Management Implications from the Scientific Journals

by: Brian E. Roe, Van Buren Professor, AED Economics, Ohio State University Leader, Ohio State Food Waste Collaborative

Sometimes good management advice is difficult to parse from cutting edge academic research.  Below I share a few articles I’ve run across from my reading of the journals that might have some ready implications for managers across the state

Marketing your food locally, and looking for another angle to enhance that ‘local’ premium?

David Willis and colleagues found that consumers were willing to pay nearly twice the premium for local (versus non-local) produce and animal products if the farmer made a donation to a local food bank as part of the sale price. This created a win-win – for the farmer with the enhanced price premium and the local food bank with the donation

Ever wonder if those commercials telling you to drink milk or eat beef are worth the check-off dollars?

It’s tough to tell for sure unless the advertising totally stops, like it did for orange growers a few years ago. Oral Capps and colleague at Texas A&M found that when generic orange juice promotion essentially stopped for a few months during 2001, it resulted in more than a $50 million drop in sales.

 Better to shift to fall calving for beef cow herds?

According to Gavin Henry and colleagues from the University of Tennessee, fall calving was better in their simulations based on the last 20 years of data. Fall calving was more profitable than the spring calving for all feed rations and weaning months. Fall calving was also preferred because it was less risky in terms of profits than spring calving.

How often is it economically optimal to test your soil?

For cotton producers, when considering Potassium, it turns that about every other year makes the most sense, though not much is lost if an every third year schedule is followed instead. Check out these results from Xavier Harmon and colleagues from the University of Tennessee.

Farm Management Program Manager Career Opportunity at Ohio State University

Source: The Department of Agricultural, Environmental, and Development Economics

The Department of Agricultural, Environmental, and Development Economics (AEDE) at The Ohio State University (OSU) is searching for new position as Manager for our Farm Management Program. The incumbent will develop and implement a comprehensive and innovative farm management program that addresses critical farm management issues affecting Ohioans, including marketing and price analysis, farm financial management and investing, risk evaluation and management, agricultural processing, environmental issues, and farm entry among other issues, and integrates AEDE’s research, teaching and outreach in the area.  The Farm Management Program Manager acts as a liaison between faculty members in the AEDE Department who are conducting research on areas related to Farm Management, and with OSU Extension faculty and field specialists throughout the state.  The Manager will also lead and/or collaborate on externally funded research projects that integrate OSU faculty in the field with AEDE faculty.  In collaboration with the AEDE Outreach and Communications Manager, the Farm Management Program Manager will develop and manage communications and outreach strategies, and contributes communications content for AEDE’s farm management program and serves as an active member of the AEDE Outreach Committee.

Candidates for this position will have at least a Master’s Degree in economics, applied economics or agribusiness or equivalent educ/exp, and are also required to have experience in agribusiness/farm management.  Candidates will have the ability to lead integrated initiatives from inception to implementation, will have experience in program planning and administration, and must be collaborative and work well in a diverse team-oriented environment with superior verbal and written communications skills.

Applications will be accepted through the Careers at OSU website, https://www.jobsatosu.com/postings/79928, starting July 8 and running through August 6.  We will begin screening application on August 6.

For question on this position, please contact the AEDE Outreach Program Director, Professor Brent Sohgnen, at sohngen.1@osu.edu.

Ask the Expert Sessions Schedule for 2016 Farm Science Review

Attendees at the 2016 Farm Science Review on September 20-22, 2016 will have the chance to ask a range of questions related to their farming businesses with Experts from OSU Extension and Purdue University during the “Ask the Expert” sessions each day during the Review at the Molly Caren Agricultural Center near London, Ohio.  The sessions will take place in the Ohio State Area in the center of the main Farm Science Review exhibit area at 426 Friday Avenue.

