IRS Publishes 2011 Mileage Rates

On December 3rd, the Internal Revenue Service issued the 2011 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2011, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

51 cents per mile for business miles driven (up from 50 cents per mile in 2010)
19 cents per mile driven for medical or moving purposes (up from 16.5 cents per mile in 2010)
14 cents per mile driven in service of charitable organizations (same as 2010)

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

This blog article was written by using a press release provided by the Internal Revenue System.

Re-Emergence of the FSU Region in World Grain Markets

Click here to read the full article – October 2010 FSU Newsletter

Overview: A key event underpinning recent strength of U.S. crop prices is the 2010 crop drought in the Former Soviet Union (FSU) countries. Wheat and feed grain production in 2010 is 27% and 36%, respectively, less than in 2008. Around 85% of harvested FSU cropland lies in the Russian Federation (Russia), Ukraine, and Kazakhstan (hereafter, referred to as RUK). About half of harvested FSU land is in Russia.

Wheat and Barley are the 2 largest crops in RUK. Wheat is about 50% of harvested land, up from 35-40% in the early 1990s. Barley is about 15% of harvested land, down from 20- 25% in the early 1990s. Figure 1 (page 2) contains annual and trend production since the Soviet Union dissolved.

Meat Production declined noticeably after the Soviet Union dissolved and the economy contracted and adjusted to life after central planning. Figure 2 (page 2) contains beef, pork, and poultry production for Russia (only FSU country with consistently available data). Production of these 3 meats declined 48% from 1992 to 2000, in part leading to increased exports of wheat and barley. Since 2000, meat production has steadily increased. It now equals 73% of its 1992 level. However, the mix has changed dramatically, as beef production continues to decline while pork and, especially, poultry production increases.

Wheat and Barley Exports from RUK began increasing around 2000, as did their share of world exports (Figure 3, page 3). In 2008 and 2009, RUK accounted for over 20% of world exports of both barley and wheat. During these 2 years, RUK’s wheat exports were 44% larger than U.S. wheat exports while RUK’s feed grain exports were about 80% of Argentina’s exports.

Variable Production: Annual production and yield of both barley and wheat are more than twice as variable in the RUK as in the U.S. (Figure 4, Panels A and B, page 4). For barley, RUK increases the variability of production and yield for the world. In contrast, the RUK does not noticeably impact world variability of wheat production and yield. (Figure 4, Panel C).

Observations and Implications ► Russia, Ukraine, and Kazakhstan have emerged as major players in world grain markets.
► Their emergence represents a return to their historic role as one of the world’s bread baskets.
► Available land and the potential to improve storage suggest RUK can further increase exports.
► For the 2010 crop year, Russia instituted an export ban while the Ukraine limited exports. These decisions can be seen as a move to protect domestic consumption and the livestock sector. A key short- term question is, will they import grain to maintain recent gains in livestock production.
► A key question for the 2011 crop year is how much land will be planted to higher yielding winter (than spring) wheat before the onset of winter. While rain has fallen in much of the Russian and Ukrainian production areas, Kazakhstan remains dry.
► A key strategic question is how much of future increases in grain production will be absorbed by increased livestock production.
► A 2nd strategic question is, will Russia use its emerging food power for political gain.
► Going forward U.S. agriculture will need to monitor the RUK just as much as South America.

CASH PRICE SEASONALS, OHIO CORN, SOYBEANS, AND WHEAT

Click here to read the entire article – November 2010 Price Seasonal Newsletter

Background: It is not possible to do an effective job of pricing without being effective at cash pricing since eventually a commodity has to be sold on the cash market. Effective cash pricing starts with understanding the average seasonal pattern of cash price. This article examines the historical pattern of average monthly cash prices over the crop marketing year for Ohio corn, soybeans, and wheat. The period of analysis is the 1974 through 2009 crop marketing years.
Graphs on pages 2, 3, and 4 contain the findings for corn, soybeans, and wheat, respectively. In contrast, the discussion is organized by characteristic of the price seasonal. We hope the different perspectives enhance your understanding of the Ohio cash price seasonals.

