Newsletter | Past Issues

May, 2008

In This Issue:
Ohio Farm Custom Rates--2008

Dairy Farm Financial Analysis Opportunities

Renewable Energy Systems & Energy Efficiency Improvements Grants Program

ODA's Indemnity Program

Ohio's Annie's Project Holds Successful Winter Workshops in 2007-2008

Starting, Organizing and Managing an LLC for a Farm Business

Employee Management Crucial in Springtime

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

Ohio Farm Custom Rates--2008

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

Click here for the PDF Version of Ohio Farm Custom Rates--2008

Many Ohio farmers hire custom farm work in their farm business or perform custom farm work for others. Custom farming rates traditionally have been arrived at by a series of calculations and negotiations. One of the most common ways custom farming providers and consumers arrive at an agreeable custom farming rate is to access University Extension summarized surveys. Ohio State University Extension and the Department of Agricultural, Environmental and Development Economics have historically published farm custom rates to assist farm businesses with this important task.

“Ohio Farm Custom Rates 2008” is based on survey results from 205 Ohio farmers, custom farmers and farm managers. The custom rates presented may differ from rates in your region depending on availability of custom operators & machinery, timeliness, operator skill, field size & shape, crop conditions, performance characteristics of the machine being used and demand for custom farming services.

Custom farming rate increases for 2008 include custom Corn Harvest at $25.45/acre, Conventional Corn Planting at $15.11/acre, Drilling No-Till Soybeans at $15.68/acre, and Spraying Chemicals (Self-Propelled Sprayer) at $6.36/acre. These represent increases of 6%, 5.7%, 10.4%, and 11.6% respectively over 2006 Ohio custom rates. Other operations show similar 4 year rate increases. Higher machinery, fuel and labor costs have contributed to custom farming rate increases over the past 2 years. For more information on custom farming rates and other Farm Management Topics see our Department Farm Management Website at:

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

The "Average" rate listed below is the average of all responses. The range is the average

+/- one standard deviation which includes about two-thirds of all responses.

Ohio Farm Custom Rates – 2008

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Dairy Farm Financial Analysis Opportunities

Dianne Shoemaker, Extension Dairy Specialist

Average just isn't good enough anymore. In the dairy industry, generating an average net farm income per cow does not assure a dairy farm business a bright future. Depending on milk prices, net farm incomes have varied in the $200 to $500 per cow range over the last 5 years. Whether that is enough depends on how many cows a particular farm milks, and what they expect that net farm income (NFI) to do.

The NFI should provide a family living (if the business is a sole proprietorship), make principal payments, pay income taxes, provide investment toward retirement and have enough left to reinvest in the business. At $200 net farm income per cow, a 100 cow herd would be generating only $20,000 to do all that. That is not a sustainable business. Even in a better milk price year when NFI per cow averages closer to $500, the $50,000 generated by the same 100 cow herd is still not enough for most businesses.

Each farm has to be able to answer two important questions:

•  How profitable is my dairy? -or- What is my NFI per cow?

•  How can I improve profitability? NFI per cow?

Any way you ask those two questions, it will take some serious commitment and time to determine the answers. Completing a year-end enterprise analysis of your business helps identify answers to both of those questions.

No doubt, this process requires serious time and effort, but an opportunity to conduct a FINPACK Enterprise Analysis with the assistance of technicians to help gather and process information is available from The Ohio State Univeristy Extension this spring.

Specialists and Extension Educators experienced with these analyses help interpret the results with each farm. A grant from the North Central Risk Management Center has made this service available for a limited time at no cost to the producer. Without the grant, the analysis would cost a minimum of $100.

If you are interested in learning more about this opportunity, contact Dianne Shoemaker at shoemaker.3@osu.edu or 330 263-3799.   

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Renewable Energy Systems & Energy Efficiency Improvements Grants Program

Chris Bruynis, Extension Educator, Wyandot County

Farmers looking for a way to save some money on energy efficiency improvements have the opportunity to apply for grants to offset the cost of the improvements.  This is a matching funds grant where the grant can pay up to 25% of the cost of the project.  Applicants must receive 50% or more of their gross income from agricultural activities. Eligible projects include purchase and installation of equipment, energy audits, permit and license fees, feasibility studies, business plans, and construction of new energy efficient facilities.  Last year three Ohio farmers qualified and received grants through this USDA Rural Development program.  More details can be found at http://www.rurdev.usda.gov/rbs/farmbill/index.html   or by contacting your local OSU Extension office.

