Farm Office Live Session Slated for Thursday, May 14 from 9:00 to 10:30 a.m.

OSU Extension is pleased to be offering the a “Farm Office Live” session on Thursday morning , May 14 from 9:00 to 10:30 a.m.  Farmers, educators, and ag industry professionals are invited to log-on for the latest updates on the issues impact our farm economy.

The session will begin with the Farm Office Team answering questions asked over the ten days.  Topics to be highlighted include:

  • Updates on the CARES Act, Payroll Protection Program, Economic Injury Disaster Loan (EIDL), and Coronavirus Food Assistance Program (CFAP) Update
  • Corn and soybean budgets
  • Supply and demand balance sheets
  • Other legal and economic issues

Plenty of time has been allotted for questions and answers from attendees. Each office session is limited to 500 people and if you miss the on-line office hours, the session recording can be accessed at farmoffice.osu.edu the following day.  Participants can pre-register or join in on Thursday morning at  https://go.osu.edu/farmofficelive 

Paid Sick Leave and COVID-19: Requirements & Tax Credits Under the Families First Coronavirus Response Act

Written by Barry Ward, Leader, Production Business Management and Director, OSU Income Tax Schools

In our recent Farm Office Live webinars, we’ve discussed the paid sick leave provisions in the Families First Coronavirus Response Act.  The new law recognizes that many employees have been forced by COVID-19 to stay home rather than report to work.  In such cases, the law obligates employers to provide paid sick leave but also gives federal tax credits to employers for doing so.  Here’s a summary of how the law works.

Emergency paid sick leave provision

Employers with less than 500 employees are required to provide paid sick leave to employees who are unable to work (or telework) if they have become ill with COVID-19, have similar symptoms, or must provide care to someone with COVID-19 issues.  Employees who have to care for children due to school or day care closure are also eligible for partial paid sick leave. Employers are required to provide 100 percent of the usual pay rate to an employee if they have COVID-19 or the related symptoms, up to $511 per day. If they’re unable to work due to the need to care for an affected individual or to care for children due to school or daycare closure, the employee must be paid 2/3rds of their usual pay rate up, up to $200 per day.

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Expanded family leave provision

A second provision, the expanded family leave provision, requires employers to provide employees with up to 12 weeks of leave for COVID-19-related needs.  This leave requirement applies to employees who are unable to work due to having to care for children whose school or daycare is closed or unavailable because of COVID-19.   The first ten days of the expanded family leave are unpaid (a deductible of sorts), although the employee can use the “emergency paid sick leave provision” or accrued sick leave to cover these days if necessary.  After the first ten days, the employee is eligible to receive 2/3rd of regular pay for the remaining ten weeks, capped at $200 per day.

Note that employers with fewer than 50 employees are eligible for an exemption where the viability of the business would be threatened.  The exemption applies to the requirements to provide leave to care for a child whose school is closed or if child care is unavailable.

Employer tax credits to fully compensate for required leave

This new law provides corresponding refundable tax credits to equal all required leave provided by an employer whether the leave was required and provided under the emergency paid sick provision or the expanded family leave provision.  The credits are refundable payroll tax credits, designed to immediately and fully reimburse employers, dollar-for-dollar, for the cost of providing the required leave to their employees.

To receive the credit, employers hold on to payroll withholding as offset. Payroll withholding that can be held as this tax credit includes withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.  If this amount isn’t enough to provide the full tax credit due the employer, the employer will have to file a return with the IRS.  More information on how to claim these credits is available at: https://www.irs.gov/newsroom/covid-19-related-tax-credits-how-to-claim-the-credits-faqs

Additional details are available on the U.S. Department of Labor’s “Families First Coronavirus Response Act: Employer Paid Leave Requirements” page, here: https://www.dol.gov/agencies/whd/pandemic/ffcra-employer-paid-leave

Registration Now Open for May 6 Annie’s Virtual Reunion

By: Amanda Douridas, Extension Educator

Those who have participated in an Annie’s Project understand the camaraderie and friendships that are developed during the course. They also understand the value of education to improve the farm operation. Keeping those two points in mind, the Ohio Women in Ag team is hosting a virtual Annie’s Reunion on May 6 from 9-11 a.m.

