Ohio Corn, Soybean and Wheat Enterprise Budgets Project Low to Negative Returns Again for 2017

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

Production costs for Ohio field crops are forecast to be slightly lower to slightly higher in 2017 depending on the crop and the profit picture remains poor, much the same as in 2016. Variable costs for corn for 2017 are projected to be $328 to $407 per acre depending on land productivity. Lower fertilizer costs are offset by somewhat higher fuel, chemical and interest costs.

Variable costs for 2017 Ohio soybeans are projected to range from $194 to $210 per acre. Some minor changes in soybean weed control assumptions led to higher herbicide costs. This higher cost together with higher fuel and interest expense more than offset lower fertilizer and seed costs.

Wheat variable expenses for 2017 are projected to range from $161 to $192 per acre, down slightly from 2016. Lower fertilizer prices are the primary drivers of lower variable costs in 2017 offsetting slightly higher herbicide costs.

With continued low crop prices expected for 2017, returns will likely be low to negative for many producers. Projected returns above variable costs (contribution margin) range from $183 to $342 per acre for corn and $212 to $384 per acre for soybeans. (This is assuming fall cash prices of $3.65 per bushel for corn and $9.40 per bushel for soybeans.) Projected returns above variable costs for wheat range from $112 to $205 per acre (assuming $4.20 per bushel summer cash price).

Returns to land for Ohio corn (Gross Revenue minus all costs except land cost) are projected to range from -$40 to $107 per acre in 2017 depending on land production capabilities. Returns to land for Ohio soybeans are expected to range from $39 to $202 per acre depending on land production capabilities. Returns to land for wheat (not including straw or double-crop returns) are projected to range from -$62 to $25 per acre.

Total costs projected for trend line corn production in Ohio are estimated to be $786 per acre. This includes all variable costs as well as fixed machinery, labor, management and land costs. Fixed machinery costs of $130 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 $76 per acre. Returns Above Total Costs for trend line corn production are negative at -$157 per acre.

Total costs projected for trend line soybean production in Ohio are estimated to be $566 per acre. (Fixed machinery costs – $108 per acre, land charge – $187 per acre, labor and management costs combined – $55 per acre.) Returns Above Total Costs for trend line soybean production are also negative at -$66 per acre.

Total costs projected for trend line wheat production in Ohio are estimated to be $540 per acre. (Fixed machinery costs – $126 per acre, land charge – $187 per acre, labor and management costs combined – $38 per acre.) Returns Above Total Costs for trend line wheat production are also negative at -$205 per acre.

These projections are based on OSU Extension Ohio Crop Enterprise Budgets. Newly updated Enterprise Budgets for 2017 have been completed and posted to the OSU Extension Agriculture and Natural Resources Farm Management Tools website:

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

 

 

 

 

 

 

Northeast Ohio Small Farm Conference to be held on March 25 in Massillon

by Rory Lewandowski, Wayne County Extension Educator

The 2017 Northeast Ohio “Living Your Small Farm Dream” small farm conference will be held on Saturday, March 25 at the RG Drage Career Center in Massillon located at 2800 Richville Dr. SW Massillon, 44646.  The conference is a program of the OSU Extension Small Farm Program and will provide farm owners and landowners with the opportunity to learn more about skills useful on a small farm, how to make their small farms work better, expand their operations, or gather ideas on how to utilize rural acreage.

Participants will choose from more than 25 different sessions offered over 4 breakout sessions during the day.  General topic tracks include horticulture production, livestock and aquaculture, small farm management, natural resources, marketing and selling.  Presenters include OSU Extension specialists and educators as well as USDA agency personnel, and area farmer entrepreneurs.  The trade show represents industries, businesses, services and organizations that provide products or services utilized on a small farm or rural property.