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ODA's Indemnity Program

Howard Siegrist, Extension Educator, Licking County

In times of economic uncertainty and unrest, assurance of one's livelihood can be a welcomed comfort. Because of this, agricultural producers in Ohio should be aware of the grain regulatory program and Ohio 's indemnity program that provide a safety net for excessive losses due to insolvency of grain handling businesses. Since 1983, the indemnity fund has proven effective with the reimbursement of more than $8 million to Ohio grain producers. Understanding how the indemnity fund money is allocated is important to everyone that is involved in the handling and depositing of grain in Ohio .

The Ohio Department of Agriculture (ODA) licenses agricultural commodity handlers in Ohio to provide protection to commodity depositors. A handler is any person or entity who purchases more than 30,000 bushels of commodities in a calendar year from producers or provides any type of commodity marketing transaction. Handlers are required by law to be licensed by ODA. A commodity depositor is any person who delivers an agricultural commodity to a licensed handler for storage, conditioning, shipment or sale. In addition, a depositor is any owner or legal holder of a ticket or receipt issued for an agricultural commodity who is a creditor of the handler for the value of the commodity. Licensing requires that an application be filed, fees paid, insurance provided on inventory, and at least a review level financial statement be submitted with applicable notes prepared by a Certified Public Accountant.

The indemnity fund was created by allocating a one-half cent per bushel fee for all commodities handled by a licensed handler. This allocation should not be confused with a commodity check-off program, which is used for research and promotion purposes.

Three years ago, leaders of the agriculture industry raised the cap on the indemnity fund to $10 million to account for higher commodity prices and the increased size of Ohio 's grain handlers. The current balance of the fund is more than $12 million, including accumulated interest. The one-half cent per bushel assessment is reinstated if the fund balance drops below the $8 million mark.

Early warning signs of a grain handler's cash flow problems may include checks returned for insufficient funds, failure to be paid in a timely manner (within five working days) or promises to pay interest if the seller does not take payment.

The Director of Agriculture holds a priority lien on assets of a failed handler for the benefit of the depositors. Statute 926.01 of the Ohio Revised Code was implemented in 1988, and was tested and prevailed in the Merchants Grain insolvency.

Indemnity claims from a failed handler are reviewed by the Commodity Advisory Commission made up of three farmers, three commodity handlers, and one banker involved in agricultural lending. The Commission determines the price of the claimed commodities according to the law and makes approval recommendations on the claims.

The amount of reimbursement that depositors will receive depends upon their marketing transaction or other circumstances. For guidance on a specific case, contact the Grain, Feed and Seed Section of ODA. If the indemnity fund is depleted due to the failure of multiple handlers, claims will be paid in the order received by the department as the fund is replenished.

It is imperative that farmers keep complete and accurate records of their commodity deposits and understand the marketing transactions in which they are involved. Producers must keep copies of all scale tickets and settlement sheets. Producing complete and accurate receipts of your transactions could be the determining factor in claim approval.

Claims take time to approve as they move through the legal system of required checks and balances. Although payment isn't immediate, this is a priority for the department and every attempt is made to assist claimants within the scope of ODA's authority.

Agriculture has changed drastically in the last decade, and high commodity prices and market volatility are major concerns to licensed handlers, farmers and agricultural lenders. If you need our assistance or more information, call the Grain, Feed and Seed Section of ODA at 614-728-6410.

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Ohio's Annie's Project Holds Successful Winter Workshops in 2007 & 2008

Julia Nolan Woodruff, OSU Extension Educator, Ashland County

Annie's Project began in 2003 as one Extension Educator's idea in Illinois . Ruth Hambleton developed the workshop based on her mother, Annie Fleck's life as a farm wife. She was a small-town girl who grew up to be a teacher, marry a farmer and lived with her in-laws. Annie was responsible for keeping the farm records, which were used to make tough management decisions in times of financial hardship. She was the person who held together the family as well as the business. Since that first Annie's Project graduated ten women in 2003, the program has spread to eighteen states and 4,835 women have completed the six week workshop. Eight Ohio counties have conducted an Annie's Project over the past two winters with 170 women participating.

Annie's Project is an agricultural business course in risk management designed to address the needs of women involved with agricultural operations. It brings women together to learn the financial skills and critical information needed to manage the complicated business of running a farm today.

Specific topics include financial record keeping, money management, understanding basic financial statements, financial management tools, goal setting and mission statement writing, commodity marketing basics and marketing plan development, crop insurance, family communication, estate planning, liability issues, land rental contracts and other contracts. Women also learn more about themselves and their families/co-workers through the Real Colors® personality program.

Annie's Project has been well received by Ohio 's farm women. The evaluations thus far have reported very positive impacts in the lives of the women involved in the classes. For example, a few of the preliminary results reported by three counties in 2008 showed:

•  98% had an improved understanding of how to eliminate communication barriers that existed within their farm businesses.

