Ukraine: The Breadbasket of Europe

by: Ian Sheldon, Professor and Andersons Chair of Agricultural Marketing, Trade, and Policy, Agricultural, Environmental, and Development Economics, Ohio State University

This short essay, recently published in the Ohio State online magazine Origins: Current Events in Historical Perspective, places the impact of the war in Ukraine on global markets into a historical context.  Since the collapse of the Soviet Union, Ukrainian agriculture has returned to its pre-revolutionary position as a major agricultural exporter, largely due to land reform and restructuring of its collective farms.  Land reform has resulted in the development of large-scale, privately-operated farms with owners investing in new technology and introducing best management practices. By 2018, cereal yields had increased by almost 40%, Ukraine re-establishing itself as the “breadbasket of Europe. The full article can be accessed at: https://origins.osu.edu/read/ukraine-food-war-agriculture

Export Policies and Russia’s Invasion of Ukraine: What Might it Mean for Ohio Soybean Farmers?  

by: Ian Sheldon, Professor and Andersons Chair of Agricultural Marketing, Trade, and Policy, Agricultural, Environmental, and Development Economics, Ohio State University and Chris Zoller, Associate Professor and Extension Educator, Agriculture & Natural Resources, Ohio State University Extension – Tuscarawas County

Use of Commodity Export Policies

With Russia and Ukraine alone accounting for 12 percent of total calories traded (IFPRI, April 13, 2022), continuation of the war has intensified the vulnerability of developing countries to food insecurity, the G7 countries recently predicting 43 million people were being pushed towards famine (The Guardian, May 14, 2022).  The impact of Russia’s invasion of Ukraine on exports from the Black Sea region of staple foods such as wheat, corn, and vegetable oils, has had a significant impact on world food prices, adding to the impact of supply chain disruption due to the pandemic, and drought-reduced yields in 2021.  The UN Food and Agriculture Organization (FAO) reports that its food price index stood at 158 points this April, 30 percent higher than in April 2021, and its highest level since 1990, (UN/FAO, April 2022).

Like past food price crises, notably the grain price spikes in 2007-2008 and 2010-2011, many countries are responding to higher food prices and shortages with restrictions on exports of key commodities.  As of April 2022, 16 countries had imposed export restrictions, including Ukraine, Russia, Indonesia, Argentina, Turkey, Kyrgyzstan, and Kazakhstan, affecting about 17 percent of total calories traded, the key commodities being wheat, palm oil, corn, sunflower oil, and soybean oil, affecting 36, 55, 17, 78, and 6 percent of their exports respectively (IFPRI, April 13, 2022).  As is already the case with the announcement of proposed ban on all Indian wheat exports (Bloomberg, May 13, 2022), more countries are likely to respond to increasing food prices in this way.  Unfortunately, this has the potential of creating a “collective action” problem, i.e., countries have a unilateral incentive to reduce domestic food prices by using export restrictions, but if enough countries implement such policies, it simply exacerbates the rise in global food prices.  At the same time, the World Trade Organization (WTO) lacks an effective means to discipline use of such “beggar thy neighbor” policies.

The Case of Vegetable Oils

Prior to Russia’s invasion of Ukraine, between them the two countries accounted for 73 percent of global exports of sunflower oil.  By late-April, there had been a 25 percent reduction in traded sunflower oil, and there is also uncertainty about how much sunflower seed has been planted in Ukraine this spring (New York Times, April 30, 2022).  Even though sunflower oil accounts for only 9 and 12 percent of global vegetable oils production and consumption respectively (USDA, April 12, 2022), the global price of vegetable oils has already risen to an all-time high this year (Financial Times, May 9, 2022), with canola, palm oil, sunflower oil, and soybean oil prices rising by 72, 61, 44, and 41 percent respectively in the past year (Wall Street Journal, April 7, 2022).  Not surprisingly, with limited stocks and rising prices, vegetable oils are even being rationed to consumers by major grocery retail chains in developed countries such as Belgium, Spain, and the United Kingdom (New York Times, April 30, 2022).

The rise in vegetable oil prices has also been exacerbated by Indonesia recently banning exports of palm oil to protect its domestic consumers (Reuters, April 22).  The expected global impact of the ban is not surprising given Indonesia accounts for 59 percent of global palm oil production, palm oil accounting for 35 and 33 percent of global vegetable oil production and consumption respectively (USDA, April 12, 2022).  Add to this the fact that substitutes such as soybean oil and canola are not readily available due to recent drought conditions in Argentina, Brazil, and Canada (Reuters, April 23, 2022), which is putting further pressure on vegetable oil prices.  For example, soybean oil prices on the Chicago Board of Trade had risen by almost 50 percent by end of April this year (Reuters, April 22, 2022).

