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Newsletter | Past Issues
December,
2008
In This Issue:
Flexible
Cash Lease Calculator
Story
Marketing for Your Farm
MarketMaker
Linking Agricultural Markets
COOL
Implementation: The First 45 Days
HogMonster.com? Online Employment
Forums for the Hog Industry
2008 Ohio Survey of Food, Agriculture
and Environmental Issues
ACRE
Publications Available
Income
Tax Management
Commodity
Programs and Biofuels Focus of Latest Choices Magazine
Do
you have a question that you would like to ask the Ohio
AG Manager Team? If so, click here to email your
question
Flexible
Cash Lease Calculator
Barry
Ward, Leader, Production Business Management
Brian
Freytag, Extension Intern, AEDE Undergraduate Student
Ohio
State University
Volatile
commodity markets continue to make it challenging to
negotiate equitable and sustainable cash rents between
landowner and farmer. Rental rates left unchanged for
the past 5 years may have been un-equitable the last
two years as farm profitability was higher in parts
of the Midwest with respectable yields. Fixed cash rental
rates negotiated last year may seem too high in the
face of lower grain prices and higher fertilizer prices.
A flexible cash lease may be worth considering as we
continue to grapple with uncertain market conditions.
What
it Can Do
The
Flexible Cash Lease Calculator allows the user to input
a base rent and baseline yields, prices and costs along
with minimum and maximum lease amounts if desired. These
parameters will serve as the basis for the base rent.
Year end yields, prices and costs will be added by the
user to formulate the actual “flexed” rental amount
at the end of the year based on the deviations in yield,
price and costs from the baseline figures.
One
aspect of the Flexible Cash Lease Calculator that is
different from others is the inclusion of costs as a
variable in the flex lease formula. This component allows
the volatility in costs to be included in the “flexible
cash rent formula” if both landowner and tenant agree.
Where
to Find It
The
Flexible Cash Lease Calculator is an Excel Spreadsheet
that can be viewed and downloaded at: http://aede.osu.edu/Programs/FarmManagement/Budgets/download.htm
How
Does It Work
The
Input Page is the section of the calculator where the
user inputs their particular production numbers. This
page has 6 different sections where user input is required
for an accurate estimation of a flexible rent.
Part
1, entitled “Basic planting, yield, and rent information,”
allows the user to input the expected acres of corn,
soybeans, and wheat that will be planted. If other crops
are grown, the user can type those in the boxes provided
instead of the three defaults. The user will also be
expected to type in the Base Cash Rent, which is negotiated
between landowner and tenant. The user also inputs a
Base Yield. This Base Yield is the typical or target
yield for the field or farm and corresponds to the Base
Rent. The Yr. End Yield is the actual farm yield or
a third party pre-agreed upon yield for the growing
season.
The
user will then input their Base Price which corresponds
to the base rent. Normally, crop futures may be used
to estimate this number. The Yr. End Price is a harvest
price or an average of a basket of marketing year prices
that both parties agree upon at the lease signing. The
user may then type a Minimum Rent, which will ensure
that the landowner receives some compensation in case
of poor performance. The Maximum Rent ensures that,
in the case of a higher than expected yield or price,
the tenant will receive fair compensation. These various
user inputs are available for three separate crops,
but will summarize to one rental rate.
Part
2, entitled “Fertilizer input costs by Crops,” allows
the user to input Base and Yr. End Nitrogen, Phosphorus,
and Potassium pries. These prices are to be inputted
at a cost per acre rate. Just like the yield and price
in Part 1, the base costs are generally what the planned
costs are at the start of the lease term while the Yr.
End Costs are the actual or indexed costs (costs indexed
from a third party such as university enterprise budgets)
during the current growing season.
Part
3, “Chemical Input Costs,” takes the Base and Yr. End
Chemical prices per acre. This should include all herbicide,
insecticide, and fungicide costs that are expected for
the particular crops and the actual costs (or indexed
costs) for the growing season.
Part
4, entitled “Diesel Input Costs,” is the farmgate cost
of diesel used per acre. The 2009 OSU Extension Enterprise
Budgets currently available on the OSU Farm Management
website can be a useful tool in estimating the cost
of diesel fuel used per acre.
Part
5, “Seed Input Costs,” will allow the user to input
a seeding rate per acre a well as the Base and Yr. End
seed costs per 1000. This will automatically calculate
the total Base and total Yr. End Seed costs for the
users benefit.
Part
6 is the “Other Input Costs” section where the user
can input other costs that have not at this point been
covered. These can be written or typed up to the right
of the input boxes. These should be calculated in cost
per acre.
This
page will then calculate the total Base and Year End
input costs. This section does not require any user
input, but is there for reference, and will be used
in the subsequent page for the calculations.
