each has indicated willingness to continue to engage with OSU students in the classroom at some point in the future. 

While it is difficult to bid farewell to these colleagues the department is proud to welcome Dr. Ani Katchova to its faculty ranks as an associate professor.  Dr. Katchova assumes the roles as the Farm Income Enhancement Chair and as the inaugural Director of OSU’s Center for Cooperatives.  Ani received her Ph.D. from AEDE in 2001 and has gathered extensive experience at sister departments at the University of Illinois and the University of Kentucky where she conducted extensive research in agricultural finance, agribusiness management and cooperatives.  With multiple visiting scholar appointment as USDA’s Economic Research Service in Washington, DC, including one spell as a AAAS Science and Technology Fellow, Ani is intimately familiar with the economics of the US farm sector and has received multiple awards for both research and teaching.  Dr. Katchova has been actively meeting with leaders of agricultural cooperatives and looks forward to developing innovative educational opportunities related to cooperatives and farm income enhancement opportunities for stakeholders in Ohio and beyond.