Implications for U.S. and Ohio Soybean Farmers

The Russian invasion of Ukraine has driven home a fact we have always known – agriculture operates in a global environment.  Access to export markets is critical to U.S. agriculture, especially for soybeans, the number one export for U.S. agriculture.  According to the USDA Foreign Agriculture Service (FAS), in 2020, U.S. soybean exports to the world reached a record $25.7 billion in value.

WASDE Report

The May 2022 World Agricultural Supply and Demand Estimate (WASDE), available here: https://www.usda.gov/oce/commodity/wasde/wasde0522.pdf changed its soybean outlook, including raising the 2022/2023 average price from $13.25 per bushel to $14.40 per bushel.  A projected increase in U.S. soybean production will result in an increase of 6.1 million tons of oilseed production compared to 2021/2022.  WASDE also forecast global soybean production to increase, with Brazil representing more than one-half of the increase.  The Brazilian soybean crop is expected to be a record 149 million tons, with Argentina adding another 51 million tons.  As is the case in the U.S., weather can have a significant impact on soybean production in South America.

Double-Crop Possibility

It is difficult to think about planning the 2023 crop when we are behind schedule getting this year’s seeds in the ground, and much can and will change between now and the 2023 planting season.  However, you may want to consider an analysis conducted by the University of Illinois examining production and profitability from double-crop soybeans.  The article is available here: https://farmdocdaily.illinois.edu/wp-content/uploads/2022/05/fdd051722.pdf.  We provide a summary below.

The authors of the article evaluate a wheat-double-crop-soybean rotation for 2023 and find this production practice to be more profitable than growing either corn or soybeans, especially in southern Illinois.  The authors note that in the long-run, yield increases are necessary before there will be widespread adoption of this production practice.  Much of the projected profitability is related to higher prices because of the war in Ukraine.  In addition, more acres planted to wheat would likely drive down its price.

The authors note that these technological advances may be useful:

  • Development of wheat varieties that could be harvested earlier.
  • Higher yielding wheat varieties.
  • Double-crop soybean varieties with higher yield potential.

If interested in reading more of the specifics of this analysis, click the link above.

Moving Forward

There are several uncertainties related to soybean prices, including how long the war continues, weather, production, demand, fertilizer price, etc., that are out of your control.  We encourage you to manage what you can control and consider the following:

  • How might global events impact your business
  • Know your cost of production.
  • Develop budget scenarios. As of this writing, soybean futures for November 2023 closed at just over $14.00 per bushel.
  • Utilize OSU Extension Crop Enterprise Budgets: https://farmoffice.osu.edu/farm-management/enterprise-budgets#2022
  • Talk with your agronomist, Extension Educator, lender, and other advisors.

 

 

 

The Impact of U.S. Agricultural Exports on Jobs

by: Chris Zoller, Extension Educator, ANR, Tuscarawas County

We are aware that agriculture is a competitive business that operated in a global environment.  We understand the importance of global trade to market U.S. produced agricultural commodities.  Have you ever considered how important exports of agricultural good produced in the U.S. are to maintaining jobs?

A recent USDA Economic Research Service (ERS) recently analyzed the importance of agricultural exports as it relates to jobs in 2020.  The full report is available here: https://www.ers.usda.gov/data-products/chart-gallery/gallery/chart-detail/?chartId=103827&cpid=email.

In 2020, U.S. agricultural exports were valued at more than $150 billion and every $1 billion of exports is estimated to create 7,550 jobs.  Crop and livestock production account for the majority, supporting a total of 439,500 jobs.  Jobs in this segment included labor provided by farm owners and family members, hired employees, and contract labor.

U.S. agricultural exports also supported 423,900 off-farm jobs in service, trade, and transportation of agricultural goods.  Exports supported 162,100 food-processing jobs and 107,000 jobs in packaging, canning, and bottling.

The graphic from USDA ERS further describes the importance of U.S. agricultural exports in creating and supporting jobs.

Farm Service Agency Loans Available for Beginning Farmers

by: Chris Zoller, Extension Educator, ANR in Tuscarawas County

Building and managing a successful farm is a significant financial investment and can be especially challenging for those just beginning, especially those unable to obtain financing through commercial lenders.  The United States Department of Agriculture (USDA) Farm Service Agency (FSA) makes and guarantees loans to beginning farmers.

Each year money is allocated to FSA for farm ownership and farm operating loans for beginning farmers.  These loan programs are important as beginning farmers have historically experienced more difficulty obtaining financial assistance.

What is a Beginning Farmer?

