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Ohio Ag Manager

January 2012

Dec
20
2012

ACRE Payments not Probable in Ohio for 2012

By: Chris Bruynis, PhD, Assistant Professor & Extension Educator, OSU Extension. Recently I read an article that suggested that an Average Crop Revenue Election (ACRE) payment might be possible for the corn crop in Illinois. So, I thought maybe it might be possible here in Ohio. We have relatively good estimates from the National Agricultural Statistical Service (NASS) on the 2012 yield for Ohio. Corn yield is estimated at 123 bushels per acre and soybeans at 43 bushels per acre. Corn represents a decline of approximately 22% and soybeans are down 10% from the five year Ohio Olympic average. The ACRE revenue guarantee for corn in Ohio is $627. To calculate the actual crop revenue for the state, simply multiply the state average yield times the market average price for the year. The market year starts in September of 2012 and goes through August 2013. Since the market average price is not known, one can determine what the market price needs to be less than by dividing the ACRE revenue guaranty by the average yield. For corn this would be $5.10 per bushel. For September through November the Market year average is $6.76 and the USDA is projecting it to be $7.60 for the year. Unless something drastic happens in the grain markets, it is highly unlikely there will be an ACRE payment in Ohio for the 2012 corn crop. The same calculation can be made for the soybean crop. By dividing the Ohio soybean revenue guarantee of $493 by the average yield of 43 bushels per acre you ...
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Farm Policy, Financial Management, January 2012
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Jan
09
2012

Can I Avoid Paying Taxes on Oil/Gas Payments?

By Chris Zoller, Chris Bruynis & David Marrison, OSU Extension Educators & Peggy Hall, Extension Specialist, Agricultural Law

The leasing of land for oil and gas drilling throughout eastern Ohio has provided landowners with substantial revenue.  OSU Extension has received many calls from landowners asking how they can avoid paying taxes on these payments.  The quick answer is that there are very few ways to avoid paying taxes on lease bonus payments or royalty income.  Oil and gas revenue payments are classified as Miscellaneous Income and are subject to both federal income and Ohio taxes (and should be reported appropriately). 

Taxation on Lease Bonus Payments: Cash payments received by the landowner prior to drilling, commonly referred to as lease bonus payments (typically paid on a per acre basis) are considered ordinary income for tax reporting purposes and are subject to ordinary income taxes. These payments might be made on an annual basis each year of the lease’s primary term, or could be made as a lump-sum payment that combines all annual payments into one payment made upon executing the lease.  All lease payments are reported to landowners on IRS form 1099 MISC, Box 1, Rents.  Lease payments must also be reported on page 1 of Schedule E, Supplemental Income and Loss.  This amount then flows to line 17 of IRS Form 1040 and is not subject to any self-emplo...
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January 2012, Tax Management
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Jan
09
2012

Financial & Tax Implication of Oil & Gas Leases Meetings to be held

by David Marrison & Clif Little, OSU Extension Educators OSU Extension is pleased to offer Financial & Tax Implication workshops in selected counties during the winter of 2012. These workshops will help landowners understand the financial and tax implications of oil & gas leases/royalties. These meetings will help participants become more aware of the potential tax implications of leases and royalty payments. Don’t get caught blindsided by the taxes which will be due. Learn which payments are subject to ordinary income taxes versus capital gain; about the percentage depletion deduction; and how signing a lease may affect your CAUV status. Learn how the IRS handles oil & gas payments. Learn what questions to ask and receive financial planning tips for managing the potential income from these wells. The following meetings have been scheduled: Thursday, January 19, 2012 Ashtabula County Extension office 9:30 to 11:00 a.m. This class is already sold out. Thursday, February 16, 2012 Mid East Career & Technology Center in Buffalo, Ohio (Guernsey County). 6:00 p.m. For more information: contact Clif Little at 740-489-5300 or 740-732-5681. Tuesday, February 21, 2012 Trumbull County Extension office 9:30 to 11:00 a.m. More information can be obtained by calling 440-576-9008 or click here for the Tax Implications of Oil & Gas Meeting Registration Form Thursday, February 23, 2012 Ashtabula County Extension office 9:30 to 11:00 a....
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January 2012, Tax Management, Upcoming Events
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Jan
09
2012

