Newsletter | Past Issues

August, 2009

In This Issue:

ACRE or DCP: Which One to Choose?

Farm Service Agency has a Variety of Farm Loans

Have you Thought About Developing a Public Relations Plan for Your Farm?

Ohio’s Proposed Constitutional Amendment on Livestock Welfare

Making Big Financial Decisions: Using FINPACK as a Management Tool

Social Media Guide Available from Ohio Farm Bureau

Ohio Land Use Conference September 16

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

ACRE or DCP: Which One to Choose?

Chris Bruynis, Ph.D., OSU Extension Educator & Assistant Professor

Farmers needing to decide between the 2008 Farm Bill's average crop revenue election ( ACRE ) and the traditional direct and counter cyclical program (DCP) have until August 14, 2009 to make up their mind. In order to make the election, farmers need to understand the strengths and weaknesses of both programs. Traditional DCP has direct payment, marketing loan, and price counter-cyclical components while ACRE has a reduced direct payment and marketing loan component plus the average crop revenue election component. DCP and ACRE programs are summarized below.

1 The 2009 revenue must also be below the farm revenue guarantee.

2 This number represents the preliminary state revenue guarantee as of July 10, 2009. Revenue guarantees will become final for the 2008 corn and soybean crop on September 30, 2009. The wheat revenue guarantee for the 2008 crop was finalized June 30, 2009.

Direct payments are calculated on base acres and historic yields of crops. This payment is not triggered by price or yield conditions. In Ohio the average payment is $18.55 per acre. If a farmer elects DCP he would receive the entire amount but if he elects ACRE the amount would be reduced by 20% and would, on the average, equal $14.84.

Market loans rates vary slightly for each county in Ohio . If a farmer wanted to store grain in bins on the farm and borrow against the grain, more bushels would need to be leveraged as collateral to borrow the same amount of money if ACRE is elected over DCP. Unlike past years where farmers could select the day to determine LDP's, a 30 day average price will now be used for both DCP and ACRE to determine LDP payments. Under ACRE the price would need to be 30% lower before LDP's would be paid compared to DCP levels.

Counter-cyclical payments would be made if the average U.S. cash price for the 2009 marketing year falls below the listed price per bushel for each commodity. Payments would be calculated on base acres multiplied times counter-cyclical yields for each farm. ACRE payments would be made if the 2009 Ohio average yield multiplied times the 2009 averageU.S. cash price is lower than the State ACRE Revenue Guarantee for each crop respectively. If this occurs, then each farm enrolled in ACRE would also need to have their 2009 revenue below the farm's revenue guarantee.

Even though ACRE is a revenue guarantee program, most farmers understand price better. Assuming an average yield for the 2009 Ohio crop, the 2009 average U.S. cash price would need to be below the prices listed in the following table in order for ACRE to make a payment. For example, if the Ohio corn crop averaged 150 bushel per acre and the average price of corn between October 1, 2009 and September 30, 2010 was $3.50, farms enrolled in ACRE would receive an ACRE payment providing their revenue was also below the predetermine farm revenue guarantee. Conversely, if the average price of corn for the same period was $4.00, no payment would be made. If the average Ohio corn yield was 157.5 bushels per acre in 2009, the price would need to be below $3.53 before ACRE payments were triggered at the state level. Likewise, an average corn yield of 142.5 would need corn below $3.90 to trigger ACRE payments.

2 The price for wheat reflects a blended wheat price to include all wheat varieties not just soft red winter wheat.

To illustrate the differences in farm program payments an example 100 acre farm with three scenarios consisting of 100 acres of corn, 100 acres of beans and 100 acres of wheat was used. This farm has 42 acres of corn base, 47 acres of soybean base and 11 acres of wheat base. The following table illustrates the expected farm program payments for DCP and ACRE under different price scenarios holding the 2009 yields constant at the state Olympic average. This example is also using the preliminary State ACRE Revenue Guarantee for corn and soybeans which could change through September 30, 2009.

What if the farmer had planted 45 acre of corn, 45 acres of beans and 10 acres of wheat under the same price scenarios? Assuming crop prices track up and down together as illustrated, the following table shows the anticipated payments for the example farm.

Simplifying DCP and ACRE to make them easily understood is difficult. These prices and payment levels, even though they are accurate under the assumptions, are for illustrative purposes only. Farmers should take time to complete spreadsheet programs to calculate their anticipated benefit from the DCP and ACRE programs to determine which option is the best for them.