A beginning farmer is an individual or entity who:

  • Has not operated a farm for more than 10 years
  • Substantially participates in the operation
  • For farm ownership loans, the applicant cannot own a farm greater than 30 percent of the average size farm in the county, at the time of application
  • If the applicant is an entity, all members must be related by blood or marriage, and all members must be eligible beginning farmers

Additionally, beginning farmers must meet the loan eligibility requirements for the program.

Maximum Loan Amounts

The Farm Service Agency makes available a variety of loans, each with a different maximum loan amount.  The loan types and maximum allowable amounts are provided below:

  • Direct farm ownership: $600,000
  • Direct operating loan: $400,000
  • Microloan: $50,000 each for operating and farm ownership
  • Guaranteed farm ownership or operating loan: $1,825,000
  • EZ Guarantee: $100,000 ($50,000 if the lender is a micro lender)

Down Payment Program

FSA has a special loan program to assist beginning farmers purchase a farm.  Retiring farmers may use this program to transfer their land to future generations.  Requirements are listed here:

  • Cash down payment of at least 5% of the purchase price
  • Loan amount limited to 45% of the least of:
    • Purchase price of the farm
    • Appraised value of the farm or
  • $ 667,000 ($300,150) maximum
  • 20 year loan term
  • Interest rate is 4% below the direct farm ownership rate, but no lower than 1.5%

The remaining balance may be obtained from a commercial lender or private party.  FSA can guarantee up to 95% of the loan if financing is obtained from a commercial lender.  Participating lenders do not have to pay a loan guarantee fee.

If financing is secured from participating lenders, the amortization period must be at least 30 years and cannot have a balloon payment due within the first 20 years of the loan.

Additional Options to Access Capital

Beginning farmers may be interested in participating in a joint financing arrangement.  FSA will lend up to 50% of the amount financed and another lender provides the remaining percentage.  These funds can be used for any authorized farm ownership purpose.  The interest rate is two percent less than the direct ownership rate but not lower than 2.5%.  The term of the loan will not exceed 40 years or the useful life of the security.

Land Contract Guarantees

FSA does provide financial guarantees for land sales to beginning farmers.  The seller may request either of the following:

  • Prompt Payment Guarantee: A guarantee up to the amount of three amortized annual installments plus the cost of any related real estate taxes and insurance.
  • Standard Guarantee: A guarantee of 90% of the outstanding principal balance under the land contract.

The farm purchase price cannot exceed $500,000 or the market value of the property.  The buyer is required to provide a minimum down payment of 5% of the purchase price of the farm.  The interest rate is fixed at a rate not to exceed the direct farm ownership loan interest rate in effect at the time the guarantee is issued, plus three percentage points.  The guarantee period is 10 years.  Contract payments must be amortized a minimum of 20 years.

How to Apply

Direct loans are available through your local Farm Service Agency office.  For guaranteed loans, you must apply with a commercial lender who participated in the Guaranteed Loan Program.  Your local FSA office can provide a list of participating institutions.

Locating Your FSA Office

If you are unsure which FSA office services your county, please visit: https://offices.sc.egov.usda.gov/locator/app?state=oh&agency=fsa

Expiring CRP Contracts Eligible for the Transition Incentives Program -Help a Beginning, Veteran or Socially Disadvantaged Farmer

By: David Marrison, OSU Extension Educator-Coshocton County

Are you a landowner that has land enrolled in the Conservation Reserve Program (CRP)?  Does your CRP expire in the next year? Would you like to help a beginning, veteran, or socially disadvantaged farmer get a head start in farming and in return receive an incentive to do so?  If so, you may be interested in the CRP Transition Incentives Program available through the Farm Service Agency.

What is the Conservation Reserve Program?

The Conservation Reserve Program was authorized by the Food Security Act of 1985 and was reauthorized by the Agricultural Improvement Act of 2018. The goal of CRP is to voluntarily contract with agricultural producers to not farm environmentally-sensitive land but instead utilize it for conservation benefits.

CRP participants plant long-term, resource-conserving plant species, such as approved grasses or trees (known as “covers”) to control soil erosion, improve water quality and develop wildlife habitat. In return, participants receive rental payments and cost-share assistance as well as are eligible for climate-smart practice incentives. The contract duration is between 10 and 15 years.  The CRP suite of programs include General CRP, Continuous CRP, Grassland CRP, Conservation Reserve Enhancement Program (CREP), Clean Lakes, Estuaries, and Rivers Initiative (CLEAR30) and State Acres for Wildlife Enhancement (SAFE). CRP protects more than 20 million acres of American farmland.

What is the Transition Incentives Program (TIP)?

