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Newsletter | Past Issues
March,
2009
In This Issue:
Crop
Insurance Affects SURE Payments
Legal
Issues for Agriculture Conference Slated for NW Ohio
Agricultural
Financial Conditions - 2009
No
Federal Estate Tax Next Year
Determining
Income for Farm Program Payment Eligibility Programs
Ag
Link Deposit Program Applications Due March 13, 2009
MILC
and LGM-Dairy
Methane
Digester 101
Ohio
Farm Income Summary Available
NASS
Releases 2007 Census of Agriculture
Do
you have a question that you would like to ask the Ohio
AG Manager Team? If so, click here to email your
question
Crop
Insurance Affects SURE Payments
Chris
Bruynis, OSU Extension Educator, Wyandot County
Farmers
looking to participate in the Supplemental Revenue Assurance
(SURE) Program that was created in the 2008 Farm Bill
have until March 15 th to purchase
crop insurance for their corn and soybeans. If
a farmer chooses not to purchase crop insurance, they
cannot participate in SURE. Essentially the SURE revenue
guarantee will be 115% of the crop insurance coverage
level plus 120% of the NAP coverage levels. If
no crop insurance if purchased than 115% time zero will
be zero. If a 75% coverage level is purchased
the SURE revenue guarantee will be approximately 86%.
The SURE revenue guarantee, however, will be capped
at 90% of the farms expected crop revenue. Any
SURE payments will be triggered by a disaster declaration
but the payment will be calculated by subtracting total
farm revenue from the farm's SURE revenue guarantee
and multiplying the difference by 60% to arrive at the
actual payment. Linked to this article is a factsheet
distributed by California FSA that outlines the SURE
payment calculation. Remember, this legislation
is still under review and subject to change but warrants
farmer's attention now because of the link to crop insurance
and the upcoming sales closing date. Click
here to learn more about the SURE program.
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Legal
Issues for Agriculure Conference Slated for NW Ohio
Peggy
Hall, Director of the OSU Agricultural & Resource
Law Program
A
wide variety of legal issues relating to agriculture
is the focus of a unique one day conference hosted by
OSU Extension on Wednesday, March 25, 2009. The Northwest
Ohio Agricultural Law Conference will feature sessions
taught by attorneys on Using Flexible Farm Rental Agreements,
Ohio Conservancy District Law, Legal Risk Assessment
Issues, Authority over Large Livestock Operations, Farm
Business Planning Strategies, and a general Agricultural
Law Update.
Featured
speakers include Bill Beach and Kathryn Mohr of Robison,
Curphey and O'Connell; Larry Gearhardt and Dave Pennington
of Ohio Farm Bureau Federation; Peggy Hall of The Ohio
State University Agricultural & Resource Law Program
and Robert Moore of Wright Law Company, LPA.
Joining
OSU Extension in sponsoring the program are the law
firms of Robison, Curphey and O'Connell in Findlay ;
Wright Law Company, LPA in Dublin ; Ohio Farm Bureau
Federation; Ag Credit and Farm Credit Services of Mid-America.
Early
registration is necessary for the conference, which
takes place from 8:30 a.m. until 3:30 p.m. at The Lighthouse
Banquet Facility, 10055 W US 224 in Findlay , Ohio .
A brochure and registration form are available through
local OSU Extension offices or online at http://www.aede.osu.edu/programs/aglaw
. The registration fee of $30 per person or $20
for additional family or company members covers lunch
and materials. For registration questions, contact OSU
Extension, Hancock County at 491.422.3851.
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Agricultural
Financial Conditions - 2009
Bruce
Clevenger, OSU Extension Educator, Defiance County
Farms
and agribusinesses experienced historic volatility throughout
2008, but what does that mean for 2009. In and effort
to better understand what is happening in the agricultural
economy, a survey was conducted in January 2009 by the
Extension Risk Management Education Regional Centers
and the Center for Farm Financial Management at the
University of Minnesota.
The
results expressed the level of financial stress facing
producers, factors contributing to the financial stress,
expectations of lenders, and how well agricultural producers
are equipped to endure the financial stress.
Results
can be found at: http://www.agrisk.umn.edu/uploads/ARL03971.pdf
The
survey was completed by over 2,300 agricultural professionals,
representing all 50 states.
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No
Federal Estate Tax Next Year
Jim
Skeeles, OSU Extension in Fairfield & Hocking Counties.
The federal estate tax rate is 45% but none will be
charged on the estates of even those most wealthy if
they die next year in 2010. This year no federal estate
tax will be charged for a single person without a spouse
if net taxable estate value is below 3.5 million. Let's
hope the death rate of those very rich doesn't increase
this and next year!