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Farm Service Agency has a Variety of Farm Loans

David Marrison, OSU Extension Educator

The Farm Service Agency (FSA) has a variety of loan programs which Ohio farm and agribusinesses may be eligible. FSA makes direct and guaranteed farm ownership and operating loans to family-size farmers and ranchers who cannot obtain commercial credit from a bank, Farm Credit System institution, or other lender. Loans are available in the areas of direct farm ownership and operating; beginning farmers and ranchers; emergency farm; socially disadvantage farmers and ranchers; and youth loans. The following is a brief description of each loan program

Direct Farm Ownership Loans- These loans allow farm families to purchase farmland, construct or repair buildings and other fixtures, and promote soil and water conservation. The maximum amount is $300,000. Loan applicants may choose to participate in a joint financing plan. In this program, FSA lends up to 50 percent of the amount financed, and another lender provides the balance. FSA may charge an interest rate of not less than 4%.

Direct Operating Loans- Operating loans are available and may be used to purchase items such as livestock, farm equipment, feed, seed, fuel, farm chemicals, insurance, and other operating expenses. The loans can also be used to pay for minor improvements to buildings, costs associated with land and water development, family subsistence, and to refinance debts under certain conditions. These funds cannot be used to finance nonfarm enterprises. The maximum loan is $300,000.

Emergency Farm Loans- Emergency loans are issued to help producers recover from production and physical losses due to drought, flooding, other natural disasters, or quarantine. Emergency loan funds may be used to: restore or replace essential property; pay all or part of production costs associated with the disaster year; pay essential family living expenses; reorganize the farming operation; and refinance certain debts.

Beginner Farmer and Rancher Loan Program- Direct and guaranteed loans are available to beginning farmers and ranchers who are unable to obtain financing from commercial credit sources. Each fiscal year, FSA targets a portion of its direct and guaranteed farm ownership and operating loan funds in this area. A beginning farmer or rancher is an individual or entity who has not operated a farm or ranch for more than 10 years; meets the loan eligibility requirements of the program to which he/she is applying; substantially participates in the operation; and, for farm ownership loan purposes, does not own a farm greater than 30 percent of the median size farm in the county. All applicants for direct farm ownership loans must have participated in business operation of a farm for at least 3 years.

Socially Disadvantaged Farmers & Ranchers Loans- Guaranteed loans are available to approved socially disadvantaged applicants to buy and operate family-size farms and ranches. A socially disadvantaged (SDA) farmer, rancher, or agricultural producer is one of a group whose members have been subjected to racial, ethnic, or gender prejudice because of his or her identity as a member of the group without regard to his or her individual qualities. SDA groups are women, African Americans, American Indians, Alaskan Natives, Hispanics, Asian Americans and Pacific Islanders.

Youth Loans- Youth loans are available up to $5,000 for eligible individual rural youths age 10 through 20 to finance income-producing, agriculture-related projects. The project must be of modest size, educational, and initiated, developed and carried out by rural youths participating in 4-H clubs, FFA or a similar organization. The project must be an organized and supervised program of work. It must be planned and operated with the assistance of the organization advisor, produce sufficient income to repay the loan, and provide the youth with practical business and educational experience in agriculture-related skills.

More information on the Farm Service Agency Loans can be obtained by contacting your local Farm Service Agency Office. The location of these offices can be obtained by accessing: http://www.fsa.usda.gov

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Have You Thought About Developing a Public Relations Plan for Your Farm?

Julia Nolan Woodruff, OSU Extension Educator

As we look at the challenges facing agriculture today, the list must include the fact that Americans are further removed from the farm than ever before. For the most part, they don’t know or understand common agricultural practices farmers use to produce the food and fiber we all enjoy. The public, with limited working agriculture knowledge also includes policy makers at the local, state and national levels. Even though the public may lack agricultural knowledge, they do have an interest in learning more about farm production. By providing information to the public about common agriculture practices, chemical applications, animal welfare issues, manure application, etc. you will be educating in a proactive and positive manner. Developing a farm public relations (PR) plan will provide an organized and meaningful delivery of information to the public.

Before you dive into developing a PR plan there are a couple of questions you should answer first.
• What are our farm’s PR goals, i.e. why are we doing this?
• Who will take the lead on developing and implementing the plan?

These are two very important questions. Your might want to create awareness, develop a favorable farm image, build a larger customer base, etc. It doesn’t matter what your goals are as long as you have set and written goals. Without goals, it will be difficult to determine if the plan is meeting the farm’s PR needs and if it is worth the time and effort. It is also important to have someone responsible for the farm’s public relations plan. Without a specific person taking the lead on the PR plan, it may just remain a really good idea that never got started.

After the proceeding questions have been answered, it is time to begin developing the PR plan. The first step is to think about your farm’s mission and objectives. Your mission statement will help explain what your farm does, how it does it and why. It is important that you build your mission statement on your core values. This will help the public understand who you are and what is important to your farm business. You may also consider writing a short history of your farm business. How the farm was started and the changes that have occurred over the years may not seem exciting to you, but today’s public is interested in getting to know and learn about farms and farmers as we’ve seen through the growth of the local foods movement.