The Transition Incentives Program (TIP) was authorized under 2018 Farm Bill to encourage the voluntary transition of land enrolled under an expiring CRP contract to a veteran, beginning, or socially disadvantaged (SDA) farmer who will return the land to sustainable grazing or crop production. The Agricultural Improvement Act of 2018 (2018 Farm Bill) authorized $50 million for TIP for the fiscal years 2019 through 2023.

TIP provides landowners and operators with an incentive to return land to production on an expiring CRP Contract in a way that preserves established conservation practices. It also provides an opportunity for beginning and socially disadvantaged farmers and ranchers to purchase their own land or rent land.

Table 1: Definitions of Farm Operator for the Transition Incentives Program

Type of Farm Operator Means a person, or for entities has at least 50 percent interest in that entity, who:
Beginning Farmer Has not been a farm or ranch operator for more than 10 years
Veteran Farmer or Rancher Has served in the Armed Forces and who has:

• Obtained status as a veteran during the most recent 10-year period, or

• Operated a farm or ranch for no more than 10 years.

Socially Disadvantaged Farmer Is a member of a socially disadvantaged group whose members have been subjected to racial or ethnic prejudice because of their identity as members of a group without regard to their individual qualities. Gender is not included.

TIP provides landowners or operators with up to two additional annual rental payments on existing CRP land which is set to expire, on the condition they sell or rent this land to a beginning farmer, veteran or to a socially disadvantaged group who is not a family member. The new landowners or renters must return the land to production using sustainable grazing or farming methods. Key provisions of TIP include:

  • Beginning, veteran, and SDA farmers and CRP participants may enroll two years before the scheduled date of CRP contract expiration, or until the $50 million limit is reached.
  • Only land enrolled in an expiring CRP contract is eligible. TIP enrollment is on a continuous basis.
  • The owner or operator must agree to sell, or have a contract to sell, or agree to lease long-term (at least 5 years) the land enrolled in an expiring CRP contract to a beginning, veteran, or SDA farmer who is not a family member.
  • Owner or operator must agree to permit the beginning, veteran, or SDA farmer to make conservation and land improvements according to an approved conservation plan.
  • Beginning, veteran, or SDA farmers participating in TIP may re-enroll eligible land under CRP.
  • Beginning, veteran, or SDA farmers must materially and substantially participate in the operation of the farm involved in CRP contract modification.

More information:

More information about the Conservation Reserve Program Transition Incentives Program can also be found at:

https://www.fsa.usda.gov/programs-and-services/conservation-programs/transition-incentives/index

If you are interested in learning more about this or other Farm Service Agency programs, contact your local FSA office.  Not sure which FSA serves your county?  Use this link: https://offices.sc.egov.usda.gov/locator/app?state=oh&agency=fsa  to locate your nearest FSA office.

Resources

Conservation Reserve Program- Transition Incentives Program.  Accessible at: https://www.fsa.usda.gov/Assets/USDA-FSA-Public/usdafiles/FactSheets/2019/crp_transition_incentive_program-fact_sheet.pdf

Conservation Reserve Program-Overview. Accessible at:

https://www.fsa.usda.gov/Assets/USDA-FSA-Public/usdafiles/FactSheets/2019/conservation-reserve_program-fact_sheet.pdf

About the Conservation Reserve Program.  Accessible at:

https://www.fsa.usda.gov/programs-and-services/conservation-programs/conservation-reserve-program/index

OSU Extension is thankful the support of USDA through the Outreach Education and Technical Assistance for Farm Service Agency Programs grant.

U.S. Agricultural Market Outlook: Soybean

by: Chris Zoller, Extension Educator, ANR, Tuscarawas County

The Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri recently released its latest U.S. Agricultural Markets Outlook.  The full report is available here: https://www.fapri.missouri.edu/wp-content/uploads/2022/03/2022-U.S.-Agricultural-Market-Outlook.pdf.  This article will provide a summary highlighting the soybean outlook section of the report.

Introduction

The latest FAPRI report establishes projections for agricultural commodities out to the marketing year 2031/2032.  The data used to make these projections was based on information available in January 2022.  FAPRI recognizes much has changed since information was gathered, especially the war in Ukraine.  The authors of the report acknowledge that several factors may potentially impact the predictions.  These factors include exports, commodity prices, input expenses, net farm income, government farm programs, and consumer food prices.

The projections in this report assume no new ad-hoc government payments (like those related to the COVID-19 pandemic) will be provided and provisions of the 2018 Farm Bill will continue.  On a macroeconomic level, the authors recognize the uncertainty of oil markets, the likelihood interest rates will rise, and observe that weather will impact the soybean yield in South America.