The reunion will allow past participants to catch up with each other through virtual breakout rooms and further expand their education through 3 different tracts: Farm Management, Livestock and Food. The opening session will provide resources and inspiration for the unique challenges farms are facing right now. Breakout sessions include grain and livestock market updates, backyard poultry, food prep and preservation and more. Those who have not participated in an Annie’s Project are also invited to attend to learn more!

Registration is open until noon on May 5 at http://go.osu.edu/AnniesReunion. For questions, please contact Amanda Douridas at Douridas.9@osu.edu.

Those who have not had the opportunity to participate in an Annie’s Project are welcome to join us as well. Annie’s Project is a national program focused on farm management education for farm and ranch women. The course consists of 18 hours of education 5 risk areas: financial, human resources, legal, market and production. For more information, visit https://www.anniesproject.org/. Contact Gigi Neal if interested in learning about upcoming programs at neal.331@osu.edu or 513-732-7070.

Economic Assistance for Agriculture during COVID-19

written by: David L. Marrison, Associate Professor & Extension Educator, Coshocton County; Ben Brown, Assistant Professor, Department of Agricultural, Environmental, and Development Economics; Barry Ward, Director, OSU Income Tax Schools & Leader, Production Business Management; Peggy Hall, Associate Professor, Agricultural & Resource Law, Director, OSU Agricultural & Resource Law Program; and Dianne Shoemaker, Field Specialist, Dairy Production Economics

Click here for PDF Version of this article.

The coronavirus pandemic has certainly altered all our lives. The impact is being felt by families, businesses, governmental agencies, and civic organizations.  To help families and businesses alike, various levels of government have passed legislation to help lessen the economic blow of COVID-19. This article provides a brief overview of some of the assistance which has been made available. These include tax deadline provisions, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, Families First Coronavirus Response Act, Ohio Bureau of Workers’ Compensation rebates, unemployment compensation, and Wind and Hurricane Indemnity Program, Plus (WHIP+)

Tax Deadline Extensions:

On March 21, 2020, the Internal Revenue Service extended the federal tax filing deadline for 2019 taxes from April 15 until July 15, 2020.  The IRS encourages any taxpayer who is owed a refund to file as quickly as possible. The Ohio General Assembly through House Bill 197 also extended the deadline on March 25, 2020 to file Ohio Taxes until July 15, 2020.

Coronavirus Aid, Relief, and Economic Security (CARES) Act

The CARES” Act was signed into law by President Trump on March 27, 2020. The CARES Act contains several provisions designed to sustain Americans during the COVID-19 health and economic crisis. Discussed here are the Paycheck Protection Program (PPP), the Coronavirus Food Assistance Program (CFAP) and the Deferred Payroll Tax Program.

Paycheck Protection Program

The Paycheck Protection Program expands the Small Business Administration (SBA) loan program for 100% federally-guaranteed loans to small employers and eligible self-employed individuals impacted by COVID-19. These loans are designed to be forgivable if specific requirements are met.  Unlike many other SBA programs, farms/agricultural businesses are eligible provided they employ fewer than 500 employees.  Eligible self-employed individuals including independent contractors may apply for a loan.

The SBAs guidance provides that the PPP loan proceeds can be used by a Schedule F filer for the following:

  • Owner compensation replacement, calculated based on 2019 self-employment income.
  • Employee payroll costs for employees whose principal place of residence is in the United States.
  • Eligible mortgage interest payments on any business mortgage obligation on real or personal property, business rent payments, and business utility payments.
  • Interest payments on any other debt obligations incurred before February 15, 2020.
  • Refinancing an SBA EIDL loan made between January 31, 2020, and April 3, 2020.

The program has a maximum loan amount of the lesser of either $10 million or 250% of the average monthly payroll costs in the one year prior to the loan plus refinanced Economic Injury Disaster loans received after January 31, 2020.  This loan has a maturity of 2 years and an interest rate of 1%. A borrower is eligible for loan forgiveness in an amount equal to the sum of certain payroll, mortgage interest, rent, and utility payments made during the 8-week period after the loan’s origination date.