The complete list of sessions includes:

FSR-scheduleclipart

The Ask the Expert Session is being offered by OSU Extension’s Ohio Ag Manager Team.  The Farm Science Review offers visitors some 180 educational presentations and opportunities presented by educators, specialists and faculty from OSU Extension and the Ohio Agricultural Research and Development Center, which are the outreach and research arms, respectively, of the college.  A complete listing of the education presentations can be found at: http://fsr.osu.edu/sites/fsr/files/imce/Web%20program%20schedule.pdf

Advance tickets for the Review are $7 at all OSU Extension county offices, many local agribusinesses and online at fsr.osu.edu/visitors/tickets. Tickets are $10 at the gate. Children 5 and younger are admitted free.  Hours are 8 a.m. to 5 p.m. September 20-21 and 8 a.m. to 4 p.m. on September 22, 2016.

 

2016 Ohio Farm Custom Rates

by: Barry Ward, Leader, Production Business Management Department of Agricultural, Environmental and Development Economics & John Barker, Extension Educator Agriculture/Amos Program, County Director- Ohio State University Extension Knox County

A large number of Ohio farmers hire machinery operations and other farm related work to be completed by others. This is often due to lack of proper equipment, lack of time or lack of expertise for a particular operation.  Many farm business owners do not own equipment for every possible job that they may encounter in the course of operating a farm and may, instead of purchasing the equipment needed, seek out someone with the proper tools necessary to complete the job. This farm work completed by others is often referred to as “custom farm work” or more simply “custom work”. A “custom rate” is the amount agreed upon by both parties to be paid by the custom work customer to the custom work provider.

The custom rates reported in this article are based on a statewide survey of 365 farmers, custom operators, farm managers and landowners conducted in 2016. These rates, except where noted, include the implement and tractor if required, all variable machinery costs such as fuel, oil, lube, twine etc., and the labor for the operation.

Some custom rates published from this study have a wide range. Possible explanations are the type or size of equipment used, size/shape of fields, condition of the crop (for harvesting operations), the value of labor, the mix of labor and equipment used and the different income goals of full-time custom operators versus farmers supplementing their income. Also some custom operations are provided at bargain rates due to family relationships between the parties or due to the fact that custom providers may see an increased probability of eventually securing the custom farmed land in a cash rental or other rental agreement. Some providers are simply attempting to spread their fixed costs over more acreage to decrease fixed costs per acre and are willing to forgo complete cost recovery of their variable costs.

Average custom rates reported in this publication are a simple average of all the survey responses. The Range rates represent -/+ one standard deviation around the average1. The Median represents the middle value in the survey responses. The Minimum and Maximum reported reference the minimum and maximum responses from the survey data for a given operation.

Charges may be added if the custom provider considers a job abnormal such as distance from the operator’s base location, difficulty of terrain, amount of product or labor involved with the operation, or other special requirements of the custom work customer.

There is no assurance that the average rates reported in this publication will cover your total costs for performing the custom service or that you will be able to hire a custom operator for the average rate published in this factsheet. Calculate your own costs carefully before determining the rate to charge or pay. It may be helpful to compare these custom rates with machinery costs calculated using an economic engineering approach. The data are intended to show a representative farming industry cost for specified machines and operations. The following resources are available to help you calculate and consider the total costs of performing a given machinery operation. Users may also consider using the data contained in these publications as a base for future custom rates.

Farm Machinery Cost Estimates available at:

https://drive.google.com/file/d/0B3psjoooP5QxWWd3a2cwblJCTjQ/viewMachinery

Economics at farmdoc:

http://www.farmdoc.illinois.edu/manage/index.asp

Estimating Farm Machinery Costs

http://www.extension.iastate.edu/agdm/crops/html/a3-29.html

Before entering into an agreement, discuss all of the details of the specific job with the other party.

Fuel prices have an impact on custom rates and rates may fluctuate based on large movements in fuel prices. The approximate price of diesel fuel at the time of this survey was $1.75-$2.50 per gallon for off-road (farm) usage.

