Farm Labor Contractors in Ohio

(Some aspects of the FLC are provided here, while more specific detail can be found through sources cited at the end of this article.)

Many Ohio producers employ migrant labor to help with their agricultural enterprise but they also have diversified operations with grain, beans, corn, dairy, livestock, farm markets and maybe even ag tourism. Time IS money, and a helping hand managing migrant labor can be a wise investment, given factors of Hispanic language, culture and social frameworks. Very often, this role is filled through a Farm Labor Contractor (FLC) or crew leader.

Role of the Contractor

The traditional view of a farm labor contractor revolves around their ability to obtain labor for an employer, and then manage that labor on site.  While the FLC helps identify, recruit and otherwise contract the necessary labor…and is therefore also referred to as recruiter, he (or she) may serve in other capacities.  Some FLCs may recruit labor but only provide transportation to the employer/job site.  Others may travel to Ohio apart from the labor but live amongst them in temporary labor housing during the season. An FLC may also supervise labor, keeping time/hours, directing the work assignments and serving as a go-between for the employer.  Often, they manage the physical housing facilities and deal with the daily social issues of the workforce.

 Two Farm Labor Contractor Examples

Contractor A is an older female, with past and present experience as a farmworker, joining her labor in the field work. Coordinating with the grower, she helps manage production to fill market orders while serving as field supervisor for the crew. A big part of the labor is single males, so, on lunch breaks, she serves as cook and crew leader, watching the time as well as the stew. After work, she may be counselor, social worker or transportation to run errands.  Significantly, she has been coming to Ohio for many years and has much experience with the programs and services directed at Hispanic labor. In fact, she has developed relationships with staff of many agencies, and she is a board member of a national health organization.

She observes that the best recruitment involves word-of-mouth job information, and she also cites good housing, good pay, and good agency services as factors.  The traditional way of recruiting through strong family/extended family bonds has somewhat given way to a workforce of singles with less committed relationships.  Some inexperienced workers need skills training to be productive, and a worker’s attitude also plays a part.

Contractor B is a male in his mid-20s who started by helping FLCs in transportation of workers.  Like Contractor A, he also serves as field supervisor, housing manager and monitor of labor social needs.  In recruitment, he also favors the referral of candidates by present labor, through their family and friends.  However, he also stresses the review of work history, the provision of work references, and consulting with other crew leaders who may have had contact with the worker seeking employment.

His situation differs from that of Contractor A, who works for only one grower and has asmaller crew, housed in one labor camp.  His grower has three separate housing facilities, and this FLC oversees the two closest to each other.  He also coordinates efforts with two other crew leaders because of the size and distance of the operations.  Also, Contractor A comes and goes with her labor as the crops go, but Contractor B remains as a general farm hand for a few more months, including the hauling of grain.  Then he goes south for the winter, returning in spring to help with planting and preparing the labor housing.

Some Context

The unrest and unknown in the immigration controversy is no secret. The Ft.Worth Star-Telegram recently reported :

“…since January 2009 more than 2,700 employers have been audited and $40 million in penalties assessed for immigration violations, more than during eight years under President George W. Bush…Napolitano told members of the National Conference of Editorial Writers that comprehensive immigration reform must include tougher employer sanctions as well as harsher penalties for immigration fraud and smuggling.”

Nationally, the Farm Bureau Federation has estimated that $5 billion to $9 billion worth of farm production would be lost in the short term if access to immigrant workers were cut off, and as much as one fifth of U.S. output in fruits, vegetables and nursery products would shift to other countries.

Unless something positive and workable is done for the ag industry, the role of the Farm Labor Contractor will remain as a crucial part of the whole.

*****

For some of the legal aspects of the farm labor contractor role, see the Dept. of Labor’s Wage & Hour Fact Sheet #49:  http://www.dol.gov/whd/regs/compliance/whdfs49.pdf  

For a broader overview of contractors, visit http://www.dol.gov/whd/mspa/index.htm

Is Planting Cover Crops Affecting My Crop Insurance Coverage?

