Ethics…do they really matter to me?

By: Julia Nolan Woodruff, Extension Educator, Erie County

Recently I attended the National Conference for Extension Risk Management Education in St. Louis and one of the keynote speakers was Professor Marianne Jennings from Arizona State University. Dr. Jennings discussed the topic of ethics and how it related to risk management. My first thought was ethics, really does that relate to risk management and farmers? We are all ethical people, right? It’s those guys running large corporations embezzling millions of dollars, using company credit cards for personal charges, manipulating reports and data, committing financial fraud and the list goes on. Do farmers really have to deal with these issues?

As you think about these statements a little more, you begin to realize that first thought about ‘those guys managing large corporations worth millions of dollars’ could actually describe a farmer. Today’s farmer may be managing a family farm, but it could be a business as large as some of the corporations we’ve read about lately with ethical issues. Just because it is a family business, it does not exempt it from ethical issues.

Another thought, ethics affect both large and small businesses. The big ethical blunders are well publicized because most times they involve millions of dollars or a major cover up of information affecting a lot of people, but that doesn’t mean that smaller businesses don’t have problems caused by unethical decisions.

Dr. Jennings gave several reasons why ethics matter throughout her talk, but the one that really stuck was a quote by a Madison Avenue PR executive, “the single greatest competitive advantage a company has is its reputation.” As a farmer, when you think about your relationships within the community and the consumer, I think this quote rings very true. If your farm’s reputation was damaged due to an ethical lapse, how would that affect your relationship with landlords and your ability to rent land in the future? How would it affect your ability to obtain capital or operating loans from the local lenders? What about relationships with current employees and your ability to recruit and hire new, dependable employees? And the big question, how would consumers view your operation and agriculture as an industry as a result?

As you think about just these few questions, what cost could they have to your farm? What if you lost land you currently were renting because of an ethical issue or you lost out on rental land, not because your bid wasn’t high enough, but because the landlord had heard about questionable ethics of the farm management team? This has a real effect on the farm’s bottom line. Questionable ethics costs real dollars.

Ethics also matter because as a nation we are not doing so well, as Dr. Jennings pointed out to the conference audience. A few statistics she shared about our future work force from a Josephson Institute 2008 study are as follows:

  • 64% of high school students cheated on an exam in the last year at least once.
  • 82% have copied another’s homework.
  • 82% have lied to their parents and 62% have lied to a teacher in the past year.
  • 30% have stolen from a store in the past year.
  • 26% admitted lying on their answers to this survey.

Other statistics she shared showed that 11% of college students reported cheating in 1963. That number grew to 75% in 2006. Finally the KPMG 2008 survey revealed that 74% of employees observed a high level of illegal or unethical conduct at work in the past 12 months.

Even though the statistics and the reports show that as a whole we are not doing very well on the ethical scorecard, we still have a tendency to believe as individuals we are very ethical. It‘s those other people who are acting in an unethical manner, not me! We tend to justify why something we did was ok. So I ask you, have you seen any signals around the farm in the past year that might give the impression there are unethical practices happening? What have you done in the past year that might be considered unethical?

A couple of examples to think about:

  • You paid for your items at the store and when you got home you realized that you had not paid for the pack of gum you got. What do you do?
  • You sold a bike (car, wagon, tractor) to a neighbor and it was later stolen. He asks you to inflate the sales price (on the claim form) so he could get a larger sum from the insurance company. What do you do?

As you think about these very common and real life questions, it helps us to realize ethical decisions aren’t just a challenge for CEOs of multimillion dollar companies. They really do apply to our farm businesses and our everyday lives. We have to think about how we conduct business and how we are perceived not only within our communities but worldwide. Lately, farmers are being judged more than ever by consumers. We need to continue to put our best ethical foot forward.

Dr. Jennings did a very good job of helping us to see the ethics of everyday life and it made me think of a story that related to my young daughters. My kindergartener had to read a story to someone each night and then that person was to sign her paper. She had chosen to read to an older friend one day, but the friend did not understand she needed to sign the paper. I told my daughter I would just sign her friend’s name on the paper for her so she could turn it in the next day. My third grader was quick to point out that was not the right thing to do because “Mom you don’t know that she really read the story and you can’t sign someone else’s name.” Maybe we could all learn a few things about ethics from our young children. There is no ‘gray area’ or justification for them – only right and wrong!

