Farm Office Live to Analyze USDA’s Pandemic Assistance for Producers Initiative

By Barry Ward, David Marrison, Peggy Hall, Dianne Shoemaker and Julie Strawser – Ohio State University Extension

April’s “Farm Office Live” will focus on details of the USDA’s Pandemic Assistance for Producers” initiative announced on March 24, 2021. Changes were made in effort to reach a greater share of farming operations and improve USDA pandemic assistance.

During the webinar, we will be sharing details about the pandemic initiative and discussing some of the changes made to the Coronavirus Food Assistance Program (CFAP).  Our Farm Office Team will also provide a legislative update and discuss changes to the Paycheck Protection Program and Employee Retention Credits. They will also be on hand to answer your questions and address any related issues.

Two live sessions will be offered on Wednesday, April 7, from 7:00 – 8:30 p.m. and again on Friday, April 9, from 10:00 – 11:30 a.m. A replay will be available on the Farm Office website if you cannot attend the live event.

Farm Office Live is a webinar series addressing the latest outlook and updates on ag law, farm management, ag economics, farm business analysis and other related issues. It is presented by the faculty and educators with the College of Food, Agricultural and Environmental Sciences at The Ohio State University.

To register or view past recordings, visit https://go.osu.edu/farmofficelive.

For more information or to submit a topic for discussion, email Julie Strawser at strawser.35@osu.edu or call the Farm Office at 614-292-2433.

Farm Office Live Continues!

by: Barry Ward, David Marrison, Peggy Hall, Dianne Shoemaker – Ohio State University Extension

“Farm Office Live” continues this winter as an opportunity for you to get the latest outlook and updates on ag law, farm management, ag economics, farm business analysis and other related issues from faculty and educators with the College of Food, Agricultural and Environmental Sciences at The Ohio State University.

Each Farm Office Live begins with presentations on select ag law and farm management topics from our specialists followed by open discussions and a Q&A session. Viewers can attend “Farm Office Live” online each month on Wednesday evening or Friday morning, or can catch a recording of each program.

The full slate of offerings remaining for this winter are:

  • March 10th 7:00 – 8:30 pm
  • March 12th 10:00 – 11:30 am
  • April 7th 7:00 – 8:30 pm
  • April 9th 10:00 – 11:30 am

Topics to be addressed in March include:

  • Coronavirus Food Assistance Program (CFAP)
  • Proposed Stimulus Legislation
  • General Legislative Update
  • Ohio Farm Business Analysis – A Look at Crops
  • Crop Budget & Rental Rates

To register or view past recordings, visit https://go.osu.edu/farmofficelive

For more information or to submit a topic for discussion, email Julie Strawser at strawser.35@osu.edu or call the farm office at 614-292-2433. We look forward to you joining us!

Communication Infrastructure Leasing and Purchase Agreements

by: Mike Estadt, OSU Extension Educator in Pickaway County and Jeffrey Lewis, Research Specialist, OSU Ag and Resource Law Program

The coronavirus pandemic has revealed to rural Ohioans that broadband internet is no longer a luxury but a requirement for work, school, and daily activities.  Recent legislation in the Ohio House of Representatives and policy from many organizations and governmental agencies are calling for the buildout of communications infrastructure to address the discrepancies in broadband technology.

One of the proposed alternatives is increased 5G cellular network coverage. Many current cell towers will be converted, but additional towers may be required to increase the range of this high-speed wireless technology. Landowners in deficient areas may receive inquiries into the purchase of or rental of a parcel of land to construct a tower on.  The questions of how much is my land worth and should I sell it or lease the property will arise.

The benefit to SELLING the tower site is your ability to get all your money now, instead of later. Think of the lottery.  Most people take the cash option because they can get a better return with other investments than they can with the lottery’s annuity payment. It is the expectation of an improved future Return on Investment (ROI) that motivates them more than the ROI itself, which often does not materialize. If the time value of money is a motivation, a conversation with a financial advisor is advised because the flip side is you could be selling something now that could provide you with a more profound benefit later.

