Newsletter | Past Issues

February, 2007

In This Issue:

Farm Size Requirements to Meet Family Living Expenses

Retirement Savers Credit

IRS Announces Federal Excise Tax Refund

Saving $$$$$'s per Soybean Acre

Legal Liability for Handling Manure

Easing the Burden of Credit Card Debt
What's Popcorn Really Worth?
Transition Planning Workshops Slated for Ohio

Ohio Valley Marketing Conference

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

Farm Size Requirement to Meet Family Living Expenses

Donald J. Breece, Farm Management Specialist, OSU Extension Center at Lima

The size of a farm required to make a desired living income is one of those economic questions most easily answered by "that depends."  It depends upon such things as the desired family living standard, amount of debt or investment to be paid by enterprise profits, production efficiency, market prices received for the products, and per unit cost of production. The web sites listed at the end of this section provides benchmark information to help establish the profit potential of given enterprises. It should be noted that Net Farm Income or Profit will be affected greatly by assumptions made for market prices, production levels, available family labor, and input costs. However, it may be best to first step back and look at some general economic principles, as it pertains to all family farm businesses producing commodities for sale.

The 2005 Ohio Business Summary of farms, utilizing the FINPACK computer program for financial analysis, averaged $419,475 Value of Farm Production per farm with 1.6 operators, $71,283 Net Farm Income, and about $25,000 of non-farm income. On a per family basis this would be $262,172 of Farm Production, $44,552 NFI, plus about $15,600 of non-farm income. Economists have generally indicated that it takes about $50,000 living costs for an average farm family. The average family living and taxes from the 2005 Ohio Summary was $44,104 per farm. So how many dollars of gross farm sales would it generally take to earn nearly $50,000 to take care of a family?

It generally will take at least $300,000 of gross revenue to generate $50,000 family living income. Assume it takes 75% of revenue (operating expense ratio) to cover "out-of-the -pocket" costs.  This leaves 25% for debt service, capital replacement, growth and family living costs.  The $300,000 gross revenue example would net $75,000.  After $50,000 for family living, this would only leave $25,000 for debt payments and investment.

The following web sites may be used to identify benchmarks and budget information.  Also, note that farm businesses will need to grow 5-7% per year just to keep even.

Illinois Farm Business Farm Management Association: www.fbfm.org

A report of 2005 information from 1,209 farms that averaged $351,457 in farm receipts, $27,810 non-farm income, net farm income of $55,030 and non-capital family living expenses of $52,743.

The Center for Farm Financial Management, University of Minnesota, collects FINPACK data from several states, mostly in the Midwest . In 2005, 3236 farms reported an average of $376,778 farm receipts, $22,944 non-farm income, net farm income of $81,959 and family living of $40,753. “FINBIN is one of the largest and most accessible sources of farm financial and production benchmark information in the world. FINBIN places detailed reports on whole farm, crop, and livestock financials at your fingertips.” www.finbin.umn.edu

National Ag Risk Library and a Library of Budgets: www.agrisk.umn.edu

OSU Extension Budgets: www.aede.osu.edu/programs/FarmManagement

Farm families will often under estimate requirements for family living expenses. As additional operators are brought into the farm business, a realistic estimate must be considered for additional family living expenses. The following indicates some recent research in the area of family living income and expenditures.

2002-2005, the University of Kentucky Cooperative Extension Service completed a detailed study of 121 farm families. The trend is for climbing living expenses, $57,336 in 2005 for a family of 2.8 people, with 55 as the average age of the operator. The expense breakdown is Contributions $4,060, Medical $7,346, Life insurance $1,421 and Expendables of $40,936 for a non-capital total of $53,763. Capital expenses of $3,573 increased the total to $57,336. Total farm receipts averaged $375,553, net farm income was $64,594, and non-farm income amounted to $42,068. On a per acre basis, family living amounted to $83.70 in 2005, $72.05 in 2004 and $70.64 in 2003 (total living expenses divided by total operator acres). However, if non-farm income was considered in 2005, the 685 acres only needed to contribute $22.29 per acre toward family living.

The University of Illinois continues to study more than 1,200 farm families enrolled in the Illinois Farm Business Farm Management Association program. In 2005 non-capital living expenses averaged $52,743. The breakdown is as follows: Contributions $2,058, Medical $7,433, Life and Disability Insurance $2,900, and Expendables $40,352. Capital expenses added $5,542 for a total of $58,285. This was for 3.1 family members and an average age of operator to be 52 years. In addition, income taxes averaged $10,351. Total farm receipts averaged $351,457, net farm income $55,030, and non-farm income was $27,810. On a per acre basis in 2003, family living averaged $79 for each tillable acre. However, if non-farm income of $39/acre was considered, than $40 per tillable acre would need to have been generated from the farm business to meet family living.

Certainly, as a minimum, farm families should plan for family living costs to exceed the U.S. Department of Health and Human Services poverty guidelines for 2006 (Table). A family of four with income below 130% of the poverty guideline or $26,000, may qualify for the USDA Food Stamp Program. The risk of such a large investment, as in farming, deserves a more reasonable return to family labor.

2006 HHS Poverty Guidelines

SOURCE:   Federal Register , Vol. 71, No. 15, January 24, 2006, pp. 3848-3849

Family living expense requirements are driving the size requirements of commodity agriculture. Commodity production assumes smaller profit margins. To meet future family living demands, farms will continue to grow in size and scale. David Kohl, Virginia Cooperative Extension, lists some rules of thumb for family living costs: Family living costs generally account for between 10 and 15 percent of gross farm revenue. Also, a farm business exceeding a debt to asset ratio of 50% means that living expenses should generally be under 10% of revenue. He indicates that there may be some evidence for couples over the age of 65 requiring approximately 25% more to support their lifestyles than a couple who are 35. For older couples, medical costs are much higher and travel plans add to the living expenses. What does this mean for retirement planning and its affect on the businesses future? With increasing life expectancies, it will be more common to have two generations of retired farm families possibly drawing on the resources of an operating business. Retirement planning is, therefore, essential to any transition plan.

