Valuing Standing Forages: The Late Summer Challenge

Valuing standing crops to sell/purchase and ensile for livestock feed is a perennially challenging question. Sellers want to maximize net income from their crops while buyers strive to minimize their feed expenses. In spite of the apparent challenges, it is possible to determine a price that is fair to both.

The most reasonable pricing strategy is to determine the fair market feed value of the crop and adjust that value by harvest costs. An adjustment should then be made for whichever party is assuming the risk of getting a quality feed harvested and into storage.

Feed value of a good crop that could be harvested as a grain crop or a forage crop will be considerably different than the feed value of a crop that will not make a harvestable grain crop. This could be a crop that was planted late and will not mature before expected frost or a drought-stressed crop that may make little or no grain but will have some value as a forage crop. “Valuing Corn for Silage…How much is it worth?” walks you through the process of valuing both “normal” and stressed crops for silage (web address below).

Two additional articles, “Pricing Standing Corn…” and “Pricing Standing Soybeans for Silage” were developed in 2002 to guide farmers through the process of pricing silage crops based on nutrient (feed) values. Market values of feed nutrients have changed over time, and these resources will be updated with 2005 prices in August.

Resources available at dairy.osu.edu:

Valuing Corn for Silage…How much is it worth?
http://dairy.osu.edu/resource/feed/Valuing%20Corn%20for%20Silage%202003.pdf

Pricing Standing Corn for Silage
http://dairy.osu.edu/resource/feed/Pricing%20silage%202002%20Final.pdf

Pricing Standing Soybeans for Silage
http://dairy.osu.edu/resource/feed/Pricing%20Standing%20Soybeans%20for%20Silage-Revised.pdf

OHFOOD: An Ohio Food Industries Input-Output Model (Version 8.0, May 2005)

OHFOOD, an acronym for Ohio food, is a sophisticated input-output model. The model is designed specifically to capture the inter-dependencies and linkages among various sectors and industries composing the complex economy of Ohio. The input-output model of Ohio’s economy also maintains substantial detail on the food and agricultural sectors. The interindustry model describes the linkages among various sectors of the economy and is specifically designed to provide estimates of the economic importance of the food and agriculture-related cluster, along with the general manufacturing and service sectors, of the economy. Also, OHFOOD provides several types of economic multipliers for detailed food and agriculture-related sectors of the economy.

This is the first OHFOOD model that is based solely on the North American Industrial Classification System (NAICS). The results provided in this report are not comparable to any previous OHFOOD results because of this change in the classification system.

This documentation provides a succinct analysis of the importance of food and agriculture to the state’s economy, based on the interindustry model. The analysis indicates that for 2002 the food and agricultural cluster of Ohio’s economy contributed 11 percent of the output, added 9 percent to Ohio’s gross state product, accounted for 15 percent of the total employment, and contributed 9 percent of total income.

In 2002, the Ohio economy generated a gross state product (GSP) of $388.2 billion. The food and agricultural cluster’s share of this GSP was $36.0 billion, or $9.27 of each $100 of Ohio GSP. For 2002 the contribution to GSP for the five components of the cluster are $1.6 billion for farm inputs, machinery, and professional services; another $2.3 billion from agricultural production; about $11.6 billion from processing; an additional $13.3 billion from food wholesaling and retailing; and another $6.9 billion in food services.

Of these 5 major components comprising the food and agricultural-related cluster, the food wholesaling and retailing sectors are the largest in terms of contribution to GSP, contributing 37 percent of the total contribution to GSP of $36.0 billion by the entire food and agriculture cluster. The food and forestry-related products are the next largest in terms of GSP, contributing nearly 33 percent of the total GSP of $36.0 billion by the entire food and agriculture cluster. The food service sector is notable for its contribution to employment. This sector accounts for nearly 449,000 jobs, or nearly 45 of every 100 jobs accounted for by the food and agriculture cluster. The entire food and agriculture complex accounted for over one million jobs in Ohio in 2002, or about one of every seven jobs (15 percent) in Ohio.

Keeping the OHFOOD model updated with the latest data available is an on-going task of the Farm Income Enhancement Program and the Agribusiness Research Group within the Department of Agricultural, Environmental, and Development Economics of The Ohio State University. The complete study may be printed from a downloadable pdf file available from the AED Economics Department of The Ohio State University at: http://aede.osu.edu/resources/docs/display.php?cat=21 .