However, most of us, even many farmers who are known
to live poor but die rich don't have to worry about
federal estate tax rates. The conservative long term
estate planning approach is to assume the threshold
level at which federal estate tax will be assessed will
be one million dollars worth of net taxed assets during
and after 2011 and that the rate will be just shy of
50%. A less conservative approach would put the net
threshold amount for a person without a spouse at two
million.
Those with estates below one or two million will still
have estate settlement costs, comprised primarily of
Ohio estate tax but also with significant attorney expense.
The "Basic Estate Planning Fact Sheet Series"
http://hocking.osu.edu/agriculture-natural-resources/estate-planning
estimates the following costs for settling the various
estate sizes of a single person without a spouse: $50,000
would cost $8,000; $250,000 would cost $38,000 and $500,000
would cost $87,000, or costs in the 16 to 17% range.
Those quite wealthy, with federal taxable estates of
one to two million need to do estate planning. Those
less wealthy without federal estate tax liability can
and may reduce estate settlement costs below the 16
to 17% range, especially if both spouses are still living.
Refer to the fact sheet series for a basic discussion
on costs plus the following topics: transferring property
before death; wills; letter of instruction; life insurance;
trusts; giving; sale of home; nursing home costs; medicare
and medicaid.
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Determining
Income for Farm Program Payment Eligibility Programs
Robert
Moore, Attorney, Wright Law Co. LPA
The
2008 Farm Bill and subsequent regulations have established
new adjusted gross income (AGI) and adjusted gross farm
income (AGFI) limitations for farm program payment eligibility.
The new limitations are considerably lower than the
previous limitation of $2,500,000 and could have application
to more producers than did the limitation under prior
law. As a result, the corect computation of AGI
and AGFI can be critical for ensuring that a producer
remains eligible for farm program payments. Click
here to read a full article on the new income limitation
rules.
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Ag-Link
Deposit Program Applications Due March 13, 2009
Kevin
Boyce, Ohio Treasurer of State
Ohio
farmers can now apply for 2009 funding assistance through
the Treasury's Agricultural Linked Deposit Program (Ag-link).
Participating banks throughout the state will begin
accepting applications for the competitive program through
March 13, 2009. Ag-Link offers reduced interest
rate loans to farmers who have been hit hard by economic
times and need assistance. The Treasury allocates $125
million of its annual portfolio for the purchase of
certificates of deposits from banks, which then pass
the savings on to farmers who have been approved for
loans. Recipients are chosen on an as-needed basis.
In
order to qualify for Ag-link, farms must be for-profit
with headquarters and more than half of their operations
maintained in Ohio . Additionally, farmers must have
a documented need for the reduced interest rate and
may request the reduction for up to the first $100,000
of a loan. To apply, farmers must first be
approved for an operating loan or line of credit from
their Farm Credit System lender or a participating bank.
After approval, they may then apply for an interest-rate
reduction from the Ohio Treasury. The Treasury does
not restrict how the farmer spends the loan funds, but
priority for the rate reduction will be given to farmers
using the funds for feed, seed, fertilizer and fuel.
Honorably discharged veterans will also receive preference.
The
deadline for receipt applications is Friday,
March 13, 2009 at 5:00 P.M, and applications must be
mailed. Faxed applications are not accepted due to the
high demand for the program. Written
notification of the status of each application will
be mailed no later than April 6, 2009. Treasurer Boyce
will announce the amount of money invested in each county
in early April. Funding will be available as early as
April 8, 2009 to assist with spring planting.
Click
here for a one page information sheet on this program.
Applications and a list of participating lenders
are available on the Ohio Treasury Web site at www.ohiotreasurer.gov.
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MILC
and LGM-DAIRY
Cameron
Thraen, Professor, Department of Agricultural, Environmental,
and Development Economics
As
you read this it will be of no surprise that the prices
paid on the dairy markets have dropped to levels not
experienced since March of 2006. At that time, the prices
reported by the National Agricultural Statistical Service,
NASS, were $1.18 for cheese, $1.18 for butter, $0.88
for nonfat dry milk and $0.35 for whey. The Class 3
price at that time was $11.35 and headed lower over
the coming months in 2006. The Class 3 price averaged
$11.88 for all of 2006.
Today
we are back at those 2006 price levels after reaching
historical highs for these dairy commodities and the
Class 3 milk price. Cheese topped out at $2.14 per pound
in mid December 2008, butter at $1.72 in October of
2008, nonfat dry milk at $2.08 in October of 2008, and
whey at $0.79 in April of 2008. All of these high dairy
commodity prices combined to produce a Class 3 price
which averaged just above $18.00 for 2007.