The biggest advantages to LEASING the cell tower site is your long-term stability of income and the ability to negotiate lease terms.  Leases will vary upon length and terms.  As the final renewal term comes close to expiration the tenant might be very motivated to negotiate newer terms. It generally will be financially advantageous to keep the same site, since vacating the site would require the cell tower company to remove the tower and remediate the site to its original condition, then buy/lease a new site and install a new tower at the new site.

The downside to leasing the tower site is the site remains a part of the parent tract. If the fee owner of the parent tract tries to get a loan against the property, the tower site could affect the type of financing available. Residential lenders might have concerns with blended-use properties. One might consider subdividing the tower site from the parent tract to mitigate this issue.

General considerations of a cell tower lease include:

  • Value. The lease amounts will always depend upon various factors. The dollar amount will depend on the type of tower, location, and availability of other sites. Some sites may fetch rates of a thousand dollars per year, while others can garner six figures.
  • Legal Description and Access. The lease needs to include a detailed legal description that specifically identifies the tower site and the means of access. Will you be granting the network company an easement to access the tower site? Or is the network company dropping the tower in the back yard next to your pool and using your driveway? If so, you may be damaging the value of your house.
  • Maintenance and Taxes. Who maintains the access driveway, takes care of noxious weeds and pays the real estate taxes? Will your property taxes increase? Will your insurance premium increase? Contact your insurance provider to determine if you may need to increase your liability insurance. Make sure increased operating expenses are either factored into the rent or you can work an expense pass-through into the lease.
  • Duration, renewal options, and escalation clauses:
    • Usually, long-term. Initial term may be as short as 5 years or as long as 15.
    • Renewal terms could be anywhere from 1-10 years in duration. Some leases may contain a series of renewal options that could total the term of 30 years if all renewal options are exercised.
    • Escalation clauses sometimes activate with each renewal. An escalation allows the landowner to increase the rental rate according to a pre-agreed timeline. This escalation could be a negotiated as a percentage every year or an adjustment every 5 years according to Consumer Price Index.
    • If the lessor chooses not to renew the lease, make sure the lease clearly states who is responsible for the removal of the tower and remediation of the property back to its original state.

It goes to say that before entering into any type of lease or purchase agreement, have an attorney review the documents.

 

 

 

 

Ohio Legislation on the Move

By: Peggy Kirk Hall, OSU Ag and Resource Law Program

Originally published on February 15- https://farmoffice.osu.edu/blog/mon-02152021-1154am/ohio-legislation-move

The Ohio General Assembly is off and running in its new session.  Many bills that affect agriculture in Ohio are already on the move.   Here’s a summary of those that are gaining the most momentum or attention.

Tax Conformity Bill – S.B. 18 and H.B. 48.  The Senate has already passed its version of this bill, which conforms our state tax code with recent changes to the Internal Revenue Code made in the latest COVID-19 stimulus provisions of the Consolidated Appropriations Act.  Both the Senate and the House will also exempt forgiven Paycheck Protection Program second-draw loan proceeds from the Commercial Activity Tax.  The Senate version additionally exempts Bureau of Workers Compensation dividend rebates from the Commercial Activity Tax beginning in 2020, but the House bill does not.  Both bills include “emergency” language that would make the provisions effective in time for 2020 tax returns.

Beginning farmers tax credits  H.B. 95.  A slightly different version of this bill is returning after not passing in the last legislative session.  The bi-partisan bill aims to assist beginning farmers through several temporary income tax credits:

  • Businesses that sell or rent agricultural assets such as land, animals, facilities or equipment to certified beginning farmers can receive a 5% income tax credit for sales, a 10% of gross rental income credit for cash rents, and 15% of gross rental income for share rents.
  • Certified beginning farmers can receive an income tax credit equal to the cost of participating in a certified financial management program.

Beginning farmers, among other requirements, are those in or seeking entry into farming in Ohio within the last ten years who are not a partner, member or shareholder with the owner of the agricultural assets and who have a net worth of less than $800,000 in 2021, which adjusts for inflation in subsequent years.  Beginning farmers must be certified by the Ohio Department of Agriculture or a land grant institution.  The House Agriculture and Conservation Committee will discuss the bill at its meeting on February 16.