Saving Wheat Seed

An age old practice that has been in place literally since the beginning of agriculture is the saving back of seed wheat from the current harvested crop. There are two important questions worth asking in today’s modern agriculture. Is this really the best option in terms of both economics and production potential? Is this practice still legal?

One of a crop producer’s goals should be to plant the best variety or hybrid for his operation. Variety selection should be based on multi-year, multi-location performance data gathered from properly conducted, unbiased testing programs-such as those conducted by OARDC. Performance trials are conducted at several locations within the state each year with results published and available at the county Extension office in each of Ohio’s 88 counties and on the Internet at: http://www.agcrops.osu.edu.

Another producer goal should be to plant high-quality seed of the best varieties and hybrids adapted to his/her farm. Selection and use of high-quality seed is the first step in establishing a good stand and in producing a profitable crop. The use of recommended cultural practices, proper fertilization, and control of plant pests is of little practical value if the seeds do not produce healthy, vigorous plants or if an un-adapted variety is selected.

From a risk management standpoint, the advantage of planting new seed from a new variety such as “Truman” wheat for example, has the added benefit of being the most Fusarium or Scab resistant variety in the soft red winter wheat seed in the market place. Scab is the most devastating disease that Ohio producers annually face with wheat production.

Seed companies employ plant breeders to develop and release improved varieties. Previously, all wheat and soybean varieties grown in Ohio had been developed and released by plant breeders employed by the USDA or at the state experiment station. Those publicly developed varieties were tested by other interested states during their development and then released to the seed companies for reproduction and sale to producers and are known as “public” varieties. The development of genetically modified (GM) varieties and the use of utility patents to protect those varieties has further complicated how harvested grain and seed may be used on the farm.

You can save seed of any of the current wheat varieties for planting on your own farm. You can not sell seed of a variety that has Plant Variety Protection. See the table below for more details.

Be aware that some of the IP programs require that you purchase new seed of the IP variety each year to be eligible for the IP program.

As for any saved wheat seed, it is recommend that all saved seed be tested for germination and be treated with a fungicide or fungicide combination to control loose smut, common smut (bunt), seed-borne Stagonospora nodorum and Fusarium (scab). Current recommendations are available in the Seed Treatment For Agronomic Crops bulletin at http://ohioline.osu.edu/b639/index.html. Additionally, the current list of wheat seed treatments and their relative effectiveness from at:

http://www.oardc.ohio-state.edu/ohiofieldcropdisease/corn/seedtreatmentefficacy.htm .

Home-grown grains are often low in quality and germination and are frequently contaminated with weed seed and should not be used for seed except in an emergency, and then only after it has been cleaned, tested for germination and vigor, and treated with the appropriate fungicides. If home-grown grain is to be used for seed, then the seed field should be carefully harvested with a machine adjusted to maintain the best grain quality. The grain should be harvested when the grain moisture is four to eight percentage points higher than the proper storage moisture to reduce damage to the grain and then handled gently to avoid damaging the seed coat.

The cost of professionally produced and conditioned seed is only slightly more expensive than that of saved grain that has been properly cleaned, conditioned, and treated with the appropriate fungicides and insecticides and is an excellent value. Investment in new seed each planting season encourages seed companies to develop new, better-adapted, higher-yielding varieties that generate more income than can be realized from using one’s own grain for seed.

All carryover seed and all grain saved for seed should be tested for germination and vigor before use. For grains saved on the farm, these tests should be conducted before the grain is cleaned, treated with a fungicide, and bagged. Two laboratories in Ohio specialize in testing all kinds of seed for germination, purity, vigor, and other quality traits. These laboratories are:

Central Ohio Seed Testing
P.O. Box 1580
6150 Avery Road
Dublin, OH 43017-6580
Phone: (614) 792-0334
Fax: (614) 889-8979

Seed Technology, Inc.
P.O. Box 397
1383 Columbus Avenue
Marysville, OH 43040
Phone: (513) 644-0088
Fax: (513) 644-0602

Seed Protection: Rights and Responsibilities

FARMER

’94 PVPA

TITLE V

PATENT

Allowed to save seed

Yes*

Yes*

No

Allowed to sell seed (no advertising) to neighbor if in compliance with state laws.

No

’70 PVPA only

No

CONDITIONER:

Condition varieties for farmers

Yes*

Yes*

No

Store seed for farmers

Yes*

Yes*

No

Clean or stock as step in marketing variety

No

No

No

Deliver or load seed to a third party

No

No

No

Advertise farmer saved seed

No

No

No

Sell or act as broker for farmer saved seed

No

No

No

*Limited to the amount of seed needed to plant a farmer’s own holdings (land owned, leased or rented).

