Ohio State University Extension On-Farm Energy Demand Monitoring Project

Chris Zoller –Extension Educator, ANR & Eric Romich- Extension Field Specialist, Energy Education

Greater automation on farms has resulted in an increase in energy consumption on many farms. Due to increased electrical usage, many farms are now billed on a commercial rate structure. Unlike residential rates, which are based primarily on total energy usage measured in kilowatt hours (kWh), commercial accounts are also charged for the highest peak demand usage spike over a short time period measured in kilowatts (kW).

Ohio State University Extension secured grant funding to investigate how peak energy demand affects livestock facilities and, in turn, the manner by which farmers can implement energy management strategies, and make investments in equipment to minimize costs and promote long-term sustainability. We have equipment installed on six university and/or private swine and dairy farms across the state. Monitoring equipment installation was finalized earlier this year and we have begun collecting data from each cooperating farm. OSU Extension personnel involved in the project include Eric Romich, Tim Barnes, Rory Lewandowski, Eric Richer, Dale Ricker, and Chris Zoller.

While we are have not collected enough data to make any specific recommendations, we have a few months of data collected that has provided us the opportunity to make sure our monitoring equipment is functioning properly. As data is collected, it is shared with faculty and students in the Ohio State University College of Computer and Electrical Engineering. Students and faculty in the college analyze the data to develop a model that will help us interpret the findings.

Click Here to Access Full Report Which Shows Results

Observations

Many farmers are aware if they are on a demand rate. However, fewer farmers fully understand the details of how their demand charges are calculated including monthly measured demand formulas, power factor correction penalties, and if they are charged a minimum monthly demand based on seasonal spikes. These specific electric rate details greatly influence possible solution strategies.

Based on the preliminary data, there appears to be some motor loads that can be shifted (load shifting) to perform work during times when other critical motor loads are idle, thus reducing demand charges. Ultimately, energy management strategies to reduce demand cost will likely include a mixture of energy conservation, energy efficiency technologies, programmable logic controls and timers to preform load shifting, and possible on-site electric generation.

Summary

Obviously, farmers are interested in ways to reduce energy operational cost. However, before making investments in energy efficiency and renewable energy equipment, it is important to understand how you are charged for electricity. Some farms are still on residential electric rate tariffs and their bills are relatively easy to understand. However, because farms are using more electric, many farms are now on commercial electric rate tariffs that are more complex. Taking the time to investigate your rate tariff and analyze your consumption patterns will help you prioritize potential energy savings solutions, providing you the greatest return on your investment.

Ag Lender Seminars feature Federal Reserve Bank of Kansas City Economist

By Wm. Bruce Clevenger, Amanda Douridas & Rory Lewandowski, Extension Educators

The 2018 OSU Extension Agricultural Lender Seminars will feature keynote speaker, Courtney Cowley, Economist at the Federal Reserve Bank of Kansas City, Omaha, Nebraska.  Cowley will speak to each of the three regionally offered Ag Lender seminars scheduled in October 2018.  She will share her research and the role of the Federal Reserve Bank with her topic “Outlook for the U.S. Economy with Implications for the Ag Sector.”  Cortney Cowley is an economist in the Regional Affairs Department of the Federal Reserve Bank of Kansas City. Her current research focuses on agricultural finance, commodity markets, farm management, and natural resource economics and policy. Cowley’s responsibilities also include writing for the Tenth District Survey of Agricultural Credit Conditions and the Federal Reserve System’s Agricultural Finance Databook.    Cowley joined the Bank in 2015 after completing her Ph.D. in Agricultural Economics at Oklahoma State University. She also holds a B.S. degree in Biosystems Engineering from Oklahoma State and a M.S. degree in Civil Engineering from Colorado State University.

Additional speakers at each location include: Farm Policy & Commodity Outlook – Ben Brown, OSU CFAES, Farm Mgmt. Program Mgr.; Ohio Farm Economy & Production Economics – Barry Ward, OSU Extension, CFAES, Production Business Management; Dairy Production Economics – Dianne Shoemaker, OSU Extension, CFAES, Field Specialist; Hops, Barley & Ohio’s Specialty Crops – Brad Bergefurd, OSU Extension, CFAES, Extension Educator & Horticulture Specialist.

