Ag Lender Seminars Scheduled for 2013

Bruce Clevenger & Rory Lewandowski, OSU Extension Educators

OSU Extension has scheduled four Agricultural Lender Seminars across Ohio in October. The purpose of the program is to update agricultural lenders on current agricultural issues and topics and to provide them with a knowledge base that will help them to understand potential clientele agricultural financing needs. The agenda is based on evaluations from previous seminars, input from lenders and Agricultural Extension Educators on high priority topics. Program locations and dates follow. All programs run from 9:30 am until 3:00 pm. Lenders, lending support teams and bank board of directors are encouraged to attend these informative and satisfying seminars.

Frankfort, OH – Ross County, October 23rd
Ottawa, OH – Putnam County, October 25th
Urbana, OH – Champaign County, October 28th
Wooster, OH – Wayne County, October 30th

Keynote speakers at all four 2013 seminars include Dr. William Edwards, Emeritus Professor, Iowa State University Department of Economics on Choosing Crop Insurance in 2014, Dr. Carl Zulauf, Professor, Ohio State University Department of Ag, Environmental, and Development Economics on Ag Policy Update, 2013, and Dr. Matt Roberts, Associate Professor, Ohio State University, Department of Ag, Environmental, and Development Economics on Lending and the Coming Income Crisis in Crops. Furthermore, additional topics have been included for each location to meet local needs and interests.

Seminar check-in begins at 9:00 am with the program scheduled from 9:30 am until adjournment around 3:00 pm. Cost of registration is $65/person. This fee covers facility rental, speaker costs, an educational materials packet, continental breakfast, lunch and associated costs. Pre-registration is requested to help plan for the meals and material packets that are needed. Please note the pre-registration deadlines in the enclosed brochure for seminar locations.

Contact Bruce Clevenger, OSU Extension Defiance County, for more information at 419-782-4771, or click on the link for a brochure that includes a complete agenda for each location along with a registration form.

A brochure with more detailed program topics and a registration form is available at: http://defiance.osu.edu/top-stories/ag-lender-seminars or:

Click here to access the registration brochure

Questions may be directed to the OSU Extension Defiance County office, phone number 419-782-4771 or by email at: clevenger.10@osu.edu

Shale Development, Ohio Agriculture, and Natural Gas Utilization

By: Douglas Southgate, Professor, Ohio State University Department of Agricultural, Environmental, and Development Economics and Associate Director of the Subsurface Energy Resource Center at Ohio State University

Hydraulic fracturing combined with horizontal drilling have unlocked untold volumes of oil and natural gas in deep shale formations – first in the United States, where the energy industry has taken the lead in this game-changing advance, and more recently in other parts of the world.

The impact on rural Ohio has been profound. In the eastern part of the state, hundreds of wells have been drilled into the Utica and Marcellus formations, with a thousand or more to follow. Pipelines have been or are being constructed within and beyond areas with active drilling, to carry the dry natural gas (or methane) used to heat homes and businesses and to generate electricity as well as the ethane and other natural gas liquids (NGLs) that the petrochemical and polymers sector transforms into myriad products. Rural landowners are reckoning with the consequences. Many of them have grown wealthy, thanks to the bonus and royalty payments received in return for the leasing of subsurface rights. All must deal with changes in the landscape as drilling pads, access roads, and pipelines are put in place.

For Ohio agriculture, shale development has another impact, one resulting from adjustments in the market for dry natural gas. As recently as 2008, gas prices in this country moved up and down with the value of crude oil and its derived products, such as gasoline and diesel fuel. Prices also spiked whenever hurricanes struck the Gulf Coast, where nearly one-fifth of this country’s gas was produced before shale development began around the turn of the twenty-first century and where terminals for liquefied natural gas (LNG) imports are concentrated. But during the past five years, the markets for gas and oil have decoupled, with dry gas consistently changing hands for less than $4.00 per thousand cubic feet (MCF) in spite of swings in the price of oil – which currently exceeds $100 per barrel.

Inexpensive and reliably supplied from domestic sources, natural gas is getting another look from a variety of energy users. In the electric power industry, generating electricity from gas is cheaper than any of the alternatives, not only because of the low price of gas but also owing to the unmatched efficiency of gas-fired turbines. Also interested in fuel conversion are government agencies and private businesses with fleets of vehicles (e.g., city buses, delivery trucks, etc.) that can be re-fueled at a central facility during off-peak hours. Agriculture, which accounts for approximately 7 percent of all off-road use of fossil fuels in the United States, is another potential market.