A sampling of some of the topics that will be covered at the conference includes:

  • Chainsaw Safety, Maintenance and Operation
  • Raising sheep and goats
  • Grass-fed Beef Production
  • Fruit tree pruning
  • Hobby Maple Syrup Production
  • Fruit Tree and Small Fruit Disease Management and Prevention
  • Micro Greens Production
  • Vegetable Production and Season Extension with Tunnels
  • Using and calibrating hand held sprayers on the farm
  • Growing Shitake mushrooms
  • Selling eggs, poultry, produce and cottage foods
  • Marketing Meat Goats
  • Renting and Leasing Farmland
  • Renewable Energy
  • Small Farm Tax Issues
  • Aquaculture Opportunities
  • Vegetable Disease Diagnostics

The Chainsaw Safety, Maintenance and Operation topic as well as the Vegetable Production and Season Extension with Tunnels are both super sessions that extend over two break-out session time periods.  The vegetable production and season extension with tunnels session will actually start at the OARDC high tunnels in Wooster and then move to the RG Drage Center for the in-door portion of the session.  Participants may elect to do only the Wooster part, only the RG Drage Center part or both parts of this topic.

The conference begins with registration at 8:00 am, and an opening general session at 9:00 am.  The conference concludes at approximately 3:45 pm following the final breakout session.  Registration cost is $60 per person, which includes lunch and morning refreshments.  The registration deadline is March 17.  For those who are interested in attending both the Women in Agriculture conference (http://agnr.osu.edu/events/east-ohio-women-agriculture-conference-0) at the same location on March 24 plus the small farm conference on March 25 there is a discounted registration fee of $100 to attend both conferences.  Student discounts are also available.

A conference brochure and registration form along with descriptions of all the breakout sessions as well as on-line registration is available on the OSU Extension Small Farm Program web site at: http://agnr.osu.edu/small-farm-programs .  Questions can also be directed to the Wayne County Extension office at 330-264-8722.

 

It’s Never Too Late to Complete the Farm Balance Sheet

by: Eric Richer, OSUE Fulton County

It is already late February or early March and you are thinking, “I didn’t get my farm’s balance sheet updated in the first week of the year, so I’ll wait until next year”.  However, it’s never too late to complete your farm’s balance sheet. The balance sheet is a “snap shot” in time of your farm’s financial position, including what assets you own and how they are financed. The balance sheet is also known as the net worth statement. When completed precisely and timely, the balance sheet and corresponding ratios can be a very valuable tool to determine farm financial health. The balance sheet objectively measures farm business growth, liquidity, solvency, and risk capacity.

Categorizing Balance Sheet Items

The assets and liabilities on the balance sheet (including the financing of the assets) are used to determine the equity, or net worth, of the farm owner. The owner’s equity is used by lenders and insurers to determine a farm business’ value.  There are two ways to calculate the owner’s equity, or net worth. The first simply subtracts the liabilities from the assets:

Assets – Liabilities = Owner’s Equity

The second calculation adds the owner’s equity with liabilities to determine the assets:

Liabilities + Owner’s Equity = Assets

Terms of Assets and Liabilities

Beyond the broad categories of either an asset or liability, a balance sheet categorizes items into “time compartments” or terms of useful life. Useful life is a term for the amount of time an item can be utilized for the farm business. Depreciation allocates the cost of this asset over its useful life. Both assets and liabilities can be categorized into current, intermediate, and long, or fixed, terms of useful life.

Assets – Current assets can be converted to cash in one year or less. Common current assets are cash, growing crops, harvested crop inventory, market livestock, accounts receivable, and other similar items. Intermediate assets have an assumed useful life or depreciable value of one to ten years. Common intermediate assets are breeding livestock, machinery and equipment, titled vehicles, and not-readily-marketable bonds and securities. Long term, or fixed, assets are typically permanent items with value—depreciable or not—for more than ten years and include farmland, buildings, farmsteads, and other similar items.

Liabilities – Current liabilities are obligations that are due and payable in the next twelve months. Most common current liabilities include accounts payable (bills), credit card bills, operating lines of credit, accrued interest, and the current portion of principal on loans due this year. Intermediate liabilities are obligations that due to be paid back within one to ten years and are usually associated with intermediate farm assets on the left side of the balance sheet. Common intermediate liabilities are the principal remaining on machinery and equipment loans or breeding livestock purchases. Finally, long term, or fixed, liabilities are debts with terms greater than ten years like the principal balance remaining on a farmland or building mortgage.

Assets: Market Value vs. Cost Value

Market value – Today’s market values minus selling costs are used to determine market value. For example, a fully depreciated 15-year-old tractor certainly has a current market value greater than zero. A realistic current market value for this tractor can be obtained with an appraisal, or by looking at current sales of similar tractors online. Similarly, farmland bought 30 years ago likely has a different current market value today. In general, lenders may prefer the use of current market values in a balance sheet for asset valuation.