The three Ag Lender Seminars will be as follows:

Tuesday, October 16

Champaign Co. Community Center Auditorium

1512 South US Highway 68

Urbana, OH  43078

 

Wednesday, October 17

Putnam Co. Educational Service Center

Assembly Hall

124 Putnam Parkway

Ottawa, OH 45875

 

Thursday, October 18

Buckeye Agricultural Museum

877 West Old Lincoln Way

Wooster, OH 4469

Seminar programs begin promptly at 9:15 a.m. and conclude by 3:15 pm.  Registration information is available at: https://u.osu.edu/aglenderseminars/  or by contacting Bruce Clevenger, OSU Extension Educator, Defiance County at 419-782-4771 or clevenger.10@osu.edu.

OSU Extension conducts the seminars from input from Ag Lenders, County Extension Educators and Extension Specialists.  The seminars are designed to provide information that Ag Lenders will use directly with their customers, indirectly within the lending industry, and as professional development for current issues and trends in production agriculture.  OSU Extension has been offering Ag Lenders seminars for nearly 30 years.

 

 

Hops Production & Management Workshop Planned

by Chris Zoller, Extension Educator

 Are you looking for a way to diversify your farm income?  If so, raising Hops may be of interest.  The number of craft breweries has grown substantially in Ohio and many breweries are interested in sourcing locally grown hops.

The Tuscarawas County office of Ohio State University Extension will host a Hop Production & Management workshop on October 25th.  The workshop will begin at 5pm at the Mike McCoy Farm with a tour of the hop yard.  Discussion will continue at 7 pm at the Bolivar Fire Department.  Presenters include Brad Bergefurd, Horticulture/Hops Specialist, Ohio State University Extension; Andrew Marburger, Lockport Brewery; and Mike McCoy, Hops grower.

There is no cost to attend, but pre-registration is requested no later than October 18.  Reservations can be made by calling 330-339-2337.

What You Need to Know About Managing Millennials in Agriculture

by: Chris Zoller- Extension Educator, ANR

The exact dates vary depending upon your source, but the Pew Research Foundation has established birth years between 1981 and 1996 as the Millennial generation (also referred to as Generation Y or Gen Y) .  Researchers Neil Howe and William Strauss have identified the birth years for millennials as 1981 to 2004. Interestingly, Baby Boomer (those born between 1946 and 1964) is the only generation the United States Census Bureau defines.

What considerations should you have as an employer if you have employees (family or non-family) that are considered a part of this generation?  It’s not fair to paint all Millennials with a broad brush when describing this generation, but following are a few considerations when working with this generation.

The Millennial Generation
This is considered to be the most energetic, educated, and diverse generation that is also technology savvy and conscious of social issues.  Members of this generation have been influenced by terrorist attacks, school shootings, and the emergence of the Internet.  Approximately one-third of the U.S. workforce is made up of Millennials and it’s estimated they will comprise nearly one-half of the workforce by 2020.

Work-Life Balance and Flexibility
Millennials are very protective of their time away from work.  Millennials are leaders when it comes to having flexibility in the workplace.  A Bentley University study found that Millennial employees are almost twice as likely to have a spouse or partner working at least part-time compared to the Boomer Generation.  As a result, Millennials report finding time for themselves, getting enough sleep, and managing their personal and work life as being significant concerns.
The following question was asked of the Bentley University study participants: How much do you agree or disagree with the following statements if your company provided increased flexibility and/or paid parental leave?

What Do Millennials Value?  What Motivates Millennials?

Millennials are not unlike previous generations when it comes to wanting to perform meaningful work and contribute to the mission of the business.  “A survey published by the Harvard Business Review found that employees of all generations value meaningful work, yet every generation perceived that the other generations are only in it for the money, don’t work as hard, and do not care about meaning.”  I’ve reached an age where I find myself saying things like those reported in the Harvard Business Review…  Millennials also value mentoring, want to develop relationships with their employer and co-workers, desire to enhance their skills, believe training is important, and embrace technology.  This generation tends to believe that the work day doesn’t have to be ten hours.
Millennials are motivated to find ways that make production agriculture more efficient and profitable.  The entrepreneurial spirit and knowledge of technology this generation has will continue to impact agriculture.  It’s happening all around us – robotic milkers, the use of drones, apps, etc.

Work Assets
The Millennial generation has many assets they can offer to agriculture that are positive.  A consumer mentality is one started with Generation X and continues today with Millennials.  This mentality will continue to force everyone in agriculture to re-think food production and be cognizant of what consumers want, need, and desire.  Knowledge of computers and related technology can help farms better manage and interpret data to make more informed decisions.  Technology is fast paced, ever changing, and will continue to influence food production.  Millennials tend to be optimistic, goal oriented, have a positive attitude, and enjoy working with others.  These are positive attributes of employees in any business.