Wind and solar facilities – S.B. 52.  In addition to revising setback and safety specifications for wind turbines, this proposal would amend Ohio township zoning law to establish a referendum process for large wind and solar facility certificates.  The bill would require a person applying for a certificate for a large wind or solar facility to notify the township trustees and share details of the proposed facility.  That notification sets up opportunities for the township trustees or residents of the township to object to the application and submit the proposed application to a vote of township residents.  A certificate would not take effect unless approved by a majority of the voters.  A first hearing on S.B. 52 will be held on Tuesday, February 16 before the Senate Energy and Public Utilities Committee.

Grants for broadband services  H.B. 2 and S.B. 8.  The Senate passed its version of this bill last week, which sets up a $20 million competitive grant program for broadband providers to extend broadband services throughout the state.  The proposal would also allow broadband providers to use electric cooperative easements and poles, subject to procedures and restrictions.  The bill had its second hearing before the House Finance Committee last week.

Eminent domain – H.B. 63.   Based on a similar bill that didn’t pass last session, this bill changes eminent domain law in regard to property taken for the use of recreational trails, which include public trails used for hiking, bicycling, horseback riding, ski touring, canoeing and other non-motorized recreational travel.  H.B. 63 would allow a landowner to submit a written request asking a municipality or township to veto the use of eminent domain for a recreational trail within its borders.   The bill would also allow a landowner to object to a use of eminent domain for any purpose at any time prior to a court order for the taking, rather than limiting that time period to ten days as in current law.   The bill had its first hearing before the House Civil Justice Committee last week.

Minimum wage increases.  S. B. 51 and H.B. 69 Bills on each side of the General Assembly propose gradually increasing the state minimum wage to $15, but have different paths for reaching that amount.  S.B. 51 proposes increasing the wage to $12/hour in 2022, followed by $1/hour increases each year and reaching $15 by 2025, which is when a federal bill proposes to establish the $15 minimum wage.  H.B. 69 begins at $10/hour in 2022 with $1/hour increases annually, reaching $15 in 2027.  S.B. 51 was referred last week to the Workforce and Higher Education Committee and H.B. 69 was referred to the Commerce and Labor Committee.

Considerations of a Flexible Lease Arrangement

by: Chris Zoller, Extension Educator, ANR, Tuscarawas County, Barry Ward, Leader, Production Business Economics, Ohio State University Extension &  Mike Estadt, Extension Educator, ANR, Pickaway County

Thousands of Ohio crop acres are rented from landowners by farmers.  While the most common is likely a cash agreement, the flexible lease may be worthy of consideration for some farmers.  This article will provide a broad overview of the flexible lease option, including advantages, disadvantages, and structure.

The information provided here is only a summary from the Fixed and Flexible Cash Rental Arrangements for Your Farm published by the North Central Extension Farm Management Committee.  Anyone interested in learning more about flexible leasing arrangements is encouraged to read more about this topic at this site: https://aglease101.org/wp-content/uploads/2020/10/NCFMEC-01.pdf.

What is a Flexible Lease?

Because of uncertainties with prices, yields, and input costs, some farmers and landowners are apprehensive about entering into a fixed long-term cash rental arrangement.  From the perspective of the farmer, the concerns include poor yields, commodity price declines, or sharp increases to input prices might impact cash flow if there is a long-term fixed arrangement.  In times like we are experiencing now, landowners want to capitalize on high commodity prices or high yields.

Therefore, the operator and landowner may turn to the use of a flexible cash rent of one kind or another. The idea of a flexible cash rent usually pertains only to the rent charged for cropland.

Advantage of Flexible Leases

  • Flexible cash rent enables the landowner to share in the additional income that results from unexpected increases in the prices of crops considered in the rent-adjustment clause. If the cash rent also is flexed for changes in yields, the landowner will benefit from above-normal yields regardless of the cause.
  • For the operator, risk is reduced. Cash-rent expense is lower if crop prices or yields are less than normal.
  • Calculating flexible cash rent requires more communication from both parties.