There are many reasons that cover crops are planted in Ohio such as additional forage, nutrient recycling, soil erosion control, and improving soil tilth. In recent years the number of acres seeded to cover crops in Ohio has been increasing with the introduction of various legumes and barassica (oil seed radish, turnips, etc.) crops. With this renewed interest in cover crops, care needs to be taken not to inadvertently terminate crop insurance coverage.   

According to the Risk Management Agency (RMA) cover crops are considered a crop generally recognized by agricultural experts as agronomically sound for the area for erosion control or other purposes related to conservation or soil improvement. Depending on the stage of crop development, cover crops may make the intended insurable crop ineligible for crop insurance. Understanding the subtle interpretations of the RMA rules becomes important to securing crop insurance coverage.  This issue will be demonstrated through the following examples.

RMA rules do not permit crop insurance coverage for small grain crops planted for harvest that are inter-planted with another crop. This inter-planting rule specifically prohibits use of a grain drill or other tillage-based planting of the cover crop seed. Therefore, the only method available to establish a cover crop seeding in standing wheat, such as red clover, is through broadcasting the seed over the top of the wheat.  Once the wheat is harvested, mechanical seeding is acceptable.

For most crops, crop insurance policies state that any acreage following another crop that has reached the head (or bud) stage and/or that has been harvested in the same calendar year is not insurable. So cover crops seeded following wheat, soybeans or corn would not be insurable. What about seeding wheat, soybeans or corn after a cover crop?  The goal would be to make sure the cover crop does not reach the head or bud stage of growth development. Under this provision, farmers would need to destroy, either mechanically or chemically, the cover crop prior to the head or bud forming for the following crop to be insurable.  However, if the cover crop were harvested for forage instead of being destroyed, the following crop may or may not be insurable, depending on the insurance product purchased.

After harvesting a cover crop for forage farmers cannot plant and insure crops such as corn and soybeans with Yield Protection and Revenue Protection policies. However, farmers can use GRP and GRIP policies to insure these crops after harvesting cover crops. This article is not intended to answer all the questions concerning cover crops and crop insurance, but simply to increase farmer’s awareness of the potential issues. Farmers who want to plant cover crops to gain the benefits they provide, should check with their crop insurance provider prior to planting cover crops to make sure their farming practices do not result in a loss of insurance coverage due to a misunderstanding of the rules.

Ohio Dairy Web 2010

Are you a dairy producer?  Are you a member of the Ohio dairy industry?   If so you will be interested in learning about and bookmarking the website available at the Department of Agricultural, Environmental and Development Economics, College of Agricultural, Food and Environmental Sciences, The Ohio State University.  The link to this website is: http://aede.osu.edu/programs/ohiodairy/.

This website is maintained by Cameron Thraen, OSUE State Specialist, Dairy Markets and Policy.  On this website you will find current market data, charts and graphs of important dairy data, such as U.S. milk production, cow numbers and milk yields.  You can find a chart showing the net income margin for a typical Ohio dairy farm, such as Income over Feed, Net Income over Total Operating Cost, etc.  These charts are updated on a weekly or monthly basis to help you stay abreast of the markets.  There are many more links to useful information pertaining to the state of Ohio dairy.

Interested in the milk futures market?  A notable feature is a link to a current Class 3 milk futures price chart and table, updated daily.  The chart and table has that day’s closing futures price along with a table of premiums or discounts to the historical value for the Class 3 price.  Is a $14.50 January Class 3 futures price a good price?  Check out the futures premium or discount table and you will have your answer.

Along with current and historical market data and information, you will find valuable reading material on the current issues facing today’s dairy farm or industry participant.  There are links to market outlook letters from a wide array of dairy economists as well as links to the Mideast Federal Order website and comprehensive University of Wisconsin Dairy Markets website.

Fire-up your computer and take a visit to the Ohio Dairy Web 2010 site and make it one of your daily internet visits.