Work Liabilities
As with all young people, Millennials lack experience.  This is normal.  Just remember this as you work with employees in this generation – they have high expectations, focus on achieving goals, and are able and willing to learn.  Millennials prefer a structured work environment, need supervision, can be impatient, and may lack skills needed to effectively deal with difficult people.

Summary
What does all of this mean for you as an employer?  Your approach to employee scheduling may be a bit different than how you’ve done it in the past – keep in mind the high value that Millennials place on achieving a work-personal life balance.  Capitalize on the desire many in this generation have to achieve goals, perform work that is meaningful, work with others, and engage in training.  In addition, allow employees with the technology skills to help you better manage your farm for the future.  Technology will continue to impact agriculture and you will need to continually explore and evaluate the best technology for your farm business.  More employees are entering agriculture with no or limited production experience.  Be aware that your training programs may need to be more focused and incorporate hands-on activities.
Sources
Multi-Generational Impacts on the Workplace, Bentley University, 2017
Generational Differences Chart, West Midland Family Center, www.wmfc.org
Millennials in Agriculture – Part 1, Michigan State University Extension, 2017

(Originally published in Farm & Dairy, September 27, 2018)

Annie’s Project Course- Empowering Women in Agriculture

by: Jacqueline Kowalski & Robin Christensen, Extension Educators

 

 

OSU Extension in Summit and Portage Counties are teaming up to offer Annie’s Project from October 9th– November 13th, 2018. Annie’s project is a six-week program designed to address risk management education for farm women. Its objective is to educate women entrepreneurs so that they are more prepared to make farm management decisions. While a large number of farm women own and operate farms, others play a major role in the decision-making process of farm operations for farm families. Annie’s Project provides in-depth sessions on topics that are important for decision-making of the family farm. The program topics covered include human resources, legal risks, financial risks, marketing risks, and production costs and risks. Sessions are designed to be very interactive between the presenters and the participants. Information presented is tailored to meet the needs of participants in their own geographical areas.

Annie was a woman who grew up in a small rural community with the life-long goal of being involved in production agriculture. She spent her lifetime learning how to be an involved business partner with her husband, and together they reached their goals and achieved success. Annie’s daughter, Ruth Hambleton, a former Extension Educator for the University of Illinois, founded Annie’s Project in 2000 in honor of her mother. Annie’s Project is designed to take Annie’s life experiences and share them with other women in agriculture who are living and working in this complex, dynamic business environment. Additional details on Annie’s life can be found https://www.anniesproject.org/

The 6-week training will begin on Tuesday October 9th at 6:00pm, with dinner starting at 5:30pm. Registration is due October 5th, 2018. Classes will rotate between the Summit and Portage County Extension offices in Stow and Ravenna. The course fee is $100.

Please contact Robin Christensen with questions or for an application at 330-296-6432 or e-mail at Christensen.227@osu.edu

 

Consider Pros, Cons of Alternative Grain Storage Methods

by: Source: Chris Bruynis, OSU Extension Ross County

Farmers are faced with making some tough decisions this fall going into harvest. I am hearing there are large quantities of 2017’s crop still in storage in the local elevators which could lead to limited hours and inadequate storage for the 2018 large crop that is being harvested. Also there are pricing and basis concerns which clearly favor keeping the grain on the farm. These issues are making farmers scramble to find storage options and find them quick.

Ken Hellevang, North Dakota State University Extension agricultural engineer offers some advice that we need to think about when making this decision.  The important point is that all storage options should keep the grain dry and provide adequate aeration to control grain temperature. Grain must be dry and cool (near the average outdoor temperature) when placed in alternative storage facilities because providing adequate, uniform airflow to dry grain or cool grain coming from a dryer is not feasible.

Also farmers need to think about the structural issues of the building. Grain pushing against walls can damage buildings not built for grain storage. The wall must be anchored securely, and its structural members must be strong enough to transfer the force to the building poles or support structure without breaking or excessive bending. He suggests hiring an engineer to complete a structural analysis and follow the recommendations to reinforce the structure. The last thing farmers need is structural failure where we lose the grain and the structure.