The Amended Plant Variety Protection Act became effective April 4, 1995. The following actions are prohibited without the authority of the owner of a variety:
1. Selling or offering a protected variety for sale
2. Sexually multiplying the variety as a step to marketing it for seeding purposes
3. Using seed marked or labeled “propagation prohibited” to propagate the variety
4. Dispensing the variety to another person without telling that person the variety is protected

The law specifies how a farmer whose primary occupation is growing crops for food or feed (not growing crops as a source of seed to sell) may use seed. Seed protected under this law must be sold by variety name (except for turf, forage crops, alfalfa and clover). A producer who has obtained the seed with the authority of the owner may use the seed for growing a crop and save the seed that results from that crop for his/her personal use. He/she may not sell this reproduced seed to a second producer.

Title V: This option of variety protection allows for the sale of seed by variety name only as a class of certified seed. Non-certified sales are prohibited. Seed may be called “Certified” only after meeting all the requirements and standards of an Official Seed Certifying Agency, which in Ohio is the Ohio Seed Improvement Association.

Utility Patents are a means of protection for varieties with special characteristics, especially those developed through genetic engineering or biotechnology. Examples are Roundup Ready varieties and hybrids, Liberty Link varieties and hybrids, Yield Guard Plus, Hercurlex, and Clearfield Hybrids.

Summary of Spring Corn Belt Farm Wage Rates

What is an appropriate wage rate for hired farm labor? Many things drive negotiations on wage, including the worker’s experience, dependability, competency/skill, past wage level and the demands of the job. However, often it is necessary to identify a fair base wage rate from which to negotiate final salary and wage levels.

In this article we discuss two sources of data that can serve as a reference for employers and employees. The first is a general resource that provides information about a broad array of agricultural jobs while the second provides a narrow focus on the hog industry.

USDA Farm Labor Quarterly Report . Every 3 months, the USDA conducts a survey of farm employers throughout the US to determine the going wage rate for different types of jobs and different types of farms. USDA’s last survey of employers was conducted toward April of 2005 and is available at: http://usda.mannlib.cornell.edu/reports/nassr/other/pfl-bb/

The average wage rates paid in April for hired labor in the Eastern Corn Belt, which USDA defines as Ohio , Indiana and Illinois , was $9.51 an hour. USDA breaks this down by the type of labor primarily performed by the worker. The average wage rate for field work was $8.84, for livestock work was $9.17 and for work involving both field and livestock work was $8.91.

USDA also provides average wages based on the type of farm that employs the laborer, though these statistics are for a slightly broader geographical region that also include Iowa and Missouri . The average hourly wage paid by farms primarily dedicated to field crops was $8.67, to other crops was $8.74 and to livestock or poultry was $9.47.

USDA also breaks out wages paid by the size of the employing farm; in general, larger farms pay more. For the eastern and western Corn Belt combined, the highest average hourly wage paid for all types of farm labor was $10.33, and it was provided by farms with sales greater than $1 million. Farms generating $50,000 to $100,000 in sales paid the lowest hourly wage in the region: $8.10.

National Hog Farmer Study of Industry Compensation Plans. The publication The National Hog Farmer teamed with researchers from Iowa State University and the University of Minnesota to conduct a detailed survey of compensation packages used in the US hog industry during 2005.

The data collected allowed the researchers to look at wage differences by job title, education level, region of the country, and experience. The survey also provides insight into the types of benefits and incentives offered to employees. The report also compares wage and benefit rates over time, which provides a view of how employment and compensation trends are emerging within this dynamic sector. For example, the average Midwest hog unit manager received an annual salary of $37,586 in 2005, while the average Midwest farrowing manager received $31, 821. Nationally, about 38 percent of employees were eligible for some type of bonus pay as part of their compensation package, with incentives paid for high rates of pigs weaned per sow per year being the most common target for incentives. Across the nation about 66% of employees in the hog sector report receiving some type of medical insurance as part of their compensation plan, 72% report paid vacation, while 54% report a retirement plan.

Agricultural Employers Not Exempt from "New Hire" Law

One trend emerging in agriculture is that more farms are using hired labor to accomplish their goals. Farm labor laws, while retaining some exceptions, are becoming more reflective of non-farm laws and regulations. Because of this, many of our Ohio farm managers may be unaware of regulations that are applicable to their business.