Average Monthly Cash Price Seasonal (note, individual crop years vary from the average)
► On average, the low cash price occurred in the 2nd month of the crop year for Ohio corn, soybeans, and wheat. This month is October for corn and soybeans, although November is quite close for corn. For wheat, the month is July, although June is quite close.
► On average, the high cash price occurred in the 10th month of the crop year for Ohio corn and soybeans (June) and in the 9th month for Ohio wheat (February).
► The average price increase from the low-price month to the high-price month is 16% for corn, 12% for soybeans, and 9% for wheat, implying that on average, corn earned the highest cash storage returns over the 1974-2009 crop years.
■ Price increases over the crop marketing year to compensate for the cost of storage.
► The pattern of average monthly price increases from the low price month varies by crop:
■ Corn: a jump in December, followed by fairly consistent, linear increases through June peak
■ Soybeans: fairly consistent, linear price increases through the June peak
■ Wheat: fairly consistent price increases though October, with a price jump in December
■ Little change occurred in these patterns between 1974-1991 and 1992-2009.

Month in which Low Monthly Price Occurs ► For all 3 Ohio crops, the low price occurred either in the last month of the crop year or the first 3 months of the crop year for at least 74% of the 1974-2009 crop years.
■ Corn had the greatest concentration (91%) of minimum prices during this 4 month period, which for corn are the months of August through November (see Panel B, page 2).

Month in which High Monthly Price Occurs ► Especially for wheat but also for corn, the distribution of maximum prices was more scattered across the crop marketing year than was the distribution of minimum prices.
► Especially for soybeans but also for corn, the peak price tended to occur later in the crop year.
► For corn and wheat, the last and first months of the crop year were likely months for either a minimum or maximum price.

Concluding Observation ► While the monthly price pattern differs for each crop year, long term average tendencies exist in regard to average price change and month in which the low and high prices occur.
► Given these central tendencies, a cash marketer should then ask what factors that currently exist in the market may cause the cash market to deviate from its average tendencies.
► Jointly considering central tendencies while asking what is unique for a crop year provides a foundation for improving the odds for better cash marketing performance.

REFLECTION: OCTOBER USDA GRAIN REPORTS

Click here to access the complete November 2010 Demand and Supply Newsletter

Immediate Reaction: The key new information was a reduction in ending U.S. soybean stocks for the current 2010/11 crop year to 185 million bushels, from 265 and 350 million bushels in the October and September WASDE reports, respectively. U.S. yield was dropped 0.5 bushel per acre, while the trade expected soybean yield to increase. Also, soybean exports were increased by 50 million bushels. Soybean futures for the 2010 crop year finished up 50+¢/bushel. The reports for corn and wheat were basically neutral relative to market expectations. Nearby corn (wheat) futures finished down 9¢ (14.5¢) per bushel, 29¢ (39¢) off the high. I think forecasts for rain in the southern U.S. plains and southern South America was part of the reason for the wide trading range and close near the low in corn and wheat. But, I also think other factors that I cannot determine had impacts.

2010 Crop Year Perspective: While the market has focused on declining U.S. production over the last few months, U.S. corn and soybean yields are basically at trend line. Hence, the U.S. did not produce short crops of corn and soybeans. This observation implies that current markets are largely demand driven. However, going into the November reports, the markets were increasingly concerned that high prices were curtailing demand for wheat and especially corn. USDA did not adjust total U.S. wheat use, but did reduce U.S. corn feeding and exports by 100 and 50 million bushels, respectively. However, USDA increased corn ethanol use by 100 million bushels. In its WASDE commentary, USDA noted “Although small relative to domestic usage, higher ethanol exports and lower imports are also expected to add to corn use for ethanol with high sugar prices limiting the availability of ethanol from Brazil.” Last, USDA raised total U.S. production of meat during 2011 by 0.4%. In short, the November WASDE demand picture for corn and wheat is best described as mixed, thus suggesting that high prices are beginning to at least slow demand.