Other option beside existing buildings could include poly bags, but it does not prevent mold growth in damp grain or insect infestations. Place grain in the bag at recommended storage moisture contents based on grain and outdoor temperatures during the potential storage period. Heating will occur if the grain exceeds a safe storage moisture content and it cannot be aerated to control heating. The average temperature of dry grain will follow the average outdoor temperature. If considering this option, select an elevated, well-drained site for the storage bags. Run the bags north and south so solar heating is similar on both sides. Sunshine on just one side heats that side, which can lead to moisture accumulation in the grain and spoilage on the cool side.

Grain covers over a pile could be an option as well, but site preparation might be costly. A combination of restraining straps and suction from the aeration system, when designed correctly, holds grain covers in place. This system can also provide adequate airflow through the grain to control grain temperature. Place perforated ducts on the grain under the cover to provide a controlled air intake for the aeration system and airflow near the cover to minimize condensation problems under the cover. Place properly sized and spaced ducts under the pile on the ground to pull air through the grain. Some storage options use a perforated wall for the air inlet.

For additional information and building specifications on alternative storage option go to https://www.ag.ndsu.edu/pubs/ageng/grainsto/ae84.pdf.

OSU Extension Income Tax Schools Focus on New Tax Law

by: Barry Ward and Julie Strawser, OSU Income Tax Schools

How to deal with the Tax Cuts and Jobs Act—the new tax law for both individuals and businesses–is among the topics to be discussed during the upcoming Income Tax School workshop series offered throughout November and December.

The annual series helps tax preparers 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 2018 tax returns.

The tax schools are intermediate-level courses that focus on interpreting tax regulations and changes in tax laws to help tax preparers, accountants, financial planners and attorneys advise their clients, he said. The schools offer continuing education credit for accountants, enrolled agents, attorneys, annual filing season preparers and certified financial planners.

This is an important year for tax education as the new tax law creates some challenges for tax practitioners to prepare themselves for the next filing season. Our instructors have great deal of experience and training and the accompanying workbook will be a top reference to prepare tax practitioners to best serve their clients during this transition to the new tax law.

The workbook offers over 700 pages of reference material including reference tables and examples that will be valuable to practitioners. Sample chapters of the reference workbook can be found at:

http://taxworkbook.com/about-the-tax-workbook/

The tax school will also feature a separate, two-hour ethics webinar that will broadcast Dec. 12 at 1 p.m. and again on Dec. 14 at 10 a.m. The webinar is approved by the IRS and will be available to tax school participants enrolled in the two-day tax school at no extra charge.

The registration fee for each workshop is $375, with a $50 late fee if not registered two weeks prior to the school. The fee includes all materials, lunches and refreshments. The deadline to enroll is 14 days prior to the date of each school. Participants can also choose to attend just day one of the workshop for $250. Additionally, the 2019 RIA Federal Tax Handbook and the Wolters Kluwer Master Tax Guide are both available for participants to purchase for a discounted fee of $40 each. Registration information and the online registration portal can be found at:

http://go.osu.edu/taxschools

The tax schools run from 8 a.m. to 4:30 p.m. on the following dates and locations:

  • Oct. 31- Nov. 1 — Ole Zim’s Wagonshed, 1387 State Route 590, Gibsonburg.
  • Nov. 5-6 – Sheraton Suites, 1989 Front St., Cuyahoga Falls.
  • Nov. 7-8 — Ashland University Convocation Center, 820 Claremont Ave., Ashland
  • Nov. 13-14 — Presidential Banquet Center, 4548 Presidential Way, Kettering.
  • Nov. 15-16 — Old Barn Out Back, 3175 W. Elm St., Lima.
  • Nov. 26-27 — Der Dutchman Restaurant, 445 S. Jefferson Rt. 42, Plain City.
  • Nov. 28-29 — Ross County Service Center, 475 Western Ave., Chillicothe.
  • Dec. 3-4 — Ohio University, Zanesville Branch Campus Center, 1425 Newark Road, Zanesville.
  • Dec. 5-6 — The Ohio State University, Fawcett Center, 2400 Olentangy River Road, Columbus.

A daylong webinar on Ag Tax Issues will be broadcast Dec. 17 from 9 a.m. to 3 p.m.

Tax practitioners representing farmers or rural landowners, as well as farmers or farmland owners preparing their own taxes, will benefit from the five-hour webinar. The focus will be key regulations of the Tax Cuts and Jobs Act related specifically to those income tax returns.

Participants can choose between attending a host location or participating at home or in the office. Host locations will provide a facilitator, refreshments and lunch. Participants are encouraged to bring a computer to engage in the real-time Q&A. Participants who choose not to attend a host location, will have a web address emailed prior to the webinar.