One law that farmers and agribusinesses may be unaware of is the “Personal Responsibility and Work Opportunity Reconciliation Act” of 1996 (a.k.a. New Hire Law). This law requires all employers to report newly hired employees to a state directory within twenty days of their hire date (this includes all agricultural employers). This new hire information is utilized to speed up the child support income withholding process, expedites collection of child support from parents switching jobs frequently and helps to locate non-custodial parents to enforce child support orders. New hire reporting also helps children receive the support they deserve and helps prevent fraudulent unemployment payments, workers compensation, or welfare benefit payments.

Employers are required to submit the employee’s full name, address, social security number, date of birth, and date of hire. The Ohio New Hire Reporting center offers employers a variety of ways to report new hires including submitting electronically or by mailing or faxing. Producers can receive the reporting form or can complete entries electronically by linking to the following web page: https://newhirereporting.com/oh-newhire/

New hires reporting legislation requires all “employees” to be reported. Any individual who is an employee for purposes of federal income tax withholding should be reported. This includes seasonal workers even if they are hired for a short period of time to help bale hay, relief milk on a dairy farm or harvest fruit crops.

Questions can be directed to the Ohio New Hire Reporting Center at (614) 221-5330 or (888) 872-1490. Frequently asked questions can also be viewed at the Ohio New Hire website located at
https://newhirereporting.com/oh-newhire/FAQ.asp?State=OH&SessionID=

Economics of Forages – A Set of Resources

A number of resources are available concerning forage economics. The University of Kentucky has a 2005 publication concerning the economics of rotational grazing. It uses a partial budget to address the increased costs of fencing vs improved performance and increased stocking rates. Find this article at: http://www.uky.edu/Ag/AgEcon/pubs/ext_aec/ext2005-02.pdf.

For beef producers grazing endophyte infected Fescue, the University of Kentucky also has an article discussing the costs involved with replacement at: http://www.uky.edu/Ag/Forage/AEC%202005-001C.pdf.

An Extension agent from Wisconsin developed a spread sheet to evaluate the economics of the length of an alfalfa stand and looking at a corn silage/alfalfa rotation sequence: http://www.uwex.edu/ces/crops/uwforage/lengthalfalfa.xls.

There is an Internet hay exchange at: http://www.hayexchange.com/hay.htm.

The National Hay Association was formed in 1895 and has a web site at: http://www.nationalhay.org/.

The University of Missouri has a useful article about “Sizing and Siting Hay Barns” at: http://outreach.missouri.edu/webster/ag-edge/forage/haybarn-size.html.

“Round Bale Hay Storage Economics in Kentucky” is found at: http://www.ca.uky.edu/agc/pubs/agr/agr171/agr171.htm.

“Planning for a Farm Storage Building,” including spread sheets, was developed in Virginia and is found at: http://www.ext.vt.edu/pubs/bse/442-760/442-760.html.

A “Constructing Hay Feeding and Storage Pads” fact sheet was developed by Ohio Extension and is found at: http://ohioline.osu.edu/aex-fact/0332.html.

Mike Hutjens, Extension Dairy Specialist, University of Illinois, Urbana wrote an article comparing bag vs bunker vs upright storage systems at: http://www.traill.uiuc.edu/dairynet/paperDisplay.cfm?ContentID=578.

Kansas offers a spread sheet and accompanying article comparing the ownership of a big round vs a big square baler at: http://www.agmanager.info/farmmgt/machinery/OwnBaler2004.pdf.

Ohio has enterprise budgets for forages at: http://aede.osu.edu/Programs/FarmManagement/Budgets/index.htm and custom rate information at: http://aede.osu.edu/Programs/FarmManagement/Budgets/custompage.htm.

This represents a partial list of useful information concerning the economics of forages. For more information contact your local county Extension Educator.

Ohio Farmers Conservation Decisions: 2004 Survey Results

A survey of 1,500 Ohio farmers with $50,000 or more in sales from farming was conducted during March and April 2004 to assess farm environmental issues and programs. Responses numbered 613, with 525 usable for this analysis. Compared with the 2002 U.S. Census of Agriculture, respondents in our survey earned a larger share of gross farm income from grains and oilseed, as well as from dairy; but a smaller share from horticultural and greenhouse crops, as well as from poultry.

Tillage Practices: Farmers who rented land used no-till more often than did full owner operators. Tillage practices of part owner operators were similar on owned and rented land.

Environmental Best Management Practices: Grass waterways were the most common best management practice. Approximately 40% of respondents reported having them. Over half of respondents with a best management practice on owned land reported that they did NOT receive government payments for installing these practices.