Already, some agricultural operations in Ohio rely on natural gas. Greenhouses with a connection to the existing pipeline system are a case in point. Others will find it relatively easy to switch fuels, such as farms with propane-fired grain driers that are located alongside a gas line and can make a connection at a modest expense. Some of these farms might choose to retrofit driers so that either gas or propane can be used, whichever is more economical at any given time.

For operations that are farther from existing pipeline networks, fuel conversion requires a larger expenditure. Extending a gas line can cost up to $1 million a mile. Moreover, it is normal for agricultural demand for energy to fluctuate. For example, a lot of fuel may be needed to dry grain one year, but very little twelve months later due to limited precipitation during the fall. This fluctuation diminishes the economic attraction of extending the pipeline network.

Extensions in the pipeline network would not be required to run tractors, combines, and other farm machinery on gas. One option would be to operate mobile implements on compressed natural gas (CNG). However, that fuel’s energy density is low, with a given volume of gas compressed to 3,600 pounds per square inch (PSI) containing approximately one-sixth the British thermal units (BTUs) of energy contained in an equal volume of diesel fuel. Furthermore, the only practical way to deliver CNG may be in canisters. If so, switching from diesel to CNG would require a series of adaptations and adjustments on the operator’s part. For one thing, machinery would have to be retrofitted to accommodate canisters. For another, refueling would have to occur frequently (with full fuel canisters replacing empty canisters) during the peaks of planting and harvesting seasons, when tractors and combines stay out in the field for days on end. Frequent refueling would be a direct consequence of the low energy density of CNG.

Instead of CNG, LNG could be used to power farm machinery. LNG’s energy density is about two-thirds the energy density of diesel fuel. However, liquefying natural gas costs is expensive, adding as much as $4 per MCF to the price of LNG. Distribution costs would be high as well. In addition, on-farm retrofitting would not be free.

Of all the farming areas in the United States, few are in as good a position as Ohio to benefit from the abundant supplies of affordable natural gas that are a product of shale development. With small and large cities scattered throughout the state and with a pipeline network that was extensive before shale development began and that is now expanding in response to shale gas extraction, many farmers in Ohio will find that the up-front costs of fuel conversion outweigh diminished expenditures on energy, so will continue to use diesel and other conventional fuels. But for other farmers, reduced energy expenditures will exceed up-front costs, thus favoring the switch to natural gas.

Buckeye Dairy Newsletter Has Key Management Articles

The September 2013 Issue of the Buckeye Dairy News has some management issues in their latest newsletter which may be of interest to many of the Ohio Ag Manager subscribers. The newsletter is posted at: http://dairy.osu.edu, then click on Buckeye Dairy News. Articles include:

Protecting Income Over Feed Cost Margin on U.S. Dairy Farms, Dr. Cameron Thraen, State Extension Specialist, Dairy

Markets and Policy, John Newton, Ph.D. Candidate, The Ohio State University, and Dr. Marin Bozic, Assistant Professor, Department of Applied Economics, University of Minnesota

The Cost of Nutrients and Comparison of Feedstuffs Prices, Dr. Normand St-Pierre, Extension Dairy Management Specialist, Department of Animal Sciences, The Ohio State University

Glyphosate-Resistant Palmer Amaranth Problems Developing in Ohio – What Dairy Producers Need to Know
, Dr. Mark Loux, Extension Specialist, Department of Horticulture and Crop Science, The Ohio State University

The Land of “MILC and Honey” – Dairy Policy Watch 2013, John Newton, Ph.D. Candidate, The Ohio State University

Ohio State University to Offer Series of Tax Schools Statewide, November and December

BY Tracy Turner, Staff Writer

COLUMBUS, Ohio – Experienced tax preparers wanting to learn about federal tax law changes and updates for this year as well as learn more about issues they may encounter when filing individual and small business 2013 tax returns can take advantage of a series of two-day income tax schools offered by Ohio State University’s College of Food, Agricultural, and Environmental Sciences.

The eight OSU Income Tax Schools will focus on interpreting tax regulations and recent changes in tax laws to help tax preparers, accountants, financial planners and attorneys advise their clients, said Larry Gearhardt, director of the Ohio State University Income Tax School Program of Ohio State University Extension.

OSU Extension is the statewide outreach arm of the college.

“The schools are an intermediate level course and will also include information on Ohio income taxes,” he said.