Registration, which includes the Ag Tax Issues workbook, is $150. Register by mail or on-line at http://go.osu.edu/AgIssuesReg

More information on the workshops, including how to register, can be found at go.osu.edu/taxschools. Participants may contact Ward at 614-688-3959, ward.8@osu.edu or Julie Strawser at 614-292-2433, strawser.35@osu.edu for more information.

Agricultural Tax Issues Webinar

by: Barry Ward, OSU Extension, Director, OSU Income Tax Schools

Tax practitioners, farmers and farmland owners are encouraged to connect to the Ag and Natural Resources Income Tax Issues Webinar on Dec. 17 from 9 a.m. to 3 p.m. The event is sponsored by Ohio State University Extension and participants can attend the webinar at host locations throughout Ohio or connect at home or office.

The webinar focuses on issues specific to farm tax returns related to agriculture and natural resources, and will highlight key regulations of the Tax Cuts and Jobs Act related specifically to those income tax returns.

The program is an intermediate-level course for tax preparers whose clients include farmers and rural landowners. Farmers who prepare and file their own taxes will also benefit from the webinar.

Topics to be discussed during the webinar include:

New Section 199A 20% Pass-Through Deduction

Learn how pass-through business owners (most all businesses except those organized as C-Corps) can qualify for this new deduction

Farm Loss Deduction Limits

Review the special rules and limits that apply to farm losses and farm net operating losses.

Depreciation of Farm Assets

Discuss new rules impacting the depreciation and expensing of farm assets. Also review the impact of the elimination of IRC § 1031 like-kind exchange treatment for personal property on farm trades.

Farm and Ranch Tax Elections

Identify general rules applicable to making and revoking elections allowed to farm businesses.

Section 199A and Agricultural and Horticultural Cooperatives

Define the new tax law applicable to sales by patrons through cooperatives.

Farm Lease Income and the QBI Deduction

Application of the QBI Deduction to farm lease income.

Entity Considerations

Review entity planning considerations for farm clients necessitated by the new tax law.

Involuntary Conversions:

Involuntary conversions may be the result of a condemnation, a sale under a threat of condemnation, sales of livestock due to weather conditions, or a casualty. The webinar will describe the tax rules associated with these dispositions.

Taxation of Wetland Mitigation Credits

Discuss how wetland mitigation credits are created and how credits might be taxed upon sale or disposition by farmers and ranchers.

Commodities Futures and Options Contracts

Review the tax implications of hedging transactions and options contracts.

Non-Cash Transactions

Identify some of the common challenges associated with non-cash transactions—such as commodity gifts and wages, bartering, and non-cash patronage dividends—and discusses their tax consequences.

Tax Implications of Payments from Energy Companies

Explore the tax treatment of various payments that a landowner or mineral owner may receive from oil and gas exploration, drilling activity, or from wind or solar energy produced on his or her land.

Case Study with Forms

Presentation with a typical farm client and walk through form preparation for that client’s tax return.

The cost for the one-day school is $150, and applications have been made for the following continuing education credits:

  • Accountancy Board of Ohio, CPAs (6 hours)
  • Office of Professional Responsibility, IRS (6 hours)
  • Supreme Court of Ohio, Attorneys (5 hours)

Registration includes the Agricultural Tax Issues workbook. The deadline to register is Dec. 6 to ensure participants will receive the workbook in the mail before the workshop. The live webinar, which will also feature a real-time Q-and-A, can be viewed at several host locations statewide and will include lunch.

Participants also have the option to view the webinar from home if unable to attend a host location.

For those who choose not to attend at a host location, a web address for the webinar will be sent in advance of the Dec. 17 presentation.

Host locations include:

Auglaize County, OSU Extension Office, 208 S. Blackhoof St., Wapakoneta

Clermont County, OSU Extension Office, 1000 Locust St., Owensville

Miami County, OSU Extension Office, 201 W. Main St., Old Courthouse, Troy

Putnam County, OSU Extension Office, 1206 E. Second St., Ottawa

Wayne County, Fisher Auditorium, 1680 Madison Ave., Wooster

Wyandot County, Elks Lodge, 320 E. Wyandot Ave., Upper Sandusky

More information on the workshop, including how to register, can be found at go.osu.edu/agissuesreg

Contact Barry Ward at 614-688-3959, ward.8@osu.edu or Julie Strawser at 614-292-2433, strawser.35@osu.edu with questions.

