Newsletter | Past Issues

May, 2006

In This Issue:

2006 Enterprise Budgets for Corn, Soybeans, Wheat and Grass Hay
Computerized Farm Recordkeeping with Quicken 2006 Self-Study Manual Now Available as Online PDF Bulletin

Farm Succession Planning

The Pricing Performance of Market Advisory Services in Corn and Soybeans Over 1995-2004

Spanish References

Washington Scene

How Will More Ethanol Plants Affect Your Feeding Decisions?

Potential for Water Quality Trading in Ohio

National Dairy Labor Survey in Progress

Do you have a question that you would like to ask the Ohio AG Manager Team?  If so, click here to email your question.

2006 Enterprise Budgets for Corn, Soybeans, Wheat and Grass Hay
Barry Ward, Leader, Production Business Management, OSU Extension and The Department of Agricultural, Environmental, Development Economics

Whether it's done in an Excel spreadsheet or simply mulled over in one's mind, “budgeting”, or estimating profitability of an enterprise, is an important process. Budgeting is often described as “penciling it out” before committing resources to a plan. Ohio State University Extension has had a long history of providing “Enterprise Budgets” that can be used as a starting point for producers in their budgeting process.

Newly updated Enterprise Budgets for 2006 have been completed and posted to the Farm Management Website of the Department of Agricultural, Environmental and Development Economics. Updated Enterprise Budgets have been published for the following field crops: Corn-Conservation Tillage, Soybeans-No-Till (Roundup Ready), Wheat-Conservation Tillage-Wheat and Straw Harvested and Grass Hay-Large Bale System.

Our enterprise budgets are compiled on downloadable Excel Spreadsheets that contain macros for ease of use. Users can input their own production and price levels to calculate their own numbers. These Enterprise Budgets have a new look with color coded cells that will enable users to plug in numbers to easily calculate bottoms lines for different scenarios. Detailed footnotes are included to help explain methodologies used to obtain the budget numbers.

Highlights (or lowlights) of this years Crop Enterprise Budgets include increased prices for diesel and nitrogen. Our budgets assume nitrogen to cost 33.5 cents per pound of actual N and off-road diesel to cost $2.20 per gallon.

The entire set of Enterprise Budgets can be accessed at:

http://aede.osu.edu/Programs/FarmManagement/Budgets/

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Computerized Farm Recordkeeping with Quicken 2006 Self-Study Manual Now Available as Online PDF Bulletin

Barry Ward, Leader, Production Business Management, OSU Extension Department of Agricultural, Environmental and Development Economics

This article contains a correction to a web address from a previous article published in the March 2006 Edition of the Ohio Ag Manager.

The newly updated Computerized Farm Record Keeping with Quicken 2006 Self-Study Manual is now available as on online OSU Extension Bulletin in pdf format at:

http://ohioline.osu.edu/b925/

As farmers look to become more efficient in all aspects of business, financial record keeping is an area that can be made more efficient with computer record keeping software. Computerizing farm financial records can help a farmer gain efficiencies and enhance their financial analysis. With a computerized farm record keeping system, the record keeper can use software to store information, summarize data, generate and print reports and sort transactions into categories and subcategories. Storage of data is a very valuable component to a computerized system. The data entry process may take you as long as in a hand written system, but the time saver is the summarization and report generation of monthly and year end data. As in any system, good records and reports result from the data entered. The record keeping system can only summarize and report what you have entered. The record keeper also must carefully consider the way that they organize their data to optimize output and reports.

There are many components to a farm record keeping system including transactions and the end results you generate for your management team. Your receipts and expenditures should be entered in a timely manner complete with detail appropriate for the results you want to generate. For example, you should include detail on bushels of grain sold with your grain receipts if you want to know average price per bushel received at the end of the year. Some of the various types of information you can develop from a record keeping system are: Schedule F information (Cash Income Basis), data for tax reports, enterprise records, credit accounts, financial statements (net worth, income statements, cash flow), depreciation records and farm business analysis.