Participants in the tax schools will receive the 2013 National Income Tax Workbook prepared by the Land Grant University Tax Education Foundation especially for the income tax schools held in Ohio and 30 other states.

The tax schools will offer continuing education credit, including 100 minutes of ethics, for accountants, enrolled agents, attorneys and certified financial planners, Gearhardt said.

Topics include:

New Legislation
Affordable Care Act
Rulings and Cases
Individual Taxpayer Issues
Business Issues
Agricultural and Natural Resources Issues
IRS Issues
Tax Practice
Education Provisions
Construction Industry
Schedule E (Form 1040) Issues
Itemized Deductions
Natural Resources
Tax Issues in Divorce
Tax Rates and Useful Tables

The preregistration fee for each workshop is $325 with late registration $350. The fee includes all materials, lunches and refreshments. The first day program begins at 8 a.m. and adjourns at 5:25 p.m.; the second day resumes at 8:30 a.m. and concludes at 5:25 p.m. The deadline to enroll in the tax schools is 10 business days prior to the date of each school, Gearhardt said.

The eight tax school dates and locations are as follows:

Columbus – Nov. 12-13
Bridgewater Banquet and Conference Center
10561 Sawmill Parkway, Powell

Fremont – Nov. 14-15
Ole Zim’s Wagonshed
1375 State Route 590, Gibsonburg

Kent – Nov. 18-19
Kent State University-Student Center
Summit Street, Kent

Dayton – Nov. 20-21
Presidential Banquet Center
4548 Presidential Way, Kettering

Lima – Nov. 25-26
Old Barn Out Back
3175 W. Elm Street, Lima

Ashland – Dec. 3-4
Ashland University-Convocation Center
820 Claremont Ave. Ashland

Chillicothe – Dec. 5-6
Ross County Service Center
475 Western Ave., Chillicothe

Zanesville – Dec. 11-12
Ohio University-Zanesville Branch Campus Center
1425 Newark Road, Zanesville

More information on the workshops, including how to register, can be found at http://go.osu.edu/WsW. Participants may also contact Gearhardt at 614-292-2433 or by email at gearhardt.5@osu.edu

Preliminary 2014 Ohio Field Crop Enterprise Budgets

by: Barry Ward, OSU Extension, Leader, Production Business Management, Department of Agricultural, Environmental, and Development Economics

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, Wheat, Hay? 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.

Preliminary Enterprise Budgets for 2014 Ohio field crops have been completed and posted to the Farm Management Website of the Department of Agricultural, Environmental and Development Economics. Updated Enterprise Budgets can be viewed and downloaded from the following website:
http://aede.osu.edu/research/osu-farm-management/enterprise-budgets

Enterprise Budget projections updated for 2014 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 color coded cells that allow 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. Budgets include a date in the upper right hand corner of the front page indicating when the last update occurred.

The SMV Emblem means “Slow Moving Vehicle”

by Deborah Brown, OSU Extension Educator

What does that red and orange triangle with the cut-off corners mean to you? I would hope that you recognize it as a Slow Moving Vehicle (SMV) Emblem and that the vehicle to which it’s attached is moving at less than 25 miles per hour.

What does that red and orange triangle with the cut-off corners mean to a non-farmer, someone from town, the city, even a “rural resident”? When they see it, do they know to “slow down” because the vehicle bearing it is moving slowly? Or, have they been conditioned to ignore it because the last many times they saw it the vehicle it was on was going down the road at 45, 50, 55 miles per hour?

You know, what we practice is how we automatically respond: It’s called habit. So, if they get in the “habit” of not slowing down when they see an SMV Emblem because “the Emblem is always traveling close to my speed,” when they do happen to come up behind that tractor/wagon being driven by your wife/husband/kid that is going only 15-20 mph, how will they react??? It’s an accident waiting to happen!!

The SMV Emblem was developed by the Department of Agricultural Engineering at Ohio State University in 1962 in response to studies that showed about 65% of motor vehicle accidents involving Slow Moving Vehicles were rear-end collisions. We needed something to warn those coming up from behind that the tractor/wagon/equipment in front of them was going less than 25 miles per hour.