Observations and Implications: ► I expect the market to remain sensitive to the impact of high prices on demand, especially for corn and wheat. The market is well aware that demand changes often are not visible until after they occur. Thus, it is important to monitor the weekly reports listed on page 4.
► Demand concerns were reinforced on November 10 when China raised the reserve requirement for major banks in an attempt to control the flow of new money it expects to result from the U.S. Federal Reserve’s latest easing of monetary policy. China accounts for 60% of world soybean trade and 87% of the growth in world soybean trade over the last two years. If China’s economy slows appreciably, U.S. farmers will be impacted.
► U.S. ending stock-to-use ratio is the lowest since 2000 for all U.S. grains (Figure 3), notably corn (Figure 1), and well below average for soybeans (Figure 4). However, world stock-to-use ratio is above the 10-year average for soybeans and mid-way between the low and average for coarse grains. The demand-supply picture is not as tight as the U.S. situation implies. With the U.S. harvest nearly complete, the market should focus more on the world situation.
► Further increases in price will require new information, such as more declines in the U.S. $, new production problems, and larger growth in demand from developing counties. I am watching corn and soybeans in southern South America, winter wheat in the U.S. plains, and palm oil. Current conditions warrant attention but not concern. Each area had production problems during at least one recent La Nina weather event. La Nina is now occurring. If new bullish information does not emerge, I expect high prices to cause prices to decline.

Is There a High Cost of “Cheap Food” Policies?

Nearly a half century ago the world was aroused by Rachel Carson’s (1962) apocalyptic message of Silent Spring. Carson’s successors in the alternative agriculture advocate (AAA) movement continue to be pessimistic regarding the nation’s food supply and environment.

Click here to read the full article on the cost of cheap food

This essay mainly addresses U.S. AAA’s recent lament: The high cost of cheap food. Public policy, it is argued, in the form of farm commodity price and income support programs has made food artificially cheap, thereby contributing to chronic overeating and consequent cardiovascular and related maladies. On the other hand some analysts, by adding biofuel subsidies to the public policy mix, reject the “cheap food policy” finding.

This essay further broadens the scope of extant public policies affecting food to encompass public investments in research, extension, education, and infrastructure to raise agricultural productivity. At issue is whether the U.S. has pursued a low cost food policy, and, if so, the impact on society’s health and well being. And do AAAs offer an attractive alternative?

This essay makes a case that sustainable agriculture requires modern science and technology to address very real problems of poverty, disease, violence, and hunger. Policy digressions into promoting organic, local, and slow foods produced on small farms risk loss of agricultural productivity essential for improving well being of people in rich and poor countries alike.

OSU Extension to Offer New Workshop for Women

After completing several years of Annie’s Project workshops, a new workshop focused on the topic of Financial Risk Management is being piloted this winter in four Ohio counties, Erie, Knox, Ross and Wood. The Farm Finance for Women workshops are designed as a “next step” for women who have participated in Annie’s Project, but will be open to anyone. There are no prerequisites for the workshop, but there will be hands on learning opportunities and homework!

The workshop consists of four classes held once a week in the evening. The overall objective of the workshop is to help participants to learn how to gather and organize financial information. As a result, they will be able to use this information as a basis on which to make farm decisions, not just for tax management purposes. Specific topics will address: cash flow, how we manage money for both family living and the business, balance sheet and income statement development, Quicken basics for farm recordkeeping, figuring financial ratios, and benchmarking your numbers against other farms that are similar to yours. The workshop will wrap up with a local ag lender discussing the need for the information provided by the financial statements that the participants have learned how to develop throughout the class.