Conservation Compliance: Thirty seven percent of respondents had a written Conservation Compliance plan for highly erodible land (HEL) that they owned. Implementation of the plan required 38% of these respondents to change tillage practices. Analysis of the survey data found that Conservation Compliance was associated with a greater use of conservation tillage not only on HEL land but also on non-HEL land.

Participation in Farm Conservation Programs: One quarter of respondents had participated in farm conservation programs. The Conservation Reserve Program (CRP) had the highest participation rate (15%). Next highest was the Environmental Quality Incentive Program (EQIP) (6%).

Participation in Watershed Groups: Seventeen percent of respondents had participated in watershed group activities near their farm. The recent growth in watershed groups is illustrated by the finding that half of the participating respondents had done so since 1995.

Farmer’s views towards Environmental Issues: The responding farmers overwhelmingly agree (93%) that water is an important resource that needs to be protected. Only 15% agree that water pollution is a major problem in their area. Even fewer agree that farming is a major source of water pollution in Ohio (10%) and that farming activities contribute more to water pollution than do non-farming activities (5%). Eleven percent agree that government should regulate farming practices to improve water quality while 47% think government should pay farmers for adopting conservation practices.

The complete document is available here:

http://ohioagmanager.osu.edu/resources/Farmer_Conservation Decisions_04.pdf

Federal Estate Tax-What will happen to our basis in 2010?

The Federal Estate Tax exemptions ratchet up until 2010 when such exemptions are unlimited, then drop back down in 2011. Speculation is that before 2011 Federal Law will change, with much lobbying for and against repeal of the Federal Estate Tax. However, such repeal would also partially eliminate the step up in basis that occurs when property passes to heirs. Few know that if the present law prevails, that in 2010 with no Federal Estate Tax, a single person that passes away will have $1.3 Million of basis to allocate to assets and a married decedent will have $3 Million of additional basis for assets passing to the surviving spouse, so that basis can be stepped up on appreciated assets. For most farm families this would take care of the appreciation of the farm in 2010 so that a full step up in basis could occur. However, instead of getting an automatic full step up in basis, this will necessitate keeping track of basis step up.  For a discussion of the considerations for Federal Estate Tax elimination along with the potential partial loss of step up in basis, refer to the complete article.

Economic and Policy Trends Likely to Influence the Future of Forests in Ohio

This article addresses economic aspects of several management and policy issues related to forestry in Ohio. First, the article describes historical trends in Ohio forests. Second, the article considers trends in timber management on Ohio private and public forests. To address timber management, two issues are considered, the growth of the stock of forests, and timber prices. Timber prices can have a large influence on the management of forestlands. Understanding what may happen to prices in the future can help illuminate the market pressures landowners may face to harvest their trees. Potential harvest and price trends for private timberland can also help policy-makers evaluate the efficiency of harvests on public timberland. Third, the article describes recent projections of potential future land use change in Ohio, including estimates of changes in forestland, cropland and developed land. The projections are based on a recently estimated model of land use in Ohio counties.

The complete article is available at: http://aede.osu.edu/people/sohngen.1/OER/OER2(3).htm

The Pricing Performance of Market Advisory Services in Corn and Soybeans Over 1995-2003: A Non-Technical Summary

Farmers in the US consistently identify price and income risk as one of the greatest management challenges they face. Surveys suggest that numerous farmers view professional market advisory services as an important tool in managing price and income risk. As a result, there is a need to develop an ongoing “track record” of the performance of market advisory services to assist farmers in identifying successful alternatives for marketing and price risk management. The Agricultural Market Advisory Service (AgMAS) Project was initiated in 1994 with the goal of providing such information.


The purpose of this research report is to summarize the pricing performance of professional market advisory services for the 1995-2003 corn and soybean crops. Readers can view the Non-Technical Summary report at: http://www.farmdoc.uiuc.edu/agmas/reports/05_02/AgMAS05_02.html

or http://www.farmdoc.uiuc.edu/agmas/reports/05_02/AgMAS05_02.pdf


The results for 1995-2001 were released in earlier AgMAS research reports, while the results for the 2002 and 2003 crop years are new. Complete details on data collection, computation of net advisory prices and benchmarks and pricing performance tests can be found in the full AgMAS research report by Irwin et al. (2005) at:


http://www.farmdoc.uiuc.edu/agmas/reports/05_01/AgMAS05_01.html

or http://www.farmdoc.uiuc.edu/agmas/reports/05_01/AgMAS05_01.pdf