Farms/businesses can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating.   The program is a first come first served program and the initial budget allocation of $349 billion allocation was exhausted by April 16, 2020.  A second allocation of $310 billion was approved by Congress and signed by President Trump on April 24, 2020.  Applications for the second round began to be accepted on Monday, April 27, 2020.  This additional funding is expected to be exhausted quickly so farms and agribusinesses should apply as soon as possible.

More information about the program can be found at:

https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program-ppp

or at: https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businesses

Economic Injury Disaster Loans Program (EIDL)

Farm businesses and agricultural cooperatives with no more than 500 employees may also now apply for EIDL, which gives loans up to $2 million for businesses that suffer economic injuries due to COVID-19.  Because the program ran out of funds, there is a backlog in EIDL applications and the SBA is not reopening the loan portal until it catches up with the backlog.  If SBA does reopen the program, businesses apply directly through the SBA at: https://www.sba.gov/disaster-assistance/coronavirus-covid-19

Businesses may use an EIDL loan for fixed debt, payroll, accounts payable, and other operating expenses due to the pandemic, but cannot use the funds for the same purposes as the borrower’s PPP loan.  The interest rate for EIDL is higher at 3.75% (2.75% for non-profits), but the term can be up to 30 years.

EIDL also includes an “emergency advance” component that provides a $10,000 advance within a few days of submitting an application.  A borrower doesn’t have to repay the advance, even if the borrower doesn’t ultimately qualify for a loan.  But if the borrower also has a PPP loan, the PPP forgiveness is reduced by the $10,000 EIDL advance.  The emergency advance can go towards paying sick leave, payroll, increased materials costs, rental or mortgage payments, or other obligations due to revenue losses, as long as the borrower hasn’t used PPP funds for those costs.

Coronavirus Food Assistance Program (CFAP)

The CARES Act also allocated $48.7 billion dollars to the United State Department of Agriculture to mitigate the effects of COVID-19 on the production and supply of the United States’ food. On April 17, the preliminary details about CFAP were released by the U.S. Department of Agriculture (USDA) for this program targeted to assist farmers, ranchers, and consumers in response to the COVID-19 pandemic. The CFAP provides $19 billion in funds

The $19 billion program includes two major elements. The first element is for direct support to farmers and ranchers. This program can provide up to $16 billion in direct support to farmers based on actual losses where prices and market supply chains have been impacted by COVID-19. The program will also assist producers with additional adjustment and marketing costs resulting from lost demand and short-term oversupply for the 2020 marketing year caused by COVID-19.

It has been reported, although not confirmed by the USDA, that in the direct support program, $5.1 billion will be allocated to support cattle producers, $3.9 billion for row crop producers, $2.9 billion for dairy, $2.1 for specialty crops, $1.6 billion for hog producers and $500 million for other commodities.

The Chairman of the Senate Agricultural Appropriations sub-committee has indicated the direct assistance to farmers will be made with one payment comprised of the sum of two parts. The first part is 85% of the losses incurred between January 1 and April 15, 2020 (per commodity). The second part will be 30% of the projected loss in market prices due to COVID-19 between April and October 15. Secretary Perdue has expressed that payments are intended to be made by end of May or early June. To qualify for a payment, a commodity must have declined in price by at least 5% between January and April 15, 2020. While several entities have illustrated price declines, including The Ohio State University, the price series USDA will use to determine eligibility is uncertain.

Federal payment limits apply, set at $125,000 per commodity with an overall limit of $250,000 per individual or entity. USDA has indicated that CFAP may take into consideration other farm program benefits when calculating payment limitations, which could limit CFAP payments in cases where a producer is receiving payments in other federal safety net programs. The exact program limitations and qualifying support are unknown at the present time. The direct payment program will be administered by the Farm Service Agency and the Agricultural Marketing Service.  More details will be forthcoming by the Farm Service Agency in the upcoming weeks. Access more information at: https://www.fsa.usda.gov/

The remaining $3 billion dollars of the CFAP allocation will be used for a USDA purchase and distribution program.  In this program, the USDA will partner with regional and local distributors to purchase $3 billion in fresh produce, dairy, and meat. The USDA will purchase an estimated $100 million per month of fresh fruits and vegetables, $100 million per month of a variety of dairy products, and $100 million per month of meat products. The distributors and wholesalers will then provide a pre-approved box of fresh produce, dairy, and meat products to food banks, community and faith-based organizations, and other non-profits to distribute. Monthly purchases totaling $300 million will continue until the funds are exhausted.  Costs of purchasing products, and the packaging and distribution contracts are included in the $300 million per month purchases, so actual product purchases will be somewhat less than $300 million.