Disadvantages of Flexible Leases

  • For the landowner, flexible cash rent increases risk.
  • Windfall profits that may be realized by the operator from unexpected price increases are reduced.
  • If cash rent is flexed according to yield, the landowner becomes more concerned with the level of crop yields as well as the accuracy of reported yields. Yields must be verifiable and segregated for each land unit in the lease.
  • If cash rent is flexed according to yield, the operator may give up part of the benefits from higher yields resulting from managerial input, thus possibly reducing incentives to maximize profits.
  • Calculating flexible cash rent requires more management from both parties. There must be agreement on how to verify the factors that are used to set the rent each year.

Methods of Flexible Leasing Arrangements

Crop Price Only

Rents that flex only on price increase risk substantially for operators. A short crop that leads to higher prices and higher rent may leave the operator with less ability to pay.

Yield Only

With some commodities crop yields are highly uncertain. In other cases, the crop that is grown may only be fed to livestock, so no relevant market price exists. In such cases producers may prefer to negotiate a flexible lease agreement that bases the annual rent solely on the actual yield achieved.

Flex for Price and Yield

This method requires the operator and landowner to agree on a base cash rent tied to a base yield (average or expected yield) and a base expected price for each crop being considered. If only one crop is grown, this is the only crop considered. If several crops are grown and all are considered equally important, all crops may be considered in determining the current year’s cash rent.

Flex for Change in Cost of Inputs

The cost of variable inputs can change significantly from year to year and cause large swings in profitability. Incorporating a factor that reflects a ratio of the base year’s cost of inputs divided by the current year’s cost of inputs will help stabilize the bottom line for operators.

Put the Agreement in Writing

If it is decided to use some form of flexible cash rent (or any form of rental agreement), the details of how the rent will be determined should be clearly specified in a written lease agreement.

Additional information about written farmland leases is available from Ohio State University Extension at: https://farmoffice.osu.edu/sites/aglaw/files/site-library/Farm%20Lease%20Checklist%20law%20bulletin.pdf

Sources

Fixed and Flexible Cash Rental Arrangements for Your Farm, North Central Farm Management Extension Committee, https://aglease101.org/wp-content/uploads/2020/10/NCFMEC-01.pdf

What’s in Your Farmland Lease?  Ohio State University Extension Law Bulletin, https://farmoffice.osu.edu/sites/aglaw/files/site-library/Farm%20Lease%20Checklist%20law%20bulletin.pdf

Lady Landowners Leaving a Legacy Series 

by: Amanda Douridas and Amanda Bennett, OSU Extension

Land is an expensive and important investment that is often handed down through generations. As such, it should be cared for and maintained to remain profitable for future generations.

Almost half of landowners in Ohio are women. OSU Extension in Champaign and Miami Counties are offering a series designed to help female landowners understand critical conservation and farm management issues related to owning land. It will provide participants with the knowledge, skills and confidence to talk with tenants about farming and conservation practices used on their land. The farm management portion will provide an understanding of passing land on to the next generation and help establish fair rental rates by looking at current farm budgets.

The series runs every Friday, February 26 through March 26 from 9:00-11:30 a.m. and will be a blend of in-person and virtual sessions. It is $50 for the series. If you are only able to attend a couple of session, it is $10 per session but there is a lot of value in getting to know other participants in the series and talking with them each week. Registration can be found at go.osu.edu/legacy2021. For more information, please contact Amanda Douridas at Douridas.9@osu.edu or 937-772-6012. Registration deadline is February 24. The detailed agenda can be found at

https://miami.osu.edu/events/lady-landowners-leaving-legacy.

 

Whole Farm Planning – Take Time to Plan Your Work and Work Your Plan

By David Marrison, OSU Extension Educator

We have all heard the saying “Plan Your Work and Work Your Plan.”  Planning is one of the most important aspects of managing any business. This is especially true for farms and agribusinesses due to their complexity and the inherent uncertainties associated with agriculture.

OSU Extension encourages farm families to adopt a whole farm planning approach as they develop strategies for the future success of their business. The whole farm approach allows families to examine the internal structure of their business and then develop business, retirement, transition, estate, and investment plans that work in harmony.

