Ohio Ag Law Blog—Prevented planting, idle land, and CAUV taxation

By: Peggy Kirk Hall, Tuesday, June 18th, 2019
Original Source: https://farmoffice.osu.edu/blog
The decision on whether to take prevented planting is a tough one, but don’t let concerns about increased property taxes on idle land enter into the equation.  Ohio’s Current Agricultural Use Valuation program allows landowners to retain the benefit of CAUV tax assessment on agricultural land even if the land lies idle or fallow for a period of time.

Ohio’s CAUV program provides differential property tax assessment to parcels of land “devoted exclusively to agricultural use” that are ten acres or more or, if less than ten acres, generated an average gross income for the previous three years of $2,500 or more from commercial agricultural production.  Timber lands adjacent to CAUV land, land enrolled in federal conservation programs, and land devoted to agritourism or bio-mass and similar types of energy production on a farm also qualify for CAUV.

There must have been some farmers in the legislature when the CAUV law was enacted, because the legislature anticipated the possibility that qualifying CAUV lands would not always be actively engaged in agricultural production.   The law allows CAUV land to sit “idle or fallow” for up to one year and remain eligible for CAUV, but only if there’s not an activity or use taking place on the land that’s inconsistent with returning the land to agricultural production or that converts the land from agricultural production.  After one year of lying idle or fallow, a landowner may retain the CAUV status for up to three years by showing good cause to the board of revision for why the land is not actively engaged in agricultural production.

The law would play out as follows.  When the auditor sends the next CAUV reenrollment form for a parcel that qualifies for CAUV but was not planted this year due to the weather, a landowner must certify that the land is still devoted to agricultural production and return the CAUV form to the auditor.  The auditor must allow the land to retain its CAUV status the first year of lying idle or fallow, as long as the land is not being used or converted to a non-agricultural use.  If the land continues to be idle or fallow for the following year or two years, the auditor could ask the landowner to show cause as to why the land is not being used for agricultural production.  The landowner would then have an opportunity to prove that the weather has prevented plans to plant field crops, as intended by the landowner.  After three years, the landowner would have to change the land to a different type of commercial agricultural production to retain its CAUV status if the weather still prevents the ability to plant field crops on the parcel.  Other agricultural uses could include commercial animal or poultry husbandry, aquaculture, algaculture, apiculture, the production for a commercial purpose of timber, tobacco, fruits, vegetables, nursery stock, ornamental trees, sod, or flowers, or the growth of timber for a noncommercial purpose, if the land on which the timber is grown is contiguous to or part of a parcel of land under common ownership that is otherwise devoted exclusively to agricultural use.

Being forced out of the fields due to rain is a frustrating reality for many Ohio farmers today.   One positive assurance we can offer in the face of prevented planting is that farmers won’t lose agricultural property tax status on those fields this year.  Read Ohio’s CAUV law in the Ohio Revised Code at sections 5713.30 and 5713.31.

Mid to Late Prevented Planting Decisions

by: Ben Brown, Sarah Noggle, Barry Ward- The Ohio State University

Consistent rains across Ohio and the Corn Belt continue to delay planting progress as the June 17 USDA Planting Progress report showed that 68% of intended corn acres and 50% of intended soybean acres have been planted in Ohio. Nationwide, roughly 27 million acres of corn and soybeans will either be planted or filed under prevented planting insurance. Across Ohio, the Final Plant Date (FPD) for soybeans is June 20. Soybeans can be planted after the FPD, but a one percent reduction in the insurance guarantee occurs. This brief article outlines economic considerations for soybean prevented planting under three scenarios: planting soybeans on corn acres, planting soybeans late, and taking prevent plant soybeans. There are three sections to this article: a brief market update on corn and soybeans, a policy update on Market Facilitation Payments, and then finally the scenarios listed above. This article contains the best information available as of release, but conditions may change. Farmers should check with their crop insurance agents when making prevented planting decisions. OSU Extension is not an authorizing body of federal crop insurance policies.