Cost value – The net book value, or the cost of the item minus accumulated depreciation, is the cost value. For example, a fully depreciated 15-year-old tractor has a cost value of $0 in a cost based balance sheet. No appraisal is needed; only record the cost minus accumulated depreciation. Farmland (a non-depreciable, long term asset) purchased 30 years ago has a balance sheet value of the purchase cost.  In general, accountants prefer cost value balance sheets as a more clear reflection of business success, based on business decisions rather than inflation, depreciation, or appreciation of investments.

In a precisely completed balance sheet, the cost value and the market value columns usually produce different total asset values.

Keys to Completing the Balance Sheet

Several keys can help farmer improve their accuracy, effectiveness, and efficiency for completing year-end balance sheets.

  • Complete the balance sheet on the same date each year, usually as of December 31st. The information will never be more accurate than immediately after the end of the year.
  • Inventory all assets, including standard weight and measure units (ie. Lbs, head, bushels, bales, etc).
  • Utilize current market prices for crop and livestock inventories.
  • Calculate cost value for growing crops.
  • Include government payments and insurance indemnities yet to be received in accounts receivable.
  • Apply conservative breeding livestock values, avoiding large year-to-year changes.
  • Maintain a separate, easy-to-update depreciation schedule for depreciable assets.

Balance Sheet Tools

Balance Sheet Ratios to Evaluate Financial Health

The scorecard uses these three accounting statement to determine financial ratios and measurements to benchmark a farm operation against acceptable industry standards.

References:

Hachfeld, G. A., D.B. Bau, C.R. Holcomb. 2016. Balance Sheet. Farm Financial Series, #1, University of Minnesota Extension.

Langemeier, M. R. 2011. Balance Sheet—A Financial Management Tool. MF-291, Department of Agricultural Economics, Kansas State University Extension. Available online at: www.agmanager.info

USDA Makes it Easier to Transfer Land to the Next Generation of Farmers and Ranchers

DES MOINES, Iowa, Dec. 29, 2016 – Agriculture Deputy Under Secretary Lanon Baccam today announced that beginning Jan. 9, 2017, the U.S. Department of Agriculture (USDA) will offer an early termination opportunity for certain Conservation Reserve Program (CRP) contracts, making it easier to transfer property to the next generation of farmers and ranchers, including family members. The land that is eligible for the early termination is among the least environmentally sensitive land enrolled in CRP.

This change to the CRP program is just one of many that USDA has implemented based on recommendations from the Land Tenure Advisory Subcommittee formed by Agriculture Secretary Tom Vilsack in 2015. The subcommittee was asked to identify ways the department could use or modify its programs, regulations, and practices to address the challenges of beginning farmers and ranchers in their access to land, capital and technical assistance.

“The average age of principal farm operators is 58,” said Baccam.  “So, land tenure, succession and estate planning, and access to land is an increasingly important issue for the future of agriculture and a priority for USDA. Access to land remains the biggest barrier for beginning farmers and ranchers.  This announcement is part of our efforts to address some of the challenges with transitioning land to beginning farmers.”

Baccam made the announcement while touring the Joe Dunn farm in Warren County, located in central Iowa near Carlisle. Dunn is the father-in-law to Iowa native and former Marine Aaron White, who with his wife, are prospective candidates for the early termination program.  Baccam was joined by Farm Service Agency Iowa State Executive Director John Whitaker when meeting with Dunn and White.

“The chance to give young farmers a better opportunity to succeed when starting a farming career makes perfect sense,” said Baccam. “There are Conservation Reserve Program acres that are rested and ready to be productive, an original goal of CRP. The technical teams at USDA will tell us which ones can terminate from the program with little impact on the overall conservation efforts. When they do, we’ll be ready to help beginning farmers like military veteran Aaron White.”

Normally if a landowner terminates a CRP contract early, they are required to repay all previous payments plus interest.  The new policy waives this repayment if the land is transferred to a beginning farmer or rancher through a sale or lease with an option to buy.  With CRP enrollment close to the Congressionally-mandated cap of 24 million acres, the early termination will also allow USDA to enroll other land with higher conservation value elsewhere.

