Financial Management

Ask The Experts take the stage at FSR

By: Wm. Bruce Clevenger, OSU Extension Field Specialist, Farm Management

Agriculture is information driven and growers and industry always have great questions.  Who should you ask for trusted answers?  Ask The Experts at Farm Science Review!  Three days of Experts have been scheduled to take center stage again this year at the 2023 Farm Science Review.  This conversational dive explores hot/current topics between the moderator, Experts, and the audience.  The 30-minute sessions give 15-20 minutes of information from the Experts and 5-10 minutes of Q&A with the audience.  It is the best place to stop and take a sit-down break at FSR.  Grab some food and enjoy.  Experts include ag economists, weather scientists, Women in Ag leaders, veterinarians, agricultural attorneys, agronomists.

Topics include: weather whiplash, empowering Women in Agriculture, USDA Farm Bill, farm property insurance gaps, grain markets, beginning farmer education course, ticks on pasture effecting people and livestock, mold and feed, mental health, carbon markets, an average farm may not be profitable, farm labor, death’s impact on the family business, financial health of Ohio farms, and agronomy vs. economics.

Plan you day(s) at Farm Science Review at:

https://fsr.osu.edu/ , click Visitor Information, click Mobile App/Digital Directory.

 

2023 Ask The Expert Schedule

Date Time Speaker Topic
9/19/2023 10:00 Aaron Wilson Weather Whiplash – Dealing with Weather Extremes
10:30 Gigi Neal & Linda Vernon Celebrating 20 Years of Empowering Women in Agriculture – Annie’s Project
11:00 AEDE Dept The Farm Bill and Beyond
12:00 Barry Ward Economic View From The Farmgate
12:30 Robert Moore & Jeff Lewis Farm Insurance – Covering Your Assets
1:00 Seungki Lee How Is The Market Doing?
1:30 Eric Richer What is OSU’s Farm On Course?
2:00 Tim McDermott Managing Asian Longhorned Ticks on Pasture
2:30 Scott Kenney Is Hepatitis E Virus a Risk to Ohioans?
9/20/2023 10:00 Gustavo Schuenemann Molds and Mycotoxins in Cattle
10:30 Mike Estadt How Smart Are Your Commodities?  Carbon Intensity Scores and More
11:00 Clint Schroeder Utilizing Benchmarking Data: It Doesn’t Pay to be Average
11:30 Aaron Wilson Weather Whiplash – Dealing with Weather Extremes
12:00 Barry Ward Economic View From The Farmgate
12:30 Robert Moore & Jeff Lewis Farm Insurance – Covering Your Assets
1:00 Seungki Lee How Is The Market Doing?
1:30 Margaret Jodlowski Who is Working (or Will Work) Ohio’s Farms?
2:00 David Marrison Is Your Farm Business Ready for Your Death?
2:30 Margaret Jodlowski The Farm Bill and Beyond
9/21/2023 10:00 Luciana da Costa One Health and Livestock Farming
10:30 Ani Katchova How Are Ohio Farms Doing Financially?
11:00 Bridget Britton Sit down, Take a load off, and Let’s have a Chat. Life can be Stressful.
11:30 Aaron Wilson Weather Whiplash – Dealing with Weather Extremes
12:00 Barry Ward Economic View From The Farmgate
12:30 Robert Moore & Jeff Lewis Farm Insurance – Covering Your Assets
1:00 David Marrison Is Your Farm Business Ready for Your Death?
1:30 Lindsey, Ortez, Ward Agronomy + Economics = Agronomics. What Comes First in the Equation?

 

Ask The Experts is located at the corner of Kottman and Friday Avenues, Exhibit Area 425, across from the Firebaugh building.  Seating is available under the tent.

In addition to the Ask The Expert sessions, Review goers can explore OSU Extension Farm Management Resources in the Firebaugh building across from Ask The Expert area all-day, each day of the Review.  OSU Extension Farm Management resources can also be found online at: https://farmoffice.osu.edu/

 

Small Farm Education Planned at 2023 Farm Science Review

Are you a producer on a large or small farm looking to diversify your operation or a niche market looking for ways to expand and improve? The Center for Small Farms located at the corner of Equipment Avenue and Beef Street invites review attendees to stop in to listen to 30-minute sessions in the Small Farm Tent. Sessions are designed to improve small farm operations in Ohio.

Featured sessions in 2023 include: raising meat rabbits, ducks and chickens, hay production, mushroom production, crop insurance and cut flower tips. Each day the Small Farm Team will be holding curbside conversations for attendees to get more specific questions answered about your operations.