Output
Page
The
Output Page documents four different methods of calculating
your flexible cash rent.
Method
I is Flexing for Price Only. This will take your base
rent; multiply it by your adjusted price ratio (yr.
end price divided by base price). This will equal the
rent per acre, which will then be multiplied by acres
grown. This is the suggested rental rate for the year
based on changes in market conditions.
Method
II is Flexing for Price and Yield. This method will
use the same methods as above, but include the adjusted
yield ratio which is the yr. end yield divided by base
yield.
Method
III is Flexing for Price and Input Costs. This section
will combine Method I with the total input costs calculated
on the user input page. This will take the adjusted
input costs ratio (base input costs divided by yr. end
input costs) and multiply it by the adjusted price from
Method I.
Method
IV incorporates flexing for Price, Yield and Input costs.
This will multiply the base rent by the adjusted price
ratio, adjusted yield ratio, and the adjusted input
cost ratio.
In
all four methods, the Total Rent per Acre line is the
suggested flexed rent per acre for the land for the
end of the growing season. Choosing which method to
decide rental rates from will come from negotiation
between land owner and tenant.
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Story
Marketing for your Farm
Dan
Frobose, Extension Educator OFFBIN
Over
the past several years I have been working with livestock
producers in developing a “Story Market” or branding
program to add value to their farm business. Story
marketing works backward from consumer to conception
instead of the traditional methods we are used to in
production agriculture. What we try to identify are
the characteristics in a product or service that the
customer will pay a premium for, versus the norm of
what the competition has to offer.
As
commodity producers in agriculture, our history is such
that we are price takers and not price makers.
Why? Well, by definition commodity goods equal their
cost of production. So if corn historically is $3.00
a bushel, that is what it takes on average to produce
a bushel. So the least-cost producer typically reaps
the profit. As eastern corn belt producers, it is difficult
for us to achieve the economics of scale in production
agriculture whether it be in crops or animal production.
We are limited by geography and by human population.
So
how do we get a bigger piece of the pie? Let's look
at the market place and work backwards. What is our
potential customer willing to pay for in a product that
they cannot get now? Can you produce that product? And
can you produce it at a sustainable profit?
What's
your story? Crafting a marketing story
is not as easy as it sounds, and you may need to let
go of some outdated thinking in order to bring your
story to life. Doing your homework ahead of time is
the key. Obtaining a professionally conducted survey
that explores the characteristics of your market will
be your initial focus. Let the market you wish to serve
create your story.
Do
you know who you really are? A farm business
that knows who they are and what they can do can go
on to deliver their message, knowing well that some
people are just not going to buy into what the business
has to say. But those that do get it, really
get it and are the potential customer.
How
will your product or service change your customer?
All stories or marketing messages have to do
with change. A health-based product provides change
from poor health to good health. A cosmetic company
provides change from plain to beautiful, from self doubt
to self confidence. The customer wants a change. People
who are satisfied with the way things exist are not
motivated to be customers. A story market targets people
who are motivated; people who want to better themselves
to be stronger, healthier, prettier, smarter and richer.
If your potential customer isn't motivated to change,
and if your product or service cannot deliver change,
then you're wasting your time and money.
Is
your message different? You must
stand out. Your product or service must provide something
different. Your message to the customer is that you
are a leader and not a follower. Most likely your competition
has focused on specific characteristics and features
of the product and ignored the emotional marketing value
that greatly influences why people choose one product
over another.
Can
you tell your story? You must have more
than a story to tell or a message to deliver. You
must know how to tell it. Your story needs to create
a unique identity in the mind of your clientele. Try
to position your product or service as a lifestyle choice.
Who
is your customer? After conducting your
market research, you should have a pretty good idea
of who your customer is. Discover what motivates them
and design your sales approach to trigger what stimulates
them. Your approach must have direction. It must be
focused and it must deliver a clear identity of your
purpose.
Can
you handle criticism? People engaged in
production agriculture trend towards traditionalism.
Can you take pressure from your peers who subscribe
to “It can't work” thinking? Too often we lose good
ideas because we worry too much about what other people
think. Are you willing to roll up your sleeves and separate
yourself from the crowd?
Now
that you have read the previous lines regarding “Story
Marketing”, do you have an idea you'd like to pursue?
If yes, give me a call and we can visit about your idea
and your approach. I can be reached at the ABE Center,
at 419-354-6916.
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MarketMaker
Linking Agricultural Markets
Julie
Fox, Direct Marketing Specialist, Ohio State University
South Centers
It's
easier than ever for food producers to connect with
buyers
MarketMaker,
an easy-to-use web-based resource for all businesses
in the food supply chain, has been launched in Ohio
through the collaboration of Ohio
State University Extension and OARDC,
the Ohio Department
of Agriculture (ODA), Ohio
Farm Bureau, and the Center
for Innovative Food Technology (CIFT).