What
is remarkable about this price behavior is not so much
the levels reached, but how this developed. Coming out
of the low price period of 2006, the normal expectation
was for dairy product and milk prices to decline in
the early part of 2007 as was the seasonal norm. Instead,
with product shortages developing in the international
skim milk powder markets, the nonfat dry milk and whey
prices accelerated to new price heights. This intense
international demand fueled the beginnings of an unprecedented
two year advance
in the Class 3 milk price. Now that this run has come
to an end, at least for the coming six months, possibly
longer, all are asking what can we do to protect our
dairy business?
As
most of you are aware, the Food, Conservation and Energy
Act of 2008 Dairy Title includes a new version of the
2002 Milk Income Loss Contract (MILC) program. I am
calling this new, as there are a couple of new provisions
which make this similar to but not the same as the MILC
program extended under the 2002 farm bill. It is definitely
an improved version of the expiring MILC program.
The
most significant changes are (1) the incorporation of
a dairy feed ration cost adjuster to the trigger price,
(2) the increase in the total eligible pounds from 2.4
to 2.985 million pounds, and (3) the return to a 45%
payout, and (3) dropping the calculation which counted
milk shipments against the production cap even in months
with no MILC payment. If you are not signed-up for the
MILC program, you certainly should do so right away.
This can be accomplished by contacting your county Farm
Services Agency.
As
an aid in learning how the MILC program will benefit
your dairy, I have completed a revamp of the MILC Excel
calculator to reflect these changes. The Microsoft Excel
program can be obtained from my Ohio Dairy Web 2009
website. The address is: http://aede.osu.edu/programs/ohiodairy/MILC_Center/MILC_Center.htm
. At this link you will find both an Excel 2007(xlsx)
and an Excel 2003(xls) workbook. Download your selection
by using the “save target as” feature.
The
workbook program includes (1) a worksheet for MILC calculations
by month of the fiscal year and (2) a worksheet to calculate
the new feed cost adjuster. A producer can use this
program by entering average dairy yield, number of cows
and month that he or she may wish to start eligibility
for MILC payments. The program will calculate the anticipated
MILC payments for each month the anticipated total payout
from the MILC program. With the dairy feed price adjustment,
there will be payouts under this program in the coming
year. There is also a worksheet which can be used to
calculate the expected or anticipated National Average
Dairy Feed Cost ration value, based on the rules for
the MILC program. A producer can enter her or his expected
feed prices (corn, soybean, alfalfa hay) and the worksheet
calculates the National Average Dairy Feed Cost ration
value. These values can be used to play a “what-if'
game using the FYMILC-Calc worksheet.
Another
new risk management tool made available to dairy producers
through the Federal Crop Insurance system is the Livestock
Gross Margin-Dairy insurance product LGM-DAIRY. This
was announced in June and made available in August for
purchase each month. This insurance product provides
the dairy producer the opportunity to purchase an insurance
contract on the level of milk income remaining after
feed costs are subtracted. This is more complicated
financial product than the MILC program and requires
the payment of a premium. Like the MILC workbook, there
is a LGM-DAIRY workbook available on my Ohio Dairy Web
2009 website which can be downloaded. http://aede.osu.edu/programs/ohiodairy/LGM_Dairy.htm
This Excel workbook will allow you to calculate
the expected payout and premium cost for purchasing
a given level of insurance. You can enter specific information
about your dairy, expected milk and feed prices and
complete ‘what-if' evaluations. You will also find a
link to the USDA / RMA which has all of the information
on this new product.
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Methane
Digester Economics 101
Brian
Roe, Associate Professor, Department of Agricultural,
Environmental, and Development Economics
A
famous and humorous series of children's books gently
introduces children to the idea that all animals (including
little boys and girls) need some outlet for food that
is eaten, and that the body is but a weigh station for
much of the content that goes into the mouth ( The
Gas We Pass and Everyone
Poops ). While providing an excellent entrée
to broaching this delicate though universal topic among
children, these authors have yet to tackle the sticky
issue of what comes next, i.e., what to do with the
natural outcome of all this eating.
Within
the livestock sector, one idea that has surfaced is
to harness manure for its energy content through the
on-farm installation of methane digesters. With energy
prices poised to soar upon an economic recovery, and
ever-increasing regulatory and societal pressures to
handle manure carefully, any new technology with the
potential to solve two pressing issues at one time will
receive intense consideration. However, economic considerations
are crucial when evaluating any new technology.
Bill
Lazarus at the University of Minnesota, along with several
colleagues, has prepared several useful information
pieces that explore the economic aspects of methane
digesters. For an overview of national issues, consider
Lazarus's
USDA report
“This
report summarizes the existing literature and analytical
perspectives on farm-based digesters, highlights major
efforts in the United States and Europe to expand digester
usage, and discusses key policy issues affecting digester
economics. The study serves as a snapshot overview of
the industry. Digesters are fairly capital-intensive
when viewed primarily as an energy source. On a strictly
market basis, current U.S. average electricity prices
do not appear to provide sufficient economic justification
for digesters to move beyond a fairly limited niche.