“Starting the next generation of farmers and ranchers out with conservation and stewardship in mind is another important part of this announcement,” Baccam said.  “The land coming out of CRP will have priority enrollment opportunities with USDA’s working lands conservation programs through cooperation between the Farm Service Agency and the Natural Resources Conservation Service.”

Acres terminated early from CRP under these land tenure provisions will be eligible for priority enrollment consideration into the CRP Grasslands, if eligible; or the Conservation Stewardship Program or Environmental Quality Incentives Program, as determined by the Natural Resources Conservation Service.

According to the Tenure, Ownership and Transition of Agricultural Land survey, conducted by USDA in 2014, U.S. farmland owners expect to transfer 93 million acres to new ownership during 2015-2019. This represents 10 percent of all farmland across the nation. Details on the early termination opportunity will be available starting on Jan. 9, 2017, at local USDA service centers. For more information about CRP and to find out if your acreage is eligible for early contract termination, contact your local Farm Service Agency (FSA) office or go online at www.fsa.usda.gov/crp. To locate your local FSA office, visit http://offices.usda.gov/.

Since 2009, USDA has invested more than $29 billion to help producers make conservation improvements, working with as many as 500,000 farmers, ranchers and landowners to protect over 400 million acres nationwide, boosting soil and air quality, cleaning and conserving water and enhancing wildlife habitat. For an interactive look at USDA’s work in conservation and forestry over the course of this Administration, visit http://medium.com/usda-results.

Western Ohio 2017 Agriculture Outlook Meeting

by Sam Custer, Extension Educator

What does 2017 look like for Western Ohio farmers and agricultural businesses?

Learn what to expect this year during an agricultural outlook meeting February 3 at noon presented by agriculture economists and swine specialist with the College of Food, Agricultural, and Environmental Sciences at The Ohio State University.

The presentation is part of the 2017 Agricultural Policy and Outlook series offered by The Ohio State University Extension, the outreach arm of the college. The meeting is being hosted by the Agriculture and Natural Resources Educators from Auglaize, Darke, Miami, Mecer and Shelby Counties.

The meeting is partially sponsored by Farm Credit Mid America Merchants Bank of Indiana, Minster Bank, Second National Bank, The Andersons and Ohio’s Country Journal and Ohio Ag Net.

The meeting will feature presentations on matters the agricultural community should expect in 2017, including policy changes, key issues and market behavior with respect to farm, food and energy resources, and the environment, said Sam Custer, OSU Extension, Darke County Educator.

“Participants can listen and learn from Ohio State faculty as they discuss the opportunities and challenges for the agricultural sector as well as interpret the impact of recent policy decisions,” Custer said.

Speakers for the outlook meeting are:

Dale Richer, State Swine Specialist, OSU Extension

Carl Zulauf, Professor Emeritus, Ohio State University

Barry Ward, Asst. Professor, OSU Extension, Production Business Management

David Marrison, Assoc. Professor, OSU Extension

What we’ll cover:

  • Ohio Swine Production Update
  • Speculation on President Trump’s Policy Agenda
  • Examining Land Values, Cash Rents, Input Costs & Potential Crop Profitability in 2017
  • What Are Grain Markets Telling Us?
  • Farm & Estate Tax Laws – Planning for an Uncertain Future

“These presentations will provide excellent information and insights that will benefit farmers and agricultural leaders as they make plans for 2017 and beyond,” Custer said.

The meeting will be held at the Romer’s Party Room, 118 East Main Street, Greenville, Ohio.

Registration for the meeting is $20 (includes lunch) by January 27.  A registration flyer can be downloaded at http://go.osu.edu/2017darkeagoutlook.

For more information about the meeting, contact Custer at custer.2@osu.edu or 937.548.5215.

 

For more detailed information, visit the Darke County OSU Extension web site at www.darke.osu.edu, the OSU Extension Darke County Facebook page.

A New Retirement Account Option for Farm Households

By: Todd Atkinson, Farm Service Agency Director of External Affairs and Jamal Habibi, U.S. Department of the Treasury Director of Outreach, Office of Domestic Finance

Source: http://blogs.usda.gov/2016/12/20/a-new-retirement-account-option-for-farm-households/

In agriculture, retirement can mean something quite different compared with other U.S. households. Often, our parents and senior relatives on the farm or ranch are far from “retired,” and, in fact, remain active participants in daily operations and decisions.