MarketMaker
is a national network of state websites connecting farmers
and processors with food retailers, caterers, chefs,
and other food supply chain contacts. The network has
one of the most extensive collections of searchable
food industry related data in the U.S. All told, more
than 39,000 retail outlets, wholesalers, processors
and specialty food stores are accessible via the site,
with more being added all the time. Each state's site
allows users to query, map and locate data. Each site
is open and accessible on a no-fee basis.
Here
are a few of the highlights
*
More than 1,000 people log onto Ohio MarketMaker each
month.
*
Since the program launched in mid-march, the Ohio site
has received more than 400,000 hits.
*
Nationally, MarketMaker has logged almost 4 million
hits in 2008.
*
There is a growing list of participating states: Georgia,
Illinois, Indiana, Iowa, Kentucky, Michigan, Mississippi,
Nebraska, New York, and Ohio. Three new states' sites
include: Colorado, South Carolina and Washington DC.
*
New technology is being released later this year to
make the site even easier for buyers to locate and map
sources for local food.
Be
a part of the success in Ohio.
1.
Every Ohio producer can have a free listing on this
site. You can help more buyers find you by registering
your business online, http://www.ohiomarketmaker.com.
2.
You can also use the easy-to-use search tools to locate
new markets and potential buyers.
3.
Check out the case studies of how the site can be used
for three different people. There are currently three
examples on the website: A cattle farmer, an independent
maker of jams and jellies and a chef in search of organic
produce.
4. Visit the Buy & Sell Forum, where specific requests
can be posted. A recent example: Iowa State University
needs 300 pounds of sweet potatoes by the week of Nov.
3, delivered to Ames, Iowa.
“It answers all the questions you could have: How do
I contact farmers, how do I buy locally, who do I contact?”
said Mark Newton, associate director and executive chef
for OSU Campus Dining Services. “I can type in ‘salsa'
and it brings up a list of vendors who have loaded their
information into the system, like where they're located,
how they take payment and when their products are available.”
Julie
Fox, marketing and tourism development specialist at
the OSU South Centers, is the point person for the project
and says the response from the food services industry
has been astonishing. For further information, contact
Julie Fox, 740-289-2071, ext. 225; fox.264@osu.edu
.
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COOL
Implementation: The First 45 Days
Derrell
S. Peel, Oklahoma State University Extension Livestock
Marketing Specialist
After
much controversy and confusion about the rules for COOL
it is appropriate to look at impacts on producers and
consumers after roughly six weeks of mandatory COOL.
USDA-AMS has previously indicated that the first six
months of COOL will be devoted to education and implementation
of COOL before the focus shifts to enforcement. The
final rules for COOL have not been published so there
is still a chance of more changes to the rules.
In
Oklahoma, general indications are that COOL is not resulting
in major difficulties for cattle producers. Most cattle
auctions in the state are providing affidavit forms
for their customers, usually as continuous affidavits
which are filed with the auction. It is less clear that
cattle buyers are aware that they need to be asking
for COOL documentation for purchased cattle although
in many cases the documentation is included in routine
documentation of the transaction. In private treaty
sales, both buyers and sellers need to make the effort
to make sure that COOL documentation is passed from
seller to buyer. The affidavits developed by the industry
seem to be successful in minimizing the burden on producers
to provide required COOL documentation. It remains to
be seen how effective and complete the paper trail will
be if and when there is an attempt or need to verify
origin back to the producer from retail.
At
the consumer level, most retailers are now providing
the required COOL information on retail beef sales.
In Oklahoma, it appears most beef is utilizing the “Product
of USA, Canada and Mexico” label initially. However
use of the “Product of USA” label may increase in the
future. There have been only a few reports of any consumer
reaction of any sort to whatever label is being used.
Although some retailers have a preference for using
a particular product and label, several retailers have
indicated that they are more concerned with using only
one type of label (regardless of which label it might
be) to avoid the expense of tracking multiple product
categories.
Much
of the cost of COOL has always been presumed to occur
at the packer level where it is most difficult to segregate
product of different origins. Most major beef packers
have designated certain plants and shifts to process
mixed label cattle and minimize these costs. This results
in some additional shipping costs for some producers.
The magnitude of these additional costs for packers
and producers is not yet clear.
The
major bone of contention about COOL has always been
whether the potential benefits would outweigh the costs
of implementation. It is clear that it will take more
time before either the costs or benefits of COOL will
be known.
Source:
http://agecon.okstate.edu/livestock/
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HogMonster.com?