Crop Insurance: What are the Preventative Plant Rules?

By: Chris Bruynis, Assistant Professor & Extension Educator; Greg Schiefer, Scheifer Farm and Family Insurance; and Marlene McCreary, Farmers Mutual Insurance

With the weather forecasters calling for more wet weather for the next ten days, farmers are starting to think about the preventative planting provisions in their crop insurance policies.  Although most crop insurance policies have some preventative plant provision, neither GRP nor GRIP policies have preventative plant coverage, so check with your agent. One good thing is that farmers have choices and do not have to rush into any decisions but need to be aware of their options before getting to busy in the field. The target date for corn to be planted is June 5th and farmers can either take preventative planting, switch to another crop, or still plant corn with a reduction in coverage.

Claiming preventative planting probably will not be the first choice in 2011 because many farmers have already locked in favorable contract prices for their corn and will need to plant some corn to fulfill those obligations. But if farmers choose to take preventative plant they will need either 20% or 20 acres of a unit (whichever is smaller) to have not been planted this year.  Example: a farmer has 400 acres of corn insured, 20% of 400 would be 80 acres and since 20 acres is smaller, there would need to be at least 20 acres of preventative plant in order to file a claim.   The maximum numbers of acres that a farmer can claim is equal to or less than the highest number of acres of that crop planted in the past 4 growing seasons less the acres planted this year.  Example: a farmer had 380 acres in 2007, 120 acres in 2008, 400 in 2009, and 340 acres in 2010 of corn. This year he is able to plant 200 acres of corn.  He can claim 200 acres of preventative plant (400 acres is the greatest number of acres planted in the past 4 years less 200 acres he planted this year). 

If preventative plant is chosen the farmer’s historical average will not be harmed.  You will be eligible for 60% of your guarantee per acre. However if preventative plant is chosen and you plan to follow with another crop in 2011, you will have to wait until the end of the late plant period for corn (July 1) and your prevented plant claim would be reduced to 35% of your coverage and only 35% of your premium would be due.  A production of 60% of your corn’s historical average will be recorded reducing your historical averages. If the farm plants soybeans after the preventative plant date expires, he will also need  insured the soybeans, however it will result in a reduced coverage as July 1 is eleven days into the late plant period for beans. A preventative plant claim must be filed within 72 hours of the final plant date which is June 5th for corn and June 20th for soybeans or within the late plant period for the crop.  Basically, the claim should be filed as soon as the decision is made not to plant a crop on the affected acres after the final plant date has passed for the crop.

The second option and probable the most common is simply switching to another crop. Here in Ohio, most farmers will switch those preventative plant acres to soybeans. This will be influenced by many factors including contracted corn bushels, herbicides already applied, availability of soybean seed, market price of soybeans and planting date.

The third option is to simply wait it out and plant corn after the June 5th preventative planting date. The late planting window that opens after June 5 allows for corn to be planted but with a reduction in coverage level. Each day after June 5 will result in the affected acres being reduced by 1% of your chosen coverage levels. Example: if a 50 acre field did not get planted until June 10 then the coverage will be reduced on those acres by 5%. If a farmer purchases coverage that would result in a $600 payment per acre, the premium will remain unchanged and the coverage would become $570 per acre in this scenario. If a farmer chooses this option and then cannot plant corn he can still file a preventative plant claim as long as it is still within the late plant period (until July 1).

This is just a summary and it is not meant to substitute for the actual Multi-Peril Crop Insurance provisions. Farmers wanting to explore their options should contact their insurance agent for specific rules associated with their insurance coverage.

How to Be Your Own Boss

by Chris Bruynis, PhD, Assistant Professor & Extension Educator

Sometimes I have the opportunity to dialogue with people wanting to enter into the business of farming. This could be returning home to the farm and entering into some business arrangement with the existing business, starting a second career after having worked away from the farm for some time, or starting a retirement business. Regardless of when or why people are motivated to return to the business of farming there are some things they need to do to be successful in being their own boss.

Consider these tips from successful business owners who learned how to position a new business for success from the start.