Market Update

The World Agricultural Supply and Demand Estimates released on June 11, 2019, provided a mixed bag of news for corn prices, but the bullish factors outweighed the bearish factors and the December futures price increased 15 cents by market close. The Outlook Board lowered acreage 3 million acres reflective of relative returns from prevent plant and revenue over variable costs. However, the 10 bu. /acre drop in the national yield, reflective of the late planting across the Corn-Belt, provided possibly the biggest shock to the corn market. Most analysists had a decrease in final yield, but few expected a 10-bushel decrease down to 166 bushels per acre in the June WASDE- a month that rarely sees a decrease in yield given the length of season left. The market seems to have now figured in a yield decline and a reduction of 5-7 million acres. Further declines in yield during the growing season and increases in prevented planting acres favor price increases heading into fall. However, these are still largely unknown factors and market softness could happen as well.

The mixed bag continued with bearish signals in the corn balance sheet- corn exports continue to weaken on large to near record production quantities in Southern Hemisphere and currency exchange rates working against U.S. grain sellers. Strong yields in South America and the price differential may significantly reduce U.S. corn exports. Higher prices and lower production in the U.S. reduce the availability of corn for feed use. U.S. corn exports and corn for feed use estimates were collectively lowered 425 million bushels. The U.S. corn ending stocks to use ratio is lowered to 11.8%, the lowest ratio since the 9.2% experienced during the 2013/14 marketing year. Market increases in the fall of 2019 provide opportunities for producers to market multiple years’ worth of grain at profitable prices.

The soybean balance sheet continues to show market softness with no change in acreage or yield. The March Planting Intentions Report had already lowered soybean acres 4.6 million earlier in the year to 84.6 million acres and planting challenges for corn potentially have shifted some intended corn acres to soybeans. With a couple more weeks to go in the soybean-planting window, final soybean acreage is far from known. However, soybean ending stocks topped the 1 billion bushel mark- an emotional mark for soybean prices. U.S. soybean exports continue to struggle with lower world demand and competitive prices. The U.S. soybean beginning stocks for 2019/2020 were increased on softness in soybean export estimates for the end of 2018/2019. The reduced planting intentions earlier in the year and some switching from corn acreage could mean there is little price rally in a moderate reduction in soybean acreage or yield. An increase in soybean acreage would provide another bearish signal to an already soft market. While an increase in soybean acreage might sound crazy given current planting conditions, the current acreage count was already lowered in March.

Policy Update

A USDA issued press release on June 10th provided some details of the announced trade package.

  1. The 2019 Market Facilitation Program (MFP) payments will be made on a planted acre basis and the rates will be calculated for each county. The rates were not released. All eligible crops in a county will receive the same payment.
  1. If a cover crop is planted and that cover crop has the potential to be harvested, then that cover crop will be eligible for a minimum MFP payment- providing a way to get an MFP payment on prevented plant acres. The definition of a harvestable cover crop was not defined. This payment is not included in the examples below there is no way to know the size of this payment.
  1. The disaster assistance in the “Additional Supplemental Appropriations for Disaster Relief Act of 2019” will be eligible for Secretarial or Presidential declared disaster areas. On June 14, Governor DeWine sent a letter to Secretary Purdue requesting a disaster deceleration request for Ohio. The additional assistance could increase the prevented planting payment value, but the press release indicated a modest increase. The Disaster Bill passed by Congress and signed by President Trump also allows for the use of the higher of the projected price or the harvest price for the targeted areas. Because it is unknown which or if any areas will be included in the disaster aid bill, there is not the inclusion of changes in prevented payments in the examples below.

Acres intended to be planted to Corn

The corn FPD for full crop insurance purposes in Ohio was June 5. Producers could still plant corn in Ohio at a reduced crop insurance guarantee of 1% per day after the FPD or they could take a prevented planting indemnity on Revenue Insurance (RP), Yield Insurance (YP) or other Common Crop Insurance Policies (COMBO). Producers have 4 options available for intended corn acres:

  1. Plant corn
  2. Take a prevented planting payment
  3. Plant soybeans
  4. Take 35% of the corn prevented planting payment and plant soybeans after the late plating soybean period of June 20 in Ohio.

Given the calendar is starting the 3rd week of June, it is unlikely that there are many producers who are still planning to plant corn that have not done so. However, a relatively high 18% was planted last week in Ohio. Planting corn this late in the season is connected to the expectation that prices will increase through the year and be high enough to offset yield losses and added increases in drying costs. Two additional scenarios exist where producers will likely still see the benefits of planting a corn crop.