Financially, retirement in agriculture can be different, too. Compared to the general population, farmers and ranchers have a distinctive combination of assets, income sources, and saving habits, with large percentages of their financial portfolios intertwined in the business equity, all which must be carefully considered when planning for intergenerational transfers, and while generating and maintaining retirement income.

As for actual savings accounts, while 60 percent of all households nationwide participate in some type of a retirement account, just 40 percent of eligible farm households do. In fact, only 7 percent of farmers and ranchers contribute to the types of Individual Retirement Accounts (IRA) that can provide helpful tax advantages, with just 3 percent of the general population having an IRA.

That’s why the U.S. Department of the Treasury recently launched a new tool, known as myRA, for anyone interested in a simple, safe, understandable, and affordable method to start saving for retirement.

It costs nothing to open an account, there are no fees, and contributions are invested in a U.S. Treasury security that safely earns interest. You can contribute as little as a few dollars each month, or even create automatic contributions from your bank account or paycheck, up to $5,500 per year. When you’re ready, you can roll over these savings into a private sector Roth IRA at any time to continue growing your savings.

The myRA is not intended to replace existing employer-sponsored retirement plans, such as a 401(k) plan, because those accounts may offer special incentives like an employer matching payment. But if you don’t have access to a retirement savings plan, or excessive fees and complicated investment options are daunting, or perhaps you would like the younger members of your family to have better retirement awareness, then the U.S. Treasury’s myRA savings account might be an option for you?

Even if your future goal is to receive on-farm income, inheritance, or varying degrees of off-farm income such as social security, rental income, or veterans benefits, a myRA account still may be a helpful addition to your portfolio. Plus it is never too early to start saving: if you are 18 or older, not a full time student, and not a dependent, you are eligible.

So as the holidays approach, and the year nears its end, perhaps a new myRA could be a great way to take that first step towards building, or complementing, that retirement nest egg. To learn more about the program and its beneficial tax attributes, visit myRA.gov.

OSU Extension to Hold Women in Agriculture Program on Saturday, January 28, 2017 in Ashtabula County

The Ashtabula County Extension office is pleased to announce to be hosting a “Women in Agriculture” Program on Saturday, January 28, 2017 from 9:00 to 3:30 p.m. at the Ashtabula County Extension office located at 39 Wall Street, in Jefferson, Ohio.

This program is for women who are involved in the many different aspects of agriculture found in northeast, Ohio. This meeting will be our kick-off for a regular program schedule for women involved in agriculture.

Join women for a day of networking and learning about the factors which can make your business thrive. Learn more about personalities and how to work with others. Learn more about goal setting, mission statements, and improving family communication.  Together we will plan for a Women in Agriculture Program Series for 2017. Come help us plan for future programs.

Featured speakers include:

Emily Adams, Agricultural & Natural Resources Extension Educator for Coshocton County;

Abbey Averill, 4-H & Ag Program Assistant for Ashtabula County, and

David Marrison, Agricultural & Natural Resources Extension Educator for Ashtabula County.

Pre-registration is requested by Wednesday, January 18, 2017.  The cost is $20 per person and includes lunch, snacks and program handouts.  More information can be obtained by contacting Abbey Averill at the Ashtabula County Extension office at 440-576-9008.

A program flyer can be also be found at: http://go.osu.edu/ne-events

 

Ag Outlook and Policy Meeting to be held on February 2 in Wooster, Ohio

So what’s ahead for farmers and Ag businesses in 2017?  OSU Extension invites producers to attend the Ag Outlook and Policy meeting on Thursday, February 2, 2017 from 9:30 a.m. to 3:15 p.m. at the Fisher Auditorium OARDC located at 1680 Madison Avenue in Wooster, Ohio. A wide variety of experts will be on hand to share their agricultural outlook for 2017.