After much testing of various designs, it was found that a triangle-shaped emblem, with a 12-inch-high florescent orange center and three 1¾-inch-wide reflective borders was most effective for day and night visual identification. The “cut off corners” happened after field testing: One of the graduate students – Ted Gastier – took the prototype to his home farm in Erie county over Thanksgiving. Those 1950s/1960s-era tractors were rear-mount and the corners of the sign put numerous tears in his coveralls as he got on and off. That problem was solved by cutting off the corners which gave us the unique shape we have today! This year we celebrate the 50th anniversary of the dedication and introduction of the SMV Emblem.

So, how do we protect this icon so it can continue to protect us? We use it properly!!
• Clean, undamaged, not faded
• Visible 500 feet to the rear
• Triangle point facing upward
• Mounted perpendicular to the direction of travel, 20o+/- from the vertical
• Mounted 2’ to 10’ from the ground
• Located in the center or as near left-center of the implement as possible
• Securely/rigidly attached (No “blowin’ in the wind”!)
• MAXIMUM SPEED = 25 miles per hour
o Even when that wagon/implement is being pulled by a pick-up truck!
o Removed or covered when the vehicle is being transported on a truck or trailer (How many times have you seen that semi-truck going down the road with a tractor or other implement loaded on it and the SMV Emblem clearly visible to the rear?? What an impression that makes at 65/70 mph . . .)

Oh, yeah: There are now tractors designed to go over 25 mph. Do they need to have an SMV Emblem? Yes!! They also need to have an SIS – a Speed Identification Symbol – posted that shows the tractor’s maximum speed. This SIS needs to be visible 500’ to the rear. Any wagon or implement towed behind these tractors also need to show the SMV Emblem and the SIS. This law went into effect in October of 2007. (The SIS needs to be ASABE approved and can be obtained through your implement dealer.)

In addition, the operators of these tractors have to have documentation of the manufacturer’s stated maximum speed for the vehicle. The 2007 law also requires that anyone driving a tractor over 25 mph have a valid driver’s license, and it created a duty to operate any agricultural tractor with “reasonable control.” (NOTE: A driver’s license is not required as long as any tractor/implement is being driven less than 25 mph, even if the tractor/implement is designed to go faster.)

As a farm manager, it is your responsibility to ensure that those working with you know, understand, and practice safe procedures. Using the SMV Emblem properly is one of the Most Important procedures to practice! Be sure your workforce knows and understands the rules.

Practicing proper procedures can help protect all of us from rear-end collisions. It’s the responsibility of all of us to re-condition other drivers so that the SMV Emblem means “Slow Moving Vehicle.”

Sources used: http://dticreative.com/client/WrightLaw/beta/wp-content/uploads/2012/12/SISFactSheet.pdf; http://agsafety.osu.edu/smv-emblem.
See also – Fact Sheet AEX-598-08 on Visibility of Ag Equipment:
http://ohioline.osu.edu/aex-fact/pdf/AEX_598_08.pdf

OSU to Offer Ag and Natural Resource Tax Issues Workshop

Tax preparers and farmers who file their own farm tax returns have an opportunity to participate in OSU Extension’s Agriculture and Natural Resource Tax Issues Workshop on December 19, 2013.  The day long webinar-based workshop features Professor Phil Harris of … Continue reading

Ohio Budget Bill Changes Property Tax Rollbacks

by Larry Gearhardt, OSU Field Specialist, Taxation

Every two years, the Ohio General Assembly has the formidable task of passing a biennial budget for the state. Unlike the federal budget, the budget for Ohio is required to be a balanced budget. This year, H.B. 59 was passed and signed by the Governor on July 1. This budget will take Ohio through 2014 and into 2015.

Ohio’s budget contains numerous tax provisions that affect taxpayers. For example, the state sales tax was increased from 5.5% to 5.75%. The state income tax rate was decreased by 10%. The Commercial Activity Tax (CAT) was removed from the sale of motor fuels and replaced by a new motor fuels tax. But perhaps the most impact will be felt by landowners with the eventual elimination of the ten percent and two and one-half percent real property tax rollbacks. The Homestead Exemption was also adjusted.

Since 1971, Ohio’s landowners have enjoyed a ten percent reduction in total real property tax on non-business property (with the exception of farming, which is considered non-business use for this reduction) and a two and one-half percent reduction in the tax due on the value of an owner occupied home. These rollbacks were passed to lessen the opposition of Ohio voters to the adoption of a state income tax. The state has been reimbursing local governments for the lost revenue, which in 2012 totaled $1.7 billion.