The Farm Business– At the center of most farms and agricultural businesses is the family unit. Each family, individually and collectively, has its own history, values, and goals. It is valuable for the business to begin the planning process by reflecting on family and farm history. Valuable lessons can be learned by all the generations involved by examining past successes and disappointments. The underlying values and goals of the family unit and each individual should also be determined. While these values and goals oftentimes remain unspoken, they have a large impact on how family members treat each other and employees and make business decisions.

An analysis of the current state of the farm should also be conducted to determine the physical, fiscal and personnel status of the business. This analysis should also examine the operation’s efficiency and identify any available resources that are not currently being utilized. The farm’s profitability, business structure, operating procedures and employee management should also be examined. It is also helpful for the management team to identify the external influences that could impact the business in the future. These influences could include any governmental, political, economic, environmental, social or technological elements.

Developing the Five Essential Plans – Once a family has completed its internal analysis, family members can continue the planning process by developing business, retirement, transition, estate, and investment plans. A description of each planning area is given in the following paragraphs. It should be noted that each of these planning areas does not stand alone. Like spokes in a wheel, all will need to work in harmony to ensure the long-term viability of the business. Each area can positively or negatively affect the performance of the others. One example of this would be if investment planning has gone well, more assets will be available to help fund business operations or retirement needs. As plans are developed for each of the five areas, it is essential that the management team examine the effects that each has or could potentially have on the other plans.

 

 

Business Plan– A business must be profitable in the long run in order to exist. On most farms, the major planning that occurs is for the farm’s production practices. An example of this is deciding what variety of corn to plant or deciding what sires to use for breeding cows. However, planning for the success of the farm business should include much more.

A comprehensive business plan should be developed. This plan not only helps the family develop a plan of action for production and operation practices, but also helps develop plans for the financial, marketing, personnel and risk-management sectors of the business. One recommended method of evaluating the farm business is to conduct a SWOT analysis. This analysis examines the Strengths, Weaknesses, Opportunities and Threats in each of these areas. In short, the agricultural business plan presents a picture of the agricultural business or farm, where the business is going, and how it will get there.

Retirement Plan– No one expects to work forever. A strategy to help each business member meet his or her expected retirement needs should be developed. The two main retirement questions that should be addressed are how much money does each family member need for retirement and what will the farm’s obligation be to retirees? A variety of factors such as age at retirement, retirement housing and other retirement accounts held by the family will affect retirement needs. It is essential that retirement plans are established early for all members of the business. It is also important that the profitability of the farm be such that a family member can retire and not adversely affect the financial position of the business.

Transition Plan– The goal of transition planning is to ensure that the business has the resources to continue for many generations. Transition planning helps the family analyze its current situation, examine the future, and then develop a plan to transfer the business to the next generation. This includes planning not only for the transfer of assets but also managerial control. Members of the primary generation should invest time in transferring their knowledge to the next generation.

Estate Plan– Farm estate planning is determining how the farm assets, such as land, buildings, livestock, crops, investments, machinery, feed, savings, life insurance, personal possessions, and debts owed to or by the farm, will be distributed upon the death of the principal operator(s). The estate plan, in concert with the transition plan, helps to address how the off-farm heirs can be fairly treated without jeopardizing the future of the farming heir.

Investment Plan– The primary investments made by farm families are usually in land, machinery, and livestock. Farm operations may, however, wish to invest in such off-farm investments as stocks, bonds, mutual funds, real estate, life insurance, retirement homes, precious metals or disability insurance. These investments allow farm families to save for future education or retirement needs and allow for investment diversification. Factors that farmers will need to consider during investment planning include the rate of return, personal risk tolerance levels, tax considerations and the time horizon available for investing.

More Information- More information about the whole farm planning model can be found in a factsheet accessible at: https://ohioline.osu.edu/factsheet/anr-52

Farm families are encouraged to use this and other OSU Extension farm management resources, along with a competent attorney and accountant, to develop their plans.

Check out the Farm Office Website at http://farmoffice.osu.edu/ for additional farm management resources.