What Quicken Can Do For You

Quicken is an easy to use computerized record keeping software package that enables the user to keep detailed farm financial records. You can think of Quicken as your checkbook. It can also be used to track a total of ten different account types including asset, liability, and all bank accounts.

Quicken enables the user to keep basic cash receipts and expense records and provide financial data to you, your tax preparer and other members of your farm management team. Other Quicken features include easy account reconciliation and income and expense budgeting. Quicken reports that may be generated include income statements, cash flow reports, enterprise summaries, personal and business income tax reports and others. Although Quicken does not easily track inventories and does not allow you to keep depreciation records, inventories may be kept on a separate spreadsheet and depreciation records can (and probably should) be kept current by a tax professional.

This Quicken self-study manual has been developed due to the demand of Ohio producers seeking assistance on using an inexpensive, easy to use program for farm record keeping. The objective of the authors is for Quicken users to begin keeping farm records on their home computer by following the step by step procedures outlined in each chapter of this manual. The manual will also be useful to experienced Quicken users as they upgrade to a newer version and continue to improve their record keeping skills.

A commonly asked question is, “Which version of Quicken should I purchase for my farm records?” Quicken offers five different versions for 2006, Quicken Basic 2006, Quicken Deluxe 2006, Quicken Premier 2006, Quicken Home & Business 2006 and Quicken Mac 2006. While each product has different features, our experience is that the basic program, Quicken Basic 2006, will perform most farm record keeping tasks adequately.

This manual is written for Quicken 2006 Basic. Future manuals and updates will be available on the OSU Extension Ohioline web site http://ohioline.osu.edu or at the OSU Agricultural, Environmental and Development Economics Farm Management website:

http://aede.osu.edu/Programs/FarmManagement/

In most cases the basics needed to begin your farm record keeping will not change with a newer version.

We also receive questions about the use of the Quicken Home & Business version versus the use of Quicken Basic for farm record keeping. If your farm business requires you to create customer invoices and statements and to have accounts for payables and receivables, you need to be using the Home & Business version of Quicken. The Home & Business version can also generate accrual-based profit and loss statements if the program is set up and used properly throughout the year. However, for the majority of cash-basis farm record keepers, Quicken Basic will provide more than enough information for management decisions and income tax planning.

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Farm Succession Planning

David L. Marrison, Ashtabula County Ag & NR Extension Educator

As the population of Ohio 's farm operators increases, succession planning will become one of the most important risk management issues a farm family will face. Most farmers dream of seeing their legacy passed onto the next generation but postpone initiating a plan for succession often citing there is not enough “time” to discuss these matters. Or when planning does occur, it usually involves grandma and grandpa drafting a will outlining who gets the farm, cows, or Depression glass and then hiding it in a safe place until they die. Often times, the farm is split evenly between the siblings regardless of their involvement with the farm.

To many times, we see farm families torn apart and successful farms sold to the highest bidder because of the lack of family planning and communication about the future. National statistics from the Small Business Administration indicate that while 78% of families intend to pass the business onto their children, only 34% have created a succession plan. 25% of these plans consist only of a will. In most cases, farm families forget two of the most important components of succession planning. These being- planning for retirement and for the successful transfer of management. The stark reality is that only 30% of first generation businesses survive to the second generation and 15% to the third. If you are a successful fourth generation business, you are something special as only 2% of businesses make it to this level.

So what can we do today to help insure the future success of our farm business? What questions can we ask ourselves which can help us build for a successful and prosperous future?

Is the Farm Business Developing Future Managers?

 Many of our family farms have two to three generations working side by side. Farm families have traditionally been a hierarchical structure where the older generation holds the “purse strings” until death. Oftentimes, the “second generation” on the farm is not given any managerial control of the operation until they are old enough to retire themselves. Yes, the younger generation will make mistakes. All producers have made mistakes many of which have been forgotten in direct proportion with the quantity of gray hairs. Farm businesses should develop a plan for sharing managerial responsibilities between generations. A key question to ask in this discussion is how long does a son or daughter have to be a hired hand before they are giving any decision making responsibilities?