This year’s biennial budget contains language which phases out these reductions. The new law says that the ten percent and two and one-half percent rollbacks will no longer apply to new levies that are enacted after August 31, 2013. These non-qualifying levies include any additional levies, the increase portion of any renewal levy that contains an increase, and the full effective millage of replacement levies. Levies that will continue to qualify for application of the rollbacks are levies approved at or before the August 2013 election, inside millage and charter millage as they appear on the 2013 tax list, renewals of qualified levies (i.e. those without an increase), and the substitute of qualified school district emergency levies under Revised Code section 5705.199.

In order to avoid confusion by the taxpayer, the nomenclature will be changed on the tax bills. The ten percent rollback will now be called the “Non-business Credit” and the two and one-half percent rollback will be referred to as the “Owner Occupancy Credit.” This change is necessary because the implementation of these changes will reduce the ten percent and the two and one-half percent rollbacks over time so that the landowner will not be receiving a full ten percent and two and one-half percent reduction. The new terms have been taken directly from H.B. 59.

The Homestead Exemption has also been adjusted and will now become a means-tested exemption. Under the old law, any Ohio landowner who currently lives in their home and that home is their primary residence, qualifies for an exemption if:
• He is at least 65 years old or will reach age 65 during the current tax year; or
• He is certified totally and permanently disabled, regardless of age; or
• Is the surviving spouse of a qualified homeowner, and who was at least 59 years old on the date of the spouse’s death.

Eligible homeowners were able to shield $25,000 worth of the market value of their home from local property taxes. Beginning with the tax year 2014, new participants in the homestead exemption program will be subject to a means test. The exemption will only be available to those otherwise eligible taxpayers with household incomes that do not exceed $30,000, as measured by Ohio adjusted gross income for the preceding year. That amount will be indexed to inflation each fall and is expected to be around $30,400 for tax year 2014. Existing homestead exemption recipients will continue to receive the credit without being subject to the income test.

It is important to note that in order to be exempt from the means test, the homeowner must actually receive a homestead exemption credit for tax year 2013. This means that a homeowner who is not receiving the homestead exemption credit for tax year 2012 must file an application by June 2, 2014 to secure the exemption for tax year 2013. Otherwise, the homeowner will be subject to the income test for all future years.

Homeowners who received a homestead exemption credit for tax year 2013 will never be subject to the income requirement even if they move to another Ohio residence. In other words, the grandfather status is “portable” and is associated with the individual alone, rather than with a particular residence.

Employer Notice to Employees Due October 1, 2013 Under Affordable Care Act

by Larry Gearhardt, OSU Field Specialist, Taxation

An important notice requirement for employers is fast approaching under the Affordable Care Act. Employers who are subject to the Fair Labor Standards Act (FSLA) are required to provide a notice to their employees of the availability of insurance coverage under the ACA exchanges. This notice is due October 1, 2013. An excellent explanation of this notice requirement appeared in the August 22, 2013, edition of TAXPRO WEEKLY and is reprinted below.

Notice of Coverage to Employees
The Affordable Care Act (ACA) requires employers to provide all new hires and current employees with a written notice about ACA’s Health Insurance Marketplace, or exchanges, by October 1, 2013. This requirement is found in Section 18B of the Fair Labor Standards Act (FLSA). ACA’s exchange notice requirement applies to employers that are subject to the FLSA. Employers must provide the exchange notice to each employee, regardless of plan enrollment status or part-time or full-time status. Employers are not required to provide a separate notice to dependents or other individuals who are or may become eligible for coverage under the plan but who are not employees. Employees hired after October 1, 2013, must be provided this notice within 14 days of the employee’s start date.

The exchange notice should inform employees about the existence of the exchange and describe the services provided and the manner in which the employee may contact the exchange to request assistance. The notice should also explain how employees may be eligible for a premium tax credit or a cost-sharing reduction if the employer’s plan does not meet certain requirements. The notice must also inform employees that if they purchase coverage through the exchange, they may lose any employer contribution toward the cost of employer-provided coverage, and that all or a portion of this employer contribution may be excludable for federal income tax purposes. The notice should include contact information for the exchange and an explanation of appeal rights. The Department of Labor has provided two sample exchange notices, one for employers who offer a health plan to some or all employees and one for employers who do not offer a health plan.

Employers may use one of these models, as applicable, or a modified version, provided the notice meets the content requirements described above.
Featured in TAXPRO Weekly – August 22, 2013

WHICH EMPLOYERS ARE SUBJECT TO THE FAIR LABOR STANDARDS ACT?
If employers subject to the Fair Labor Standards Act are required to give the notice, the question then becomes, “Am I subject to the FLSA?”