Get educated– Get prepared by learning about your future business, whether it’s through formal education such as college or technical training, or by reading and “being a sponge” for information related to your field. Learning is a constant that needs to occur for you to stay current on business strategies and tactics necessary for success.

Get experience– Thinking and acting like business owner while working for someone else can be another strategy and stepping stone to business ownership. The secret is to constantly think and evaluate what is happening in the business environment and the business reaction to those pressures… “Would you make the same decision as your employer?”

Get advice– Consider creating an advisory board that can review your strategies and financial information in order to provide advice. You probably will not have the time to read and track everything that will affect your business, so relying on an advisory board can not only provide good advice, it can be an excellent source of information. Another approach is to hire a coach that can help you learn how to actually run a successful business (and the coach does not need to be from a farm or agricultural background).

Get comfortable with failure
– Although you probably want to avoid those fatal failures if possible, get use to the idea that you will make mistakes and that these mistakes will provide valuable learning opportunities for you to grow personally as well as to grow your business.

Get away– There are multiple returns to you in getting away from the agricultural business from time to time to recharge yourself. This does not always need to be a vacation unrelated to the farm business, but a good conference, tour or other agricultural related event can often do the same thing (and it would be tax deductable).

Although there are no secret answers to being a successful new agricultural business, getting education, experience, advice, comfortable with failure, and away from the heat are thing successful agricultural business owners have embraced. Add to this some common sense, some luck, and some calculated risk taking, and the probably of business success is greatly enhanced.

Sharing Farm Machinery-Can it Increase Profits for Ohio Farmers?

by: David Marrison, Assistant Professor & Extension Educator

2010 was a fabulous year for many Ohio crop producers due to the high commodity prices which prevailed for much of the year.  But higher seed and fertilizer prices in 2011 may trigger some farmers to re-examine how they can decrease their cost of production for their commodities. Cooperative approaches can provide an alternative for farmers to reduce risks and more effectively manage farm resources.

One way which has helped save medium and small farm operations money is joint ownership of farm machinery.  Joint ownership of farm machinery offers medium and small operators a chance to reduce costs per acre and increase labor efficiency. Potential savings exist in several areas such as 1) greater annual use of large ticket machines; 2) more efficient use of labor during peak fieldwork times; 3) opportunities to do custom work for other operators or landowners; 4) greater use of individual operator skills and specialized labor and 5) more efficient use of repair and maintenance tools and facilities.  Some members of machinery joint ventures also cite the ability to own larger and more modern machinery as an advantage, although if this is carried too far, some of the cost savings may be negated. A study in Saskatchewan estimated that three medium sized grain farms (1,500 acres each) could combine their equipment and reduce their total machinery costs per acre from $44.66 to $28.75 under conventional seeding technology, and from $37.93 per acre to $25.36 per acre using direct seeding technology (Harris and Fulton). 

As with any shared ownership arrangements, there are potential pitfalls.  The key to successful joint ownership is for the partners to be able to agree on when and how to use each piece of equipment.  Shared arrangements also has the potential to reduce the flexibility and independence of the individual producer.

To help farm operators who are exploring sharing farm machinery, the North Central Farm Management Extension Committee has put together an 87 page manual to help farmers. The Farm Machinery & Labor Sharing Manual (ISBN #0-89373-106-4 Artz, Edwards, & Olson) discusses both operational and organizational issues. It includes sample sharing agreements and worksheets for allocating costs fairly. This manual includes cases studies that highlight the various types of arrangements, identify potential problems associated with sharing resources, and explains the strategies these groups used to resolve them.

This publication can be order on-line for $25 at:  http://www.mwps.org/index.cfm?fuseaction=c_Products.viewProduct&catID=778&productID=17841&skunumber=NCFMEC-21&crow=1

Additional resources on the joint machinery ownership have been authored by Iowa State University and can be found at:

Joint Machinery Ventures http://www.extension.iastate.edu/agdm/crops/html/a3-34.html

Farm Machinery Joint Ventures http://www.extension.iastate.edu/agdm/crops/html/a3-37.html

Farm Machinery Joint Venture Worksheet http://www.extension.iastate.edu/agdm/crops/html/a3-38.html

Opportunities for Beginning Farmers through using the Transition Incentive Program