Computerized Farm Recordkeeping Workshops

Wm. Bruce Clevenger, OSU Extension Educator, Defiance County Pencil and paper is still the way most farmers keep records. As farm size, income or debt increases, many farmers and lenders look for computer programs that allow fast data entry, have internal checks for accuracy and allow summarizing of data. Most farmers begin their search by asking "Is there a simple computer program that will keep my records like the farm account books?" Ohio State University Extension and other land grant colleges have recognized the computer software Quicken® as a computerized farm recordkeeping system.  Users can record transactions of both the farm and family and categorize them based on farm enterprises income and expenses as well as family living expenses.  Its popularity is due to the ease of data entry and to its low price of $60 to $100. This single-entry system is essentially an electronic checkbook. It allows users to track loans, write checks,   reconcile the checkbook with the bank statement and quickly create reports for the farm business, family, and tax purposes. OSU Extension is offering a Computerized Farm Recordkeeping Workshop with Quicken® that will focus on setting up accounts, categorizing income and expenses, hands-on data entry, running tax reports, and preparing farm production reports.  Workshop will utilize a computer laboratory with Quicken® software installed to be used by participants during the workshop. Workshops will be held: January 30 ...
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January 2012, Upcoming Events
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Jan
09
2012

2011 Farm Business Analysis – The time is now!

by: Dianne Shoemaker, Field Specialist, Dairy Production Economics shoemaker.3@osu.edu        Grain prices rocked in 2011 (if you were selling!), and milk prices were pretty nice too, but net farm income will vary from outstanding to poor depending on a number of factors.  Were you selling grain or buying feed being one of the major factors.  How did your farm do?  You surely have a general sense…you were either pre-paying to manage income tax liabilities or that wasn’t an issue…but how did it do by the numbers? Direct costs, total costs, and net returns per acre, per bushel, per ton of crops grown.  Total cost of production per cwt, feed cost per cwt, net farm income per cow.   These are important numbers for every farm as they monitor individual enterprise profitability, develop and monitor risk management plans, and look for opportunities.  What was the return on assets? Return on equity?  What were the Farm Financial Standards Council “Legal 21” financial measures?  How did your farm do this year compared to last year? How does your farm stack up against all of your competition?  Against all farms your size?  Against the top 20% of both groups?  Need help answering all of these questions?  Completing your farm’s financial analysis for 2011 using the FINAN with enterprise analysis program is an organized and effective way of getting those answers done each year…with the added benefit of a growing state, regional and national da...
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Financial Management, January 2012
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Jan
06
2012

Tree Harvesting on Your Land: Legal Liability Issues and Precautions

By: Peggy Kirk Hall, Director of Agricultural Law, OSU Agricultural and Resource Law Program

Imagine that you have a number of dead and downed trees on your property and someone asks for permission to harvest the trees.  Typically, that person seeks an exchange:  removal of the trees at no cost in exchange for rights to the wood.  If you grant permission and the person suffers an injury while removing the trees, will you be liable for that person’s medical bills and other costs?   Are there any actions you could take to protect yourself from the potential of liability?  These are important questions a landowner should address before allowing someone to harvest dead and downed trees.  Click here to read the firewood liability factsheet.

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January 2012, Legal Issues
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Jan
06
2012

AEDE New Faculty: Sathya Gopalakrishnan

The Department of Agricultural, Environmental and Development Economics (AEDE) at The Ohio State University, is welcoming several new faculty during the 2011-2012 academic year.  This month we highlight Professor Gopalakrishnan, who teaches several key environmental and resource economics courses in the department.  Here’s Sathya’s short biography and statement of interests: I am an Assistant Professor in the Department of Agricultural, Environmental and Development Economics at The Ohio State University. I obtained a PhD in Environmental and Resource Economics from Duke University in 2010. I also have a Master of Science degree in Agricultural Economics from Michigan State University and a Master of Arts in Economics from the University of Hyderabad, India. I am originally from Chennai (Madras), India. An interest in exploring the ubiquitous interdependencies between economic agents with conflicting interests and dynamic natural resources motivates my research. I study feedbacks between physical processes and economic decisions, and the policy implications of these interconnected dynamic systems. I have a specific interest in coupled models of complex coastal (physical) and economic systems, non-market valuation of environmental amenities and bioeconomic modeling. When I am not working, I enjoy classical Indian Music and nurture my interest vegetarian cooking. Welcome Sathya! Departmental Website: http://aede.osu.edu/about-us/our-people/sathya-gopalakrish...
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January 2012
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Jan
06
2012

