Newsletter | Past Issues

March, 2008

In This Issue:
Ohio Cropland Values and Cash Rents, 2007-08

Economic Stimulus Act and Farmers

Today's Higher Fertilizer Prices Show Even Greater Savings for Precision Agriculture

Farm Management Newsletter Roundup

Pricing Hay

Call Before You Cut - Your Timber

Tax Characteristics of Business Entities Available to Ohio Farmers

Using Liability Limiting Entities to Manager Liability Exposure for Ohio Farms

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 Cropland Values and Cash Rents, 2007-08

Barry Ward ( ward.8@osu.edu ) Leader Production Business Management

OSU Extension, OSU Department of Agricultural, Environmental and Development Economics (AEDE)

Introduction

Landowners, prospective buyers, farmers and lenders often seek baseline data and trend data with which to base their buy/sell and rental decisions upon. A survey is conducted annually drawing on the expertise of numerous professionals that are knowledgeable of Ohio 's cropland markets. Surveyed groups include farm managers, rural appraisers, agricultural lenders, OSU Extension Educators, farmers and Farm Service Agency personnel.

Surveying these agricultural professionals is an attempt to capture unbiased data for evaluating cropland value and cash rents. One hundred twenty-nine surveys were completed, analyzed and summarized. Respondents were asked to give responses based on 3 classes of land in their area; “Top” producing land, “average” producing land and “poor” producing land. The survey results are summarized in Tables 1 and 2.

This survey found that in 2007, Ohio cropland averaged $4456.56 per acre for top land, $3703.60 for average land and $2933.61 for poor land. Top land averages 183.92 bushels of corn per acre, 59.98 bushels of soybeans per acre and rented for $141.37 per acre. Average land yields on average 149.82 bushels of corn per acre, 47.46 bushels of soybeans per acre and rented for $111.47 per acre. Poor cropland averages 117.91 bushels of corn per acre, 35.35 bushels of soybeans per acre and rents for $85.45 per acre.

Respondents were also asked to give their projections of land values and cash rents for 2008. For 2008 land values in Ohio are projected to average $4685.20, $3921.58 and $3123.49 per acre for “Top”, “Average”, and “Poor” land, respectively.

Ohio Results

Top Cropland

Survey results indicate that “top” performing cropland in Ohio averages 183.92 bushels of corn per acre. Results also show that average value of “top” cropland in 2007 was $4456.56 per acre. According to this survey “top” producing cropland in Ohio is expected to be valued at $4685.20 in 2008. This is a projected increase of 5.13%.

“Top” crop land in Ohio rented for an average of $141.37 per acre in 2007 according to survey results. “Top” cropland is expected to rent for $156.88 in 2008. This equates to a cash rent of $0.85 per bushel of corn produced. Rents in the “top” cropland category are expected to equal 3.35% of land value in 2008.

Average Cropland

Survey results for “average” production cropland show an average yield to be 149.82 bushels of corn per acre. Results show that the value of “average” cropland in Ohio was $3703.60 per acre in 2007. According to survey data this “average” producing cropland is expected to be valued at $3921.58 per acre in 2008. This is a projected increase of 5.89%.

“Average” cropland rented for an average of $111.47 per acre in 2007 according to survey results. “Average” cropland is expected to rent for $123.50 per acre in 2008. This equates to a cash rent of $0.82 per bushel of corn produced. Rents in the “average” cropland category are expected to equal 3.04% of land value in 2008.

Poor Cropland

The survey summary shows the average yield for “poor” performing cropland equals 117.91 bushels of corn per acre. Results also show that the average value of “poor” cropland was $2933.61 per acre in 2007. According to survey data this “poor” producing cropland is expected to be valued at $3123.49 in 2008. This is an increase of 6.47%.

“Poor” cropland rented for an average of $85.45 per acre in 2007 according to survey results. Cash Rent for “Poor” cropland is expected to average $94.82 per acre in 2008. This equates to a cash rent of $0.80 per bushel of corn produced. Rents in the “poor” cropland category equal 2.91% of land value.

Northwest Ohio Results

Top Cropland

Survey results indicate that “top” performing cropland in northwest Ohio averages 182.22 bushels of corn per acre or 60.0 bushels of soybeans per acre. Results also show that the average value of “top” cropland was $4040.57 per acre in 2007. According to this survey “top” producing cropland in northwest Ohio is expected to be valued at $4250.94 in 2008. This is a projected increase of 5.21%.