The FLSA establishes minimum wage, overtime pay, recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector and in Federal, State, and local governments. The FLSA is a very complex and extensive law. For the purposes of this article, the discussion about the FLSA is general in nature and readers are advised to consult with professionals to determine if the FLSA applies to them.

There are two ways that an employer can be subject to the FLSA: “enterprise coverage” and “individual coverage.” An “enterprise” is covered if it has an annual dollar volume of sales or business done of at least $500,000 and employs another person other than a family member. An “individual” is covered if their work regularly involves them in interstate commerce. The FLSA covers individual workers who are “engaged in commerce or in the production of goods for commerce.”

Agriculture is considered an industry that is included in interstate commerce. However, agricultural employers are exempt from the minimum wage and the maximum hour limitations if the employer used less than 500 “man-days” of farm labor in any calendar quarter of the preceding calendar year. A “man-day” is considered any day that an employee worked one hour or more during a day. Special rules apply to agricultural employers that use farmworkers who are paid on a piece rate basis.

It is unlikely that agricultural employers will be subject to the October 1, 2013, notice requirement to employees because of the foregoing exemptions. However, if there is any question whether or not the employer is subject to the Fair Labor Standards Act, it is highly recommended that the employer consult with a professional.

Refrains in the phosphorus discussion

Brent Sohngen, AED Economics, Ohio State University
September, 2013.

When talking about how we regulate phosphorus, I hear the same refrains over and over again.

The first one goes something like this: We have solved the attached P problem, now we just have to find the right tools to solve the soluble P problem. These tools invariably include things like reducing winter manure applications, the 4 Rs, cover crops, trapping nutrients in-stream with two-stage ditches, etc.

The second one is: Phosphorus inputs have been declining since the 1970s. Isn’t this evidence that farmers are doing their share to reduce the pollution problem?

Absolutely, there is truth to each of these, but my take on the policy lessons and the implications for what we should do next are completely different than most others (go figure).

Let’s look more closely at the attached P problem we have “solved.” One of the vexing problems with phosphorus in watersheds is that it is so persistent. We have added a lot over the years to our crop systems, and our crops have only used about 40% of what we have added in the past 40 years (Figure 1). The rest remains in the ecosystem or is removed by our rivers. The problem of course, is the part that is removed by our rivers and ends up in our lakes, particularly in soluble form.

Is it?

By my calculation, we have accumulated an astonishing 300 lbs of P per acre of farmland in the Maumee river basin (Figure 2). Using a conversion of 2 lbs of P per 1 ppm, this means that about 150 ppm is attached to soils somewhere in the ecosystem, whether it’s in farmer’s fields, or stream banks, or other parts of the ecosystem in NW. The results probably are not that much different across most other parts of the state or region.

Most of this P is unavailable right now to crops, given that soil tests in Northwest Ohio soils are in the 30-40 ppm P range for available P according to Hermann (2011). Converting to pounds, around 60-80 lbs. P per acre are available for crops, which is actually more than the 25-35 lbs. P (60-80 lbs P2O5) that farmers add to each acre of corn each year. Of these, 15-21 lbs. are removed in crops each year, leaving 10-14 lbs P in stalks and soils, to be further distributed in the ecosystem during the non-growing season.

These numbers are probably an under-estimate of what is left in the ecosystem actually. I have left out inputs due to animal manure. According to Bruuselma et al. (2011), manure P inputs are about 31% of chemical P inputs, so my P input estimate is actually underestimated by quite a lot.

The issue to me is that our effectiveness at trapping P has left a lot of P out there in the ecosystem for us to deal with today. I agree that reducing P inputs will not solve this historical problem right away, but neither will our efforts to continue to trap additional nutrients via our traditional conservation programs. Even supposedly new conservation methods that do nothing more than trap P will not solve the problem, now or in the future.

Now, consider the refrain about declining P input trends. Figure 1 clearly shows that chemical P inputs have declined since their highs of the mid-1970s. In addition, P removal by crops has continued to increase as yields have increased. Removals by the river have fluctuated, but stayed relatively stable in overall terms. River removal is a fairly small part of the total.

So we have added lots of P, but we are adding less and less and our crops are taking up more and more. That’s essentially the point Bruuselma et al. (2011) made, although they suggested that we were nearing the point where P inputs needed to start rising again in order to maintain crop yields.