The following presentations will be made during the program:

Speculation on President Trump’s Policy Agenda and What Are Grain Markets Telling Us?- By: Carl Zulauf, Ag Policy Specialist and Professor Emeritus from The Ohio State University will provide “

Dairy Economic Update- By: Dianne Shoemaker: OSU Extension Dairy Production Economics Field Specialist

Beef Cattle Outlook- By: John Grimes: Extension Beef Program Specialist

Ten Legal Trends That Could Change Agriculture- Peggy Hall: OSU Extension Ag Law and Resources Program

Crop Budget and Cropland Rental Update- Rory Lewandowski: Extension Educator Wayne County

Farm & Estate Tax Laws – Planning for an Uncertain Future- David Marrison: Extension Educator Ashtabula County

This program is being sponsored by OSU Extension, Farmers National Bank, and Farm Credit.  The registration cost is $15 per person with the deadline of January 26, 2017. Make checks payable to OSU Extension. Please send checks and registration to: OSU Extension- Wayne County, 428 W. Liberty Street – Suite 12, Wooster, Ohio 44691.  More information can be obtained by calling the Wayne County Extension office at 330-264-8722 or email Rory Lewandowski at Lewandowski.11@osu.edu

OSU Extension Farm Management Series to be held in Frazeysburg, Ohio

Where am I? Where do I want to be? How can I get there? Producers new to farming, beginning farm managers, or farm managers who want to re-focus on the financial management of their farm business will all benefit from participating in the 2017 Coshocton, Licking, Muskingum Counties Farm Management series.  This program will help participants answer these questions by learning to analyze agricultural enterprise costs and to work with agricultural lenders.

The farm management seminar series will be held Monday evenings January 23, 30 and February 6 from 6:30 pm to 9:00 pm.  Presenters include OSU Extension educators, Extension specialists and representatives from local agricultural financial institutions.  The farm management seminar series will be held at the Frazeysburg Presbyterian Church.

Topics that will be covered in the series include:

  • Making Record Keeping Do More Than the Tax Return
  • What Is the Mission of Your Farming Operation
  • Developing Your Balance Sheet
  • Basics of Finance
  • Developing Your Business Plan
  • Farm Transition Planning

The farm management seminar series is sponsored by Farm Credit Mid-America, North Valley Bank and The Community Bank.

Registration for the workshop series is $30 and includes the program, handouts and a light supper provided each evening.  An informational flyer and registration form is available on the Coshocton County Extension web site at go.osu.edu/clmfarm.  For more information contact Emily Adams at the Coshocton County office (740-622-2265 or adams.661@osu.edu) or Clifton Martin at the Muskingum County office (740-454-0144 or martin.2422@osu.edu ). The deadline to register is January 13, 2017.  Registration is limited to the first 30 paid registrants.

Farm Financial Management School to be held in Wayne County

Wayne County Extension is hosting a 6-evening farm financial management school on Thursday evenings in January and February.   The school will begin the evening of January 12 and run six consecutive Thursday evenings through February16.  This year’s school is going to focus on helping participants to answer 3 basic financial questions:

  • Where am I (the farm) financially?
  • Where do I (the farm) want to be financially?
  • How do I (the farm) get there?

The school will be structured to include presentations, discussion, and hands-on activities.  Participants will learn how to put together and use financial documents to measure their current farm financial situation, track expenses and cash flow, make decisions to help improve or maintain the financial situation, and work more effectively with Ag lenders.  Topics that will be covered over the 6 week school include: mission statements, balance sheets, cost of production, family living expense, farm income statements, farm cash flow statements, enterprise budgets, bench marking, financial standards/ratios, record keeping, budgeting,  working with ag lenders,  marketing, and crop insurance.  Each participant will receive a 3-ring binder notebook with materials and handouts from each session.

The school will be held in the commissioners meeting room located in the upper level of the county administration building.  A light meal will be available each evening at 6:45 pm and class instruction will begin at 7:00 pm and conclude by 9:30 pm each evening.  The registration cost is $50/person.  Sponsorships provided by Farm Credit Mid-America, Farmers National Bank and Wayne Savings Community Bank are helping to cover presenter costs, mileage and materials.

Pre-registration is requested to the Wayne County Extension office at 330-264-8722 by Friday, January 6 or by email to Lisa Parker, Wayne County Extension office assistant at: parker.1269@osu.edu.   A farm financial management school flyer with a registration form is available on the Wayne County Extension web site at: http://go.osu.edu/agwayne.