Estimates for Agricultural Risk Coverage and Price Loss Coverage Payments for Program Year 2017

by Ben Brown, Department of Agricultural, Environmental, and Development Economics- The Ohio State University

Click here for complete report with figures & tables

The Agricultural Adjustment Act of 2014 ushered in two programs to the safety net for producers in Ohio and across the country: Agricultural Risk Coverage (ARC0-CO) and Price Loss Coverage (PLC). Both programs serve as shallow loss programs protecting against large variations in revenue and price respectively. The two programs opperate differently and should not be compared as substitute programs. However, producers were allowed a one time choice at the beginning of the farm bill to enroll each commodity in either ARC-CO or PLC. Participation rates in Ohio largely followed the national participation rates for corn and soybeans but differed for wheat. The national participation rate for wheat favored PLC, whereas in Ohio, producers favored heavily toward ARC-CO. Nonetheless there are producers in Ohio that are enrolled in ARC-CO and PLC for corn, soybeans, and wheat. This report looks toward the end of the marketing year to estimate county level payments for ARC-CO and PLC in Ohio. As a reminder, payments finalized in October 2018 will be for program year 2017. This information will be important for producers and lenders wishing to estimate their autumn cash flow.

In October of 2017, the majority of producers in Ohio received some form of commodity program payment for the program year 2016. In fact, every county across Ohio triggered a corn ARC-CO payment except Ashtabula county. Soybean ARC-CO payments for Ohio in program year 2016 were smaller and sparce compared to corn. The majority of Ohio counties triggered a wheat ARC-CO payment, but smaller base acres of wheat exist. In program year 2017, it is estimated six counties triggered corn payments while nearly half triggered soybean payments and two thirds triggered wheat payments.

 

Data Source and Calucation:

ARC-CO payments are based on a formula seperated into two parts: historical revenue benchmark and actual year revenue. The historical revenue benchmark is the Olympic average of yields and prices for the five previous cropping years at 86% of the total. The actual year revenue is the current year yields multiplied by the Marketing Year Average (MYA) price for each commodity. In the case where the curent year revenue falls below the historical revenue benchmark, a payment is triggered up to a 10% cap. If the current year revenue is higher than historical revenue then no payment is triggered.

As a reminder both ARC-CO and PLC payments are calculated from a formula using Farm Service Agency (FSA) yields and marketing year average prices. The estimations for this report use National Agricultural Statistic Service (NASS) yields for 2017. It should be noted that FSA yields are historically lower than NASS yeilds and should be treated as a lower bound for possibile payments. NASS does not provide county yields for all counties, particially due to a low survey respone rate. Counties with a NASS yield are included.

The corn and soybean marketing year is September 1st to August 31st meaning that final prices won’t be known for several more months. Using World Agricultural Supply and Demand Estimates (WASDE) average prices from May, MYA prices of $3.40 for corn, $9.35 for soybeans, and $4.70 for wheat are applied. As the marketing year progresses, it is likely that these estimates will flucuate with price. Higher price results in a smaller payment, similarily, a lower price results a larger payment.

MYA prices used in the historical calculation are as followed:

 

MYA 2012/13 MYA 2013/14 MYA 2014/15 MYA 2015/16 MYA 2016/17
Corn $6.89 $4.46 $3.70 $3.70 $3.70
Soybeans $14.40 $13.00 $10.10 $8.95 $9.50
Wheat $7.77 $6.87 $5.99 $5.50 $5.50

 

Years where the MYA price finished below the fixed reference price are replaced with the respective value and represented in bold above. Payments would be lower if the actual MYA price was used in the calculation. Soybeans have never finished below the reference price. Crossed out prices represent the highest and lowest values; these are thrown out in the Olympic average.

Established in the program payment calculations is a limit for payments on 85% of base acres. For simplicity purposes, these figures are adjusted to rates that represent the payment on 100% of enrolled acres. Because of the Budget Control Act of 2011, a 6.8% government sequester has been applied similar to payments made in program years 2014, 2015 and 2016. There is uncertainty as to how the Tax Cuts and Jobs Act of 2017 will impact the sequestration level.