  1. He or she has applied nutrients and some input costs
  2. He or she needs feed for a livestock operation

Still, it is difficult to see corn reaching black layer before the first fall frost. For acres where no input costs have been applied, yield and insurance guarantee declines along with current futures prices of $4.62/ bushel and an increase to drying costs do not suggest producers should continue to plant corn. As mentioned in the market update section there is a possibility for higher prices, especially if the market is on the high end of acreage estimates and summer weather is not cooperative for moderate yield variations. For producers that have applied some input costs, the window is almost closed for expected returns to be larger than the prevented planting corn payment. This varies on the producer and the level of input costs.

The third option is to plant soybeans on those intended corn acres. As mentioned in a previous OSU Extension article- soybean returns above variable costs at current prices do not return a higher value than taking corn prevented planting payments. Higher soybean prices would tighten the decision, but the current balance sheet does not show the needed support to soybean prices. In the case that soybean planting continues to be delayed, the usual soybean prevented planting payment is considerably lower than the original corn prevented planting payment. Most producers will want to maximize the corn share of their prevented plant acres given the corn/soybean indemnity ratio.

The last option to take 35% of the corn prevented planting payment and plant soybeans become relevant for corn acres after the late planting period has concluded (June 25 in Ohio). Producers do not have this option available to them at this moment. A consideration of this option needs to be made that historical production history or APH yields will be negatively affected decreasing the insurance guarantee in future years. At this time, market signals do not suggest this option provides returns that are larger than straight prevented planting payments of corn. The inclusion of a MFP payment on the planted soybeans could make this option comparable. It is hard to know without the release of county payment rates.

Acres intended to be planted to Soybeans

The FPD for soybeans in Ohio is approaching quickly and with only half the crop planted, there is the potential that large amounts of Ohio soybean acreage will be planted in the late planting period or classified as prevented planting under insurance policies. Producers should continue to plant soybeans up to the FPD if possible. Once the FPD on June 20 is reached, producers have three options:

  1. Plant soybeans
  2. Take the prevented planting payment for soybeans
  3. Wait until the late planting period has finished and plant an alternative crop while taking 35% of the prevented planting payment on soybeans.

After the FPD for soybeans has been reached, the first option for soybean intended acres is to plant soybeans in the late planting period. Remember, like corn, the soybean insurance guarantee decreases a percent per day during this period. Yield declines in soybeans are harder to estimate given the variability in previous late planting years and final yields. The trend line does decrease with late planting but the variation in yields is larger as a percent than that experienced in corn. Economic considerations for planting soybeans versus taking the prevented planting soybean payment should first be calculated on the net return of the soybean crop above variable cost and the net return of soybean prevented planting payment. The calculations below are illustrated for an 80% coverage level on a RP insurance policy and a trend-adjusted actual production history of 50 bu. / acre. As mentioned in the policy section, the Federal Disaster Bill allows for the inclusion of the higher of the projected price or the harvest price. However, that is not guaranteed so the projected price of $9.54/bushel is used in these calculations.

Returns from Planting Soybeans

The insurance guarantee for soybeans in this scenario is

(80% x 50 bu. x $9.54/bu.)= $381.60

However, producers planting soybeans do not receive the projected Variable costs will need to be subtracted from this an addition of a reasonable MFP payment. Using the Farm Budget for soybeans on the OSU Farm Office webpage, a variable cost of $220/ acre on soybeans seems reasonable. Adding in a $45/ acre MFP payment (it is not sacred about this value other than if you weight MFP payments in 2018 for corn and soybean acres the average is close to $45/acre) you get your expected returns for planting soybeans.

Insurance Guarantee of $381.60 minus cost of $220 plus MFP payment of $45 = $206.60/acre

Remember that this insurance guarantee drops 1% per day after the FPD of June 20. Given that current November futures contracts are $9.34/bushel, there is the possibility of an insurance payment being made with a relatively large drop in yield. In this scenario of the price at $9.34/bu. a yield of 41 bushels/ acre would be needed to trigger insurance payments. A lower price would not require as large of a drop in yield similarly as a higher price would require a larger drop in yield.

Returns from Soybean Prevented Planting

Using the same scenario as above- the prevented planting payment would be 60% of the insurance guarantee. Some producers could have bought up to a higher coverage level, but most Ohio producers have a 60% prevented planting coverage level.