The question really is, why have we been adding less and less? There are lots of reasons, and I’ll just mention the two most important. First, the aggregate numbers reported by me and others capture corn, soybeans, and wheat. Since the mid-1970s Northwest Ohio has increased soybean acres and reduced corn and wheat acres. Historically only about 34% of soybean acres receive P treatments, compared to over 90% for wheat and corn. And the rates are about 40% less for soybeans than corn. So, in the last 40 years, we have shifted to a less P intensive crop in NW Ohio and it has slowed our overall P application.

Second, looking at the individual crops, P application rates fell modestly from the 1970s to the early 2000s for corn, but actually rose a bit for soybeans and wheat. Then between 2006 and the present, P application rates fell for all crops, and by quite a lot. You can see this in Figure 1 where P inputs have fallen substantially overall. This could be the effect of growing concerns with the environmental effects of P, but I doubt it. The other “thing” that happened after 2005 was a really large increase in P input prices (Figure 3).

Based on this, I’m inclined to believe that the reduction in P inputs from the 1970s to early 2000s was largely driven by crop switching, while the reduction from 2005 to the present was mostly driven by rising prices. Nothing guarantees that these two trends will last forever. In fact, lower energy prices with hydraulic fracturing, or fracking, may drive down the price of P to “normal” levels. This will lead to increases in P use by farmers.

In summary, my concerns with the refrains I keep hearing and my responses are as follows:

(1) I agree, we have done a great job of trapping P in our soils and our ecosystem. Was this really such a good idea? There are really large levels of P out there somewhere in the ecosystem and they are likely to be contributing to our current problems. Should we continue trying to trap P in the ecosystem or should we just reduce P inputs? In addition to filter strips, riparian zones, and conservation tillage, cover crops and two-stage ditches are another form of trapping. I fail to see how more P trapped in the ecosystem equates with better environmental outcomes in the future.

(2) There is no reason why farmers will not go back to increasing P applications when P prices fall. This is particularly true if P applications enhance yields. I believe they do, after all yields have stagnated since the early 2000s at precisely the time when P applications fell the most.

(3) Philosophically, the more we believe in trapping, the less incentive we have to reduce P inputs or even economize on them (i.e., use the 4R’s), especially when prices for P fall.

(4) The 4 R’s are an outstanding guidepost. In fact, the reason why farmers have been receptive at all to the 4 R’s in recent years is that P prices have been so high. When an input is valuable, people don’t waste it. The 4 R’s exhort people not to waste their inputs.

(5) Going forward, the best way to enforce a broad-based application of the 4 R’s is with a tax on P inputs. Then everyone will have an incentive to use the 4 R’s even when P prices fall. Otherwise, as P prices fall, which they probably will, P applications will start to rise again. For completely different reasons, Bruuselma et al. (2011) advocate that P applications should start to increase as farmers use up the chemically available portion in farm fields. With a tax on P, we can ensure that this is done in an environmentally sensitive way.

(6) You will notice here that I fully accept the notion that reducing P will have an impact on crop yields. There is no free lunch. If we want to reduce P in our ecosystems, someone somewhere will have to pay. Right now, the system is set up so that society pays for lots of things that don’t solve the problem through conservation programs. My proposal clearly redistributes the costs towards farmers through taxes on inputs.

(7) To avoid having this be a large financial loss to farmers, I propose using some of the money in the conservation programs, and just simply giving that money to farmers in order to make them financially whole from the higher input taxes. This is the most efficient way to handle a pollution problem, and neither farmers nor society will be worse off than they are now. In fact, both will be better off in the future with better water quality.

References:

Bruuselma, T. W., R. W. Mullen, I. P. O’Halloran, and D. D. Warncke. 2011. “Agricultural phosphorus balance trends in Ontario, Michigan and Ohio.” Canadian Journal of Soil Science 91:437-442.

Heidelberg University. 2012. National Center for Water Quality Research.
http://www.heidelberg.edu/academiclife/distinctive/ncwqr

Hermann, MC. 2011. “ Laboratory Evaluation and Soil Test Phosphorus Trends in Ohio” Unpublished Master’s Thesis, School of Environment and Natural Resources, Ohio State University.

USDA-NASS. 2013. US Department of Agriculture, National Agricultural Statistics Service Quickstats database. http://www.nass.usda.gov/Quick_Stats/

World Bank Data. 2013. http://data.worldbank.org/


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