Corn Estimates

Expectations for program year 2017 corn ARC-CO payments will be smaller and rare across much of Ohio. This is largely because of the formula benchmark lowering each year as a result of lower prices. In previous years the historical five year revenue included high prices from MYA 2011/12 and 2012/13. Those have been worked out of the formula and the probability of triggering a payment has lowered. The 5 year olympic average price in 2016 was $4.79 compared to a price of $3.95 in 2017. Payment variations across counties happen due to variations in yields. Highland County tiggers the largest estimated payment at $24 per acre as a result of a 2017 yield of 167 bu/acre compared to a 2016 yield of 176. The average payment in 2016 was $57 whereas in 2017 it is estimated at $8. Fewer counties are expected to receive a payment with a smaller average payment in comparison from 2016.

Soybean Estimates

In a complete reverse of 2016, the majority of counties in Ohio are expected to trigger a soybean ARC-CO payment due to smaller county soybean yields and a lower historical revenue benchmark. County yields across Ohio were closer to historical trend than previous years and the five year MYA prce was $10.86 in 2017 compared to $11.86 in 2016. Payments are projected larger in the northern part of the state where soybean acres are more prevelant. In 2016, 29 Ohio counties triggered an ARC-CO payment whereas in 2017, 38 counties are expected to trigger a payment. The average payment in 2016 was $18, whereas in 2017 the average payment is projected at $23. In difference to corn more counties are expected to trigger a payment this year than last.

Wheat Estimates

Corn and soybeans represent the majority of commodity base acres in Ohio with over 4 million base acres of corn and over 3 million base acres of soybeans. Wheat has just over 800 thousand base acres enrolled in ARC-CO or PLC. However, 82% of wheat base acres have ARC-CO enrollment. In 2016, all but four Ohio counties triggered an ARC-CO payment with an average payment rate of $32. In 2017, the estimated average payment rate is $24 in roughly two-thirds of Ohio’s counties. The lower rate is a product of a higher expected MYA price for the current year of 2017/18. The largest payments are located along the Indiana/Ohio boarder.

PLC Payments

PLC county payments estimates can be made at this time, but with less certainty. Largely because the PLC program has a higher focus on the current MYA price, which is being replaced with the WASDE estimated average price. In Ohio, 3% of soybean base acres, 7% of corn acres and 18% of wheat acres are enrolled in the PLC program. PLC calculation includes taking the positive difference of the fixed reference price minus the current MYA price. Fixed reference prices are as followed: corn- $3.70, soybeans- $8.40, and wheat- $5.50. Given current WASDE projections for a high, low and average MYA price, a PLC payment is triggered at all three levels for corn and wheat with differing levels of size while soybeans do not trigger a payment at any level. PLC payments are expected to be larger for corn than last year while smaller for wheat. Soybeans have never triggered a PLC payment since the creation of the farm bill.

Summary

Payments for ARC-CO and PLC won’t be made until later in the calendar year, but for cash flow planning an estimate can be seen as important. Estimates for program year 2017 include fewer counties in Ohio triggering a corn ARC-CO payment in 2017 compared to 2016 with a smaller average payment of $8. This is due to a lower historical benchmark after high prices were removed from the five year Olympic average. In relation to 2016, more Ohio counties are expected to trigger a soybean ARC-CO payment with a higher per acre average payment rate. Yields closer to a historical trend line have created a higher probability of a soybean payment for half of Ohio’s 88 counties. Like corn, a similar story exists for wheat where fewer counties are expected to receive a payment with a lower average per acre payment rate compared to 2016. A higher expected current year marketing year average brings the current year revenue above the historical benchmark for a third of Ohio’s counties. PLC payment rates are expected to be higher for corn and lower for wheat in 2017 than 2016, but applies to a small percentage of Ohio base acres. Soybeans are not expected to trigger a PLC payment. Estimates for ARC-CO and PLC for each county are included in the appendix.

These are estimates of what payment rates could look like in the majority of Ohio’s 88 counties. Yields and prices will be finalized by the Farm Service Agency later in the calendar year.

Data Sources:

United State Department of Agriculture- Farm Service Agency. ARC/PLC Program. Washington, D.C.: United States Department of Agriculture, 2018.

United States Department of Agriculture- National Agricultural Statistics Service. County Yields. Washington, D.C.: United States Department of Agriculture, 2018

United States Department of Agriculture- World Agricultural Outlook Board. World Agricultural Supply and Demand Estimates, WASDE-574, February 8, 2018.