Insurance Guarantee of $381.60 x 60% = $228.96

There is no MFP added to this scenario and we are assuming that there is no additional cost to include. It is possible that soybean seed has already been purchased and will need to be factored into the equation. However, a maintenance charge of $25/acre is included to manage the bare acres. This brings the prevented planting return to $203.96/ acre.

In comparison, the net return for planting soybeans was roughly $3/acre higher for planting soybeans given an estimate for possible MFP payments at $45. Outside of planting a soybean crop in 2019 and having low yields that could affect future actual production history values, the minimum returns to planting soybeans is similar to those of taking prevented planting payments. There is some potential upside to net returns if prices strengthen most likely due to further decreases in soybean acreage or U.S. soybean exports increase at the end of 2018/19, the beginning of 2019/20 or both. A price later in the season that provides a cash price (futures minus basis) above $7.63/bu. and a yield that matches the historical production of 50 bu./acre would calculate to a higher net revenue than prevented planting payments. Similarly, a yield of 45 bu./acre would need a cash price above $8.48/bu. to trigger a higher return than the prevented planting payment. Because of yield and insurance guarantees of 1% per day after June 20, the downside risk of planting a soybean crop will grow.

Conclusion

The above analysis is based on a set of assumptions for soybean planting near the FPD of June 20 in Ohio. It is assumed that the MFP payment will be $45/acre (again this is not a final rule, and should be seen as illustration purposes only) and that costs are roughly $220 per acre. Some producers will have variable costs included on prevented planting soybean acres- especially purchases treated soybean seeds.

Decisions around prevented planting will continue to be difficult. However, corn prevented plant payments are estimated to have a higher net return than soybean prevented planting payments. Switching corn intended acres to soybeans and taking a prevented planting payment on soybeans does not seem like the best option. The producer should continue to plant soybeans up to the June 20 FPD, after that the decision is tight between planting a soybean crop and taking the prevented planting payment. There is some upside potential for planting soybeans although the current U.S. soybean balance sheet does not provide many positives. Moving later into the late planting period window decreases the insurance guarantee and soybean yields and improves the possibility of soybean prevented planting net returns being larger than late planted soybean net returns. For most Ohio producers this point comes roughly around June 25, the same day that the late planting period for corn ends. As a final reminder- producers should always consult with their crop insurance provider before making final decisions.

New Podcast Episodes

by: Amanda Douridas, OSU Extension Educator

The Agronomy and Farm Management Podcast has been releasing new episodes every other week since May 2018 and is set to release its 29th episode next Wednesday. To make it easier for listeners to find past episodes, the podcast has a new landing page at http://go.osu.edu/AFM.

Here you will find a listing of all past episodes, descriptions of what we talked about and links to additional resources. We cover a wide range of topics for corn, soybean and small grain farmers on agronomic and farm management topics. Episodes include legal topics such as leases, LEBOR, and hemp; timely seasonal topics like disease, insects and weather; and operational improving strategies related to nutrient management, precision agriculture and grain marketing.

Stay up to date on the latest episodes by following us on Twitter and Facebook (@AFMPodcast) and adding us to your favorites in Apple Podcasts or Stitcher. Give us a good rating and review if you like the podcast! If there is a listening platform you would like us to broadcast on or you have a topic suggestion, reach out on social media or by email at Douridas.9@osu.edu.

 

Corn vs. Soybeans in a Delayed Planting Scenario – Profit Scenarios

by: Barry Ward, Leader, Production Business Management & Director, OSU Income Tax Schools

Wet weather and planting delays throughout much of Ohio and the eastern Cornbelt have many producers thinking about switching corn acres to soybeans or the taking the prevented planting option of their Multiple Peril Crop Insurance policy. Ohio had 9% of intended corn acres planted by May 19th which is far behind the 5 year average of 62%. Farms with pre-plant nitrogen or herbicides applied for corn production may have no option to switch to soybeans. Seed availability may also limit choice for some. Other factors, such as strict adherence to a crop rotation or landlord considerations may limit farmer choice when it comes to switching from corn to soybean plantings in a given year. Farm leases may contain specifications on crop rotations or even what crops may be grown. There may also be unwritten agreements between parties that limit the possibility of growing soybeans in successive years.