Are Plans Being Made for Retirement?

 Many farmers brag that they have not missed a milking in twenty years or have not taken a vacation since their honeymoon. Many farmers quip that they will die on a tractor. In fact, most will have to work up until death because they have never saved for retirement. Have you begun to save for retirement? Any retirement planning specialist can quote you the time value of money. It is essential that retirement plans are established early for all members of the farm business. After all, shouldn't you be able to retire and enjoy the grandchildren or to take that dream vacation? Even the best work horse deserves time in the pasture.

Is it Family First or Business First?

 One of the hardest aspects of many family farms is balancing family and work schedules. It is very easy for the lines between family and farm to become blurred because we live and work together 24 hours a day in close proximity. Often times the roles of being business partners and a parent, son, daughter, and sibling are unclear. Does everyone feel that their opinion and management ideas are being heard? Does dad make all the decisions because he is the father? Is there one person that you would like to fire but can't because they are family? Successful businesses recognize the need for each generation to maintain their individual identities and that priorities can change throughout a person's life. What ways are you helping to make sure that everyone can achieve a successful balance between their farm and family lives?

Is Everyone Involved?

 Succession planning is a process in which the entire family should have a role in. It should not be about secret meetings between parents and the favorite sibling or hiding the will so no on will know what is in it. The difficulty that many farmers face is determining how to treat their children “the same” while protecting the son or daughter that has remained on the farm. There is a huge difference between the words fair and equal. Estate planning does not have to be equal to be fair.

Final Thought

 The underlying success of a business agreement greatly depends on healthy family relationships. Many two generation family business arrangements fail because of poor family relations. It is easy to work on planting crops and breeding cows. It is tougher to work on developing family relations and building a plan for the future success of your business. Make sure to take time this spring to begin those discussions on how to build for retirement, how to transfer management and to develop an estate plan which can help carry your farm on for many generations. The Ohio Ag Manager Team is here to help you in this area. If you would like more information on how to make your multi-generation farm family succeed, contact David Marrison at the Ashtabula County Extension office at 440-576-9008 or by electronic mail at marrison.2@osu.edu.

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The Pricing Performance of Market Advisory Services in Corn and Soybeans Over 1995-2004

Donald J. Breece, Farm Management Specialist, OSU Extension

The University of Illinois , Department of Agriculture and Consumer Sciences has lead research about market advisory services for corn and soybeans since 1995.

Two new AgMAS Research Reports have been released:

- Report 2006-02: The Pricing Performance of Market Advisory Services in Corn and Soybeans Over 1995-2004

- Report 2006-03: The Pricing Performance of Market Advisory Services in Corn and Soybeans Over 1995-2004: A Non-Technical Summary

You may view these reports in HTML and PDF formats at:

http://www.farmdoc.uiuc.edu/agmas/index.html

The purpose of this research report is to evaluate the pricing performance of market advisory services for the 1995-2004 corn and soybean crops. Five basic indicators of performance are applied to advisory program prices and revenues over 1995-2004. Results show that advisory program prices fall in the top-third of the price range relatively infrequently. There is limited evidence that advisory programs as a group outperform market benchmarks, particularly after considering risk. The evidence is somewhat more positive with respect to farmer benchmarks, even after taking risk into account. For example, the average advisory return relative to the farmer benchmarks is 8 to $12 per acre with only a marginal increase in risk. Even though this return is small and mainly from corn, it nonetheless represents a non-trivial increase in net farm income per acre for grain farms in central Illinois . Test results also suggest that it is difficult to predict the year-to-year pricing performance of advisory programs based on past pricing performance. However, there is some evidence that performance is more predictable over longer time horizons, particularly at the extremes of performance rankings.