By: Chris Bruynis, PhD, Assistant Professor & Extension Educator

I have farmers nearing the end of their career frequently ask me “How is a young person supposed to enter into the business of farming?” Even though there are no easy answers, one  thought that comes to my mind is that these tenured farmers are going to have to assist with the transition to the next generation, even if it is not family.  To help farmers in their transition of their land to the next generation, the U.S.D.A. has a new program designed for retired or retiring owner or operator to transition expiring CRP land to a beginning or socially disadvantaged farmer who will return the land to production for sustainable grazing or crop production. This program is titled the, Transition Incentive Program (TIP) and provides annual rental payments to the land owner for up to two additional years after the date of the expiration of the CRP contract, provided the transition is not to a family member. The FSA factsheet can be found at http://www.fsa.usda.gov/Internet/FSA_File/tip051410.pdf

So who qualifies as a beginning or socially disadvantaged farmer that is not family?  Based on USDA’s Farm Services Agency a beginning farmer is an individual or entity who has not operated a farm or ranch for more than 10 years. Likewise a socially disadvantaged (SDA) farmer is one of a group whose members have been subjected to racial, ethnic, or gender prejudice because of his or her identity as a member of the group without regard to his or her individual qualities. SDA groups are women, African Americans, American Indians, Alaskan Natives, Hispanics, Asian Americans and Pacific Islanders. A family member is any individual to whom a person is related as spouse, lineal ancestor, lineal descendant, or sibling, including a: great grandparent; grandparent; parent; child, including a legally adopted child; grandchild; great grandchild; sibling of the family member in the farming operation; and spouse of a person listed in the previous seven items.

Beginning or socially disadvantaged farmers and CRP participants may enroll in TIP beginning one year before the expiration date of a CRP contract. For example, if a CRP contract is scheduled to expire on Sept. 30, 2012, the land may be enrolled in TIP from Oct. 1, 2011, through Sept. 30, 2012. For contracts that expired on Sept. 30, 2008, and 2009, or are scheduled to expire on Sept. 30, 2010, TIP enrollment may begin immediately. For more information contact your local FSA office. To find your local FSA office go to  http://www.fsa.usda.gov for a list of county offices.

Diesel Fuel Cost Calculator

By: Gene McCluer, Extension Educator

Diesel fuel costs have risen over the last year and based on current predictions will continue to rise during the coming months.  The estimated cost of fuel for tractors, combines, and various tillage and planting operations are shown in the fuel cost estimator.  If you do custom work, you will want to reflect some or all of the increased fuel costs in the rate. Using a price for number two diesel fuel at $4.00 per gallon, the table displays fuel costs for the various horsepower machines as well as different field operations.  This form is an excel spreadsheet where you can change the price change per gallon or the fuel use per acre or hour to more precisely estimate the fuel cost portion of field operations.  This will be helpful in determining the fuel costs for custom work operations or other farm work.  

You can see that the current fuel prices may raise fuel cost for a mid-size combine from $24 to over $38 per hour.  For row crop planters, the increase in fuel cost alone is 54 cents per acre.  For haymaking, just the fuel for the mower/conditioner and twine baler will increase costs $1.26 per acre. 

Legal Aspects of Oil, Gas Drilling Focus of June Symposium

By: Martha Filipic Source: Peggy Hall

Recent interest in developing Ohio’s resources for natural gas drilling has prompted Ohio State University’s Agricultural and Resource Law Program to plan an Ohio Oil and Gas Law Symposium, “The ‘New’ Ohio Oil and Gas Boom: Drilling into Legal Issues.”

The Continuing Legal Education (CLE) program for attorneys will be held from 9 a.m. to 4 p.m. Thursday, June 16, at the Longaberger Golf Club at One Long Drive in Nashport, Ohio, 10 miles east of Newark.

“Although Ohio has a long history of oil and gas production, we anticipate even greater interest in the legal issues involved as companies generate what may be unprecedented oil and gas activity in the Marcellus and Utica shale around the state,” said Peggy Hall, director of the program and Ohio State University Extension agricultural law specialist. “Today’s shale development uses new technologies and brings new legal issues that attorneys need to be aware of.”

The program offers 5.5 CLE credits. The registration fee is $175 by June 6 or $200 afterwards. Lawyers first admitted to the bar after 2008 receive a $50 discount. Lunch is provided.