Producers that don’t have these limitations may be considering the option of switching acres to soybeans and it will likely come down to expected profit. Field by field budgeting is recommended and with delayed planting the yield expectations change as we move later into the growing season. What will be the likely yields for a given farm for the two crop choices? A recent article, “Delayed Planting Effects on Corn Yield: A “Historical” Perspective” is a good starting point in evaluating potential yield loss due to late corn planting: https://agcrops.osu.edu/newsletter/corn-newsletter/2019-12/delayed-planting-effects-corn-yield-%E2%80%9Chistorical%E2%80%9D-perspective

A recent article highlighting faculty in the College of Food, Agricultural and environmental Sciences always provides valuable insight into the possible yield swings related to late plantings of corn and soybeans: https://cfaes.osu.edu/news/articles/late-start-planting-might-not-hurt-yields-much

Looking at some simple scenarios may get your budgeting process moving for your own fields. These scenarios are based on the 2019 crop enterprise budgets available online at: https://farmoffice.osu.edu/farm-management-tools/farm-budgets

Scenario 1 – Yield prospects remain unchanged, new estimated revenue based on today’s markets:

Corn – 170.2 bu/a & 4.00/bu

Returns Above Variable Costs     $293

Soybeans – 51.5 bu/a & 7.90/bu

Returns Above Variable Costs     $207

Price changes in the last 3 weeks have been favorable to corn and shows some advantage to corn with these assumptions using OSUE Enterprise Budgets.

Scenario 2 – Corn yield 13% lower (per OSU Agronomy Guide, planting date 5-22 through 5-27), soybean yields remain unchanged, new estimated revenue based on today’s markets:

Corn – 148 bu/a & 4.00/bu

Returns Above Variable Costs     $227

Soybeans – 51.5 bu/a & 7.90/bu

Returns Above Variable Costs     $207

The choice becomes closer as we see corn still outperforming soybeans (barely) in Returns Above Variable Costs.

Scenario 3 – Corn yield 13% lower (per OSU Agronomy Guide, planting date 5-22 through 5-27), soybean yields 5% lower, soybean seed costs higher due to higher seeding rate (additional 30,000 seeds per acre planted) for late planted soybeans, new estimated revenue based on today’s markets:

Corn – 148 bu/a & 4.00/bu

Returns Above Variable Costs     $227

Soybeans – 48.9 bu/a & 7.90/bu

Returns Above Variable Costs     $175

This choice again favors corn as the lower soybean yield due to late planting and additional seeding costs make the choice of corn somewhat stronger compared to Scenario 2.

The recent announcements of another round of Market Facilitation Payments and changes to Prevented Planting Coverage due to the pending Disaster Aid Bill may add further complexity to this choice.

As planting is delayed further into June the potential lower yields of both corn and soybeans due to a later planting window will tend to favor soybeans. These simplified scenarios are just examples and farmers should budget for the different yield, price and cost combinations based on their own numbers.

 

 

 

 

 

 

 

Prevented Planting Decision Tools

by Sam Custer, OSU Extension Educator

We have reviewed two prevented planting decision tools that can serve as a resource in your decision making process with your crop insurance agent. Both tools also provide resources for determining replant decisions.

In a recent Farmdocdaily article Schnitkey, G., C. Zulauf, K. Swanson and R. Batts. “Prevented Planting Decision for Corn in the Midwest.” farmdoc daily (9):88, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, May 14, 2019 they highlighted their decision tool.

The farmdoc tool can be used to make calculations for expected returns from three options: 1. Take a prevented planting payment and not plant a crop to be harvested or grazed. 2. Plant corn. 3. Plant another crop.

The farmdoc Prevented Planting Module is used to aid in making calculations for each alternative. The Prevented Planting Module is part of the Planting Decision Model, a Microsoft Excel spreadsheet within the FAST series available for download on farmdoc (here). The specific spreadsheet is available (here).

Iowa State also has an article and tool that can be found at https://www.extension.iastate.edu/agdm/crops/html/a1-57.html.

The Iowa State model can be used to determine three options also: 1. Go ahead and plant the original crop. 2. Plant an alternative crop 3. Abandon the acres, and plant a cover crop.

The Iowa State model is designed specifically for Iowa but allows you to use your numbers. The farmdoc model contains Ohio data but also allows you to use your specific numbers.

Prevent Plant…What’s That Again?