1 Standard deviation is a measure of the variability of the survey responses. One “standard deviation” both above and below the average (mean) includes approximately two-thirds of all survey responses.

Click here to Access the Ohio Farm Custom Rates 2016 Data Tables

Prevalence and Cost of On-Farm Produce Safety Measures in the Mid-Atlantic

By Erik Lichtenberg and Elina Tselepidakis

We use data from a survey of leafy greens and tomato growers in the Mid-Atlantic region to investigate the prevalence and cost of produce safety practices required under the proposed Produce Rule implementing the Food Safety Modernization Act (FSMA).  Majorities of our respondents currently employ most of the food safety practices that would be required under the proposed Produce Rule.  But the Produce Rule will nevertheless require changes on the part of a large number of growers.  We find no evidence that the use of any of these practices is correlated with farm size. We do find some evidence that the shares of product sold to grocery/retail and to restaurants are positively correlated with the probability of testing water, soil amendments or product, consistent with theoretical literature suggesting that traceability increases incentives to take precautionary measures.  We find that all of these practices exhibit substantial increasing returns to scale, implying that the burden of complying with the provisions of the Produce Rule is much lower for large operations than small ones.  Our estimates suggest in addition that compliance costs are likely to be burdensome only for a handful of practices, notably testing of soil amendments, employee training, facility sanitation, and sanitizing harvest containers; further, that burden is likely to be much greater for small and very small operations than for large ones.  See more at: http://ageconsearch.umn.edu/bitstream/168210/2/Prevalence%20and%20Cost%20of%20On-Farm%20Produce%20Safety%20Measures%20in%20the%20Mid-Atlantic%20AAEA.pdf

The Food Safety Modernization Act and Production of Specialty Crops

By Luis A. Ribera, Fumiko Yamazaki, Mechel Paggi and James L. Seale, Jr

In Choices, Quarter 1, 2016, a publication of the Agricultural & Applied Economics Association

One way economists evaluate the impacts of policies on farms is through the development and analysis of so-called “representative farms.”  Representative farms are virtual farms developed by a panel of producers for a specific crop or crop mix at a specific location.  We calculate the average cost of production per acre for the representative produce farms, excluding any food safety compliance costs.  We then show the results of an analysis of the impacts on the profitability of selected representative farms by comparing results without and with the costs of complying with the Food Safety Modernization Act (FSMA).

The profitability of representative small farms is more negatively affected than the profitability of representative large farms under FMSA.  Also, the level of the impact of FSMA compliance costs varies significantly across states.  For example, the source of irrigation water, either surface or underground, has to be treated differently, as surface water has higher chances of having a higher microbial count; therefore surface water needs to be tested more often, which increases FSMA compliance costs.

See more at: http://www.choicesmagazine.org/choices-magazine/theme-articles/producer-impacts-of-the-food-safety-modernization-act/the-food-safety-modernization-act-and-production-of-specialty-crops#sthash.wFgNXNh1.dpuf

 

Western Ohio Cropland Values and Cash Rents 2015-16

by: Barry Ward, Leader, Production Business Management- Department of Agricultural, Environmental and Development Economics (AEDE)

Ohio cropland varies significantly in its production capabilities and consequently cropland values and cash rents vary widely throughout the state. Generally speaking, western Ohio cropland values and cash rents differ from much of southern and eastern Ohio cropland values and cash rents. This is due to a number of factors including land productivity and potential crop return, the variability of those crop returns, field size and shape, drainage, population density, ease of access, market access, local market prices, potential for wildlife damage, field perimeter characteristics and competition for rented cropland in a region.

Western Ohio cropland values and cash rental rates are projected to decrease in 2016 due in large part to continued low to negative profit margin prospects for Ohio’s three major row crops (corn, soybeans and wheat). According to the Western Ohio Cropland Values and Cash Rents Survey, bare cropland values are expected to decrease from 4.8% to 11.1% in 2016 depending on the region and land class. Cash rents are expected to decrease from 5.6% to 7.6% depending on the region and land class.