Once you know who you are, the next step is to determine who your target audience is. There are a couple of broad audience groups that PR plans typically focus on.

1. Internal Audience. This includes everyone who is a part of the farm; employees, family members, stockholders, employees’ families, etc.

2. External Audience. Everyone not part of the internal audience that the farm wants to connect with and includes customers, prospective customers, prospective employees, community members, local, state, federal legislators, landowners, suppliers, competitors, regulators, etc.

It is important to determine who your audience is, so you can move to the next step and decide what information would be of interest to that audience. Think about what you want to share with the public about your farm, what they want to know, and why you want to share that information. Some examples might include:

• You may want an external audience to know about the quality product you produce and the conservation practices utilized in production to create awareness in the community.
• Another external audience topic would be basic animal welfare practices implemented on your farm. This information would help the general public understand how you care for your livestock and why specific practices are utilized by the industry.
• An internal audience such as stakeholders not involved in the everyday workings of the farm, might benefit from end of the year production records and a comparison to last year, new technologies and practices implemented recently and a financial summary for the year.

As a farm business, you know who you are, who your target audience is, what information to share and why. This leaves on last, but important part of your plan. What methods will you use to communicate this information? This is a vital part of the plan, you may have all the other steps taken care of, but if you choose the wrong communication method your audience will not be reached. Some ideas to communicate your message are as follows:

• Letters to the editor discussing what is happening during the current season, i.e. it is spring time and farm machinery will be sharing the road with motorists.
• Contact newspapers, requesting a feature story about an event or a human interest story about farm life as well as the business side.
• Develop a brochure that can be mailed to neighbors and landlords that explains your operation and the sound agricultural practices that you utilize to produce your product.
• Classroom visits to help youth understand how their food is produced.
• Speaking at meetings of community organizations to share the economic impact agriculture has in the community.
• Hold a ‘block party’ at your farm; give tours and explanations about how your farm is part of the food production cycle.
• Develop WebPages, YouTube videos and/or social networking sites such as Facebook or Twitter to tell your story. Pictures and daily updates draw interest to your farm and help the public develop a connection with the people producing their food and fiber.

One last note as you are developing and delivering your PR plan; be sure to use language that the general public will understand. Every day farm terminology such as heifers, A.I., chemical names, etc. might be confusing to the non-farm public, so take time to explain terms. Your PR plan will help you be effective at informing and educating, but only if your message is received.

References:

1. Reasons for business Communication. Located at: http://srdc.msstate.edu/ecommerce/curricula/farm_mgmt/module2_4.htm

2. Novak.J. (January/February 2005). Public relations can help your business. TPI Turf News.

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Ohio’s Proposed Constitutional Amendment on Livestock Welfare

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

Following a lengthy battle over the state’s budget, the Ohio House and Senate agreed on by joint resolution on July 13, 2009, to place a constitutional issue on livestock care before Ohio voters this fall. Each legislative body had passed different versions of the proposal in the past few weeks. The final version adopted by the legislature proposes an amendment to the Ohio Constitution that:

• Creates the Ohio Livestock Care Standards Board, to include:
      o The director of the department of agriculture, who shall chair the Board;
      o Ten members appointed by the Governor with Senate approval, as follows: one family farm representative, one member knowledgeable about food safety in Ohio; two members representing statewide farmer organizations; one veterinarian licensed in Ohio; the State Veterinarian; the dean of an Ohio college or university’s agriculture department; two members of the public representing Ohio consumers; one member representing a county humane society; two family farmers appointed by the Speaker of the House and the Senate President.
     o No more than seven members of the same political party.

• Grants the Board exclusive authority to establish standards for the care and well-being of livestock and poultry, subject only to the authority of the Ohio General Assembly, and requires the Board to consider factors including but not limited to: agricultural best management practices, bio-security, disease prevention, animal morbidity and mortality data, food safety practices, and the protection of local, affordable food supplies for consumers.

• Delegates authority for administering and enforcing the standards to the department of agriculture.

• Gives the Ohio General Assembly the power to enact laws necessary to carry out the purposes of the constitutional amendment.

• States that no other provision of the Constitution shall limit or impair the power granted by the constitutional amendment.

Ohio voters will decide on November 3, 2009, whether to adopt the proposed constitutional amendment.

View the joint resolution at http://www.legislature.state.oh.us/res.cfm?ID=128_SJR_6_AS.

