2014 Farm Bill Sign-up is NOT Finished Yet!

By: Chris Bruynis, Assistant Professor and Extension Educator, Ross County

Many farmers are under the belief that they have completed all the necessary steps needed to complete the sign-up for the 2014 farm bill programs.  They made the yield update and base acre reallocation decisions and then they made the ARC/PLC decision for each farm.  So what decision is left to make?  Just as it has been in previous years, farmers still need to enroll in the farm bill program.  The enrollment window has been announced and will begin June 17, 2015, and will end Sept. 30, 2015.

The concern is if farmers do not know they have one more paper to sign at FSA they will lose out on any potential benefits, especially since this enrollment period will include both 2014 and 2015.  If farmers do not enroll their farms, then all the previous decisions on reallocations, updates, and program choice were all for nothing.  Also if landowners or farmers choose not to update yield, reallocate base acres, and make a program election, they can still enroll a farm into the new farm bill program. These farms would simply keep their existing yields and bases and will default to Price Loss Coverage (PLC) as their program choice.

Farmers are encouraged to contact Farm Services Agency and make an appointment to enroll their farm(s) into the 2014 farm bill programs.  Also do not forget to certify your 2015 planted acres with FSA. This is important to maintain the farm history, to determine farm bill payments under ARC-Individual, and provide information for future farm bill programs.

Western Ohio Cropland Values and Cash Rents 2014-15

By: Barry Ward, Leader, Production Business Management, Department of Agricultural, Environmental and Development Economics (AEDE)

Ohio cropland varies significantly in its production capabilities and cropland values and cash rents vary widely throughout the state. Generally speaking, western Ohio cropland values and cash rents differ from much of southern and eastern Ohio cropland values and cash rents. This is due to a number of factors including land productivity and potential crop return, the variability of those crop returns, field size and shape, drainage, population density, ease of access, market access, local market prices, potential for wildlife damage, field perimeter characteristics and competition for rented cropland in a region.

Western Ohio cropland values and cash rental rates are projected to decrease in 2015 due in large part to continued low to negative profit margin prospects for Ohio’s three major row crops (corn, soybeans and wheat). According to the Western Ohio Cropland Values and Cash Rents Survey, bare cropland values are expected to decrease from 5.2% to 11.9% in 2015 depending on the region and land class. Cash rents are expected to decrease from 6.2% to 8.5% depending on the region and land class.

The “Western Ohio Cropland Values and Cash Rents” study was conducted from February through May in 2015. The study is an opinion based survey surveying professionals with a knowledge of Ohio’s cropland values and rental rates. Surveyed groups include farm managers, rural appraisers, agricultural lenders, OSU Extension educators, farmers, landowners, and Farm Service Agency personnel.

When interpreting this summary of survey results please be aware that results will differ widely within a region and it will be useful to consider the ranges that are listed in the tables as you consider how your parcels may compare. It is also important to stress that land in a given region does not fall neatly into thirds of each land quality class (average, top and poor). There will likely be very little acreage in a given county or region that will fall into the “top” land category. Top land will typically be large tracts of land with highly productive soils. “Average” land will typically make up the majority of land in a given region or county while “poor” land will tend to be land with lower productivity soils, steep slopes, poor drainage, or come in smaller tracts (or a combination of these).

To access the complete summary go to:

http://aede.osu.edu/about-us/publications/western-ohio-cropland-values-and-cash-rents-2014-15

 

 

Ohio Corn and Soybean Enterprise Budgets Project Slightly Lower Costs But Low to Negative Returns

By:  Barry Ward, Leader, Production Business Management, Department of Agricultural, Environmental, and Development Economics

Production costs for Ohio field crops may be flat to slightly lower in 2015 but the profit picture looks poor, much the same as it did 2014. Variable costs for trend line Ohio corn and soybean production for 2015 will be slightly lower than 2014. Variable costs for corn (163 bushels per acre) for 2015 are projected to be $412 per acre. Variable costs for 2015 Ohio soybeans (48 bushels per acre) are projected to be $210 per acre. Lower energy and crop insurance costs and zero to slight increases for many other inputs have led to the slightly lower production cost projections for Ohio’s two major commodity crops.

With continued lower crop prices expected for 2015 returns will likely be low to negative for many producers. Projected returns above variable costs (contribution margin) range from $138 to $272 per acre for corn and $236 to $439 per acre for soybeans. (This is assuming fall cash prices of $3.65 per bushel for corn and $9 per bushel for soybeans which are both higher than present prices.)

Returns to land for Ohio corn (Gross Revenue minus all costs except land cost) are projected to range from -$86 to $35/acre in 2015 depending on land production capabilities. Returns to land for Ohio soybeans are expected to range from -$10 to $132 per acre depending on land production capabilities.

Total costs projected for trend line corn production in Ohio are estimated to be $847 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 $205 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 -$230 per acre.

Total costs projected for trend line soybean production in Ohio are estimated to be $592 per acre. (Fixed machinery costs – $108 per acre, land charge – $205 per acre, labor and management costs combined – $57 per acre.) Returns Above Total Costs for trend line soybean production are also negative at -$143 per acre.

These projections are based on OSU Extension Ohio Crop Enterprise Budgets. Newly updated Enterprise Budgets for 2015 have been completed and posted to the Farm Management Website of the Department of Agricultural, Environmental and Development Economics. Updated Enterprise Budgets can be viewed and downloaded from the following website:

http://aede.osu.edu/research/osu-farm-management/enterprise-budgets

 

 

 

Economic Impact of Avian Influenza

By: Sam Custer, OSU Extension Educator, Darke County

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

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

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

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

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

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

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

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

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

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

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

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

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

Study Points to Succession Planning Communication Barriers

By: Chris Zoller, Extension Educator, ANR

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

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

Introduction:

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

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

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

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

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

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

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

Findings

Passive Communication:

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

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

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

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

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

Waiting for Children to Make Career Decisions:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Summary

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

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

Large Dairy Relocations – Water Dominates the Decision

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

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