Ohio Farm Custom Rate Survey 2012

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: http://aede.osu.edu/sites/drupal-aede.web/files/Custom%20Rate%20Survey%20Instrument%202012%20Survey.doc  Or you may access the survey at:  http://aede.osu.edu/programs-and-research/osu-farm-management/publications Surveys can be completed and returned via email, mail or fax.  email   ward.8@osu.edu Fax     (614) 292-4749  Address:   Attn: Barry Ward, The Ohio State University, Department o...
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Farm Rents, January 2012
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Jan
06
2012

Ag Lease 101 – New Website Housing North Central Lease Bulletins and Sample Leases

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”...
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Farm Rents, January 2012
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Jan
05
2012

Ohio Court of Appeals Denies Township Challenge to ODA Anhydrous Regulations

A claim that the Ohio Department of Agriculture’s (ODA) anhydrous ammonia regulations are unreasonable and fail to protect public health and safety has again been rejected by the courts.  A recent decision by Ohio’s Fifth District Court of Appeals concluded that the challenge by Sharon Township’s Board of Trustees in Medina County failed to establish a valid legal claim. The case raised considerable controversy in Sharon Township, where the owner of South Spring Farms requested ODA approval to install a 12,000 gallon anhydrous ammonia storage tank.   Ohio law grants ODA the authority to adopt rules concerning the handling and storage of anhydrous ammonia and other fertilizers and also prohibits any local regulation of fertilizers.   ODA created anhydrous regulations in the late 1970s; those regulations require ODA approval of the location and design of a stationary ammonia system. ODA approved South Spring Farms’ application in 2010 and granted a permit for installation of the tanks.  Sharon Township filed a lawsuit against ODA, asking the trial court to grant an injunction prohibiting the ODA from permitting the installation of anhydrous storage tanks “until the ODA established regulations which would reasonably protect the health, safety, and welfare of people and property which can be reasonably foreseen to be exposed to the toxic and deadly effect of an uncontrolled release of this dangerous material, anhydrous ammonia.” The legal basis for the ...
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This post is a reprint of a post by Peggy Hall that originally appeared at Ohio Agricultural Law Blog.
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January 2012, Legal Issues
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Dec
30
2011

RMA Makes Changes in Biotech Endorsement Program and Streamlines Crop Reporting Dates

By: Chris Bruynis, Assistant Professor & Extension Educator, Ross County Farmers that were able to reduce crop insurance premiums by using the Pilot Biotechnology Endorsement (BE) approved by the Federal Crop Insurance Corporation Board of Directors (FCIC Board) starting with the 2008 crop year (CY), will no longer be able to beginning with CY 2012. The Pilot BE has provided a premium rate reduction to eligible producers that plant certain qualifying corn hybrids. After careful consideration, and in consultation with the pilot submitters, the FCIC Board has concluded the Pilot BE will terminate in the interest of program simplification. However, RMA will consider an appropriate reduction in the underlying base premium rates for corn in the existing pilot area beginning with the 2012 crop year. Ohio was one of the states in the Pilot BE Program. The Risk Management Agency (RMA) and the Farm Service Agency (FSA) have established 15 common acreage reporting dates for producers participating in RMA and FSA programs. Before the streamlining, RMA had 54 acreage reporting dates for 122 crops, and FSA had 17 dates for 273 crops.  In Ohio, this change means producers will now have four acreage reporting dates instead of five. Beginning in 2012 burley tobacco, spring cabbage (planted 3/15-5/31), corn, grain sorghum, hybrid corn seed, spring oats, popcorn, potatoes, soybeans, tomatoes, and any other crops not listed elsewhere will have a July 15 acreage reporting date. ...
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Farm Policy, January 2012
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Dec
30
2011