2010 Step Up in Basis

With the 2010 repeal of the federal estate tax, the rules for determining income tax basis on inherited property became more complicated for deaths occurring in 2010.  The income tax basis of a property is used for determining capital gains when an asset is sold and depreciation.  In prior years and in future years, the estate’s basis in the property is the fair market value at date of death, regardless of whether this is an increase or decrease in the decedent’s basis.

The basis of inherited assets in 2010 will be determined by a complicated process beginning at the lesser of the decedent’s basis in the property or the fair market value of the property on date of death.  Thus for some, the basis still may be decreased, particularly for stocks that have decreased in value.  For assets whose basis is still less than the fair market value, each estate of a U.S. citizen or resident has $1,300,000 of basis to add to the decedent’s existing basis. If property passes to a surviving spouse either outright or in a qualified terminable interest, the estate has another $3,000,000 of basis that the executor may allocate.  The additional basis amount is increased by capital loss and net operating loss carryovers of the decedent and certain calculated losses.  For non-resident aliens, the executor only has $60,000 of basis to allocate.   The executor may not increase the basis of any asset to more than the fair market value of the property at date of death.

For example, if a U.S. citizen or resident has a $2,000,000 estate with a $700,000 basis before death, the entire estate would receive a full step-up in basis.  If the pre-death basis was $200,000 and the assets do not pass to a spouse, there would not be a full basis step up.  The estate would have only $1,500,000 of basis.  The executor should be able to select the assets to which the executor allocates the basis.

The executor may not allocate basis to any property acquired by the decedent within three years of date of death if the property was acquired by gift or inter vivos transfer for less than full and adequate consideration, except for certain property that was received by gift from a spouse.   This expands the old rules in a couple of ways.  The old rules only applied to property acquired within one year of death and only if the property returned to the same person.

As under the old rules, the executor may not allocate basis to any property that falls within the definition of income in respect of a decedent, such as ordinary IRAs or other taxable retirement accounts.

The rules for 2010 can be a record keeping nightmare.  Many people do not know the current basis of their property, and their children or heirs may have an even harder time finding the appropriate records.   Executors may need to dig through several decades of records.

The IRS indicates on its website the following information.  Executors must file an information return if the property acquired from the decedent exceeds $1,300,000 or if the decedent acquired certain property by gift within three years of death. The information return is used to report the carryover basis of the decedent’s property and the allocation of the basis increase allowed under the new basis rules.

The new information return is due with the decedent’s final income tax return.  Generally, this means that for decedent’s dying in 2010, the due date is April 15, 2011. The IRS has not yet released the new form. Failure to file this information return may result in a penalty of $10,000.

In addition, executors must provide to each beneficiary a written statement that lists the information reported on the information return with respect to the property that the beneficiary acquired from the decedent. The executor must furnish the beneficiaries with this statement no later than 30 days after the filing of the estate information return. Failure to provide each beneficiary with this statement may result in a penalty of $50 for each failure.

However, it is important to note that a similar basis system enacted for decedents’ estates with dates of death after 1976 was postponed so that it did not apply to any dates of death before 1980 and then was retroactively repealed.  Accordingly, you will want to continue to monitor these rules as Congress addresses the estate tax system in the coming months… or years.

Major Crop Insurance Changes for 2011 Crop Year – Combo’s Product Released for 2011 Crop Insurance Year

 

After several years of planning, the Risk Management Agency will release the COMBO product for use in insuring crops for the 2011 cropping year. The first experience many producers will have with the Combo product will be when insuring wheat for 2011. The COMBO product is meant to simplify crop insurance choices, replacing many individual farm-level products with one product: the COMBO product. The release of the COMBO product does not impact county level plans such as Group Risk Plan (GRP) or Group Risk Income Plan (GRIP).

The COMBO product has three “plans” offering coverage previously contained in the Actual Production History (APH), Crop Revenue Coverage (CRC), Income Protection (IP), and Revenue Assurance (RA) products.

