Barry Ward, OSU Extension, Leader, Production Business Management, Department of Agricultural, Environmental, and Development Economics & Greg Reinhart, Undergraduate Student Intern, OSU Department of Agricultural, Environmental and Development Economics
Budgeting helps guide you through your decision making process as you attempt to commit resources to the most profitable enterprises on the farm. Crops or Livestock? Corn, Soybeans, Wheat, Hay? We can begin to answer these questions with well thought out budgets that include all revenue and costs. Without some form of budgeting and some method to track your enterprises’ progress you’ll have difficulty determining your most profitable enterprise(s) and if you’ve met your goals for the farm.
Budgeting is often described as “penciling it out” before committing resources to a plan. Ohio State University Extension has had a long history of developing “Enterprise Budgets” that can be used as a starting point for producers in their budgeting process.
Newly updated Enterprise Budgets for 2013 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:
Enterprise Budget projections updated for 2013 include: Corn-Conservation Tillage; Soybeans-No-Till (Roundup Ready); Wheat-Conservat... Read More »
by: Barry Ward
Department of Agricultural Environmental and Development Economics
Ohio State University Extension, Leader, Production Business Management
We have been preaching about flexible leases for years. Flexible cash leases are THE ANSWER to all problems plaguing farmers and landowners attempting to find an equitable cash lease each year. Right?! Well….ok maybe not. Flexible leases may not be for everyone but they may be a tool you should at least consider as you try to manage the volatility in the crop sector these days.
Landowners and farmers have found it increasingly hard to agree on an equitable cash rent as crop prices and input costs have experienced a fair bit of volatility over the last several years. Cash lease rates aren’t public knowledge and don’t have any public clearinghouse such as a futures exchange so information on rates is often sketchy. The local diner does not qualify as a reliable information clearinghouse! Farmers with full yield and profit information are often reluctant to share this information with the landowner for fear of rent escalation. Landowners knowing there is significant value in “fringe benefits” that farmers provide (snow clearing, rock removal, fence-row maintenance, tiling, etc.. ) may be reluctant to recognize this value in the negotiation process.
Farmer: “I’m only paying $125 per acre for a similar farm” or landowner: “my neighbor is getting $200 per acre for land that isn’t nearly as good as my... Read More »
By: Clif Little, Extension Educator, Guernsey & Noble Counties
The provisions of an oil and gas lease and right-of-way grant, outlines payment details and can be a complex element of a lease or grant. Understanding these provisions is integral when considering the financial aspects of an oil and gas lease or right-of-way grant. In modern oil and gas transactions landowners are often offered a signing bonus in consideration for granting a lease or right-of-way grant. It is a common practice for companies to offer this payment in the form of a bank draft once the agreement is signed and notarized. For many landowners who are accustomed to exchanging paper notes or personal checks for things they purchase, a bank draft can be a new financial experience. Understanding the elements of a bank draft can assist a landowner who may come across one when entering into oil and gas related agreements.
A bank draft in simple terms is a “conditional” form of payment to be honored within a described time period. The draft itself may appear similar to a personal check. One key element that typically appears in a bank draft are a list of conditions for payment. The conditions of payment are important for a landowner to review prior to signing any agreement. A number of companies involved in shale development and the leasing of land utilize bank drafts. A landowner may be informed that this is the standard form of payme... Read More »
Barry Ward, Leader, Production Business Management, OSU Extension, Department of Agricultural, Environmental and Development Economics
Cropland values in Ohio have increased again in 2012. Data from the Oho Ag Statistics Service shows an increase of 13.6% for bare cropland in Ohio for 2012. According to their data, bare cropland averages $5000/acre, up from $4400/acre the previous year.
An OSU Extension survey conducted in December 2011 estimated that the increase in value of Western Ohio cropland in 2012 would be 7.5-9.1% depending on region and land class. The Chicago Federal Reserve Bank and Purdue University both conducted surveys in June 2012 and found that cropland values in Indiana had appreciated 10-18.1% from one year ago.
Crop profitability prospects were positive in 2011 as they have been for the most part since 2007. Profit margins in 2012 were highly variable across Ohio due to moderate to severe drought. Crop insurance proceeds will alleviate much of the yield shortfall and financial stress associated with the 2012 drought. This period has seen some of the most profitable years in the last 50 years of crop production. These profit streams and healthier balance sheets have led many farmers to seek an investment option for these profits and many have chosen to invest in land. Investors outside of agriculture have also been strongly considering and looking to farmland as an investment alternative.