Soybean Outlook

Soybean shipments to China reached record levels in 2020 & 2021 when China’s port industry recovered from African Swine Fever and the U.S. and China reached a Phase 1 trade deal.  A decline in the profitability of China’s pork industry and lowered demand for soybean meal is projecting an export decline in the first half of the marketing year.  The FAPRI report does project flat to slight increases in U.S. soybean exports to China.

Soybean production in 2021 reached a record high, exceeding the record set in 2018 & 2019 by seven million bushels.  Large export numbers have resulted in lower ending stocks of U.S. soybeans, hitting a five-year low.  Some improvement in ending stocks should result this marketing year because of an expected increase in production.

Increased exports are favorable for prices.  Soybean prices paid to farmers averaged under $11 per bushel for seven years.  The 2021/2022 price exceeds $12 per bushel, and we have seen futures prices go even higher.  Increased demand for soybean oil will help raise prices for the 2022/2023 marketing year.  Some models analyzed by FAPRI indicate that higher prices could increase the soybean reference price.

FAPRI predicts ARC and PLC payments to be modest in this projection.  The crop insurance projected net indemnities are expected to be greater than in previous years.

Biodiesel accounted for approximately 90% of the increase in soybean oil use between the 2012/2013 and 2020/2021 marketing years.  FAPRI expects continued growth in renewable diesel production and only modest growth from food and other domestic uses.  Soybean oil exports from the U.S. also remain modest due to increased exports of soybean oil from Argentina and greater exports of Asian palm oil for the global vegetable oil market.

Planning

The projections made in the FAPRI report are based on current information, but the authors recognize that this is all subject to change.  Weather, political tensions, interest rates, and many other factors will influence the final production, costs, and returns.

While you don’t have much control over these factors there are some things you can do to prepare.  I encourage you to manage what you can control and consider the following recommendations:

  • Know your cost of production. The FAPRI report indicates soybeans will average between $10 and $12 per bushel over the projection period.  Can you be profitable at this price point?  If not, what changes need to occur?
  • Consider enrolling in the OSU Extension Farm Business Analysis and Benchmarking Program (https://farmprofitability.osu.edu/).
  • Use budgets and scenarios to plan. OSU Extension Enterprise Budgets are updated and available here: https://farmoffice.osu.edu/farm-management/enterprise-budgets.
  • Meet with your Extension Educator to review budgets and plans.
  • Talk with your input providers. What are they able to tell you about input price projections?
  • Keep your lender informed of your finances and plans.
  • Talk to family members about the future of your business.
  • Stay tuned to what is happening around the globe and the potential impacts to agriculture and your business.

 

 

 

 

 

U.S. Agricultural Market Outlook: Corn & Wheat

by: Chris Zoller, Extension Educator, ANR in Tuscarawas County

The Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri recently released its latest U.S. Agricultural Markets Outlook.  The full report is available here: https://www.fapri.missouri.edu/wp-content/uploads/2022/03/2022-U.S.-Agricultural-Market-Outlook.pdf.  This article will provide a summary highlighting the corn and wheat outlook section of the report.

Introduction

The latest FAPRI report establishes projections for agricultural commodities out to the marketing year 2031/2032.  The data used to make these projections was based on information available in January 2022.  FAPRI recognizes much has changed since information was gathered, especially the war in Ukraine.  The authors of the report acknowledge that several factors may potentially impact the predictions.  These factors include exports, commodity prices, input expenses, net farm income, government farm programs, and consumer food prices.

The projections in this report assume no new ad-hoc government payments (like those related to the COVID-19 pandemic) will be provided and provisions of the 2018 Farm Bill will continue.  On a macroeconomic level, the authors recognize the uncertainty of oil markets, the likelihood interest rates will rise, and estimate corn variable costs will increase 2.2% per year.

Corn Outlook

After several years of prices below $3.70 per bushel, corn prices have increased, with nearby futures having hit nearly $8.00 per bushel recently.  The effective reference price escalator is expected to be triggered in the 2023/2024 marketing year.  Over this projection, the per bushel price for corn is expected to decline and average around $4.00.

Acres planted to corn this year are projected be just under 94 million.  Because of projected price declines, the number of acres planted to corn is expected to drop over the projection period.

No program benefits are expected for corn in this marketing year.  Net indemnities from crop insurance are expected to average $29 per acre and PLC payments at $21 per acre during the forecast period.  While not displayed in the graph below, ARC payments are expected to be like PLC payments.

Wheat

The war in Ukraine has created a great deal of discussion about wheat.  Russia and Ukraine account for approximately 30% of the world export market.  Continued fighting and port closures have many questioning how much of the wheat crop in these countries will be harvested and eventually exported.

Additional acres planted and an expected return to trend yields for the 2022/2023 result in an approximate 24% increase compared to last year.  This forecast calls for production, stocks, and exports to grow throughout the projection period.