In addition to the educational sessions, producers can meet with OSU Extension professionals at the Small Farm help Desk to have their individual management questions answered. While visiting the Center for Small Farms be sure to check out the upcoming 2023 and 2024 Small Farm Financial Colleges occur throughout the state. Don’t forget to get a registration packet for the 2024 Small Farm Conference too!

 

Characteristics of Beginning Farmers in Ohio and Potential Impact of the Ohio Beginning Farmer Tax Credit Program

By: PhD students Xiaoyi Fang and Zhining Sun and Professor Ani Katchova, Farm Income Enhancement Chair, in the Department of Agricultural, Environmental, and Development Economics (AEDE), and Chris Zoller, Associate Professor and Extension Educator, Agriculture & Natural Resources, Ohio State University Extension – Tuscarawas County

 

Click here to access the PDF version of this article that includes figures

 

Highlights

  • Ohio’s new and beginning farmers are individuals who intend to enter the farming industry or have less than ten years of experience as a farm owner/operator in Ohio.
  • Ohio’s new and beginning farmers compared to established farmers, tend to be younger, operate smaller farms, and less likely to state farming as their primary occupation.
  • The Ohio Beginning Farmer Tax Credit Program supports new and beginning farmers by providing income tax credits to: 1) beginning farmers who attend a financial management program, and 2) landowners that sell or rent farmland to beginning farmers.

Profile of Ohio Beginning Farmers

According to the definition provided by the Ohio Department of Agriculture, a beginning farmer in Ohio must meet several specific criteria. An individual must be a resident of Ohio who intends to enter the farming industry or has less than ten years of experience as a farm owner/operator in Ohio. In addition, the individual must not hold any partnership, membership, shareholder, or trustee positions related to the assets they intend to acquire or lease.  The individual must have net worth of less than $800,000, among other requirements.

Analysis of the 2017 Census of Agriculture offers valuable insights on Ohio’s new and beginning farmers.  About a quarter of all farm and principal farm producers in Ohio are new and beginning farmers while the rest are established farmers. Contrary to a common assumption that new and beginning farmers are young, the age distribution of new and beginning farmers in Ohio spans a wide range of age groups (Katchova and Ahearn, 2016). While 32% of new and beginning farmers are 34 years of age or younger, a significant portion of them (9%) are 65 or older.  On average, new and beginning farmers are younger than established farmers but there are also older new and beginning farmers in Ohio.

Although males still dominate both groups, the proportion of males among new and beginning farmers is smaller (61%) than among established farmers (68%). Only 24% of new and beginning farmers in Ohio report their primary occupation as farming, indicating diverse income sources. Over half of new and beginning farmers in Ohio engage in off-farm work for more than 200 days, unlike established farmers who are less involved in off-farm work. New and beginning farmers in Ohio typically operate smaller farms in terms of operated acres.  Over half of new and beginning farmers operate less than 50 acres of farmland. New and beginning farmers in Ohio have a comparable percentage of owned or leased acres as do established farmers.

According to a USDA definition, economic class of farmers is defined as the market value of agricultural products sold and government payments.  There is a higher number of established farms in every economic class especially in the largest value economic classes, compared to new and beginning farmers.

The Census of Agriculture reveals that oilseed and grain farming is the most common specialty for new and beginning and for established farmers.   Most new and beginning farmers tend to specialize in oilseeds and grain farming (25%), other crops (21%), beef cattle (18%) and other livestock (17%).  Compared to established farmers, new and beginning farmers in Ohio tend to specialize more in specialty crops, other crops, beef cattle, and other livestock farms.

Potential Impact of the Beginning Farmers Tax Credit Program

In 2022, Ohio implemented a Beginning Farmer Tax Credit Program to support new and beginning farmers in the state. This program aims to address the financial challenges faced by new entrants in the agricultural industry by offering two support mechanisms. The first mechanism provides a tax credit to new and beginning farmers who participate in a state-approved financial management program. By offering this tax credit, the program seeks to alleviate the financial stress of starting and managing a farm business. This incentive encourages beginning farmers to actively engage in financial planning and management, which can contribute to their long-term success.

Qualifying financial management programs provide information on a variety of topics including farm business planning, farm financial statements, cost of production, farm record keeping, farm taxes, farm financing, risk management, and farm business analysis. Beginning farmers who complete a qualifying financial management program pay the cost of the program but are eligible for a non-refundable tax credit upon completion of the program.

The second support mechanism focuses on providing tax credits to qualified farmland owners in Ohio. These tax credits are offered to landowners who sell or rent their farmland to beginning farmers. By incentivizing landowners to work with new and beginning farmers, the program aims to address the aging farmer population trend and promote farmland transition to the next generation. This provision helps to transition operated acres from established to beginning farmers, creating more opportunities for new farmers to start their farm businesses and grow.