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Spansish Refernces

Donald J. Breece, Farm Management Specialist, OSU Extension

As more Spanish speaking employees work in agricultural industries, there seems to be an increasing need to translate languages. Here are some helpful web sites.

http://forum.wordreference.com/index.php

http://www.wordreference.com/

Agricultural dictionary

An agricultural and human resource management dictionary is found at http://danr.ucop.edu/ag-labor/

Thanks to Gregorio Billikopf Encina, University of California , for the information. His labor management web sites are at:

http://www.cnr.berkeley.edu/ucce50/ag-labor/ (English)

http://www.cnr.berkeley.edu/ucce50/agro-laboral/ (español)

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Washington Scene

This Article Coordinated by David P. Anderson, Texas A&M University , and Joe L. Outlaw, Co-Editor, Choices. This excerpted publication also attributed to American Agricultural Economics Association

The first few months of 2006 in Washington , D.C. have been dominated by a lobbying scandal, the President's State of the Union Address and subsequent budget proposal, suspected terrorist phone surveillance, and foreign ownership of U.S. Ports. From an outsider's perspective, not as much legislation is acted upon in years divisible by 2 (election years) as in non-election years. The agricultural committees have held hearings on a wide array of issues from crop insurance to biosecurity. The House Committee on Agriculture also began holding Farm Bill hearings in February. While not a lot of legislation is moving forward, there are currently several issues of interest to our profession being discussed in Washington . The following is a brief summary of some of the issues.

Doha Round

The Hong Kong Ministerial ended in December with what most would call limited success. Most observers feel that an agreement can be reached if negotiators can accomplish the ambitious plan laid out for the rest of 2006. The timeline is as follows:

1. Agree on degree of tariff cuts by April 30, 2006,

2. Agree on degree of reductions in Trade Distorting Domestic Support,

3. Complete work on eliminating export subsidies by agreed upon date of

         2013, and

4. Each country to submit its tariff schedule reductions and other reductions by

         July 30th.

Again, most observers feel that the end of 2006 is a fairly realistic deadline to reach an agreement by if the U.S. Congress is to vote on the agreement before Trade Promotion Authority expires in July 2007.

Ag Disaster Assistance

Commodity organizations have asked repeatedly over the past few months for an ag disaster assistance package to provide financial assistance for losses due to weather/natural disasters, as well as financial hardship due to high energy prices. There have been a number of proposals offered thus far and each has failed to pass.

Farm Bill

The Secretary of Agriculture held an extensive number of Farm Bill listening sessions around the U.S. during 2005. There is some speculation that he might be the first Secretary in 20 years to submit a farm bill proposal. The House Committee on Agriculture began holding Farm Bill hearings in February with the first few taking place in North Carolina , Alabama , California, and Nebraska . The Senate Agriculture Committee is expected to begin holding hearings across the U.S. later in the year. Again, observers feel that most of the work on the Farm Bill will begin in earnest after the November elections.

Debt Ceiling Raised

After bumping up against the statutory debt ceiling of $8.18 trillion during February, Congress raised the debt ceiling by $781 million on March 16th. This was the fourth increase in the debt ceiling in the past five years.

BSE

BSE again popped up with a cow in Alabama testing positive. Japan is still not importing U.S. beef following the shipment of veal that included bone material. The agreement with Japan on beef imports allowed for more BSE cases in the U.S. , but not for mistakes over products shipped. So, the result is that Canada is shipping beef to Japan , but the U.S. is not. This situation will continue to frustrate all levels of participants from Congress on down.

Animal Identification

The recent BSE case has furthered calls to force a mandatory animal identification system on the livestock industry. While most mainline groups support some kind of system, arguments remain over costs, control, mandatory versus voluntary systems, and system details. Beyond the federal involvement, the issue has heated up on the state level in many areas. State agencies that are involved in implementing premises identification and moving the system forward are facing more opposition. Many producers, often out of the mainstream, have expressed worries about government-privacy issues, loss of control, and burdensome costs on small producers.