“Top” crop land in northwest Ohio rented for an average of $141.02 per acre in 2007 and is expected to rent for $156.17 in 2008 according to survey results which equals $0.86 per bushel of corn produced. Rents in the “top” cropland category are expected to equal 3.67% of land value.

Average Cropland

Yields for “average” production cropland are 149.09 bushels of corn per acre or 47.55 bushels of soybeans per acre. Results show that the value of “average” cropland in northwest Ohio was $3417.59 per acre in 2007. According to survey data this “average” producing cropland is expected to be valued at $3637.04 per acre in 2008. This is a projected increase of 6.42%.

“Average” cropland rented for an average of $111.39 per acre in 2007 according to survey results and is expected to rent for $125.69 in 2008 which equals $0.84 per bushel of corn produced. Rents in the “average” cropland category are expected to equal 3.46 % of land value in 2008.

Poor Cropland

The survey summary shows the average yield for “poor” performing cropland in northwestern Ohio equals 117.82 bushels of corn per acre or 35.33 bushels of soybeans per acre. Results also show that the average value of “poor” cropland was $2761.32 per acre in 2007 and is expected to average $2946.70 per acre in 2008. This is an increase of 6.71%.

“Poor” cropland rented for an average of $86.76 per acre in 2007 and is expected to average $97.50 per acre in 2008 according to survey results which equals $0.83 per bushel of corn produced. Rents in the “poor” cropland category are expected to equal 3.31% of land value in 2008.

The northwest region for the purposes of this survey includes: Williams, Fulton , Lucas, Ottawa , Defiance , Henry, Wood, Sandusky , Paulding, Putnam, Hancock, Seneca, Van Wert, Allen, Hardin, Wyandot, Crawford, Marion and Morrow Counties .

Southwest Ohio Results

Top Cropland

Survey results indicate that “top” performing cropland in southwest Ohio averages 185.51 bushels of corn per acre or 60.35 bushels of soybeans per acre. Results also show that average value of “top” cropland was $4961.54 per acre in 2007. According to this survey “top” producing cropland in southwest Ohio is expected to be valued at $5213.65 in 2008. This is a projected increase of 5.08%.

“Top” crop land in southwest Ohio rented for an average of $156.44 per acre in 2007 and is expected to rent for $174.92 per acre in 2008 according to survey results which equals $0.94 per bushel of corn produced. Rents in the “top” cropland category are expected to equal 3.36% of land value in 2008.

Average Cropland

Yields for “average” production cropland equal 152.81 bushels of corn per acre. Results show that the value of “average” cropland in southwest Ohio was $4092.16 per acre. According to survey data this “average” producing cropland is expected to be valued at $4297.22 per acre in 2008. This is a projected increase of 5.01%.

“Average” cropland rented for an average of $126.41 per acre in 2007 and is expected to rent for $137.55 per acre in 2008 according to survey results which equals $0.90 per bushel of corn produced. Rents in the “average” cropland category are expected to equal 3.20 % of land value in 2008.

Poor Cropland

The survey summary shows the average yield for “poor” performing cropland in southwestern Ohio equals 122.56 bushels of corn per acre. Results also show that the average value of “poor” cropland was $3157.61 per acre. According to survey data this “poor” producing cropland is expected to be valued at $3350.65 per acre in 2008. This is an increase of 5.01%.

“Poor” cropland rented for an average of $97.77 per acre in 2007 and is expected to average $106.30 per acre in 2008 according to survey results which equals $0.87 per bushel of corn produced. Rents in the “poor” cropland category are expected to equal 3.17% of land value in 2008.

The southwest region for the purposes of this survey includes: Mercer, Auglaize, Shelby , Logan , Union , Delaware , Darke, Miami , Champaign , Clark, Madison , Franklin , Preble, Montgomery , Greene, Butler , Warren , Hamilton , Clermont, Clinton , Fayette and Pickaway Counties .