The Beginning Farmer Tax Credit Program benefits new and beginning farmers in Ohio. By providing opportunities for financial management program training, the program reduces the barriers to entry. It equips farmers with the necessary skills to navigate the financial aspects of running a farm business. By offering incentives for farmland owners to collaborate with beginning farmers, the program helps to increase access to land and resources for new entrants. The program addresses financial challenges associated with starting a farm business. Continued investment and expansion of such initiatives are crucial for ensuring the future sustainability of Ohio agriculture.

The implementation of the Ohio Beginning Farmer Tax Credit Program holds promise in supporting new and beginning farmers’ entry in agriculture and addressing their specific needs. Continued support and resources are essential to foster the success of these beginning farmers and contribute to the success of Ohio’s agricultural sector.

References

  1. Ahearn, Mary. Beginning Farmers and Ranchers at a Glance. 2013. Economic Research Service (ERS), United States Department of Agriculture (USDA).
  2. Katchova, A. L., & Ahearn, M. C. (2016). Dynamics of farmland ownership and leasing: Implications for young and beginning farmers. Applied Economic Perspectives and Policy, 38(2), 334-350.
  3. Ohio Beginning Farmer Tax Credit Program, Ohio Department of Agriculture: https://agri.ohio.gov/programs/farmland-preservation-office/Beginning-Farmer-Tax-Credit-Program/Beginning-Farmer-Tax-Credit
  4. United States. (2007) U.S. Census of Agriculture. United States. Retrieved from the Library of Congress, https://www.loc.gov/item/lcwaN0022771/

 

What are the Implications of the Black Sea Grain Deal Breaking Down?  

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

Click Here to Access a PDF Version of Article

The Black Sea Grain Deal So Far

The Black Sea grain export deal signed by Ukraine, Turkey, Russia, and the United Nations (UN) on July 22, 2022 (USDA, Foreign Agricultural Service, Grain: World Markets and Trade, August 2022), was originally extended for four additional months in November 2022, followed by further extensions in March and May 2023 respectively, the most recent being for only two months up to July 17, 2023.  During that time-period, 32.7 million metric tons of grains and oilseeds have been shipped to 45 countries from the Ukrainian ports of Chornomorsk, Odesa and Pivdennyi (Yuzhny), the percentage breakdown of the cargo totals being corn (51%), wheat (27%), sunflower meal (6%) and sunflower oil (5%), and other (11%) (Black Sea Grain Initiative Joint Coordination Center, July 2023).

Resumption of Ukrainian sea exports over this time-period has helped in reversing the spike in global food prices that occurred after the Russian invasion of Ukraine, the FAO Food Price Index dropping by almost 39% since March 2022 (World Food Situation, FAO/UN, July 7, 2023).  However, as of July 17, 2023, Russia has ended its participation in the deal, which brings with it increased uncertainty about available global grain and oilseed supplies as well as the potential for greater price volatility and/or increased food prices (New York Times, July 17, 2023).

Even before Russia pulled out of the grain deal, the rate of exports from the three Ukrainian ports was already declining (see Figure 1), the latest export tonnage being just over 0.2 million metric tons as of July 7, 2023 (UN Black Sea Grain Initiative Joint Coordination Center).  This slowdown in exports also shows up in the average number of ships being cleared under the deal falling from a peak of 11 in October 2022 to 3 in May 2023 UN Black Sea Grain Initiative Joint Coordination Center).  At this point, the Black Sea Corridor is no longer the dominant route for exports, with more crops being shipped through ports on the Danube, as well as by rail and road (Bloomberg News, July 6, 2023).  Essentially, the deal allowed Ukraine to export the grain stockpiles that it had accumulated with the closing of its ports post-invasion, but in the view of some observers, the deal was already essentially “defunct” (Bloomberg News, July 6, 2023).

  Figure 1:

What are Russia’s Concerns with the Deal?

Russia’s unwillingness to renew the grain deal has been brewing for some time, Ukraine previously accusing it of trying to undermine the deal by dragging out and even preventing the required restrictions of Black Sea shipments before two previous renewals of the deal (Financial Times, March 19, 2023; New York Times, May 18, 2023).  Even though U.S. and European Union (EU) economic sanctions against Russia exclude trade in agricultural commodities such as grain fertilizers (Congressional Research Service, December 13, 2022), Russia has repeatedly complained about the Black Sea grain export deal since its inception (New York Times, July 17, 2023).  Even though the UN struck a deal with Russia in July 2022 to help it overcome obstacles to grain and fertilizer shipments, Moscow claims that restrictions on payments, logistics and insurance have been a major barrier to its agricultural exports (Reuters, June 16, 2023).