Farm Business New Year’s Resolutions

By: Mark Mechling, Extension Educator, OSU Extension, Muskingum County As we begin 2012, we look forward to new opportunities and challenges. Many of us develop resolutions (lose weight, stop smoking, spend more time with family) yet fail to achieve the impact we wanted. Why? Perhaps our resolutions are too vague or broad, not written down or too difficult to reach. Resolutions and goals are similar. They are definite statements of how you plan to achieve your vision of the future. In management education they are referred to as SMART goals. They should be Specific, Measurable, Attainable, Rewarding and Timed.  Goals should focus your attention, energy and action on desired results. Consider the following when making your new year’s resolutions or goals- Write them down, start small, share them with others, keep them in front of you on a daily basis and reward yourself when successful. Here are a few management resolutions that you might want to consider adding to your list for the new year. In 2012, I resolve to: Participate in at least one OSU Extension management education program such as Annie’s Project or a landowner’s program on oil and gas leasing. Conduct at least two family business meetings to discuss conflict resolution, job descriptions, succession strategies and other long range plans. Read the OSU Extension Fact Sheet by Chris Zoller on family business meetings at : http://ohioline.osu.edu/bst-fact/pdf/3612.pdf for additional informat...
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Financial Management, January 2012, Labor Management
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Dec
26
2011

Targeting a Fair Rent or Crop Share Lease Agreement

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...
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Farm Rents, January 2012
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Dec
13
2011

Biotechnology and Variation in Average U.S. Yields

By: Carl Zulauf, Professor, and Evan Hertzog, Metro High School Junior Department of Agricultural, Environmental and Development Economics Introduction: In a previous article, we compared the trend in U.S. average yield per harvested acre for the 1940-1995 and 1996-2011 periods. The year 1996 was the first year that biotech varieties of crops were commercially adopted in the U.S. The analysis included 14 crops, 3 biotech crops (corn, cotton, and soybeans) and 11 crops for which adoption of biotech varieties is limited. This article specifically examines the deviation of average U.S. yield from its trend-line yield. The objective is to provide information concerning the commonly-expressed argument that biotechnology has reduced yield variability. Analytical Procedures: The data for this analysis are from the U.S. Department of Agriculture, National Agricultural Statistics Service, accessed at http://www.nass.usda.gov/Data_and_Statistics/) during November 2011. The observation period is from 1940 through 2011, with 1940 being the approximate year that average yield began to increase for most U.S. crops. We will use corn yields since 1995 to illustrate the calculation of yield variation used in this analysis. The yearly corn yield, along with the linear trend line, is presented in Figure 1. We calculated the percent deviation of the actual yield from the estimated trend-line yield for each year. For example, U.S. average corn yield was 160 bushels per harvested acre in...
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Farm Policy, January 2012
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Dec
13
2011

Biotechnology and U.S. Crop Yield Trends

by: Carl Zulauf, Professor, and Evan Hertzog, Metro High School Junior Department of Agricultural, Environmental and Development Economics Introduction: Biotechnology varieties first became available for commercial use in the U.S. in 1996. By 2011, they accounted for 88%, 90%, and 94% of the acres planted to corn, upland cotton, and soybeans, respectively (U.S. Department of Agriculture (USDA), National Agricultural Statistics Service (NASS), Acreage, http://www.nass.usda.gov/Publications/index.asp, 6/30/11). For other crops, adoption of biotech varieties has been limited or nonexistent. Given that 15 years have passed, this article compares the trend in U.S. average yield since 1995 with the trend that existed from 1940 through 1995, a period that predates commercial biotech varieties. The year 1940 approximates when the average yield of most U.S. crops began increasing, due in part to traditional breeding methods. Analytical Methods: Yields per harvested acre were obtained for corn, all cotton, soybeans, and 11 crops for which adoption of biotechnology varieties is limited or non-existent. Source of the data is USDA, NASS, http://www.nass.usda.gov/Data_and_Statistics/, 11/2011. Linear yield trends were estimated for 1940-1995 and 1996-2011 using regression analysis. The estimated yield trends are tested statistically to determine if they exceed zero at the 95% confidence level. Also, the 1996-2011 yield trend is compared against the upper value of the 95% confidence ...
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Farm Policy, January 2012
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