Eric Richer & Chris Bruynis, OSU Extension Educators

Wet conditions in Ohio and the Eastern Corn Belt has slowed (halted?) planting progress for Ohio producers. According to the May 20th Crop Progress Report by USDA National Ag Statistics Service, Ohio had only 9% corn planted. Surprisingly that was ‘double’ what was planted the week before and well behind the 5-year average of 62% planted. In 2018, Ohio was 69% planted by this report date.

Certainly, the Prevent Plant (PP) crop insurance tool has become a hot topic this year. Many of you have had the chance to attend prevent plant meetings or speak with your crop insurance agent. If not, we will try to briefly summarize your options and strongly suggest you talk to your agent or utilize one of the calculators (see associated “Decision Tools” article by Sam Custer) to determine which option best suits your farm operation.

Your first option is to plant the corn crop by June 5, the final plant date for corn (or June 20 for soybeans). Up until the final plant date, you are eligible for your full guarantee at the level you have selected. For example, 80% coverage x 170 bu/ac APH x $4.00 = $544/acre. If you elect to plant corn after June 5, you will incur a 1% reduction in your guarantee up through June 25, at which time you can choose not to insure your corn crop or you can insure for the same guarantee as your prevent plant amount. For example, if you plant corn on June 8, the guarantee formula (170 APH, 80% coverage) would be: 80% x 170 bu/ac x $4.00 x 97% = $528/acre. Planting dates need to be recorded, as these rules apply on field-by-field and acre-by-acre basis.

Secondly, you can elect to switch your intended corn acres to soybean acres. You will not have the option to file a prevented plant claim (unless you arrive at June 20 unable to plant soybeans). You will be charged for the soybean insurance premium, not the corn premium. The decision tool referenced earlier will be helpful here as this is not an easy decision. June weather (local and regional), supply/demand economics, trade policy and input options increase the complexity.

Your last option is to file for Prevent Plant, assuming you did not get corn planted by June 5. The mechanics of prevented plant deserve a review to ensure understanding. Prevent plant covers Yield Protection (YP), Revenue Protection (RP) and Revenue Protection with Harvest Price Option policies and references the February new crop corn pricing period (aka projected price). The projected price for 2019 corn is $4.00/bu and $9.54/bu for soybeans. A corn policy has a 55% Prevent Plant guarantee (buy-up available to 60%) and soybeans a 60% guarantee (with buy-up available to 65%). In order to further be eligible for Prevent Plant, at least 20 acres or 20% of that unit must not get planted (the lesser of the two). Prevented Plant does not affect your yield history as long as you do not plant a second crop. So a quick example (80% coverage, 170 bu/ac APH) for prevented plant corn would be: 80% x 170 bu/ac x $4.00 x 55% = $299/acre.

To be sure, there are costs besides the premium that are associated with Prevent Plant. Are there ‘restocking fees’ associated with returned seed or other inputs? What are the year-long weed control costs? If utilizing cover crops, what will their cost be? What are my land costs or how do I address my land costs? Do I need to pay labor & management costs even though the land wasn’t ‘farmed’? And finally, are their opportunity costs (marketing) missed because of taking Prevent Plant? We do not have space in this article to address these but they are things to be considering.

The reporting of Prevent Plant acres-should you elect that option-is quite simple. First, the total acres of Prevent Plant corn that you can file in 2019 can be no greater that the greatest number of acres of corn you reported in any of the previous four years (2015-2018). To report Prevent Plant acres, you would first need to turn in a notice (starting June 6) to your insurance agent. Then report your Prevent Plant to USDA Farm Service Agency to get it on your acreage report. Then you will need to work with your adjuster to finalize the claim, which will generally be paid within 30 days.

Prevented planting insurance payments can qualify for a 1 year deferral for inclusion in income tax. You can qualify if you meet the following criteria:

  • You use the cash method of accounting.
  • You receive the crop insurance proceeds in the same tax year the crops are damaged.
  • You can show that under your normal business practice you would have included income from the damaged crops in any tax year following the year the damage occurred.

The third criteria is the sometimes the problem. Most can meet the criteria, although if you want reasonable audit protection, you should have records showing the normal practice of deferring sales of grain produced and harvested in year 1 subsequently stored and sold in the following year.

There are many additional questions that we could address in this article but these are the basic options to guide your thought process…unless Mother Nature just won’t cooperate!