However, since the grain deal was last renewed in May, Russia’s concerns seem to have intensified, Moscow expressing two main demands as a pre-condition for renewing the grain deal (Reuters, June 16, 2023).  The first relates to reconnection of the Russian agricultural bank Rosselkhozbank to the SWIFT international payment network (Reuters, July 12, 2023).  Following the Russian invasion of Ukraine, the EU cut off Russia from the SWIFT network in June 2022, placing a major constraint on the processing of grain export payments to Russia (Reuters, July 13, 2023).  It has been reported that the EU has been considering allowing a subsidiary of Rosselkhozbank to connect to SWIFT, UN Secretary-General Antonio Guterres asking President Putin to extend the grain deal, thereby giving the EU time to make the connection (Reuters, July 12, 2023).

The other Russian demand relates to the ammonia pipeline from Tolyatti to the Ukrainian port of Pivdennyi (Yuzhny) (IFPRI, June 13, 2023).  The pipeline has been closed since the Russian invasion and has reportedly suffered war damage.  Given the significant impact of the closure on Russia’s exports of anhydrous ammonia, it is perhaps not surprising Russia has tied recent restrictions on the registration of grain shipping at Pivdennyi to reopening of the pipeline (IFPRI, June 13, 2023).

Breakdown of the Deal

Despite the best efforts of the UN Secretary-General Guterres and Turkey’s President Erdogan, Russia has not renewed the grain deal, its Foreign Ministry issuing a statement that, “…Only upon receipt of concrete results, and not promises and assurances, will Russia be ready to consider restoring the deal…” (New York Times, July 17, 2023).  Not surprisingly, the markets reacted to the deal not being extended, wheat futures rising 4.2% on the Chicago Board of Trade (Bloomberg News, July 17, 2023), but what are the longer-term implications of the breakdown?

Even though the grain deal has been critical to relieving pressure in the world market over the past year, Ukrainian grain and oilseed production are expected to decline in 2023/24 due to the ongoing impact of the war, with disruption of ongoing planting and harvest of multiple crops including wheat, barleycorn, rapeseed and sunflowers.  The latest estimates for Ukraine’s major crops indicate significant reductions are expected in harvested acreage in 2023 compared to 2021 – wheat (-42%), sunflower seeds (-20%), corn (-38%), and barley (-33%) (USDA, Foreign Agricultural Service, June 2023). It should be noted these data do not include those parts of Ukraine either in the war zone or occupied by Russian Forces (UC-Davis ARE Update, May/June, 2023).  In terms of the potential impact on world food prices, Ukrainian grain shipments are forecast to decline by about 36% in the 2023/24 marketing year (Bloomberg News, July 6, 2023).

With expected declines in Ukrainian grain production, and the closing of the Black Sea Corridor, two price effects can be expected: world grain prices will increase with the reduction in Ukrainian exports, but at the same time Ukrainian domestic grain prices will likely fall.  This is precisely what happened after the Russian invasion:  in the case of wheat, when Ukrainian ports were blockaded, a wedge was driven between other comparable and Ukrainian prices, the wedge declining after the grain deal was struck in July 2022 (see Figure 2).  Since then, Ukrainian wheat prices have tracked other wheat prices, although a gap was starting to open-up again recently, and it can be expected to widen, reducing Ukrainian farmers’ incentives.

Figure 2:

It is also likely grain price volatility will be exacerbated, markets already being very sensitive to regional shocks even before the deal ended.  When the Nova Kakhova dam in southern Ukraine was destroyed in early June, wheat futures prices immediately rose 2%, raising concerns of an escalation in the war between Russia and Ukraine (Reuters, June 6, 2023), which was followed by a second market shock in late-June after the armed uprising in Russia, wheat futures prices increasing by 3% (Bloomberg, June 23, 2023). (For a detailed discussion of price volatility see the companion article to this one on Ohio Ag Manager: “What factors are driving the current grain market volatility?” by Seungki Lee).

There is a sense that it may be very difficult to revive the Black Sea deal at this point, with the likelihood grain and oilseed prices will rise, which will then impact the number of undernourished people globally (The Guardian, July 17, 2023).  At the same time, even though grain continues to be exported westwards from Ukraine through Poland, Hungary, Bulgaria, Romania, and Slovakia, this has created political tensions in those countries, farmers facing lower prices and reduced revenues. (Bloomberg News, April 1, 2023).  Even though the EU suspended its tariffs and quotas on imports from Ukraine after the Russian invasion, Poland and Hungary blocked imports from Ukraine in April in a response to farmer protests (New York Times, April 20, 2023).  This was followed on May 2 by the EU introducing a temporary ban on grain imports by these countries from Ukraine until June 5, while maintaining transit routes into the rest of the EU, the restrictions being subsequently extended until September 15 of this year (Reuters, June 5, 2023).