The “Western Ohio Cropland Values and Cash Rents” study was conducted from February through April in 2016. The study is an opinion based survey designed to poll professionals with a knowledge of Ohio’s cropland values and rental rates. Surveyed groups include professional farm managers, rural appraisers, agricultural lenders, OSU Extension educators, Farm Service Agency personnel, landowners and farmers.

One hundred twenty six surveys were completed, analyzed and summarized. Respondents were asked to give responses based on 3 quality classes of land in their area: “average” land, “top” land and “poor” land.  They were asked to estimate long term average (5 years) corn and soybean yields for each land class based on typical farming practices. Survey respondents were asked to estimate current bare cropland values and cash rents negotiated in the current or recent year for each land class. Survey results are summarized for western Ohio. Regional summaries (subsets of western Ohio) are presented for northwest Ohio and southwest Ohio.

When interpreting this summary of survey results users should be aware that results will differ widely within a region and it will be useful to consider the ranges that are listed in the tables as one considers how individual parcels may compare. It is also important to stress that land in a given region does not fall neatly into thirds of each land quality class (average, top and poor). There will likely be little acreage in a given county or region that will fall into the “top” land category. Top land will typically be large tracts of land with highly productive soils. “Average” land will typically make up the majority of land in a given region or county while “poor” land will tend to be land with lower productivity soils, steep slopes, poor drainage, or come in smaller tracts (or a combination of these).

 

To access the complete summary go to:

http://aede.osu.edu/about-us/publications/western-ohio-cropland-values-and-cash-rents-2015-16

Stress Management During Tough Financial Times

by: Rory Lewandowski, Extension Educator Wayne County

There is no doubt that the production agriculture sector is going through a tough financial period.  In particular, low crop prices and low milk prices are severely impacting row crop and dairy producers.  Financial stress in the farm business often equates to stress within the farm family and can extend to farm employees.  Harmful stress needs to be recognized and managed for personal health, family health and health of the farm business.

Some stress is a normal part of life.  Stress can motivate us to get things done or to make adjustments in our life that balance the stress or maybe remove the stress.  However when stress events begin to add up or stress events are added that don’t allow us to adjust or that are beyond our resources to adjust then stress begins to be harmful.  Symptoms of harmful stress as well as mechanisms and the ability to cope with stress will vary depending upon the individual.  It is important to recognize some common symptoms of stress and if these symptoms continue for prolonged periods of time, to devise a plan to manage stress.

Some common symptoms of stress include: feeling tired all the time, inability to relax, disrupted sleep pattern, irritability, anger, problems getting along with people, anxiousness, feelings of being overwhelmed, emotional outbursts, trouble concentrating, headaches, frequent illness, increased alcohol or tobacco use, and withdrawal.

Developing and maintaining avenues of communication can help farm families cope with stress during tough financial times.  Communication is vital to help relieve the burdens of financial stress and to help generate ideas for problem solving, how to cut production costs, and/or how to increase efficiency or productivity.  Regular communication during stressful financial times can help to reduce a negative environment and to prevent finger pointing and blaming.  It is natural to look for a source to blame, but in the current farm economy low prices are not the fault of any farm manager, family member or farm employee.  In addition, it is known that often just being able to talk about financial problems or feelings of frustration, helplessness and anxiety can be helpful to mental and emotional health.

In a family farm situation, it may take an extra effort to maintain communication during stressful financial times.  Try to put some “structures” in place that will help facilitate regular communication.  An example of this is regularly scheduled family or farm business meetings.  Meetings should have planned agenda items and a set starting and ending time.  Some ground rules should be in place that provide opportunity for everyone to speak and that prevent any kind of personal attacks or blaming.  The focus should be on the farm business.  One of the topics on the agenda might be an update of the current farm financial situation.   This update allows all family members and farm employees to understand the current farm situation, can squash any rumors that may have started, and can help family members and farm employees understand why repairs instead of new purchases are being made, why withdrawals for family living are being maintained or decreased, and why employee raises may be delayed or decreased.  Sharing financial information within this type of business meeting structure can empower family members and employees to feel valued as a team member and new ideas about how to meet financial challenges may be generated.