Farm Office Live Returns on February 10 & 12

by: Peggy Kirk Hall, Associate Professor, Agricultural & Resource Law

Wondering what’s happening with CFAP, the Paycheck Protection Program, and Executive Orders?  So is the Farm Office team, and we’re ready to provide you with updates.  Join us this month for Farm Office Live on Wednesday, February 10 from 7–8:30 p.m. and again on Friday, February 12 from 10–11:30 a.m., when we’ll cover economic and legal issues affecting Ohio agriculture, including:

Status of the Coronavirus Food Assistance Program (CFAP)

Update on the Paycheck Protection Program (PPP).

Tax credits information

Executive Orders that may impact agriculture

Legal update on small refinery exemptions

Farm Business Analysis program results

Legislative update

Your questions

To register for the free event, visit this link:  go.osu.edu/farmofficelive

 

 

2021 Cow-Calf Outlook Review

by: Garth Ruff, Beef Cattle Field Specialist

For beef producers in Ohio and across the U.S., 2020 was no walk in the park for several reasons related to the COVID-19 pandemic. On January, 26 2021 the OSU Beef Team hosted a Cow-Calf Outlook program featuring Dr. Kenny Burdine, Extension Livestock Marketing Specialist from the University of Kentucky.

In this presentation Dr. Burdine highlights reviews the impacts of COVID on the beef cattle industry, some management considerations for beef producers looking to add value to feeder cattle, touches on rising feed prices, and looks at the feeder cattle markets in the coming year.

For the full presentation https://www.youtube.com/watch?v=pUtWYuo1zR0

We’ve also pulled some short clips showing the value of increased management. One management consideration is to shorten and control the breeding season to increase marketing power via increasing uniformity and group size. https://www.youtube.com/watch?v=IFkOGHEJrgA&t=87s

Another management toll that will increase the value of calves is to castrate bull calves and market steers, as selling steer calves will be rewarded in the marketplace. https://www.youtube.com/watch?v=aSOTdDSiZpY

CFAP Payments Halted Until Review Conducted by Biden Administration

by David Marrison, OSU Extension

In accordance with the Regulatory Freeze Pending Review memo issued by the White House on January 20, the United States Department of Agriculture has suspended the $2.3 billion of additional assistance to the Coronavirus Food Assistance Program put in place during the final days of the Trump Administration.

The Trump administration had previously announced on January 15 providing additional assistance of CFAP expanding eligibility for some agricultural producers and commodities as well as updating payments to accurately compensate some producers who already applied for the program.  The expanded eligibility was targeted primarily for contract pork and poultry producers and others previously excluded from the relief payments.

It should be noted that Farm Service Agency offices will continue to accept applications during the evaluation period although no payments will be made while the program is reviewed. The supplemental CFAP payments (January 15 additional assistance) were to build upon the $23.6 billion in assistance provided in Round 1 and 2 of CFAP. USDA’s Farm Service Agency will still continue to accept new or modified CFAP applications from eligible producers January 19 through February 26, 2021.

In a notice on the Farm Service Agency website the Biden administration stated “In the coming days, USDA and the Biden Administration intend to take additional steps to bring relief and support to all parts of food and agriculture during the coronavirus pandemic, including by ensuring producers have access to the capital, risk management tools, disaster assistance, and other federal resources.”

Farm Office Team Note: It is not irregular for a new Presidential Administration to freeze rule making at the start of their administration as the transition occurs from one administration to the next.  Our team will be monitoring the situation and will provide updates.  Make sure to register for the next Farm Office Live webinars on February 10 & 12 at which time updates will be given on this issue and many more.  Register at: https://farmoffice.osu.edu/farmofficelive

Sources:

Coronavirus Food Assistance Program – Additional Assistance.  Access at: https://www.farmers.gov/cfap

Regulatory Freeze Pending Review.  Access at: https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/20/regulatory-freeze-pending-review/

USDA Offers Additional Assistance for Certain Producers Through Coronavirus Food Assistance Program https://www.usda.gov/media/press-releases/2021/01/15/usda-offers-additional-assistance-certain-producers-through