Summary

This study will add to existing research on Ohio farmland values and cash rents that can assist producers and landowners with purchase and rental decisions. Existing research includes:

Ohio Cropland Values and Cash Rents 2006-07 at:

http://ohioline.osu.edu/ae-fact/pdf/cropland.pdf

Ohio Farm Real Estate Markets at:

http://aede.osu.edu/resources/docs/pdf/C2V16S20-H8CG-UEFY-JGL2H3JPU7Y1PO5J.pdf

Land Rental Rates: Survey Results and Summary at: http://vanwert.osu.edu/ag/landrentalrates.pdf and companion Cash Rent Calculator at:

http://vanwert.osu.edu/ag/calculator.htm

Also, check with your local OSU Extension Office for local land value/rental survey summaries. For additional information on farmland lease issues see the Department of Agricultural, Environmental and Development Economics (AEDE) Farm Management webpage at: http://aede.osu.edu/Programs/FarmManagement/MgtPublications.htm

Return to Top

Economic Stimulus Act and Farmers

Dr. Donald Breece, Associate Professor/Department of Extension & Farm Management Specialist

The Economic Stimulus Act of 2008 has business provisions designed to encourage small businesses to buy more equipment.  For tax year 2008, the IRC Section 179 Expensing Election increases to $250,000.  It was $125,000 in 2007 and was to increase to $128,000 in 2008.  The investment ceiling was $500,000 for 2007 and will be increased to $800,000 for qualified investments in 2008.    Expensing is reduced dollar for dollar if the annual investment exceeds this limit.

In 2009 and 2010 the expensing election 179 goes back to an inflation adjusted $125,000, with the investment limit of an inflation adjusted $500,000.  Beginning 2011 the tax law reverts to previous legislation and the Section 179 deduction amount will only be $25,000 and the investment limit returns to $200,000.

In 2008 the bonus first-year depreciation returns, much like it was following 9/11.  The immediate deduction will be 50% of the adjusted basis of qualified property purchased and placed in service before the end of 2008.  This is not an election, in order not to take it, a person must elect out of it.  It applies to only original use property (heifers qualify, but cows will not).  Property must qualify for modified accelerated cost recovery system, MACRS, with a depreciation period of up to 20 years.  It includes machinery and equipment, machine sheds, and grain bins for example.  See your tax practitioner for details.

Return to Top

Today's Higher Fertilizer Prices Show Even Greater Savings for Precision Agriculture

John Barker, Extension Educator, Knox County

Farmers often question the economic value GPS based technology. Does precision agriculture pay? In most precision agriculture circles, this is the most often asked question, and at times a most difficult question to answer.

Today's technology allows farmers to vary the application rates of crop inputs throughout a field. These practices are creating vast and sweeping changes on many farms. This technology allows such inputs as herbicide, insecticide, fertilizer, manure, etc. to be altered at any particular point within a field. GIS software allows various field data such as soil test results, crop scouting data and yield data to be analyzed and incorporated into the decision making process.

Theoretically, combining field based data with the ability to vary input usage at specific points within a field should increase input efficiency. Increased efficiency should improve profit margin and result in the adoption of more environmentally sound practices. - But does it pay?

To answer this question data was analyzed from a 45 acre Central Ohio farm. Seven years of accurate and calibrated yield data was available for this field utilizing a GPS based yield monitor. This field was in a strict corn-bean rotation. Fertilizer recommendations were developed utilizing the four following scenarios.

Scenario 1: Fertilizer recommendations were made according to the farmers normal production practices. Variable rate technology was not utilized in this scenario.

Scenario 2 : The field was divided into 2.5 acre grids. Soil samples were collected and sent to a lab for analysis. The fertilizer application data was developed for this field utilizing variable rate technology based upon the results from the soil test data.

Scenario 3 : The field was divided into management zones based upon soil type. Soil samples were then collected from each soil type. Each sample size was approximately 2.5 acres or less. The fertilizer application data was developed for this field utilizing variable rate technology based upon the results from the soil test data.

Scenario 4: GIS software was used to divide the field into management zones. These zones were based upon actual, historic crop removal data from this field. Fertilizer recommendations were based upon the actual crop removal in each of these management zones. Fertilizer applications were made utilizing variable rate technology.

Table 1 contains the data from this analysis. Fertilizer recommendations were made for each of the four scenarios using the Tri-State Fertilizer Recommendations as a guide. Overall fertilizer use was the highest using the farmers normal production practices (scenario 1). Utilizing grid soil sampling and variable rate applications (scenario 2) fertilizer use was reduced by 3,420 pounds. Soil sampling using management zones based upon soil type and utilizing variable rate fertilizer applications (scenario 3) reduced overall fertilizer use by more than 3.5 tons. Scenario 4 which utilized G.I.S. software to divide the field into management zones based upon crop removal and utilizing variable rate fertilizer applications produced the most efficient fertilizer use. This scenario, which is based on the actual field production, shows phosphorus recommendations were reduced by almost 1.5 tons and the potash recommendations were cut in half - But does it pay?