 

What Factors are Driving the Current Grain Market Volatility?

By: Seungki Lee, Assistant Professor, Agricultural, Environmental, and Development Economics, The Ohio State University

Click here to access PDF version of the articles

During the last few weeks, grain futures markets have showed significant swings in response to several events: the expanding drought, USDA’s June Acreage Report, and the looming Black Sea Grain deal. The heightened uncertainty in the commodity market is causing concern among US growers about market prospects. Given the current influence of multiple variables on prices, relying solely on price indices may lead to a misinterpretation of the market outlook. Therefore, in this article, we will look into three primary factors individually that have the potential to impact the market in the upcoming months.

  1. Expanding Drought Conditions and USDA’s July WASDE Report

The first and very perceivable force that raises uncertainty is the domestic growing condition – the expanding drought in the Midwest. A striking example is that 98% of Minnesota’s crop land are currently experiencing drought (Brown, 2023). USDA’s July WASDE report adjusted down corn yield to 177.5 bushels per acre, 4 bushels down from last month, whereas soybean yield forecast was not changed. However, a substantial change in the acreage projection (corn up and soybean down) in the June USDA’s Acreage Report mainly determined the overall production estimates. This indicates that the market has not fully accounted for the potential yield reduction caused by the drought. Despite the undeniable impact of the drought, the exact extent of harvest reduction remains uncertain, further contributing to market unpredictability. Even though commodity prices hold steady, growers can be largely worse off (Probert et al., 2023). Table 1 provides a quick summary of July WASDE updates for new crop corn, soybean, and wheat.

Table 1. Summary of July WASDE Estimates

  Corn Soybean Wheat
Marketing Year 23/24F ∆Jun ∆22/23 23/24F ∆Jun ∆22/23 23/24F ∆Jun ∆22/23
Yield (bu/acre) 177.5 -4.0 +4.1 52.0 ** +2.5 46.1 +1.2 -0.4
Production 15,320 +55 +1,590 4,300 -210 +24 1,739 +74 89
Total Supply 16,747 +5 +1,615 4,575 -185 0 2,449 +51 -21
Feed & Residual 5,650 — +225            
Ethanol 5,300 — +75            
Crush       2,300 -10 +80      
Domestic Use 12,385 — +305 2,426 -10 +85 1,132 +20 +1
Exports 2,100 — +450 1,850 -125 -130 725 — -34
Total Use 14,485 — +755 4,276 -135 -45 1,857 +20 -33
Ending Stocks 2,262 +5 +860 300 -50 +44 592 +31 +12
Price ($/bu) 4.80 — -1.80 12.40 +0.30 -1.80 7.50 -0.20 +1.33

Note: The default unit is a million bushels if not specified.

  1. An Official Termination of Black Sea Grain Deal

On July 17, Kremlin spokesman Dmitry Peskov announced that Russia is pulling out of the Black Sea Grain Deal agreement, yet leaving the door open for resuming the deal if Russia’s demands were fulfilled. Since the agreement was established in July last year, this is the first time that we have seen an official stop of the deal. As we have witnessed the international connectivity in the commodity market, what’s happening in Black Sea will likely fluctuate US grain markets.

Due to the war situation and Russia’s political instability, the new deal is likely to fall into a labyrinth. Even putting the recent political turmoil in Russia aside, both sides have been complaining about the deal for months. Russia claimed that its own agricultural products and fertilizers also should be allowed to be shipped to the global market through the Black Seas (i.e., lifting the sanction on Russian crops). Ukraine claimed that Russia is using the inspection for sabotage (Malsin, 2023). The current situation is a sort of “Chicken Games,” because the negotiation time will be costly to both countries. The Black Sea Grain Initiative can possibly resume in months, but, Ukraine has already been attempting to mitigate risks by exploring alternative export channels. This development has created political tensions within the European Union, resulting in a temporary ban on grain imports from Ukraine (Sheldon and Zoller, 2023). All of these factors contribute to increased market uncertainty. As illustrated in Figure 1, China and EU countries have been major recipients of Ukraine crops through the Black Sea. The partnership and friendship of these countries will potentially play a key role in reviving the Black Sea Corridor.