Registration will be conducted by each host county and will be limited to 10 -12 women per county. The small class size will enable more interaction and computer time. The registration fee will be $50 per person. The fee will help cover the cost of materials and refreshments. Each participant will receive curriculum including the Ohio Quicken Manual for Farm Records, Money Talk, a Financial Guide for Women, and various other Extension factsheets and bulletins. The workshop is also supported by a grant from the North Central Risk Management Education Center, which has enabled the workshop fee to be kept at a lower rate and still provide several tools for participants to take home.

Workshops will be held in:

Wood County—Wednesdays, February 9, 16, 23; contact: Doris Herringshaw; 419-345-9050; herringshaw.1@osu.edu

Erie County—Thursdays, February 17, 24, March 3 and 10; contact: Julia Nolan Woodruff; 419-627-7631; woodruff.94@osu.edu

Knox County—Wednesdays, January 19, 26, February 2 and 9; contact: John Barker; 740-397-0401; barker.41@osu.edu

Ross County—Tuesdays, February 1, 8, 15, 22; contact: Dave Mangione; 740-702-3209; mangione.1@osu.edu

2011 Ohio Corn, Soybean and Wheat and Hay Enterprise Budgets

The Department of Agricultural, Environmental, and Development Economics Newly updated Enterprise Budgets for 2011 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/Programs/FarmManagement/Budgets/
Enterprise Budget projections updated so far for 2011 include: Corn-Conservation Tillage; Soybeans-No-Till (Roundup Ready); Wheat-Conservation Tillage, (Grain & Straw), Alfalfa Hay and Grass Hay.
Our enterprise budgets are compiled on downloadable Excel Spreadsheets that contain macros for ease of use. Users can input their own production and price levels to calculate their own numbers. These Enterprise Budgets have a new look with color coded cells that will enable users to plug in numbers to easily calculate bottoms lines for different scenarios. Detailed footnotes are included to help explain methodologies used to obtain the budget numbers. Starting this year we will be updating these Enterprise Budgets periodically during the year is large changes occur in price or costs. Budgets will include a date in the upper right hand corner of the front page indicating when the last update occurred.

AEDE now on Facebook

The Department of Agricultural, Environmental and Development Economics is now on Facebook. Search Facebook for the “Department of Agricultural, Environmental, and Development Economics,” or follow this link to our page http://www.facebook.com/pages/Columbus-OH/Department-of-Agricultural-Environmental-and-Development-Economics/149453388421377. Make sure you add AEDE to your “likes” so you can follow what is going on in your Department. If you have anything you would like us to consider posting to the AEDE Facebook page, send it to aede@osu.edu. The page regularly lists faculty presentations and research grant activity and can give you an idea of what activities and topics are keeping the Columbus faculty members in AEDE busy.

Agricultural Policy & Outlook meetings to be held across Ohio

The following Agricultural Policy & Outlook meetings have been scheduled. Costs for meal and materials varies by location. Contact the local coordinator to register. For more information on the OSU Department of Agricultural, Environmental, and Development Economics’ Outlook Program, e-mail Program Leader Stan Ernst at Ernst.1@osu.edu.

Nov. 30… 9 a.m. start at Union County Service Center, 940 London Avenue, Marysville. Registration: Jon Rausch, OSU Ext – Union Co. at (937) 644-8117. Speakers: Carl Zulauf (Grains Outlook), Barry Ward (Land Prices & Inputs Outlook), , Cam Thraen (Dairy Price Outlook).

Dec. 1… dinner at Ohio Christian University, Leadership Center, 1476 Lancaster Pike, Circleville, Ohio 43113. Registration: Mike Estadt, OSU Ext – Pickaway Co. at (740) 474-7534. Speakers: Carl Zulauf (Grains Outlook), Barry Ward (Land Prices & Inputs Outlook), Ian Sheldon (World financial situation & shadow banking).