Senator Grassley has urged USDA to move forward implementing a system. However, Senator Chambliss has indicated that it will be a farm bill issue and could be addressed at that time.

Avian Influenza

Avian influenza continues on the radar screen as the H5N1 type spreads around the world. A recent move includes stepping up funding for government monitoring of migratory birds that are thought to play a major role in spreading the virus around the world. In the meantime, places that have found the disease have experienced large cutbacks in poultry meat demand, in spite of the effectiveness of cooking. The resulting reduced U.S. poultry exports are contributing to lower prices in the U.S. A multitude of issues around avian influenza will also continue to occupy government agencies time.

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How Will More Ethanol Plants Affect Your Feeding Decisions?

Brian Roe, Associate Professor, The Ohio State University , Department of Agricultural, Environmental, and Development Economics

More ethanol plants will be coming to Ohio . While the ‘when' and ‘where' of additional Ohio ethanol plants is constantly evolving, but livestock producers will have to deal with the fundamental fact: less corn will be available for feed while more corn byproducts from ethanol plants will be available.

This month we feature a collection of resources that can be helpful to livestock, dairy and poultry managers who are trying to decide if and how ethanol co-products will become a staple feed source in their own operations.

Iowa Beef Center – Ethanol Co-Products for Cattle Feeding

http://www.iowabeefcenter.org/content/ethanol.htm

Illinois - Using Illinois By-Product Feeds in Livestock Feeding Programs

http://ilift.traill.uiuc.edu/distillers/index.cfm

Missouri – By-Products Links for Dairy Producers

http://agebb.missouri.edu/dairy/byprod/index.htm

National Corn Growers' Association Distilled Grain Feeding Recommendations – All species

http://www.ncga.com/ethanol/pdfs/111005DGFeedingRecommendations.pdf

Wisconsin – Ethanol Co-Products and Dairy

http://www.das.psu.edu/dairynutrition/documents/shaverdistillppt.pdf

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Potential for Water Quality Trading in Ohio

Brent Sohngen, Associate Professor, The Ohio State University, Department of Agricultural, Environmental, and Development Economics

Looking for additional ways to finance conservation practices on your farm? Water quality trading may help. Currently, cities and municipalities in Southwestern Ohio are gearing up to purchase conservation practices on farms in order to reduce nutrients in the Great Miami River, and state agencies are developing programs that could bring programs like this to the entire state in the next few years. Read the article “The Potential for Water Quality Trading in Ohio” below for more information.

http://aede.osu.edu/people/sohngen.1/OER/OER_3(1)1.htm

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National Dairy Labor Survey in Progress

Dianne Shoemaker, OSU Extension Specialist, Dairy

Dairy producers are encouraged to take a few minutes to participate in this year's National Dairy Wage Survey conducted by Gregorio Bilikopf Encina at the University of California . According to Mr. Encina, “this is the third survey of its type, on milker wages at American dairies. We are asking dairy farmers throughout the United States pick one milker and then answer the survey with this individual in mind. We will ask dairy farmers to give us answers for the month of April 2006.”
 
”With all the talk and controversy about labor supply, in this year's survey we are also asking a few questions about how difficult it has been to find dairy labor. This survey is only conducted every third year and its usefulness depends entirely on how many dairy farmers take the survey.”
 

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Ohio Ag Manager Team Leaders: Chris Bruynis & David Marrison

Web Page Managers: David Marrison & Andy Kleinschmidt

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.

All educational programs conducted by Ohio State University Extension are available to clientele on a nondiscriminatory basis without regard to race, color, creed, religion, sexual orientation, national origin, gender, age, disability or Vietnam-era veteran status.

Issued in furtherance of Cooperative Extension work, Acts of May 8 and June 30, 1914, in cooperation with the U.S. Department of Agriculture, Keith L. Smith, Director, Ohio State University Extension.

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