Deferred Payroll Tax Program

The CARES Act also includes a Deferred Payroll Tax Program which provides employers the opportunity to temporarily defer payment of the employer’s portion of the social security tax.  It should be noted that this program can only be used if you are not using the Paycheck Protection Program or have a loan forgiven by the Small Business Administration.  Self-employed individuals may defer ½ of the self-employment tax. The delay is granted through the end of 2020, then taxes must be repaid in two equal installments on Dec. 31, 2021 and Dec. 31, 2022.

The complete CARES legislation can be found at: https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf

Families First Coronavirus Response Act (FFCRA or Act)

The FFCRA requires certain employers to provide their employees with paid sick leave or expanded family and medical leave for specified reasons related to COVID-19. The Department of Labor’s (Department) Wage and Hour Division (WHD) administers and enforces the new law’s paid leave requirements. These provisions will apply through December 31, 2020.

The Act requires private employers with fewer than 500 employees to provide paid sick leave when an employee is unable to work (or telework) due to a COVID-19 related illness.  The provisions include two weeks (80 Hours) of paid sick leave paid at the employee’s regular rate (capped at $511/day) if the employee is quarantined and/or experiencing COVID-19 symptoms and is seeking a medical diagnosis.  The provisions also include two weeks (80 hours) of paid sick leave at 2/3 of the employees regular rate (capped at $200 per day) if the employee is unable to work because they are caring for an individual with COVID-19 related illness or caring for children (under age of 18) if school/childcare is closed due to COVID-19.

A covered employer must provide expanded paid family and medical leave for up to an additional 10 weeks at 2/3 of the employee’s regular rate of pay (capped at $200 per day) when an employee is unable to work due to caring for a child whose school/day care provider is closed or unavailable due to COVID-19.  Employers with fewer than 50 employees are eligible for an exemption from the requirements to provide leave to care for a child whose school is closed, or child care is unavailable in cases where the viability of the business is threatened.

Tax Credit: The Families First Coronavirus Response Act does provide business tax credits.  Employers qualify for reimbursement through tax credits for all qualifying wages paid under FFCRA (dollar for dollar).

Ohio Bureau of Workers’ Compensation Rebates

The Ohio Bureau of Workers’ Compensation’s Board of Directors approved on April 10, 2020 to send up to $1.6 billion to Ohio employers to ease the economic impact of the coronavirus (COVID-19) pandemic on Ohio’s economy and business community. The Ohio Bureau of Workers’ Compensation is currently issuing dividends approximately equal to the 2018 premiums paid by the business less any outstanding balances and premiums due for March, April, and May 2020. Farms do not have to apply for this dividend as they will be automatically issued by the Ohio Bureau of Workers Compensation. The checks will expire in 90 days of issuance. More information can be found at: https://www.bwc.ohio.gov/downloads/blankpdf/COVID-19-BWCFAQs.pdf

Wind and Hurricane Indemnity Program, Plus (WHIP+)

This is not a program specifically related to Covid-19, rather the “plus” in this USDA program refers to the non-wildfire and hurricane weather conditions experienced in 2018 and 2019.  Farmers who suffered losses to crops, bushes, vines or trees in 2018 and 2019 due to excess moisture or D3-D4 drought are eligible for WHIP+. All counties minus Cuyahoga County in Ohio are eligible in 2019 or if producers can provide documentation of losses from qualified natural disasters.  More details about this program can be found at:  https://u.osu.edu/ohioagmanager/2020/04/22/whip-not-only-applies-to-baseball-enrollment-at-fsa-now-open/

Unemployment Compensation

FFCRA provided additional flexibility for state unemployment insurance agencies and additional administrative funding to respond to the COVID-19 pandemic. The CARES Act also expanded the ability of each state to provide unemployment insurance for workers who are not ordinarily eligible for unemployment benefits including self-employed and 1099 individuals.  The program is expected to open in mid-May.