For the second year the acres planted to wheat increased in 2022.  While we’ve experienced increases in wheat acres the last two years, this projection calls for all planted wheat acres to remain relatively level.

 

Crop insurance net indemnities have averaged about $7 per acre for wheat but are expected to average around $15 per acre over the projection period.  PLC payments for wheat in the near-term are expected to be small but increase in later years.

Moving Forward

The projections provided in this report are well researched given the information available today but are subject to change.  Weather, geopolitics, and many other factors are unknown and can’t be controlled.  However, I encourage you to manage what you can control and consider the following recommendations:

  • Know your cost of production. If the corn price projection in this forecast is correct, can you be profitable receiving, on average, around $4.00 per bushel?  Regardless of the commodity, knowing your cost is a critical first step.  Consider enrolling in the OSU Extension Farm Business Analysis and Benchmarking Program (https://farmprofitability.osu.edu/).
  • Use budgets and scenarios to plan. OSU Extension Enterprise Budgets are updated and available here: https://farmoffice.osu.edu/farm-management/enterprise-budgets.
  • Meet with your Extension Educator to review budgets and plans.
  • Talk with your input providers. What are they able to tell you about input price projections?
  • Keep your lender informed of your finances and plans.
  • Talk to family members about the future of your business.
  • Stay tuned to what is happening around the globe and the potential impacts to agriculture and your business.

 

 

 

 

Organic Certification Cost Share Available from Farm Service Agency

by: Chris Zoller, Extension Educator, ANR in Tuscarawas County

Have you ever considered transitioning all or part of your dairy or crop enterprise to organic production?  If so, you may be interested in programs available through your local Farm Service Agency (FSA).  These include the Organic Certification Cost Share Program (OCCSP) and the Organic and Transitional Education and Certification Program (OTECP).

Organic Certification Cost Share

The Organic Certification Cost Share Program (OCCSP) provide cost share assistance to producers and handlers who are obtaining organic certification for the first time or renewing their previous certification. Organic certification is obtained through certifying agents accredited by the USDA National Organic Program.

This program provides 50 percent of a certified operation’s allowable certification costs, up to a maximum of $500.  The following categories or “scopes” are included: crops, livestock, wild crops, processing/handling, and organic program fees. Cost share is provided on a first come, first served basis, until all available funds are obligated.  This program is available until September 30, 2022.

To be eligible, a producer must have both (1) a valid organic certification for their operation at the time of application and (2) paid fees or expenses related to its initial certification or renewal for certification from a certifying agent.

Allowable costs under the OCCSP include:

  • Application fees and administrative fees
  • Inspection fees, including travel and per diem for organic inspectors
  • USDA organic certification costs
  • User fees or sale assessments
  • Postage

 Organic and Transitional Education and Certification Program

The Organic and Transitional Education and Certification Program (OTECP) provides financial assistance to producers interested in obtaining or renewing USDA organic certification.  In addition to many acronyms, there are certain terms that producers need to know the definitions.  These include certified operation, educational event, soil testing, micronutrients, transitional operation, and USDA organic certification.  These terms are defined below:

  • Certified operation – is a crop or livestock production, wild crop harvesting, or handling operation, or portion of such operation, that is certified by an accredited certifying agent.
  • Educational event – is an event, conference, training program, or workshop, that provides educational content addressing topics related to organic production and handling.
  • Soil testing – means soil testing to document micronutrient deficiencies.
  • Micronutrients – can not be used as a defoliant, herbicide, or desiccant. Those made from nitrates or chlorides are not allowed.  Deficiencies must be documented by soil or tissue testing.
  • Transitional operation – is a crop or livestock production operation that is transitioning to organic production in anticipation of obtaining USDA organic certification and has an organic system plan from a certifying agent.
  • USDA organic certification – means a determination made by a certifying agent that a production or handling operation is in compliance with the Organic Production Act of 1990.

Eligibility

To be eligible for OTECP, an applicant must have paid eligible costs during the program year and, at the time of application, be either a certified or a transitional operation.  Expenses that have been incurred during the program year but not paid by the applicant are not eligible for cost share assistance.  Eligibility for the OTECP is based on the date expenses are paid, rather than on the date the organic certification is effective.

Eligible Categories

Certified Organic Operations may have expenses for any combination of the following categories: crops, wild crops, livestock, handling/processing, program fees, soil testing, and educational events.

Transitional Organic Operations may have expenses for any combination of transitional operation, soil testing, and educational events.