  • Yield Protection will make payments when yields fall below a yield guarantee. Yield Protection replaces the APH product.
  • Revenue Protection will make payments when revenue falls below a revenue guarantee. Under Revenue Protection, the guarantee can increase if the harvest price is above the projected price. Revenue Protection is similar to coverage offered under CRC and RA with the harvest price option.
  • Revenue Protection with the harvest price exclusion will make payments when revenue falls below a revenue guarantee. With the harvest price exclusion, the guarantee will not increase if the harvest price is above the projected price. Revenue Protection with the harvest price exclusion replaces IP and RA with the base price option.

For the complete article:

http://www.farmdoc.illinois.edu/manage/newsletters/fefo10_15/fefo10_15.html

Small Business Health Care Tax Credit – Farm Business Benefit

The new health reform law gives a tax credit to certain small employers (including farm business owners with employees) that provide health care coverage to their employees, effective with tax years beginning in 2010.

Small employers that provide health care coverage to their employees and that meet certain requirements (“qualified employers”) generally are eligible for a federal income tax credit for health insurance premiums they pay for certain employees. In order to be a qualified employer, (1) the employer must have fewer than 25 full-time equivalent employees (“FTEs”) for the tax year, (2) the average annual wages of its employees for the year must be less than $50,000 per FTE, and (3) the employer must pay the premiums under a “qualifying arrangement”.

The IRS has an informative website that answers the many different questions about this new provision of the Patient Protection and Affordable Care Act which was passed by Congress and was signed by President Obama on March 23, 2010.

The following webpage contains questions and answers that provide information on the credit as it applies for 2010-2013, including information on transition relief for 2010.

 http://www.irs.gov/newsroom/article/0,,id=220839,00.html

2010 OSU Income Tax Schools to be held across Ohio this Fall

OSU Extension  and The Ohio State University’s Department of Agricultural, Environmental, and Development Economics Department are pleased to be offering eight OSU Income Tax Schools across Ohio from November 9 through December 10. These two-day schools are designed for individuals who have some experience preparing and filing federal and state tax returns for individuals and small businesses. Instruction will focus on federal tax law changes and on the issues that tax preparers may encounter in 2010 preparing tax returns. The schools also will include an Ohio income tax update.

Participants in the Tax Schools will receive the 2011 RIA Federal Tax Handbook and the 2010 National Income Tax Workbook (including a searchable CD containing the 2004-2010 workbook) prepared by the Land Grant University Tax Education Foundation especially for the income tax schools held in Ohio and 30 other states. The National Income Tax Workbook is available only as a part of the tax school registration.  Highly qualified instructors will explain and interpret tax regulations and recent changes in tax laws at these schools. Continuing education credit for Accountants, Enrolled Agents, Attorneys, and Certified Financial Planners will be offered.

The tax school locations are as follows:

Kent – November 9-10
Kent State University Student Center
Summit Street
Kent, OH 44242

Columbus – November 15-16
Bridgewater Banquet & Conference Center
10561 Sawmill Parkway
Powell, OH 43065

Fremont – November 17-18
Ole Zim’s Wagonshed
1375 State Route 590
Gibsonburg, Ohio 43431

Dayton – November 22-23
Presidential Banquet Center, Dayton
4548 Presidential Way
Dayton, OH  45429

Ashland – November 30-December 1
Convocation Center, Ashland University
820 Claremont Ave.
Ashland, OH 44805

Chillicothe – December 2-3
Ross County Service Center
475 Western Avenue
Chillicothe, OH 45601

Lima – December 7-8
Veterans’ Memorial Civic and Convention Center
7 Towne Square
Lima, OH  45801

Zanesville – December 9-10
Ohio University-Zanesville Branch Campus Center
1425 Newark Road
Zanesville, OH 43701

The pre-registration fee for each workshop is $350.  The fee includes all materials, lunches, and refreshments. The first day program begins at 9:00 a.m. and adjourns at 5:00 p.m.; the second day resumes at 8:30 a.m. and concludes at 4:00 p.m. 