Figure 1. Black Sea Grain Initiative exports to Top 5 partners and ROW

Note: the numbers in brackets indicate the rank of each country based on the total crop delivered.
Source: United Nations, as of July 17, 2023

 

  1. El Niño and Uneven Impacts Worldwide

El Niño is having an increasingly pronounced influence on global crop production (Witze, 2023), and this impact is being actively reflected in commodity markets (Currie, 2023). It is noteworthy that the effects of El Niño are expected to vary significantly across different regions. For example, Australia is currently experiencing drier weather patterns attributed to El Niño, leading to anticipated reductions in wheat production (Jackson, 2023). On the other hand, Argentina is likely to benefit from El Niño as it brings increased rainfall, replenishing soil moisture during the current growing season. This divergence in the impact of El Niño on crop production among countries will further contribute to market fluctuations. Over the past three years, Latin American countries have suffered from agricultural production setbacks caused by La Niña-induced droughts. This suggests that the transition to El Niño conditions can work favorably for countries such as Brazil and Argentina, posing an additional challenge to US exports in the future.

 

 

References

Brown, K. (2023, July 13). All of Minnesota now in some stage of drought. KSTP.com 5 Eyewitness News. https://kstp.com/kstp-news/top-news/all-of-minnesota-now-in-some-stage-of-drought/

Currie, A. (2023, July 3). Breakingviews: El Nino will brew up potent new economic storm. REUTERS. https://www.reuters.com/breakingviews/el-nino-will-brew-up-potent-new-economic-storm-2023-07-04/

Jackson, L. (2023, July 5). El Nino threshold not yet passed, Australia weather bureau says. REUTERS. https://www.reuters.com/business/environment/el-nino-threshold-not-yet-passed-australia-weather-bureau-2023-07-05/

Malsin, J. (2023, July 17). Russia Says It Is Pulling Out of Ukraine Grain Deal. The Wall Street Journal. https://www.wsj.com/articles/russia-says-it-is-pulling-out-of-ukraine-grain-deal-68190d1

Probert, A., McCorvey, J.J., and Bush, E. (2023, July 13). Drought and extreme heat burn through farmers’ margin for error – and it’s only July. NBC News. https://www.nbcnews.com/business/drought-extreme-heat-burn-farmers-margin-error-only-july-rcna93862

Sheldon, I. and Zoller, C. (2023, July 18). What are the Implications of the Black Sea Grain Deal Breaking Down?. Ohio Ag Manager.

Witze, A. (2023, June 29). El Niño is here-how bad will it be?. Nature. https://www.nature.com/articles/d41586-023-02122-6

 

OSU Agronomic Crops Team and the State Climate Office of Ohio to Host “Climate Smart: Farming with Weather Extremes”

Weather is almost always a challenge for agriculture, from too little or too much rain, late season freeze conditions, and severe weather impacts. Yet, having good management strategies for dealing with water, weeds, pests, diseases, and stress is all part of being climate smart.

After a short hiatus, the Climate Smart Conference is back! This year’s conference brings Ohio State and Central State Extension specialists and local producers together to discuss these important interactions between weather, climate, and agriculture. The event will occur on July 20, 2023, at the Der Dutchman located at 445 S. Jefferson Ave in Plain City, Ohio. The event will open at 8:30 AM and run until 3:30 PM with both a continental breakfast and lunch provided.

Speakers and topics include:

  • Weather and Climate Update – Aaron Wilson
  • Federal Climate Smart Funding Landscape with NRCS –
  • Extreme Weather and Crop Insurance – Margaret Jodlowski
  • Ag Water Management – Vinayak Shedekar
  • CSU Applied Research in Climate-Focused Areas – TBA
  • Panel – Local Producers, CSU Specialist, Glen Arnold (Manure), Bridget Britton (Farm Stress), Elizabeth Hawkins (Precision Ag)
  • Insect Pest Management – Andy Michel and Maggie Lewis
  • Economics and Grain Market Considerations – Seungki Lee

The event is free thanks to the following sponsors: Platinum – Ag Resource Management; Carbon by Indigo; Gold – AgCredit, Leist Mercantile, Ohio Corn & Wheat, and Ohio Soybean Council. Registration is required. Please register by Tuesday, July 18, 2023, at go.osu.edu/reg-climate-smart23 or by using the QR code.

OSU Extension Podcast bolsters Farm Management with new Co-Hosts

By Wm. Bruce Clevenger, OSU Ext Field Specialist, Farm Management

OSU Extension has surpassed 100 Episodes on the Agronomy and Farm Management Podcast with the leadership of Amanda Douridas and Elizabeth Hawkins.  Amanda Douridas is the OSU Extension Agriculture and Natural Resources Extension Educator in Madison County and Elizabeth Hawkins is an OSU Extension Field Specialist, Agronomic Systems.

On Episode 118, two new co-hosts began to alternate episodes between Agronomy and Farm Management.  Your new farm management co-hosts are Bruce Clevenger, OSU Extension Field Specialist, Farm Management and Josh Winters, OSU Extension Agriculture and Natural Resources Extension Educator, Jackson County.