Note that Michigan’s legislature is currently considering a proposal to address farm animal care. The proposed Animal Industry Act grants authority for regulating livestock welfare to the department of agriculture, adopts state animal care guidelines, establishes an auditing and certification program, and creates an Animal Care Advisory Council. A summary of the Michigan proposal, introduced in late June, is available here: http://www.legislature.mi.gov/documents/2009-2010/billanalysis/House/pdf/2009-HLA-5127-1.pdf.

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Making Big Financial Decisions: Using FINPACK as a Management Tool

Dianne Shoemaker, Extension Dairy Specialist, Ohio State University Extension

In “normal” times, big financial questions are: where are we, where do we want to go, how can we get there?

Big financial questions today are:
-Is there enough cash to make it through these poor markets?
-If not, where will it come from?
-If I borrow more money, can my cows pay it back?
-Is my hard-earned equity safe?
-Can I afford to keep milking cows?

Important questions are rarely easily or quickly answered. From a farm business perspective, the FINPACK® financial planning and analysis software package is a top-notch tool to help farm businesses analyze and answer these questions. Farms select which components to use depending on the questions they are trying to answer.

Where are we?
Using FINAN with enterprise analysis, a farm business can analyze their previous business year and identify which crop and livestock enterprises were profitable and which were not. It also analyzes the profitability of the total farm business. Profitability measures for the farm are graphically compared to Farm Financial Standards Council guidelines.

An individual farm’s performance can be compared and benchmarked against similar size farms in the Midwest to help identify opportunities for improvement.

Additional debt, payback and equity protection
The FINLRB software program allows a farm business to look at the “what ifs?” they are considering. On paper, the farm can look at multiple ways of changing the business, such as taking on additional debt, expanding, changing enterprises, bringing in a family member, buying out a partner, making a major capital investment, etc. FINLRB allows you to look at changes, evaluate potential profitability, debt repayment capacity and risk, and compare them to the way things currently are before money is borrowed, invested or ground is broken.

How do we get there?
The FINFLO cash flow software, allows the farm business to project cash flow and short-term borrowing needs as the farm transitions from where they are to where they want to be. Cash flow projections can be structured yearly, quarterly, or monthly.

Bottom Line: FINPACK is a powerful tool to help farm businesses analyze historical performance and project future profitability (or lack of profitability) of the existing business and potential business changes. 30 Extension educators, specialists and FBPA instructors are trained to use these tools with Ohio’s farms.

Contact your County Extension Office for assistance, or check for an ANR Educator near you, trained to use the FINPACK program in the chart below.

More information about the FINPACK programs is available at http://www.cffm.umn.edu/

Ohio State University Extension Educators and Specialists - FINPACK

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Social Media Guide Available from Ohio Farm Bureau

Andy Kleinschmidt, Extension Educator, Van Wert County

Wiki defines social media as:

...media designed to be disseminated through social interaction... Social media supports the human need for social interaction with technology, transforming broadcast media monologues (one to many) into social media dialogues (many to many). It supports the democratization of knowledge and information, transforming people from content consumers into content producers.

Here are a few examples of social media that you may have heard of: blogs, micro-blogging (e.g. Twitter), and social networking (e.g. Facebook).

Why is this important to agriculture? There is a power in social media for farmers to connect with consumers that is unprecedented.  I recommend you take a look at this outstanding 'How To' guide developed by Ohio Farm Bureau and get started:

http://ofbf.org/uploads/social-media-guide.pdf

I was recently asked why I support this media. My answer is that these tools are now a must for sharing information, making connections, and maintaining relevancy in a world that moves at the speed of information.

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Ohio Land Use Conference September 16

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

OSU Extension will host its annual Ohio Land Use Conference on September 16, 2009 at the Nationwide and Ohio Farm Bureau 4-H Center on OSU campus. Aimed at educating local decision makers, planners, resource professionals, educators and citizens, this year’s conference reflects the evolving issues affecting land use in Ohio today. Presentations by keynote speakers include:

1) Is Sprawl Dead? – Dr. Elena Irwin, OSU Dept. of Agricultural, Environmental and Development Economics

2) An Agenda for Growth and Change in Michigan – Gil White, Michigan Assn. of Realtors/People and Land Leadership Council

3) The New Federal Partnership for Sustainable Communities – Lynn Richards, U.S. EPA, Washington, DC

4) A Balanced Growth Program for Ohio – Gail Hesse, Ohio Water Resources Council

The conference also offers breakout sessions taught by state agency professionals, attorneys, educators, planners and technical experts on the topics of:

- Ohio Transportation Planning

- Rural Zoning Law

- Planning for Renewable Energy

- The “Get Green Columbus” Program

- Zoning and Agriculture

- Balanced Growth and Stormwater Planning

For more information or to register for the Ohio Land Use Conference, please visit http://comdev.osu.edu/landuse_conf.html.

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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

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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
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