Dec. 6…dinner at Jewell Community Center, 7900 Independence Rd., Jewell, OH 43530. Registration: Bruce Clevenger – OSU Ext – Definance Co. at (419) 782-4771. Speakers: Carl Zulauf (Grains Outlook), Barry Ward (Land Prices & Inputs Outlook), Carl Zulauf (Policy).

Dec. 7…lunch at Fraternal Order of Eagles Club, 400 East Lake Dr., Ashland, OH 44805. Registration: John Augenstein, Sutton Bank at (419) 207-3644. Speakers: Carl Zulauf (Grains Outlook), Barry Ward (Land Prices & Inputs Outlook), Cam Thraen (Dairy Price Outlook).

Dec. 7…dinner at Attica Fairgrounds Social Hall, 15131 E. Township Road 12, Attica, OH 44807. Registration: Ed Lentz, OSU Ext – Seneca Co. at (419) 447-9722 ext-11; or Chris Willman, Sutton Bank at (419) 426-6253. Speakers: Carl Zulauf (Grains Outlook), Barry Ward (Land Prices & Inputs Outlook), Carl Zulauf (Policy).
Dec. 17…lunch at Knights of Columbus Hall, 8440 State Route 47, Versailles, OH 45380. Registration: Justin Petrosino, OSU Ext – Darke Co. at (937) 548-5215. Speakers: Carl Zulauf (Grains Outlook), Barry Ward (Land Prices & Inputs Outlook), Ian Sheldon (World financial situation & shadow banking).

Jan. 11… dinner in Bellvue, OH. Registration: Julia Woodruff, OSU Ext – Erie Co at (419) 627-7631; or Valerie Bumb, First National Bank at (419) 483-7340. Speakers: Carl Zulauf (Grains Outlook), Barry Ward (Land Prices & Inputs Outlook), Carl Zulauf (Policy).

Jan. 17…lunch in Wooster, OH. Registration: Dianne Shoemaker, OSU Ext – Wayne Co. at (330) 264-8722. Speakers: Carl Zulauf (Grains Outlook), Barry Ward (Land Prices & Inputs Outlook), , Cam Thraen (Dairy Price Outlook).

Mar. 1…dinner at Wyandott County Fairgrounds, Upper Sandusky, OH. Registration: Chris Bruynis, OSU Ext – Wyandott Co. at (419) 294-4931. Speakers: Carl Zulauf (Grains Outlook), Barry Ward (Land Prices & Inputs Outlook), Peggy Kirk Hall (Ag Law Issues).

Farm Outlook Meeting to be held in Pickaway County

Farmers, agribusinesses and others in the agricultural industry located in Central Ohio have the opportunity to learn more about ag markets, economics and policy at an Ohio State University 2011 Farm Outlook meeting.

The program hosted by Ohio State University Extension Pickaway County with presentations from Ohio State’s Department of Agricultural, Environmental, and Development Economics.

Topics covered will include grain markets, farm inputs, land values, and an outlook to the 2012 Farm Bill. The program will be held on December 1 from 6:00 p.m. until 9:00 p.m. at the Leadership Center on the campus of Ohio Christian University, 1476 Lancaster Pike, Circleville, Ohio. Pre-registration is $25 per person or $30 per person at the door.

The program will feature the following speakers: Carl Zulauf, OSU Extension agricultural economist, who will discuss Grain Market outlook; Barry Ward, OSU Extension agricultural economist, discussing Why Farmland Values Will Never Fall and discuss Crop Inputs; Carl Zulauf, OSU Extension agricultural economist, who will present an Eye on the Horizon or Sunset: 2012 Farm Bill. Ian Sheldon will follow up last year’s program with his thoughts on the world financial crisis and the possible effect on agricultural trade.

Registration deadline is November 29th . For more information on the meeting, contact OSU Extension Pickaway County at (740) 474-7534, estadt.3@cfaes.osu.edu, or log on to http://pick.osu.edu/