Digesters make the most sense today where the odor and
nutrient management benefits are important, or where
the electricity or heat has a higher-than-average value.”
For
a view of issues at a state level, consider a report
prepared by Bachewe, Lazarus and others for the Minnesota
legislature : “ This review is prepared for a wide
audience. The motivation for its preparation is a belief
that Minnesota can improve the utilization of the manure
and organic wastes that are byproducts of livestock
farming and other activities, via the production of
biogas that can be used to produce heat and electricity.
A comparison is made between Minnesota and Denmark due
to the many similarities between the two entities. Denmark
serves as a role model for Minnesota in the number of
central anaerobic digesters that it supports while Minnesota
has none even though in terms of livestock and other
organic waste production Minnesota has a similar potential
to benefit from the development of central anaerobic
digesters.”
Finally,
if you want to run the numbers on whether a methane
digester would be beneficial on your own farm, consider
Lazarus's
excel spreadsheet that he describes as a “ Tool
for doing rough initial calculations of annual costs
and returns to be expected from owning and operating
a methane digester on a dairy farm.”
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Ohio
Farm Income Summary Available
Barry
Ward, Leader, Production Business Management
Department
of Agricultural, Environmental, and Development Economics
The
latest Ohio Farm Income publication has been completed
(2007 Ohio Farm Income) and is available at:
http://aede.osu.edu/resources/docs/pdf/AY8GJ11Z-J2NJ-BNSI-AVPQGA4J917RPPQR.pdf
or
http://aede.osu.edu/resources/docs/display.php?cat=21
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NASS
Releases 2007 Census of Agriculture
Gary
Wilson, Extension Educator, Hancock County
The
National Agricultural Statistics Service (NASS) has
released the long-awaited results of the 2007 Census
of Agriculture. The census, conducted every 5 years,
is the only source of uniform, comprehensive agricultural
data for every county in the nation. Every agency and
every mission area within USDA uses census data on a
daily basis. The census provides the factual data that
underpins all of our programs and services. It tells
us where the producers are, who they are, how they are
changing, what they are producing, and how they are
producing it. Visit the 2007 Census of Agriculture Web
site ( http://www.agcensus.usda.gov/
) to access the results, or contact NASS at nass@nass.usda.gov
for more information.
You
can access Ohio 's two-page summary at: http://www.agcensus.usda.gov/Publications/2007/Online_Highlights/County_Profiles/Ohio/cp99039.pdf
.
Find your county's summary at: http://www.agcensus.usda.gov/Publications/2007/Online_Highlights/County_Profiles/Ohio/index.asp
.
A
few highlights of the 2007 Ag Census on a national basis
is as follows:
- The
total value of U.S. farm production in 2007 was $297
billion, a $96 billion increase over the total in
the last census of agriculture taken in 2002.
- Production
expenses – costs for things like fuel, fertilizer,
seed and feed, livestock and labor – increased 39
percent between 2002 and 2007.
- Since
the 2002 census, 291,329 new farms have begun operation.
The operators of these new farms tend to be younger
and are more likely to also have off-farm jobs.
- The
2007 census shows a continuation in the trend toward
more small and very small farms.
- The
two largest groups of farms are residential/lifestyle
farms (36 percent) and retirement farms (21 percent).
- The
top five states for the value of agricultural products
sold and their percentage of the total are: California
(11.4 percent), Texas (7.1 percent), Iowa (6.9 percent),
Nebraska (5.2 percent) and Kansas (4.8 percent). Combined
with four other states – Illinois , Minnesota , North
Carolina and Wisconsin – these nine state produce
50 percent of the value of agricultural products.
Eleven states saw declines in the number of farms:
Georgia , Kentucky , Mississippi , Nebraska , New
York , Ohio , Oregon , South Dakota , Virginia , and
West Virginia .
- The
top five industries in terms of net cash income produced
were: (1) grains and oilseeds; (2) milk; (3) poultry
and eggs; (4) fruits and nuts; and (5) nursery and
greenhouse.
- Some
industries had negative income in 2007, including
sheep and goats, aquaculture and other animals (including
horses).
- Even
though the total number of farms increased, a few
sectors of production – including grains and oilseeds,
horticulture, cattle and hog operations – saw a decline
in the number of farms.
- In
2007, 125,000 farms produced 75 percent of the value
of U.S. agricultural products, down from 144,000 farms
in 2002.
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if you have problems subscribing.
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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