Ben Brown Program Manager: Ohio Farm Management Program College of Food, Agricultural, and Environmental Sciences Department of Agricultural, Environmental, and Development Economics 235 Agricultural Administration, 2120 Fyffe Rd., Columbus, OH 43210-1067 614-688-8686 Office

Net Farm Income Expected to Decline Again in 2018 After a Small Rebound Last Year

by: Ana Claudia Sant’Anna[1], Ani Katchova[2] and Ben Brown[3]

Department of Agricultural, Environmental, and Development Economics, The Ohio State University

Click here for full article with graphs

The United State Department of Agriculture (USDA), on August 30, forecasted U.S. net farm income for 2018 to decline 13% from last year, from $75.5 billion in 2017 to $65.7 billion in 2018 (USDA 2018). If realized, U.S. net farm income would decrease to levels witnessed in 2016 (Figure 1). This decline is even larger when we consider inflation-adjusted values, showing a 14.8% decrease in real U.S. net farm income. The USDA also made a similar downward forecast for U.S. net cash income. Net cash income is projected to drop 12% in 2018, from $104 billion in 2017 to $91.5 billion in 2018. These declines in farm income reverse the small rebound in income in 2017 to what would be the second lowest values in inflation-adjusted terms since 2002.

The latest USDA forecast did not consider or include payments made under the Market Facilitation Program (MFP) to producers in response to decreased prices, as a result of ongoing trade negotiations with several U.S. trading partners. A question which may arise is how MFP could change the forecast for U.S. net farm income. The MFP program is expected to make direct payments to farmers close to $4.7 billion with purchases of excess commodities of $1.2 billion and $200 million reserved for identifying new international markets through the Foreign Agricultural Service for an initial total of $6 billion on agricultural commodities (USDA, Sept. 2018). If trade negotiations continue to weigh on commodity prices, another payment of $4.7 billion could be released to U.S. producers later this fall. Considering that in the 2018 forecast, net government payments represented 7.8% of net farm income and that net government payments (i.e. government payments subtracted from federal taxes paid by producers) were negative (- $5.2 billion), an increase in government benefits could mean a smaller decline in net farm income than expected. Nevertheless the downturn in the farming sector, witnessed since 2013, would still be present.

The USDA also released the estimates for Ohio net farm income for 2017. Similar to the U.S. estimates from 2017, Ohio net farm income showed an increase after large declines since 2013 (Figure 1). In fact, net farm income in Ohio in 2017 was about 3 times larger than that of 2016 (from $0.4 billion to $1.3 billion). The concern, though, is that the 2018 Ohio farm income would experience a downturn similar to the forecast for the 2018 U.S. net farm income. Figure 1 illustrates how Ohio and U.S. net farm income have trended in the past. They seem to follow similar trends which may mean that Ohio net farm income would probably see a decrease in 2018 with respect to 2017.

Net farm income for Ohio dating back to 1949 shows that the Ohio farm sector is not doing as well as it was 5 years ago (Figure 2). Although the drop in net farm income witnessed in 2016 was not as low as that during the 80s farm crisis, it is still the lowest since the 1980s in real terms. In fact, since 2014 Ohio net farm income has been below the 69 year average of $2 billion in 2018 dollars (Figure 2). The length of time which Ohio net farm income remains below its long-term average is concerning. In the twenty first century, Ohio net farm income remained below the 69 year average a couple of periods, but the longest duration was for four years (2005 to 2008). Current statistics, though, point to 2018 possibly being the fifth consecutive year that Ohio net farm income is below the long-term average. Greater emphasis should be placed on the length of the downturn rather than the fact that net farm income in Ohio is not as low as it was during the farm crisis. These observations made for Ohio echoes those of Gloy and Widmar for the U.S. net farm income (Gloy and Widmar 2018)

 

References

Gloy, B. and Widmar, D. (2018, September 4). “After 2017 Rebound, Net Farm Income to fall in 2018”. Agricultural Economic Insights. Retrieved September 10, 2018, from: https://ageconomists.com/2018/09/04/after-rebounding-in-2017-net-farm-income-to-slump-in-2018/

United State Department of Agriculture (USDA), Economic Research Service (ERS). (2018). 2018 Farm Sector Income Forecast. Retrieved September 10, 2018, from https://www.ers.usda.gov/topics/farm-economy/farm-sector-income-finances/farm-sector-income-forecast/

United State Department of Agriculture (USDA). (2018, September 4). USDA Launches Trade Mitigation Programs [Press release]. Retrieved September 10, 2018, from https://www.usda.gov/media/press-releases/2018/09/04/usda-launches-trade-mitigation-programs

[1] Post-Doctoral researcher in the Farm Income Enhancement Program

[2] Associate Professor and Farm Income Enhancement Chair

[3] Program Manager for the Farm Management Program