Payment Amounts & Limitations

Eligible Applicants Category of Expenses Payment Amount
Certified operations Certification – crops 25%, up to $250
Certified operations Certification – livestock 25%, up to $250
Certified operations Certification – wild crops 25%, up to $250
Certified operations Certification – handling 25%, up to $250
Certified operations State Organic Program fees 25%, up to $250
Transitional Operations Eligible transitional expenses 75%, up to $750
Certified & Transitional Operations Educational event registration fees 75%, up to $100
Certified & Transitional Operations Soil testing 75%, up to $150

Required Documentation

In addition to dividing expenses paid by category, applicants self-certify to having either a valid organic certificate, or documentation to show a transition to organic.  Applicants must retain documentation in support of their application for three years after the date of approval.

Additional Information

If you are interested in learning more about this or other Farm Service Agency programs, contact your local FSA office.  Not sure which FSA serves your county?  Use this link (https://offices.sc.egov.usda.gov/locator/app) to locate your nearest FSA office.

These OSU Extension resources may be of interest:

https://ohioline.osu.edu/factsheet/sag-3

https://ohioline.osu.edu/factsheet/anr-34

For Ohio specific information about the organic certification process, consult the Ohio Ecological Food and Farm Association: https://certification.oeffa.org/.

OSU Extension is thankful the support of USDA through the Outreach Education and Technical Assistance for Farm Service Agency Programs grant.

This article was originally published in the Farm & Dairy Newspaper on April 28, 2022. It can be accessed at: https://www.farmanddairy.com/columns/organic-certification-cost-share-available-from-farm-service-agency/715098.html

 

Biden Administration Appoints John Patterson to Serve as State Executive Director for USDA’s Farm Service Agency in Ohio

Source: Ohio Farm Service Agency

The Biden Administration recently appointed John Patterson as the new State Executive Director (SED) for the USDA Ohio Farm Service Agency (FSA). Patterson joined the Ohio FSA team on April 25, 2022.

Patterson is a former state legislator and retired classroom teacher whose work experience spans over 40 years. He recently completed eight years in the Ohio House until term limits prohibited his continued service. During his time in the House, Patterson served on the Agricultural and Natural Resources Committee, including two terms as ranking member. Patterson was a co-author of HB 7, which provides funding for the H2Ohio initiative begun by Governor DeWine. He was also an original co-author of the Young Farmers Tax Credit bill. A Co-Chairman of the Finance Subcommittee on Primary/Secondary Education in his last term, Patterson co-authored the Cupp-Patterson Fair School Funding Plan which was incorporated into the state budget in 2021.

Prior to his time in the House, Patterson taught U.S. History at his alma mater, Jefferson Area High School in a small, rural district in northeast Ohio. He taught Advanced Placement, Honors, and General U.S. History, retiring in 2012. In addition to his teaching duties, Patterson served as the Model United Nations advisor for nearly three decades. Patterson was also the chief negotiator for his union for over twenty years—a position from which he learned much about compromise and the pursuit of mutually beneficial goals. He also coached basketball, baseball, golf, and cross-country. Patterson earned his Ph.D. in Education at Kent State University in 1996. He has been married to his wife Nancy for 38 years and has two sons, Joshua and Jeremiah.

As SED, Patterson will be responsible for overseeing the delivery of FSA programs to agricultural producers in Ohio.  These commodity, conservation, credit, and disaster assistance programs ensure a safe, affordable, abundant, and nutritious food, fiber, and fuel supply for consumers.

Farm Service Agency serves farmers, ranchers, foresters, and agricultural partners through the effective, efficient, and equitable delivery of federal agricultural programs. The Agency offers producers a strong safety net through the administration of farm commodity and disaster programs. Additionally, through conservation programs, FSA continues to preserve and protect natural resources and provides credit to agricultural producers who are unable to receive private, commercial credit, including targeted loan funds for beginning, underserved, women and military veterans involved in production agriculture.

USDA touches the lives of all Americans each day in so many positive ways. In the Biden-Harris Administration, USDA is transforming America’s food system with a greater focus on more resilient local and regional food production, fairer markets for all producers, ensuring access to safe, healthy and nutritious food in all communities, building new markets and streams of income for farmers and producers using climate smart food and forestry practices, making historic investments in infrastructure and clean energy capabilities in rural America, and committing to equity across the Department by removing systemic barriers and building a workforce more representative of America. To learn more, visit usda.gov.