In addition, a 2 hour Ethics session will be offered at three of the tax school locations (Kent, Columbus, & Lima) during the first evening of these three schools from 5:15-7:15 p.m.  The registration fee for the ethics workshop is $60 per person.  The workshop locations are:

Kent – November 9
Columbus – November 15
Lima – December 7

Complete workshop information for the 8 OSU Income Tax Schools and the 3 Ethics workshops can be found at http://incometaxschools.osu.edu.  A downloadable registration form as well as on-line registration is available at this location.   Information can also be received by contacting Dr. Warren Lee, Ohio Income Tax Schools Coordinator, at 614-292-6308 or lee.69@osu.edu

Adoption and Use of Precision Farming Technology in Ohio: Results from the 2010 Ohio Farming Practices Survey

Precision farming has been rapidly adopted by Ohio farmers since the first tools were introduced two decades ago. The “2010 Ohio Farming Practices Survey” was conducted earlier this year to determine the current level of adoption of precision farming technology in Ohio and to assess farmers’ perceptions of the costs and benefits of their adopted precision farming system. As second research question addressed farmers’ management of precision farming information and data to identify further opportunities to advance the use of this technology in the state.

The survey was mailed to a randomly selected sample of 3,000 farmers in Ohio. We restricted the sample to farmers generating more than $50,000 in annual farm sales and stratified across sales categories to guarantee sufficient representation of larger farms. Sample addresses were drawn from all 88 Ohio counties. We applied a weighting procedure based on farm sales categories in the calculation of all statistics to return estimates to a sample representative of Ohio farmers. A total of 1,401 surveys were returned of which 1,163 had sufficient responses to enter our analysis. The effective response rate was 40.4%.

We found that 38.8% of all surveyed farmers had adopted at least one precision farming component (‘adopters’) and 3.6% planned to adopt precision farming within the next three years. Almost a quarter of farmers (23.5%) reported that they didn’t have plans to adopt precision farming within the next three years. Just over one third (34.1%) of respondents reported that they were not familiar at all with precision farming.

Farm size as measured by farm sales, age, education, and enterprise type were all found to influence famers’ familiarity with precision faming technology. More than half of farmers reporting sales between $50,000 and $99,999 were unfamiliar with precision farming while less than ten percent of farmers reporting sales of $1,000,000 or more indicated that they were unfamiliar with precision faming.

The survey confirmed distinct differences between adopters and non-adopters. In particular, operators of larger farms were shown to adopt precision farming technology at much higher rates than operators of smaller farms, confirming a trend found in earlier studies in Ohio and nationally.

The most basic precision farming technology, a portable or fixed mounted GPS device, was also the most frequently adopted precision farming technology with a 30.2% adoption rate. Compared to smaller farms, larger farms were exceeding the adoption rates by about eight times. 78.5% of farms with sales of $1,000,000 or more were using a GPS device compared to 10.2% of farms with sales between $50,000 and $99,999.

The second most frequently adopted precision farming technology was precision guidance. This technology was adopted by 27.4% of respondents surveyed in this study. While less than 10% of farms with sales between $50,000 and $99,999 were using this technology, adoption by farmers with sales of $1,000,000 or more were at 77.7%. Manual steering assisted by a lightbar was the most popular precision guidance technology reported by 65.1% of precision guidance adopters. 45.0% of adopters reported an assisted steering guidance system while 7.2% reported an auto steering guidance system.

Yield monitor technology was the third most popular precision farming technology. 25.3% of all surveyed farmers used a yield monitor. With 79.7%, the adoption rates by operators of large farms were exceeding the adoption rates of smaller farms (7.0%) by about eleven times. The majority of adopters (64.7%) were using a yield monitor system linked to a GPS system.

Geo-referenced soil mapping was used by 22.7% or all farmers. Adoption rates range from 8.6% for small farms to 55.8% for the largest farms.