With many dollars and buyers chasing farmland, it isn’... Read More »
Dr. Bill Weiss, Professor and Extension Specialist & Dianne Shoemaker, Extension Field Specialist, Dairy Production Economics
With a “normal” corn crop, pricing a standing crop for silage can be “interesting”. Pricing a drought-stressed corn crop is even more interesting. What is the actual nutrient content of the crop? How well will the crop ferment? Will nitrate levels put the potential silage crop at risk? There are many unknowns, with the biggest challenge being how to determine the dollar value to assign to that risk.
The value of drought-stressed corn silage can be estimated using expected nutrient composition and the cost of the nutrients. The average composition of drought-stressed corn silage in Table 1 is reasonable, but the composition of silage for a specific situation (e.g., hybrid, growing conditions, etc.) could be substantially different. The nutrient values were calculated based on numerous feed prices in central Ohio. To read more click here to download the pdf of 2012 Pricing Drought Stressed Corn Silage
By: Barry Ward, Leader, Production Business Management, Ohio State University Extension, Department of Agricultural, Environmental and Development Economics
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 publication are based on a statewide survey of 122 farmers, custom operators, farm managers and landowners conducted in 2012. 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.
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 bef... Read More »
by: Barry Ward, OSU Extension, Leader, Production Business Management, Department of Agricultural, Environmental, and Development Economics
Ohio cropland varies significantly in its production capabilities and cropland values and cash rents vary widely throughout the state. Generally speaking, western Ohio cropland values and cash rents differ substantially from 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, field shape, drainage, population, ease of access, market access, local market price, potential for wildlife damage, and competition for rented cropland in a region. This fact sheet is a summary of data collected for western Ohio cropland values and cash rents.
Click here for the Western Ohio Cropland Values and Cash Rents Fact sheet 2011-12
Ohio cropland values and cash rental rates are projected to increase in 2012. According to the Western Ohio Cropland Values and Cash Rents Survey, bare cropland values are expected to increase from 7.3% to 9.1% in 2012 depending on the region and land class. Cash rents are expected to increase from 5.7% to 11.5% depending on the region and land class.
The “Western Ohio Cropland Values and Cash Rents” study was conducted surveying professionals knowledgeable about Ohio’s cropland markets. Surveyed groups include farm managers, rural appraisers, agricultural lenders, OSU Extension e... Read More »
By: Barry Ward, OSU Extension, Leader, Production Business Management, Department of Agricultural, Environmental, and Development Economics
Although crop-share leases constitute a smaller percentage of total land leases today than they did 25 years ago, they are still an important type of lease arrangement in many areas.
In a crop-share lease arrangement, the crop-share that each party receives should be proportional to the value contributed toward production. Market-based payment to each party is the basic concept for developing an equitable crop-share lease. An equitable crop-share lease should be developed following some basic rules or principles:
1. The landowner and operator should share total returns in the same proportion as they contribute resources (or total economic costs which includes accounting costs and opportunity costs.)
2. Variable expenses that increase yields should be shared in the same percentage as the crop is shared.
3. Share arrangements should be adjusted to reflect the effect new technologies have on relative costs contributed by both parties.
4. Operators should be compensated at the termination of the lease for the undepreciated balance of long-term investments they have made.
5. Good, open, and honest communication should be maintained between the landowner and operator.
Some advantages of a crop-share lease include:
• Compared to cash rents, less operating capital may be “tied up” by the operator due... Read More »
By: Barry Ward, Leader, Production Business Management, Ohio State University Extension
The North Central Farm Management Extension Committee has recently updated three lease bulletins that have been widely used by farm landowners and farm operators to evaluate lease arrangements. This article highlights the bulletin, “Fixed and Flexible Cash Rental Arrangements for Your Farm” (NCFMEC-01).
The purpose of this newly revised publication is to help operators and landowners develop equitable cash-rent arrangements and assist them in making sound decisions based on an equitable evaluation of resources. The first section of this bulletin (Part I) addresses whether a fixed cash-rent lease arrangement should be used. Part II discusses how to develop an equitable fixed cash rental rate. Part III outlines methods for developing a flexible cash rental lease and their advantages and disadvantages. Part IV discusses the importance of putting the agreement in writing. A sample lease form is also included.