Registration by credit card is available at https://www.regonline.com/OilandGasLaw, or checks payable to the OSU Agricultural and Resource Law Program may be mailed with a completed form, available at http http://aede.osu.edu/programs/aglaw to Peggy Hall, Department of Agricultural, Environmental, and Development Economics, 2120 Fyffe Road, Columbus, OH, 43210. All registrations must be received by June 13.

The program flyer is available here and the program will address:

  • “An Overview of the Shale Resource,” by Thomas B. Murphy, co-director of the Penn State Marcellus Center for Outreach and Research.
  • “Mandatory Pooling and Current Regulatory Issues,” by Sandra H. Ramos, legal counsel for the Ohio Department of Natural Resources Division of Mineral Resources Management.
  • “Dealing with Dormant Minerals and Old Leases,” by Eric C. Johnson, attorney with the Johnson and Johnson Law Firm in Canfield.
  • “Ohio Oil and Gas Leases: A Primer,” by Gregory D. Russell, attorney with Vorys, Sater, Seymour, and Pease LLP in Columbus.
  • “Landowner Leasing Issues: Panel Discussion,” with Johnson and Christopher N. Finney, attorney with Logee, Hostetler, Stutzman & Lehman, LLC, in Wooster.
  • “Representing Landowner Groups in Oil and Gas Leasing,” by Finney.

For more information, contact Peggy Hall at aglaw@osu.edu  or 614-247-7898.

Consider More than Just Money When Leasing Your Farmland

By: Chris Zoller, Extension Educator, ANR, Tuscarawas County

Approximately 50% of the farmland in Ohio is leased.  This is and will continue to be the case as farm operators seek more land to maintain a competitive position in today’s agricultural market.  These leasing arrangements create opportunities for landowners and farmers to develop relationships that can allow the landowner to receive additional income and the farmer to spread his costs over additional acres. 

Valuing the Tenant

It is no surprise that, in most cases, the landowner who has land available to rent wants to maximize their return and the person wanting to farm the land also wants to maximize their return by limiting the amount they pay in land rent.  There are various methods available to determine a “fair” rental rate; one benefit landowners may not consider is the value of the person who is renting their land.

In some cases, landowners charge no rent or a very minimal amount to the farmer.  For many, this is the result of a relationship that has developed over the years and/or the reputation the farmer has achieved within the community.  There is no formula for calculating the value of the farmer to the landowner, but it can result in benefits for everyone involved.

As a landowner you may think it is crazy to charge a reduced or no land rent, but there are a number of reasons why this may be the case, including:

  • An opportunity to allow a beginning farmer to get established
  • Because the farmer has a good reputation in the community
  • A person who does “extra” things for the landowner, (e.g., plowing snow, mowing along field edges, installing drainage tile, etc.)

In times of high grain prices many landlords believe they should receive more in rent payment and many are approached by farmers willing to pay more than the landlord is presently receiving.  This may sound attractive, but there are potential negative consequences.  Consider the long-term impacts of renting to someone who doesn’t apply adequate lime or fertilizer to the soil.  Is getting a few extra dollars per acre worth creating a situation where nutrients are mined from the land and the potential exists for relationships to be damaged?

Rising Food Prices: What is Behind the Trend?

There is unrest around the world tied to some degree to the fact that food prices are rising. Here at home, prices are on the rise too, not enough to cause political upheaval, but enough to cause some unease. Why are food prices higher? How bad is it? What can be done? Ohio State University’s Ian Sheldon and American Farm Bureau’s Bob Young discuss these and other related issues in this audio podcast recorded by Ohio Farm Bureau.

http://ofbf.org/media-and-publications/listen/4/602/

Western Ohio Cropland Values and Cash Rents 2010-11

 Barry Ward (ward.8@osu.edu) Leader Production Business Management OSU Extension, OSU Department of Agricultural, Environmental and Development Economics (AEDE)

Ohio cropland values and cash rental rates are projected to increase in 2011. According to the Western Ohio Cropland Values and Cash Rents Survey bare cropland values are expected to increase from 3.1% to 7.4% in 2011 depending on the region and land class. Cash rents are expected to increase from 7.19% to 10.11 % depending on the region and land class.  click here to download the 2011 Western Ohio Cropland Values and Cash Rents