More information about unemployment compensation can be obtained by contacting the Ohio Department of Job & Family Services at 1-877-644-6562 or http://jfs.ohio.gov/ouio/index.stm

More information on these programs can be found at:

The Treasury Department

https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businesses

Small Business Administration

https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program-ppp

CARES Legislation

https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf

Department of Labor – Families First Coronavirus Response Act

https://www.dol.gov/agencies/whd/pandemic/ffcra-employer-paid-leave

Paycheck Protection Program Offers Forgivable Loans for Eligible Small Businesses.  Kristine A. Tidgren.

https://www.calt.iastate.edu/blogpost/paycheck-protection-program-offers-forgivable-loans-eligible-small-businesses

Ohio Bureau of Workers Compensation

https://www.bwc.ohio.gov/

Latest COVID-19 legislation to provide more funds for farm businesses

https://farmoffice.osu.edu/blog/mon-04272020-1142am/latest-covid-19-legislation-provide-more-funds-farm-businesses

Ohio Department of Job & Family Services

http://jfs.ohio.gov/ouio

Note

This was written and published on April 27, 2020.  Please be advised that further guidance and changes are being released by the agencies for each of the programs highlighted in this document.  Check with each agency for clarification and modifications for each of these programs.

Farm Office Live on Monday April 27

OSU Extension is pleased to be offering the third session of “Farm Office Live” session on Monday evening, April 27, 2020 from 8:00 to 9:30 p.m.  Farmers, educators, and ag industry professionals are invited to log-on for the latest updates on the issues impact our farm economy.

The session will begin with the Farm Office Team answering questions asked over the past week.  Topics to be highlighted include:

  • Update on the CARES Paycheck Protection Program
  • Economic Injury Disaster Loan (EIDL)
  • Coronavirus Food Assistance Program (CFAP) Update
  • Ethanol and biofuel update
  • ARC and PLC Forecasts
  • Other legal and economic issues

Plenty of time has been allotted for questions and answers from attendees. Each office session is limited to 500 people and if you miss the on-line office hours, the session recording can be accessed at farmoffice.osu.edu the following day.  Participants can pre-register or join in on Monday evening at  https://go.osu.edu/farmofficelive 

Join OSU Extension for Farm Office Live on April 20

OSU Extension is pleased to be offering the third session of “Farm Office Live” session on Monday evening, April 20, 2020 from 8:00 to 9:30 p.m.  Farmers, educators, and ag industry professionals are invited to log-on for the latest updates on the issues impact our farm economy.

The session will begin with the Farm Office Team answering questions asked over the past week.  Topics to be highlighted include:

  • Update on the CARES Paycheck Protection Program (It is out of money!)
  • WHIP+
  • Update on commodity prices
  • Update on Dairy Margin Coverage program
  • Update on Unemployment compensation
  • Other legal and economic issues

Plenty of time has been allotted for questions and answers from attendees. Each office session is limited to 500 people and if you miss the on-line office hours, the session recording can be accessed at farmoffice.osu.edu the following day.  Participants can pre-register or join in on Monday evening at  https://go.osu.edu/farmofficelive 

“Farm Office Live” returns Monday, April 13 at 8:00 p.m.

OSU Extension is pleased to be offering a second “Farm Office Live” session on Monday evening, April 13, 2020 from 8:00 to 9:30 p.m.  Farmers, educators, and ag industry professionals are invited to log-on for the latest updates on the issues impact our farm economy.

The session will begin with the Farm Office Team answering questions asked over the past week.  Topics to be highlighted include:

  • Update on the CARES Paycheck Protection Program
  • Update on the Dairy Economy
  • Examination of how COVID-19 is impacting agricultural exports
  • Bureau of Workers Compensation’s announcement  of dividend returns
  • A look at the long term macro economic impact of COVID-19
  • Will property taxes be delayed?
  • Potential Legal Impacts of COVID-19

Plenty of time has been allotted for questions and answers from attendees. Each office session is limited to 500 people and if you miss the on-line office hours, the session recording can be accessed at farmoffice.osu.edu the following day.  Please register at  https://go.osu.edu/farmofficelive 

The OSU Farm Office is Open! COVID-19 and Other Hot Topics on Monday, April 6 at 8:00 p.m.