This newly revised North Central Region bulletin titled “Fixed and Flexible Cash Rental Arrangements for Your Farm” is available at the “AgLease101” website under the “Document Library” tab at: http://www.aglease101.org/
Barry Ward, Leader, Production Business Management, OSU Extension
Custom farming providers and customers often arrive at an agreeable custom farming machinery rate by utilizing Extension surveys results. Ohio State University Extension collects surveys and publishes survey results from the Ohio Farm Custom Survey every other year. This year we are updating our published custom farm rates for Ohio.
We need your assistance in securing up-to-date information about farm custom work rates, machinery and building rental rates and hired labor costs in Ohio.
Please download the Ohio Farm Custom Rates 2012 survey and respond even if you know only a few rates. We want information on actual rates, either what you paid to hire work or what you charged if you perform custom work. Custom Rates should include all ownership costs of implement & tractor (if needed), operator labor, fuel and lube. If fuel is not included in your custom rate charge there is a place on the survey to indicate this.
The survey is available for download as a Word document at:
Or you may access the survey at:
Surveys can be completed and returned via email, mail or fax.
Fax (614) 292-4749
Address: Attn: Barry Ward, The Ohio State University, Department o... Read More »
Barry Ward, Leader, Production Business Management
More than half the cropland in the North Central Region of the United States is rented. Rental rate and leasing information is highly sought by both land owners and land operators.
AgLease101.org includes multi-state materials which help land owners and land operators discuss and resolve issues to avoid legal risk. The website also guides both land owners and land operators towards informed and equitable decisions.
AgLease101 was created by a team of economists and attorneys as a part of the North Central Farm Management Extension Committee. AgLease101 is online at: http://www.aglease101.org/
The “Document Library” within AgLease101 contains the newly revised bulletins and sample leases in pdf format for free download and use. The sample lease forms are all in a fillable pdf format to allow users to input their own lease values and other specifics.
Revised Lease Bulletins include:
Fixed and Flexible Cash Rental Arrangements For Your Farm (NCFMEC-01)
Crop Share Rental Arrangements For Your Farm (NCFMEC-02)
Pasture Rental Arrangements For Your Farm (NCFMEC-03)
Newly revised sample leases include:
Fixed and Flexible Cash Rental Arrangements For Your Farm (NCFMEC-01A)
Crop Share Rental Arrangements For Your Farm (NCFMEC-02A)
Pasture Rental Arrangements For Your Farm (NCFMEC-03A)
AgLease101 also includes a section of “Frequently Asked Questions” (FAQ) and a section “For Educators”... Read More »
By Wm. Bruce Clevenger, OSU Extension Defiance County
When farmers and landowners evaluate cropland rental arrangements, questions arise like “Should we continue farming on shares?” “Which is more fair, crop share or cash rent?” “Do we have the right share percentages?” “How do we set a fair cash rent?” “What happens to my risk?”
These are common questions across Ohio and the Midwest. As the dynamics of cropland production changes with market and production forces as well as landownership transitioning to the next generation or owner, cropland leasing and rental arrangements too will evolve.
To help with the analysis, The Center for Farm Financial Management (CFFM) at the University of Minnesota offers a software called FairRent. Some OSU Extension County offices have the software to assist farmers and landowners evaluate current or future cropland leasing and rental arrangements.
FairRent evaluates both cash rental and share rental arrangements based on expected yields, prices, government program payments, and expenses. The results calculate a break even cash rental rate and help develop a realistic bidding range for cash rental negotiations. The share rent results show whether sharing production and expenses will result in a fair economic return for the operator.
FairRent also has sensitivity tables that show how break even bids change with varying yields and prices. All sensitivity levels interact with government payments to show the pric... Read More »
Information presented above and where trade names are used, they are supplied with the understanding that no discrimination is intended and no endorsement by Ohio State University Extension is implied.
Ohio State University Extension embraces human diversity and is committed to ensuring that all research and related educational programs are available to clientele on a nondiscriminatory basis without regard to race, color, religion, sex, age, national origin, sexual orientation, gender identity or expression, disability, or veteran status. This statement is in accordance with United States Civil Rights Laws and the USDA.
Keith L. Smith, Ph.D., Associate Vice President for Agricultural Administration and Director, Ohio State University Extension TDD No. 800-589-8292 ( Ohio only) or 614-292-1868