The fifth most commonly adopted precision farming technology was variable rate application for fertilizer. Large farms were again leading the adoption but the difference to smaller farms was less pronounced exceeding adoption rates by about five to seven times. Variable rate application was most popular for application of potassium (19.4%), lime (19.1%), and phosphorus (18.8%). Variable rate application for nitrogen was less popular with 5.7% of all farmers adopting.

Boundary mapping was used by 15.6% of all farmers and aerial/satellite field imaging was adopted by 9.8% of all farmers.

Additional precision farming components that were adopted less frequently include variable rate application for seeds (9.0%), herbicides (8.0%), and pesticides (7.6%). Similar low adoption rates were reported for map-based field scouting for weeds (8.8%), insects (8.2%), and crop diseases (7.8%).

On average, farmers in Ohio had adopted between 5 and 6 individual precision farming components.

We asked respondents to indicate the perceived value of each adopted precision farming component as well as of the entire precision farming system. Results indicated that for the average operator evaluation, benefits of the adopted precision farming system were exceeding costs. Almost a third (28%) of adopters reported that the benefits of their precision farming system were significantly greater than costs while 47.7% suggested that benefits were slightly greater than costs. Only 8.6% of farmers felt that costs were slightly or significantly greater than benefits.

Variable rate application for fertilizer technology received the most positive evaluation indicating that, on average, this is the most profitable individual precision farming component. Geo-referenced soil sampling technology ranked second before precision guidance technology. Yield monitor technology ranked forth before map-based field scouting technologies and variable rate technologies for other crop inputs. Boundary mapping technology and aerial/satellite field imaging technology were ranked the least profitable precision farming technologies. Overall, the results suggest that, across farmers, any of these individual technologies were profitable or at least neutral in their benefits and costs.

In summary, our data provides an update of the most recent trends in the adoption of precision farming technology in the state and confirms distinct differences between adopters and non-adopters. In particular, we found that operators of larger farms were shown to adopt precision farming technology at much higher rates than operators of smaller farms. The most important individual precision farming components for operators in Ohio were GPS technology, precision guidance, and yield monitor technology. Across farms, benefits of the adopted precision farming system were exceeding costs suggesting that precision farming was considered profitable by the average adopter. 

A full report of this study and additional information are available from: http://aede.osu.edu/programs/VanBuren/FarmerSurvey2010.htm.

Tax Benefit – Section 179 Expensing Increased from $250,000 to $500,000 for 2010 and 2011

The recently passed “Small Business Jobs Act of 2010” signed into law on Monday, September 27th allows for opportunity for sizable tax write offs for farmers in 2010 and 2011. In an effort to further jumpstart the economy, this Act raises the threshold on “Section 179 Expensing” from the current limit of $250,000 to $500,000 for tax years 2010 and 2011. The terms apply to new and used equipment. Previous law phased out the deductions as eligible purchases exceeded $800,000. The new ceiling for this phase-out has been raised to $2,000,000. The new Act also revived the 50 percent bonus depreciation for qualified property placed in service in 2010. These measures are meant to be an incentive for taxpayers to buy equipment.

Further information on the Act can be found at:

http://www.calt.iastate.edu/taxbill.html

http://www.sba.gov/jobsact/

2011 Ohio Corn, Soybean and Wheat Enterprise Budgets

Budgeting helps guide you through your decision making process as you attempt to commit resources to the most profitable enterprises on the farm. Crops or Livestock? Corn, Soybeans, or Wheat? We can begin to answer these questions with well thought out budgets that include all revenue and costs. Without some form of budgeting and some method to track your enterprises’ progress you’ll have difficulty determining your most profitable enterprise(s) and if you’ve met your goals for the farm.

Budgeting is often described as “penciling it out” before committing resources to a plan. Ohio State University Extension has had a long history of developing “Enterprise Budgets” that can be used as a starting point for producers in their budgeting process.

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).

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.