As you may know, Ohio State’s campuses and offices are closed.  But we are all working away at home, and our virtual offices are still open for business.  Starting Monday April 6th, the OSU Farm Office Team  will open our offices online and offer weekly live office hours from 8:00 to 9:30 p.m.  We’ll provide you with short updates on emerging topics and help answer your questions about the farm economy.   Each evening will start off with a quick 10-15-minute summary of select farm management topics from our experts and then we’ll open it up for questions and answers from attendees on other topics of interest.

Who’s on the Farm Office Team?  Our team features OSU experts ready to help you run your farm office:

  • Peggy Kirk Hall — agricultural law
  • Dianne Shoemaker — farm business analysis and dairy production
  • Ben Brown — agricultural economics
  • David Marrison — farm management
  • Barry Ward  — agricultural economics and tax

Each office session is limited to 500 people and if you miss our office hours, we’ll post recordings on farmoffice.osu.edu the following day.  Register at  https://go.osu.edu/farmofficelive.  We look forward to seeing you there!

The CARES Act’s Paycheck Protection Program for Small Businesses

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

We love blogging about agricultural law, but sometimes we don’t feel the need to interpret a law that one of our colleagues has already explained perfectly.  Such is the case with an article about the new Paycheck Protection Program recently enacted by Congress in the Coronavirus Aid, Relief, and Economic Security (CARES) Act.  Our colleague Kristine Tidgren at Iowa State’s Center for Agricultural Law and Taxation has written an excellent explanation of the new loan program here.

A few questions about the Paycheck Protection Program that Kristine answers in detail in her blog post are:

  • Who’s eligible for the loans?  Any small business concern, business concern, 501(c)(3) nonprofit, veterans’ organization or tribal business concern employing 500 or fewer employees and eligible self-employed individuals including independent contractors may apply for a loan.  Farm businesses with less than 500 employees fit within these eligibility parameters.
  • How much are the loans?  The program has a maximum loan amount of the lesser of either $10 million or 250% of the average monthly payroll costs in the one year prior to the loan plus refinanced Economic Injury Disaster loans received after 1/31/20.
  • What can the loans be used for?  Certain payroll costs, as well as group health care benefits, salaries, commissions and similar compensation, mortgage interest, rent, utilities, and other previous debt obligations.
  • What are the terms?  The loans have a maximum maturity of 10 years and the interest rate can’t exceed 4%.  Lenders have to defer both interest and principal payments for at least the first 6 months.  Note the forgiveness provisions below, however.
  • What about loan forgiveness?  A borrower is eligible for loan forgiveness in an amount equal to the sum of certain payroll, mortgage interest, rent, and utility payments made during the 8-week period after the loan’s origination date.  The loan forgiveness can’t exceed the principal amount and is subject to a number of reduction factors, which Kristine explains.
  • What considerations apply to loan approval?  In reviewing loan applications, a lender must consider whether the borrower was in operation on Feb. 15, 2020 and had employees for whom the borrower paid salaries and payroll taxes.  Applicants must also certify that the uncertainty of current economic conditions makes the loan request necessary to support ongoing operations; funds will be used to retain workers and pay eligible expenses; the applicant does not have an application pending for another loan for the same purpose; and that the applicant has not received amounts under the program for the same purpose for the period of February 15 to December 31, 2020.
  • How to apply?  According to the Small Business Administration: “Businesses can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program.”   Consult with your local lender as to whether it is participating in the program. Visit www.sba.gov for a list of SBA lenders.
  • When to apply?  Lenders may begin processing loan applications for most businesses as soon as April 3, 2020, and for independent contractors and self-employed individuals by April 10, 2020.
  • Where to learn more?  The Treasury Department and the Small Business Administration have posted extensive information and the application the loan program on their websites.

Watch for more resources about the CARES Act and other COVID-19 legislation here on our blog and on OSU’s Farm Office website at farmoffice.osu.edu.

January is a Great Time to Complete the Farm Balance Sheet

Eric Richer, OSUE Fulton County

 The balance sheet is a “snap shot” in time of your farm’s financial position, including what assets you own and how they are financed. The balance sheet is also known as the net worth statement. When completed precisely and timely, the balance sheet and corresponding ratios can be a very valuable tool to determine farm financial health. The balance sheet objectively measures farm business growth, liquidity, solvency, and risk capacity.