Bruce Clevenger and Josh Winters will host Farm Management and Amanda and Elizabeth will continue with Agronomy.  “Farm management is important to your farming operations and Elizabeth and I are excited to partner with Bruce and Josh to enhance the farm management piece of the podcast,” says Amanda.

Episode 118 investigates Farm Insurance Policies with guest Robert Moore, J.D., Attorney, OSU Extension Agricultural and Resource Law Program.  “I would challenge you to find a more important component of farm management, that receives less attention than the farm insurance policy,” Robert Moore.

OSU Extension has many ag law resources available at https://farmoffice.osu.edu click on Law Library and Farm Office Blog.  Robert and Peggy Hall author weekly posts and write law bulletins are a wide range of topics from Agritourism to Zoning.

Visit https://go.osu.edu/afm to listen, subscribe, and suggest a topic for future episodes.  Listeners can also search their smart device app for Agronomy and Farm Management to listen and subscribe.

Consumer debt in U.S. hits $17 trillion dollars, U.S. agricultural real estate debt projected to record levels.

By Mike Estadt, OSU Extension Educator

It was reported by the Federal Reserve1 this week that U.S. consumers have accumulated a record $17 trillion dollars of debt or which $12.04 trillion related to mortgage debt.  Especially concerning was the increasing amount of credit card debt at $986 billion as reported by the Federal Reserve report.

The USDA Economic Research Service in its Farm Income and Wealth Statistics2 report released on February 7, 2023, reported U.S farm real estate debt is expected to be at record levels at $375.9 billion in 2023.  Farm sector real estate debt has been increasing since 2009 and is expected to reach an amount that is 87.5 percent higher in 2023 compared with 2009 in inflation-adjusted dollars.  (Table 1.)

Table 1.

The combination of low interest rates, increasing net farm income over the past six years (Table 2), and stronger equity positions because of increasing asset valuation, farmers have found themselves in the position to be active participants in the farmland market.

Table 2.

Taking on additional agricultural real estate debt comes with certain risks that should be carefully considered. Here are some of the key risks associated with increasing agricultural real estate debt:

Financial Risk: Increasing debt means higher interest payments and potentially higher overall financial obligations. If your agricultural operations face challenges such as fluctuating commodity prices, adverse weather conditions, or market uncertainties, it may become difficult to meet the increased debt obligations. This can lead to financial distress and potential default.

Market Risk: Agricultural markets can be volatile, influenced by factors such as global supply and demand, trade policies, weather events, and changing consumer preferences. If market conditions deteriorate, it may impact the profitability of your agricultural operations, making it harder to generate sufficient income to repay the debt.

Interest Rate Risk: Changes in interest rates can affect the cost of borrowing and your ability to service the debt. If interest rates continue to rise in the agricultural sector or if credit becomes harder to obtain, it will lead to higher debt servicing costs and potentially strain your financial position. It is essential to assess the potential impact of interest rate changes on your ability to manage the debt burden.

Property Value Risk: The value of agricultural real estate can fluctuate over time. If the value of the property decreases, it may affect your overall equity position and potentially limit your borrowing capacity for future needs. A decline in property value can also make it challenging to refinance existing debt or obtain favorable terms for additional loans.  Current conditions in Ohio and throughout the corn belt, predicate that this scenario has a low probability of happening.

Production Risks: Agriculture is subject to production risks, including weather-related events, pests, diseases, and other unforeseen challenges. These risks can impact crop yields, livestock health, and overall farm productivity. If your agricultural operations experience significant production setbacks, it may affect your ability to generate income and meet debt obligations. Lenders will want to see adequate risk management tools such as crop insurance for example to guard against revenue decreases.

Operational Risk: Expanding agricultural operations requires careful planning and management. Taking on additional debt means assuming more operational responsibilities and potentially increasing complexity. If the expansion is not well executed or managed efficiently, it can lead to operational inefficiencies, higher costs, and reduced profitability.

To mitigate these risks, it is crucial to conduct thorough financial analysis, stress testing, and risk assessments before taking on additional agricultural real estate debt. Maintaining a diversified income stream, having contingency plans, and keeping a buffer for unforeseen events can help manage and mitigate these risks. Additionally, seeking professional advice from agricultural consultants, financial advisors, and lenders can provide valuable insights and guidance in navigating these risks effectively.

If a grower is thinking about expansion of their farming operations with a farm purchase, lenders will require a financial analysis of the existing operation.  The Ohio State University Farm Business Analysis and Benchmarking program offers producers a complete a financial analysis of their farming operation.  This analysis will help you understand where your areas of profitability are in the business. It will give you tools to understand the numbers behind your analysis and will show you how to use them to further your success.  Visit https://farmprofitability.osu.edu/  for further information.