Online Employment Forums for the Hog Industry
Brian Roe, Professor, Department
of Agricultural, Environmental and Development Economics,
Ohio State University
Online
job searching is becoming the norm for young job seekers
in many professions. Posting your resume on Monster.com
or one of the many industry-specific online job platforms
is now a rite of passage rather than the exotic approach
to employment it was merely a few years ago.
As
with so many technological advancements, the agricultural
sector is following suit. Consider the hog sector, for
example, where pigcareers.com seeks to become this profession's
on line employment clearing house (www.pigcareers.com).
While its ambitions are only slowly being fulfilled
(in early December, the site boasted only 18 job postings),
it has the potential to be an important pork portal
for those seeking to fill positions or to follow career
opportunities in the hog sector. For a limited time,
employers can advertise positions for free, though if
the site takes off, employers will pay $250 for single
job postings that stay listed until the job is filled.
More
general agricultural employment sites also exist, with
www.agcareers.com (part
of the farms.com franchise) being one popular alternative.
While less focused than pigcareers.com, it offers postings
from all areas of agriculture and, for the adventurous,
from all parts of the world. Compared to pigcareers.com,
it featured a few more pork-sector job postings during
early December viewing (about 23 versus 18 at pigcareers.com),
though it took a little more trial and error during
search to locate just those jobs associated with the
pork sector.
More
than ever employers in the hog sector and throughout
agriculture are rediscovering the truthfulness of the
old bromide ‘good help is hard to find'. Tapping into
the power of the internet allows employers and job seekers
one more way to locate mutually beneficial arrangements
that continue to allow the industry to succeed.
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2008
Ohio Survey of Food, Agriculture and Environmental Issues
Chris
Bruynis, OSU Extension Educator, Wyandot County
It
is important for people involved in agriculture to know
what the perceptions of the state's population are relative
to the agriculture industry. Every two years the Ohio
survey of food, agriculture and environmental issues
is conducted by Dr Jeff Sharp. This report, found at
http://ohiosurvey.osu.edu/pdf/2008OHSurveyConcernIssueSummaryRpt.pdf,
describes Ohioans' concerns and attitudes and considers
changes in these attitudes since 2002. Some of the highlights
are:
•
A very large proportion of Ohioans reported being
very concerned about the rising cost of gas, heating
fuel, and food.
•
The level of concern about global warming in 2008
was similar to levels reported in 2006.
•
Concern about large-scale poultry and livestock development
in Ohio declined in 2008.
•
Ohioans continue to express very positive attitudes
about farming's contribution to the quality of life
in Ohio. and
•
Negative perceptions of food safety continue to rise
among Ohioans.
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ACRE
Publications Available
Stan
Ernst, Outreach Extension Program Leader, Agricultural,
Environmental and Development Economics, Ohio State
University.
Below
are links to two files on ACRE from Dr. Carl Zulauf.
One discusses the decision question regarding the alternative
policy suites while the second discusses the debate
over which method to use to calculate the price component
of the ACRE state revenue guarantee. As a reminder,
most of Carl's farm bill related publications are available
through his website http://aede.osu.edu/people/display2.php?user=zulauf.1
or by going to http://aede.osu.edu/resources/
docs/display.php?cat=21
Decision
Question: http://ohioagmanager.osu.edu/resources/DecisionQuestion.pdf
Alternative
Calculations: http://ohioagmanager.osu.edu/resources/alternativecalcs.pdf
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Income
Tax Management
George
Patrick, Professor, Department of Agr. Economics, Purdue
University
"Income
Tax Management for Farmers in 2008," Purdue Extension
CES-366-W, November 2008 is available at
http://www.agecon.purdue.edu/extension/pubs/taxplan2008.pdf.
The 2007 version is still on the website as it illustrates
how an indemnity from revenue insurance can be allocated
to physical loss (which may be deferred until the next
tax year) and a decline in part (which is not eligible
for deferral).
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Commodity
Programs and Biofuels Focus of Latest Choices
Magazine
Barry
Ward, Leader, Production Business Management, Ohio State
University
The
latest edition of Choices Magazine has two
timely feature themes. The first theme, "Commodity
Programs and Beyond in the 2008 Farm Bill", follows
agriculture and trade in five separate articles.
The articles may be viewed here:
http://www.choicesmagazine.org/magazine/block.php?block=16
The next theme, "Agriculture and Biofuels",
also has five separate articles discussing trends in
the food vs. fuel debate. The articles may be
viewed here:
http://www.choicesmagazine.org/magazine/block.php?block=17
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The
Ohio Ag Manager newsletter is published in collaboration
by OSU Extension Educators and Faculty members of Ohio
State University's Department of Agricultural, Environmental
and Development Economics.
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.
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
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