Ohio Corn, Soybean and Wheat Enterprise Budgets – Projected Returns for 2019

by: Barry Ward, Leader, Production Business Management, College of Food, Agricultural and Environmental Sciences- Ohio State University Extension

Production costs for Ohio field crops are forecast to be largely unchanged from last year with slightly higher fertilizer and interest expenses that may increase total costs for some growers. Variable costs for corn in Ohio for 2019 are projected to range from $356 to $451 per acre depending on land productivity. Variable costs for 2019 Ohio soybeans are projected to range from $210 to $230 per acre. Wheat variable expenses for 2019 are projected to range from $178 to $219 per acre.

Returns will likely be low to negative for many producers depending on price movement throughout the rest of the year. Grain prices used as assumptions in the 2019 crop enterprise budgets are $3.60/bushel for corn, $8.20/bushel for soybeans and $4.25/bushel for wheat. Projected returns above variable costs (contribution margin) range from $150 to $308 per acre for corn and $144 to $300 per acre for soybeans. Projected returns above variable costs for wheat range from $102 to $202 per acre (assuming $4.25 per bushel summer cash price).

Return to Land is a measure calculated to assist in land rental and purchase decision making. The measure is calculated by starting with total receipts or revenue from the crop and subtracting all expenses except the land expense. Returns to Land for Ohio corn (Total receipts minus total costs except land cost) are projected to range from $23 to $182 per acre in 2018 depending on land production capabilities. Returns to land for Ohio soybeans are expected to range from $84 to $254 per acre depending on land production capabilities. Returns to land for wheat (not including straw or double-crop returns) are projected to range from negative $2 per acre to a positive $143 per acre.

Total costs projected for trend line corn production in Ohio are estimated to be $753 per acre. This includes all variable costs as well as fixed costs (or overhead if you prefer) including machinery, labor, management and land costs. Fixed machinery costs of $66 per acre include depreciation, interest, insurance and housing. A land charge of $187 per acre is based on data from the Western Ohio Cropland Values and Cash Rents Survey Summary. Labor and management costs combined are calculated at $69 per acre. Returns Above Total Costs for trend line corn production are negative at -$120 per acre.

Total costs projected for trend line soybean production in Ohio are estimated to be $518 per acre. (Fixed machinery costs – $52 per acre, land charge: $187 per acre, labor and management costs combined: $45 per acre.) Returns Above Total Costs for trend line soybean production are also projected to be negative at -$76 per acre.

Total costs projected for trend line wheat production in Ohio are estimated to be $488 per acre. (Fixed machinery costs: $52 per acre, land charge: $187 per acre, labor and management costs combined: $39 per acre.) Returns Above Total Costs for trend line wheat production are also negative at -$137 per acre.

These projections are based on OSU Extension Ohio Crop Enterprise Budgets. Newly updated Enterprise Budgets for 2019 have been completed and posted to the OSU Extension farmoffice website:

https://farmoffice.osu.edu/farm-management-tools/farm-budgets

 

Should I Continue Farming?

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

 It’s no secret that all of agriculture is suffering from years of low commodity prices and rising input costs. The economic struggles have affected you financially and physically. You’ve looked at the numbers, met with advisors, and talked to family.   The thought of selling part or your entire farm brings with it added worry and concern. What can you do?

Find someone you trust and with whom you feel comfortable discussing your situation. This person may not have many answers to your questions, but they can listen to your frustrations and worries. They may be able to help you sort through the confusion and develop a course of action. Think of your situation as a picture – a set of eyes looking at the picture from the outside may see things you can’t because you are caught up in the picture.

Understand that you are not alone. Nearly every farm and farm family is in a similar situation. Don’t live in the past or dwell on what could or should have been done. Take control of the situation and develop a plan for managing the things you are able to control.

Assessment

Evaluate your financial position by meeting with your lender to discuss options for restructuring debt. Can you extend the repayment terms to provide more cash flow? Contact your Extension Educator about completing a FINPACK analysis (https://farmprofitability.osu.edu/).

What are your Specific, Measurable, Attainable, Rewarding, and Timed (SMART) goals? How are your goals similar and different from those of family and/or business partners?

Develop a list of your education, experiences, and skills. How can you use these in another career? What career opportunities fit you best?