Sources:

https://www.newyorkfed.org/newsevents/news/research/2023/20230515

https://www.ers.usda.gov/topics/farm-economy/farm-sector-income-finances/

USDA ERS Forecasting Reduced Farm Income for 2023

By: Mike Estadt and Chris Zoller, OSU Extension Educators

Forecast

The United States Department of Agriculture Economic Research Service (USDA ERS) divides the country into regions for analysis and reporting purposes.  These regions are delineated by the types of agricultural production in each area.  Recently, USDA ERS announced its projection that average net cash income for all regions will be 18% lower when compared to 2022.

Net cash income is calculated by subtracting cash expenses from gross cash income.  Increases in production expenses, reduced receipts, and less Government payments are cited as contributing factors in the projected 18% decline in net cash income.  Reductions in net cash income are expected to range from -9% to as much as -30%.  The Heartland (which includes Ohio) is forecast to experience a 13% decline in net cash income.

What to Do?

Assuming this forecast is true, now is the time to formulate a plan.  We offer the following suggestions:

  • Regardless of what you produce, know your cost of production.
  • Review and adjust your budget: Take a close look at your financial situation and revise your budget to align with the projected reduced income. Identify areas where you can cut costs without compromising the quality of your operations. This may involve reducing expenses such as equipment purchases, inputs, or labor.
  • Diversify your income streams: Explore opportunities to diversify your income by expanding into complementary agricultural activities or exploring non-farm ventures. For example, you could consider value-added processing, agritourism, or direct marketing to consumers through farmers’ markets or online platforms.
  • Improve operational efficiency: Look for ways to enhance productivity and reduce waste on your farm. Implement efficient farming practices, optimize resource allocation, and consider adopting technologies that can streamline operations and reduce costs.
  • Evaluate crop and livestock selection: Assess the profitability and market demand for different crops or livestock products. If certain commodities are projected to have lower returns, consider diversifying your production mix by focusing on crops or livestock that may offer better profitability prospects.
  • Manage risk effectively: Given the uncertain agricultural market conditions, it’s crucial to have risk management strategies in place. Explore options such as crop insurance, futures and options contracts, or other risk management tools that can provide some protection against price volatility or unexpected events.
  • Seek additional education and resources: Stay informed about market trends, agricultural policies, and technological advancements. Attend workshops, webinars, or conferences to learn about best practices and access resources that can help you navigate challenging times.
  • Collaborate with other farmers and stakeholders: Engage with local agricultural organizations, cooperative extensions, or farmer networks to share knowledge, resources, and experiences. Collaborative efforts can help reduce costs through group purchasing, shared equipment, or joint marketing initiatives.
  • Explore government assistance programs: Stay updated on government programs and initiatives that provide financial assistance or support to farmers during challenging times. These programs may include subsidies, grants, or loans specifically designed for the agricultural sector.
  • Monitor and adapt: Regularly monitor your financial performance, market conditions, and emerging trends. Be prepared to adapt your strategies as needed to navigate changing circumstances and take advantage of new opportunities.

Utilize these resources as you evaluate your business and develop a plan.

 Summary

Remember that these are general suggestions, and the specific actions you should take will depend on your unique circumstances, the type of farming you engage in, and the specific factors affecting your local agricultural market. It’s advisable to consult with agricultural experts, financial advisors, or relevant professionals who can provide personalized guidance based on your specific situation.

References

USDA Economic Research Service Chart of Notes, https://www.ers.usda.gov/data-products/charts-of-note/?cpid=email

Farm Office Live Webinar Slated for April 21 at 10:00 a.m.

The OSU Extension Farm Office team invites you to attend the April Edition of the “Farm Office Live” Webinar on Friday, April 21 from 10:00 to 11:30 a.m. This monthly webinar allows Ohio farmers and agribusiness personnel to learn more about current farm management and agricultural law issues.

In this month’s webinar, the Farm Office Team will present the following topics:

Legislative and Case Law Update​ (Peggy Hall)

  • Farm Insurance Issues​ (Robert Moore)
  • “What is a ‘Taxable Gross Receipt’ under Ohio’s Commercial Activity Tax?”​ (Jeff Lewis)
  • Inflation and Interest Rates: An Update Including a Closer ​Look at Agricultural Machinery and Equipment​ (Barry Ward)
  • Crop Budgets/Income Outlook for ‘23​ (Barry Ward)
  • Avoid Chance by making 2023 Record Keeping Goals (Bruce Clevenger)

There is no fee to attend this webinar.  However, registration is required at go.osu.edu/farmofficelive

Check out farmoffice.osu.edu for all your farm management and ag & resource law needs.