Categorizing Balance Sheet Items

The assets and liabilities on the balance sheet (including the financing of the assets) are used to determine the equity, or net worth, of the farm owner. The owner’s equity is used by lenders and insurers to determine a farm business’ value.  There are two ways to calculate the owner’s equity, or net worth. The first simply subtracts the liabilities from the assets:

Assets – Liabilities = Owner’s Equity

The second calculation adds the owner’s equity with liabilities to determine the assets:

Liabilities + Owner’s Equity = Assets

Terms of Assets and Liabilities

Beyond the broad categories of either an asset or liability, a balance sheet categorizes items into “time compartments” or terms of useful life. Useful life is a term for the amount of time an item can be utilized for the farm business. Depreciation allocates the cost of this asset over its useful life. Both assets and liabilities can be categorized into current, intermediate, and long, or fixed, terms of useful life.

Assets – Current assets can be converted to cash in one year or less. Common current assets are cash, growing crops, harvested crop inventory, market livestock, accounts receivable, and other similar items. Intermediate assets have an assumed useful life or depreciable value of one to ten years. Common intermediate assets are breeding livestock, machinery and equipment, titled vehicles, and not-readily-marketable bonds and securities. Long term, or fixed, assets are typically permanent items with value—depreciable or not—for more than ten years and include farmland, buildings, farmsteads, and other similar items.

Liabilities – Current liabilities are obligations that are due and payable in the next twelve months. Most common current liabilities include accounts payable (bills), credit card bills, operating lines of credit, accrued interest, and the current portion of principal on loans due this year. Intermediate liabilities are obligations that due to be paid back within one to ten years and are usually associated with intermediate farm assets on the left side of the balance sheet. Common intermediate liabilities are the principal remaining on machinery and equipment loans or breeding livestock purchases. Finally, long term, or fixed, liabilities are debts with terms greater than ten years like the principal balance remaining on a farmland or building mortgage.

Assets: Market Value vs. Cost Value

Market value – Today’s market values minus selling costs are used to determine market value. For example, a fully depreciated 15-year-old tractor certainly has a current market value greater than zero. A realistic current market value for this tractor can be obtained with an appraisal, or by looking at current sales of similar tractors online. Similarly, farmland bought 30 years ago likely has a different current market value today. In general, lenders may prefer the use of current market values in a balance sheet for asset valuation.

Cost value – The net book value, or the cost of the item minus accumulated depreciation, is the cost value. For example, a fully depreciated 15-year-old tractor has a cost value of $0 in a cost based balance sheet. No appraisal is needed; only record the cost minus accumulated depreciation. Farmland (a non-depreciable, long term asset) purchased 30 years ago has a balance sheet value of the purchase cost.  In general, accountants prefer cost value balance sheets as a more clear reflection of business success, based on business decisions rather than inflation, depreciation, or appreciation of investments.

In a precisely completed balance sheet, the cost value and the market value columns usually produce different total asset values.

Keys to Completing the Balance Sheet

Several keys can help farmer improve their accuracy, effectiveness, and efficiency for completing year-end balance sheets.

  • Complete the balance sheet on the same date each year, usually as of December 31st. The information will never be more accurate than immediately after the end of the year.
  • Inventory all assets, including standard weight and measure units (ie. Lbs, head, bushels, bales, etc).
  • Utilize current market prices for crop and livestock inventories.
  • Calculate cost value for growing crops.
  • Include government payments and insurance indemnities yet to be received in accounts receivable.
  • Apply conservative breeding livestock values, avoiding large year-to-year changes.
  • Maintain a separate, easy-to-update depreciation schedule for depreciable assets.

Balance Sheet Tools

Balance Sheet Ratios to Evaluate Financial Health

The scorecard uses these three accounting statement to determine financial ratios and measurements to benchmark a farm operation against acceptable industry standards.

References:

Hachfeld, G. A., D.B. Bau, C.R. Holcomb. 2016. Balance Sheet. Farm Financial Series, #1, University of Minnesota Extension.

Langemeier, M. R. 2011. Balance Sheet—A Financial Management Tool. MF-291, Department of Agricultural Economics, Kansas State University Extension. Available online at: www.agmanager.info