Evaluation

If you come to the decision that selling all or part of your farm is the best option, there are several items to address. Begin with a balance sheet and other financial information to understand your present financial situation. Doing so will help you decide how much money (and approximate number of assets) you must sell. You may want to meet with an appraiser, auctioneer, or real estate professional for help determining the expected value of assets.

Professionals

Your attorney can answer questions and advise you about legal considerations related to a sale. An accountant will help minimize your tax liability and give an estimate of what you may expect to pay in taxes.

Help is Available

There are people and agencies/organizations that can help with the transition and the emotions that come with the sale. Clergy, licensed counselors, and medical professionals can help you cope. Other sources of help include:

Ohio State University Extension (extension.osu.edu)

National Suicide Prevention (1-800-273-8255)

National Alliance for Mental Illness (1-800-950-6264)

Ohio Workforce Training (ohio.gov/working/training)

Ohio Job & Family Services, Office of Workforce Development (jfs.ohio.gov/owd)

Additional Information

Coming to the decision to sell all or a part of your farm is not an easy decision. Find someone with good listening skills. Talk to professionals, reach out for help, get answers, and make the best possible decisions. More information about this subject is available at https://ohioline.osu.edu/factsheet/anr-71.

 

REMINDER- Registration will close soon…Come Join Us for the…Small Farm Conference & Trade Show

The two day conference will be held on Friday, March 29th and Saturday, March 30th at the OSU South Centers in Piketon, Ohio.

The conference is designed for small farm owners wanting to learn more about how to make their farms work better for them. Many topics will be offered to help landowners expand their operations. Land owners can attend workshops and seminars taught by Extension professionals and industry leaders on a wide variety of agricultural enterprises.  Attendees will also get to meet various vendors at the trade show.  The trade show will be open part of the day on Friday, and all day Saturday.

Attached is the brochure that includes a mail-in registration, the agenda with session descriptions, and the registration letter for vendors.

Please see the flyer below for additional information.

For full details, please go to go.osu.edu/OSUFARMConference2019.

Landowners Leaving a Legacy

by: Amanda Douridas

Land is an important investment. One that is often passed down through generations. Farmland needs to be monitored and cared for to maintain the value and sustainability if it is to be enjoyed and profitable for future generations. Following the success of Lady Landowners Leaving a Legacy offered this past summer, Landowners Leaving a Legacy is open to everyone. If you want to learn more about your land, farming and conservation practices and how to successfully pass it on to the next generation, this program is for you!

Farming has changed dramatically over the last several decades. The thought of trying to understand it all can be overwhelming, especially if not actively farming. This series is designed to help landowners understand critical conservation and farm management issues related to owning land. It will provide participants with the knowledge, skills and confidence to talk with tenants about farming and conservation practices used on their land. The farm management portion will provide an understanding of passing land on to the next generation and help establish fair rental rates by looking at current farm budgets. We will also visit a local farm to view practices currently implemented and hear from the landowners involved.

The series runs every other Monday, February 25 – May 13 from 6:00-8:30 pm in the Champaign County Community Center Auditorium in Urbana, Ohio. It is $70 for the series. If you are only able to attend a couple of session, it is $15 per session but there is a lot of value in getting to know other participants in the series and talking with them each week. Materials and dinner included. The registration flyer can be found at http://go.osu.edu/agevents. For questions or more information, please contact Amanda Douridas at 937-484-1526 or Douridas.9@osu.edu. Please register by February 19. The detailed agenda is below.

Feb 25- Building Soil Structure

    • Introductions
    • Soil Structure Discussion and Demo
    • Tillage Methods and Compaction
  • Soil Coverage Discussion and Demo

March 11- Implementing Conservation

  • Conservation Activity
  • Aquifer Demonstration
  • Watershed Maps of Participants Farms
  • Explanation of Conservation Practices

March 25- Value of the Land Beyond the Dollar

  • Land Value Diagram
  • Landowner/Tenant Relationship Panel
  • Wildlife Habitat Programs

April 15- Transition and Succession Planning

  • Peggy Hall and Wright Moore Law Firm

April 29- Leasing and Budgets

  • Good Leasing Contracts
  • Hunting Leases
  • Overview of Commodity Budgets

May 13- Farm Visit

Some activities developed by Women, Food and Agriculture Network for its Women Caring for the Land program.