Communication is vital during times of financial stress and in addition to communicating with family members and farm employees, the farm owner or manager should have a support network that understands the farm’s financial situation.  Someone who can look at the farm situation from a non-personal perspective and that is not as emotionally invested in the farm operation can provide some clearer thinking and/or information that can be helpful in making decisions.  People in this support network may also provide a sympathetic ear that allows some of the financial stress burden to be shared.  These are people that want to see your farm succeed and be passed on to the next generation.  This support network can include your lender, equipment dealer, seed/fertilizer dealer, financial advisor, nutritionist, veterinarian, Extension educator, tax preparer, or other trusted advisors.

For more information about communication during stressful financial times go to the Dairy Issue Briefs section of the OSU Extension dairy web site at: http://dairy.osu.edu/DIBS/dibs.html .

2016 Ohio Corn and Soybean Enterprise Budgets Project Lower Costs But Low to Negative Returns

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

Production costs for Ohio field crops are forecast to be lower again in 2016 but the profit picture remains poor, much the same as in 2015. Variable costs for Ohio corn for 2016 will be 9.6% to 13% lower ($34 to $60 per acre lower) compared to 2015 depending on land productivity and target yield. Variable costs for corn for 2016 are projected to be $325 to $404 per acre depending on land productivity. Variable costs for 2016 Ohio soybeans are projected to be 6.7% to 8.7% lower ($14 to $19 per acre lower) and range from $188 to $203 per acre. Wheat variable expenses for 2016 are projected to range from $170 to $211 per acre, down $18 to $20 per acre (8.6% to 9% lower). Lower fuel and fertilizer prices will be the primary fundamental drivers of lower variable costs in 2016.

With continued lower crop prices expected for 2016, returns will likely be low to negative for many producers. Projected returns above variable costs (contribution margin) range from $194 to $359 per acre for corn and $244 to $429 per acre for soybeans. (This is assuming fall cash prices of $3.75 per bushel for corn and $10.25 per bushel for soybeans.)

Returns to land for Ohio corn (Gross Revenue minus all costs except land cost) are projected to range from -$31 to $122 peracre in 2016 depending on land production capabilities. Returns to land for Ohio soybeans are expected to range from $69 to $245 per acre depending on land production capabilities.

Total costs projected for trend line corn production in Ohio are estimated to be $787 per acre. This includes all variable costs as well as fixed machinery, labor, management and land costs. Fixed machinery costs of $130 per acre include depreciation, interest, insurance and housing. A land charge of $187 per acre is based on data from the Western Ohio Cropland Values and Cash Rents Survey Summary. Labor and management costs combined are calculated at $77 per acre. Returns Above Total Costs for trend line corn production are negative at -$146 per acre.

Total costs projected for trend line soybean production in Ohio are estimated to be $562 per acre. (Fixed machinery costs – $108 per acre, land charge – $187 per acre, labor and management costs combined – $57 per acre.) Returns Above Total Costs for trend line soybean production are also negative at -$30 per acre.

These projections are based on OSU Extension Ohio Crop Enterprise Budgets. Newly updated Enterprise Budgets for 2016 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

 

 

 

 

 

CAUV Bills Awaiting Committee Action

Legislation proposing changes to Ohio’s current agricultural use valuation (CAUV) program has remained on hold in the General Assembly since last fall. Senator Cliff Hite (R-Findlay) and Representative Brian Hill (R-Zanesville) introduced the companion bills on November 18, 2015. The Senate referred its bill, SB 246, to the Senate Ways and Means Committee on December 9, 2015 and House Bill 398 was referred to the House Government Accountability and Oversight Committee on January 20, 2016. Neither committee has acted on its bill.