Fertilizer prices of $650/ton for Potash and $850/ton for D.A.P. were used for this analysis. Soil testing charges and variable rate fertilizer application charges were included where appropriate. Scenario 4, fertilizer recommendations based upon crop removal produced the greatest savings. This scenario which had the lowest fertilizer use and no soil testing charges resulted in a savings of $88.04 per acre when compared to the farmers normal production plans. Soil sampling by soil type (scenario 3) and 2.5 acre grid sampling (scenario 2) resulted in savings of $84.91 per acre and $36.36 per acre respectively, when compared to the normal production practices for this farm.

But does it pay? In this analysis Yes! Each scenario involving variable rate fertilizer applications resulted in lower fertilizer use and a greater net return. With today's soaring fertilizer prices, savings of $36 to more than $88 per acre can have a significant impact on most Central Ohio farms.

Table 1.

Return to Top

Farm Management Newsletter Roundup

Andy Kleinschmidt, OSU Extension Educator, Van Wert County

This article summarizes farm management articles and newsletters from various sources. Below are articles and newsletters that provide focus on farm business planning, financial management, and farm management strategies besides the Ohio Ag Manager Newsletter.  We are pleased to work in conjunction with these other newsletters to provide farm management education across the nation.

Ag Decision Maker ( http://www.extension.iastate.edu/agdm/ ) is a publication of Iowa State University . The February 2008 newsletter has a number of excellent articles. I encourage you to read the article Global warming – the science ( http://www.extension.iastate.edu/agdm/homepage.html ) by Eugene Takle and Don Hofstrand. This article is a series of articles that focuses on global warming, the science behind it and the impact global warming may have on Midwestern agriculture. Very good read.

Iowa Ag Review ( http://www.card.iastate.edu/iowa_ag_review/winter_08/ ) is a quarterly publication by the Center for Agricultural and Rural Development. Miguel Carriquiry and Bruce A. Babcock have an interesting article on biodiesel. I want you to read the article, but I'll let the cat out of the bag as a teaser. The authors contend that the real winners in the biodiesel craze are indeed farmers and landowners and not biodiesel manufacturers.

Purdue Agricultural Economics Report

( http://www.agecon.purdue.edu/extension/pubs/paer/2008/february/patrick.asp ) has a very robust article on Evaluating Livestock Risk Protection for Hogs written by George Patrick, Metin Cakir, and Tim Baker. The authors provide a description of the Livestock Risk Protection Swine policy and coverage.

The farm gate ( http://www.farmgate.uiuc.edu/ ) is one of my personal favorites. It is not a rigid ‘e-newsletter'; rather, it is a free-flowing blog full of very topical issues. Authored by Stu Ellis, formerly with University of Illinois Extension , the blog is designed for cornbelt farmers and agribusinesses. The tag line is “Where Farm Decision-Makers Start Their Day.” You may want to start your day at the farm gate .

Return to Top

Pricing Hay

Gary W. Wilson, Hancock County Extension Educator, ANR

There have been many questions this year on what the price of hay is. Obviously hay value is higher and was in short supply this past year due to drought and to more acres being picked up by corn, soybeans, and wheat.

Establishing a price for hay is difficult. A national market price structure for hay does not exist, so effective marketing is very important in getting a good price. Most cash hay producers rely on a combination of experience, assessing the demand, and knowing what others are asking as guidelines in establishing an asking price for hay. Needless to say, hay prices should take into account all costs associated with production, storage, advertising, and hauling the product; therefore, record keeping is very important. Price the product competitively and realistically, the availability and cost of other feedstuffs may affect the price. Some markets provide a greater premium than others for high-quality hay. Know what the requirements are to achieve those premiums and what forage tests are necessary to document the hay quality.