How Will the Invasion of Ukraine Affect U.S. Agriculture?

by: Ian Sheldon, Professor and Andersons Chair of Agricultural Marketing, Trade, and Policy, Agricultural, Environmental, and Development Economics, Ohio State University and Chris Zoller, Associate Professor and Extension Educator, Agriculture & Natural Resources, Ohio State University Extension – Tuscarawas County

Russia’s Invasion of Ukraine: The Global Impact

The shock to global commodity markets following Russia’s invasion of Ukraine is expected to be the largest in the post-war period, and certainly since the oil crisis of the 1970s.  Over the past 30 year, the two countries have become major agricultural exporters, accounting for a quarter of global grains trade in the 2021-22 season (International Grains Council, March 9, 2022).  Across key commodities, they account for a 34, 18, 27 and 75 percent share of volume traded of world wheat, corn, barley, and sunflower oil respectively (International Food Policy Research Institute, February 24, 2022).  With Russia blockading ports on the Black Sea, 16 million tons of grain are currently stranded in Ukraine, USDA forecasting Ukrainian-Russian wheat exports to fall by 7 million tons in 2021-22, Australian and Indian exports only partially filling the gap (USDA/WASDE Report, March 9, 2022)   Also, despite reports of some spring crops being planted in Ukraine, outgoing Agriculture Minister Roman Leshchenko expects total area sown to be reduced by 19 million acres (Reuters, March 22, 2022).

Not surprisingly a market shock of this magnitude has affected both the volatility and level of prices, wheat futures at one point moving above $14/bushel, and eventually falling back to just over $10/bushel, reflecting uncertainty among traders about the invasion.  In turn, the increase in grain prices, are having a significant effect on global food prices and hence food security.  Even before the invasion, several factors were already driving up food prices, including poor harvests in South America, strong global demand, supply chain issues, reduced global stocks of grains and oilseeds, and an input cost squeeze mostly due to rising fertilizer prices.  Adding in the effect of the invasion, global food prices are now reaching levels not seen since the so-called “Arab Spring” of the early 2010s (UN/FAO, March 2022).

The steep decline in grain exports has led to institutions such as the UN World Food Program expressing concern about global food security, the cost of buying food forecast to rise by $23/month – a significant increase to those living off $1.90/day, the World Bank definition of poverty (New York Times, March 20, 2022).  Countries in the Middle East and North Africa such as Egypt, the Lebanon and Tunisia are very dependent on grain imports from Ukraine and Russia, the risk of food price inflation stirring up political and social unrest.  On top of this, there is concern other countries will adopt “beggar-thy-neighbor”-type controls on grain exports to protect their own populations, that will simply intensify the food price spike (Financial Times, March 23, 2022).

Implications for U.S. Agriculture

We are experiencing higher fuel prices at the pump, grain markets (especially wheat) rallied on news of the invasion and resulting sanctions, and the invasion created further uncertainty for fertilizer costs.  What does the future hold for fuel, fertilizer, and grain prices?  It is impossible to say with certainty, but the market does not like uncertainty.  In other words, expect a great deal of continued volatility.  Harwood Schaffer and Darrel Ray, Agriculture Policy Analysis Center at the University of Tennessee (MidAmerica Farmer Grower, March 4, 2022), make the following points about possible impacts:

  • Russia may try to broker a deal with China to avoid trade sanctions.  If this happens, the U.S. may be able to capture markets previously served by Russia.
  • If the war continues, who will harvest the Ukraine wheat crop and how will it be transported?
  • If the consensus is that the wheat crop will be short, expect an increase in prices.
  • If commodity prices do increase, will it be enough to cover rising fuel and fertilizer costs?

Scott Stiles, agricultural economist, University of Arkansas, says the war may provide an opportunity for the U.S. to sell more corn to China and the European Union, who have historically purchased corn from Ukraine (Ryan McGeeney, U of A Division of Agriculture, March 3, 2022).

University of Illinois agricultural economists Gary Schnitkey, Nick Paulson, and Krista Swanson, and Carl Zulauf, Emeritus Professor, Ohio State University (Weekly Farm Economics, March 29, 2022), offer the following potential impacts:

  • Wheat has seen positive price movement.  Because corn is a substitute feed grain for wheat, corn prices may see a greater increase than soybeans.
  • Do not underestimate the resourcefulness of Ukrainian farmers.  However, continued fighting and planting disruptions may lead to higher prices.
  • Expect continued price and availability uncertainties in the fertilizer market.

Summary

The invasion of Ukraine is proving a significant shock to global commodity markets, with the very real prospect of worsening global food insecurity as net food importing countries face shortages of key staples such as wheat.  In the short run, the expectation is that there are real limitations on the ability of the U.S. to meet the shortfall: winter wheat is already in the ground, stocks are low, drought conditions are likely to impact yields in states such as Kansas, and farmers face an input price squeeze (Financial Times, March 14, 2022).  Not surprisingly, there is political pressure on USDA to allow farmers to plant on land enrolled in the Conservation Reserve Program (CRP) without penalty (Reuters, April 1, 2022).