•  92% believed a mission statement to be important to the farm business and 46% had already written or started the process of writing a farm mission statement.

•  93% have a better idea of the farm management information available and how to access it.

Several women commented that they had changed their mind about the importance of farm family business meetings and having a written mission statement. They plan to incorporate both into their farms in the near future.

Another participant stated, “I changed my mind about my involvement in the farm business. I plan to be more involved with our farm operation, decision making and keeping informed of the resources/programs available.”

A comment made by another participant reflected the confidence many of the women feel as they increase their knowledge of farm management practices. The participant stated, “I change my mind about just dreaming about running our farm. We are going to be more aggressive in exploring solid options for making ‘our dream' a ‘reality.' Thank you for this class – it has made us get off the fence of indecision…and jump into the field.”

Annie's Project was offered by OSU Extension and their collaborators in two counties during the winter of 2007 and six counties this past winter. We hope to continue to offer Annie's Project Workshops during the winter of 2009. If you would be interested in attending an Annie's Project contact your local OSU Extension office or Julia Woodruff at woodruff.94@osu.edu or Doris Herringshaw at herringshaw.1@sou.edu .

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Starting, Organizing, and Managing an LLC for a Farm Business

Robert Moore, Attorney for Wight Law Compant and Barry Ward, Leader, Production Business Management.

The Limited Liability Company (LLC) has become the entity of choice for many new businesses in Ohio. The LLC provides the flexibility and ease of startup of a partnership while providing the liability protection of a corporation. By combining the best attributes of a corporation and partnership, the LLC provides an attractive business entity for Ohio farms and farm businesses. This fact sheet describes an LLC, how to form one, advantages and disadvantages, legal requirements, and procedures for transfer of ownership interests.  The complete factsheet can be accessed at:

http://ohioline.osu.edu/bst-fact/pdf/LLC_Farm_Business.pdf

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Employee Management Crucial in Springtime

David Marrison, Extension Educator, Ashtabula County

Spring is the time for farm labor to rise and shine. Operating a highly competitive farm requires the talents of many people.  As we juggle the many hats that spring offers, it is imperative that personnel management not be shelved for the season.  Competitive operations understand that personnel management is a major key to profitability. Personnel managers should take time to examine the five functions of management (planning, organizing, staffing, directing and controlling). They also need to develop a human resource plan which is consistent with the farm's mission and goals. This plan will serve as a guide as employees are hired, trained, and managed.

It is no secret that motivated employees are often more productive. Dr. Bernie Erven, OSU Professor Emeritus, has often cited an employee paradigm that states : “You can buy people's time: you can buy their physical presence at a given place, you can even buy a measured number of their skilled muscular motions per hour. But you can not buy the devotion of their hearts, minds or souls. You must earn these.”

How are you doing in keeping your dairy employees motivated? Have you taken time to ask your employees what motivates them? Many employers would be shocked to learn that good wages and job security are not necessarily the ultimate motivators. A study conducted by George Mason University showed the top three motivators for employees were interesting work, appreciation, and feeling in on things. Surprisingly, good wages only ranked 5 th Bottom line, you won't know what motivates your employees until you ask!

This spring, the Ohio Ag Manager team encourages you to take some time in the tractor to think about the ways you can enhance the motivation and productivity of your employees. Are job duties and expectations clearly defined? Do I need to develop an employee handbook? Is coaching and instruction given at opportune times? Do we hold employee meetings? How can I increase the skills of my employees? Do you personally thank staff for a job well done? In what ways can I improve the working environment for my employees? In what areas would I like my employees to improve and how can I help them improve? How can I remove employee dis-satisfiers such as unsafe equipment, unreasonable rules and policies, and conflict with co-workers? How can I encourage and reward initiative and new ideas?

Some employees are internally motivated while others are motivated by external rewards. By listening to employees, you can develop strategies to reward and motivate them. Some of these strategies could include: verbal praise, free meals, work uniforms, annual salary increase, free gas (a big reward given today's fuel prices), tickets to a ball game, unexpected paid time off, bonuses, flexible work schedules, special gifts for special occasions, and extra vacation days. And never forget how far a sincere thank you or compliment can go for any employee (including family members).

Your local Extension Educator can help assist you as you develop a employee management plan. Call you local Extension office today.  Specific questions can be asked to the Ohio Ag Manager team.  Click here to ask specific questions to the Ohio Ag Manager team

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Readers can subscribe electronically to this newsletter by sending an e-mail message to: ohioagmanager-on@ag.osu.edu. A successful subscription message will receive by an automatic reply from the listserv. Contact your local Ohio State University Extension Office or e-mail marrison.2@osu.edu if you have problems subscribing.

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