There are several good sources to refer to in trying establish a price for hay. A couple excellent internet sites are: www.hayexchange.com and  www.hayandstraw4u.com/ohio

The hayexchange.com site will allow you to select the state and one of the requirements for data entry is you must list the price so this is a good way to see present values.  Another method to establish hay price is to monitor various hay auctions held around the state. Some of the hay auctions located at least in the north and central part of the state are as follows:

Ashland County Auction, Ashland, Ohio

Blooming Grove Auction, Shiloh, Ohio

Danville Auction, Danville, Ohio

Kidron Auction, Kidron, Ohio

Mt. Hope Auction, Mt. Hope, Ohio

Yoder, Frey, Inc., Archbold, Ohio

Obtaining a hay analysis is always helpful. The internet sites allow space for this information and it can also be promoted at the hay auction. Both the seller and buyer benefit from this information.

Establishing a base of satisfied repeat customers is also critical to the long-term viability of a cash hay enterprise, and fair pricing is part of that process. Many successful cash hay producers maintain a fairly stable price structure for their valued customers. These producers set realistic prices and do not raise them appreciably in response to short-term hay deficits and high market prices. They do this in hopes that their customers will remain loyal and will continue to accept there established price structure when hay is plentiful and prices are low. You may hear reports of very high prices, but it is better to treat your good customers fairly over the long haul than to gain a few high-priced sales of limited volume to people you may never see again.

Return to Top

Call Before You Cut - Your Timber

Dave Apsley, Natural Resources Specialist, Ohio State University Extension

How many farmers would allow someone to come onto the farm, select and load the best cattle with a verbal promise from the buyer to pay ½ of whatever they were sold for at the market? Sounds ridiculous doesn't it? Why should selling timber be any different? Selling timber can be one of the most important financial decisions that you make in your lifetime, and an improper timber sale can cause long-term environmental damage, which greatly reduces your forest's potential to provide future benefits.

With proper planning and assistance: "you can have your cake and eat it too.” It is possible to get significantly more income from your timber sale while keeping the potential of your forest to produce future benefits in place. Call Before You Cut, a program sponsored by several of Ohio 's government and non-profit organizations and agencies, is the place to go to get the information that you need to make informed decisions about the management and harvesting of your forest resources. So if you are planning to sell some of your timber, be sure to call (1-877-424-8288) or click ( http://callb4ucut.com ) before you cut.

TOP 10 Reasons to Call Before You Cut

10) Learn if harvesting is right for you & your woods

9) Harvest the proper trees

8) Receive expert advice from a professional forester

7) Save $$$ on taxes

6) Find the best logger for the job

5) Develop a harvest contract to protect you & your forest

4) Assure a healthy & diverse forest for the future

3) Protect your soil & water resources,

and learn about Ohio 's resource protection laws

2)  Maximize profit from your timber harvest

1) Ensure your overall satisfaction with the harvest!

Call Before You Cut is sponsored by ODNR-Division of Forestry, Ohio State University Extension, Rural Action Sustainable Forestry, ODNR-Division of Soil and Water, Ohio Federation of Soil and Water Conservation Districts, Ohio Society of American Foresters, The Nature Conservancy, Ohio Better Business Bureau and Ohio Tree Farm Committee.

Return to Top

Tax Characteristics of Business Entities Available to Ohio Farmers
David Miller, Extension Emeritus, Retired District Farm Management Specialist & Robert Moore,
Attorney, Wright Law Co., LPA, Dublin, Ohio

Ohio farmers have a number of options when determining how to structure their farm businesses. The most common business entities are sole proprietorships, C-Corporations, S-Corporations, Partnerships, and Limited Liability Companies (LLCs). One of the primary factors to consider when determining which business structure to use is tax structure. The purpose of this publication is to provide a brief overview of the tax characteristics of the aforementioned business entities. The reader is encouraged to get professional tax advice before making a final determination on the tax structure that is best for their business.  Click here to access this new OSU Extenion Fact Sheet

Return to Top

Using Liability Limiting Entities to Manage Liability Exposure for Ohio Farms
Barry Ward, Leader, Production Business Management, The Ohio State University & Robert Moore, Attorney, Wright Law Co., LPA, Dublin, Ohio

Today’s farms are more susceptible to liability claims than ever before. This liability exposure comes in many different forms such as moving large machinery over roadways, inviting customers and vendors onto the business property, and environmental issues. While liability exposure cannot be eliminated, it can be managed.  Liability limiting entities, such as corporations and limited liability companies (LLCs) can be valuable tools in managing liability. This fact sheet will address the liability protection attributes of these entities and how to design a comprehensive business plan for liability protection.  Click here to read this new OSU Extension Fact Sheet.

Return to Top

**************************************************************************************

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