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Retirement Savers Credit

Donald J. Breece, Farm Management Specialist, OSU Extension Center at Lima

A 2006 survey by the Employee Benefit Research Institute reported that about 52% of workers ages 55 and older have less that $50,000 saved for retirement. Saving for retirement is also an increasingly important cash flow consideration for farm families.  For some Adjusted Gross Income (AGI) levels, a Federal Income Tax Credit is available for saving in such retirement programs as:  An IRA, SEP-IRA, SIMPLE, 401K, 403B or 457 retirement plans.  The Savers Credit is for up to $2,000 of qualified contributions.  People should strongly consider putting money into retirement accounts and to take advantage of this Savers Credit.   

% of Contribution      Single  AGI            Joint AGI
             50                 0-$15,000              0-$30,000
             20                 $15-16,250            $30-32,500
             10                 $16,250-25,000      $32,500-50,000
               0                   +$25,000             +$50,000

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IRS Announces Federal Excise Tax Refund

Donald J. Breece, Farm Management Specialist, OSU Extension Center at Lima

You may be eligible for a one-time tax refund! This one-time refund of previously collected federal telephone excise taxes may be requested on your 2006 federal income tax return. Anyone who paid long-distance excise taxes on landline, cell phone, Voice over Internet Protocol (VoIP), or bundled service that was billed for the period after Feb 28, 2003 and before Aug 1, 2006 is eligible for this refund. (Bundled service is local and long-distance service provided under a plan that does not separately list the charge for local service.) 

You can request a refund of the actual federal excise tax you paid based upon your telephone bills for this period. Or you can request the standard refund amount ranging from $30-$60 based upon the number of exemptions you claim on your individual income tax return.

Choosing the standard amount is optional. Using this option is the easiest way to get your refund and avoid gathering 41 months of old phone records. By choosing the standard amount you will only need to fill out one line on your tax return. Thestandard amount is based on actual telephone usage data and reflects the long-distance phone tax paid by similarly sized families or households.

Choosing to request the actual amount paid may be more beneficial for some taxpayers. To request a refund based upon the actual amount you paid , you must determine the amounts paid based on your phone bills. Figure the refund on Form 8913 and attach this form to your 2006 income tax return.

If you are not normally required to file a tax return, there is a new form (Form 1040EZ-T) that you can use to request this refund. Form 1040EZ-T can be mailed to the IRS or it can be prepared and filed electronically at no cost by using Free File at IRS.gov.

Businesses and tax-exempt organizations are also eligible for the telephone excise tax refund. These organizations must use Form 8913, Credit for Federal Telephone Excise Tax Paid. Businesses and tax-exempt organizations may report the actual amount of refundable phone taxes they paid for the 41-month billing period from March 2003 through July 2006. Or they may use a formula established to estimate the refund. Businesses should attach Form 8913 to their regular 2006 income tax returns. Tax-exempt organizations must attach it to Form 990-T.

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Saving $$$$$'s per Soybean Acre

Editor and Author – Barry Ward, Leader Production Business Management, Ohio State University Extension, Department of Agricultural, Environmental and Development Economics; Contributing Authors – Jim Beuerlein, Mark Loux, Nathan Watermeir, Anne Dorrance, Dennis Mills; Reviewer - Stan Ernst

“Those (farmers) who survive for the long term will be those with the lowest cost of production. In other words, a good marketing program starts with a good program for managing and controlling cost of production.” - Carl Zulauf, McCormick Professor of Agriculture Marketing and Policy, OSU Department of Agricultural, Environmental and Development Economics

1. Use Lower Seeding Rates Where Conditions Allow. Research shows that seeding rates may be lowered in many field settings. In 7” rows use the following rules of thumb:

Light colored soils, plants reach knee high to 20” – 225,000 seeds per acre.  Medium soils expected plant height of approximately 30” – 175,000 seeds per acre.  Dark soils with 40” or higher plant height - 150 – 125,000 seeds per acre

Similar seed savings can be achieved in 10”, 15” and 30” row systems. Seed savings of 10% per acre = Savings of $3.69 per acre. (Roundup Ready System)

2. Consider Roundup Ready System to Decrease Herbicide Expense.

Net Savings of $11 per acre. (Herbicide Program Savings offsets higher seed costs by $11 per acre. No-till system.)

3. Consider Generic Crop Chemicals

Herbicide savings of $2.11/acre (10% cost savings) (No-till Roundup Ready System.)

4. Consider Bulk Fuel Purchasing (5000 gallon minimum)

Diesel cost savings of $0.20 per gallon or $0.63 per acre (No-Till System). Consider Soy-Diesel which is about the same price as regular diesel. Soy-diesel is also good for your engine, the environment and the price of soybeans.

5. Use Innoculants Wisely in Your Production System. Every dollar invested in Innoculants gives you an Average Minimum Return of $2.00 per acre over time.

6. Use Seed Treatments Wisely in Your Soybean Production System.

Every dollar invested in Seed Treatment means an Average Minimum Return of $1.50 per acre over time.

7. Consider Bulk Fertilizer Purchase

Save 5% on fertilizer purchases or $1.41 per acre.

8. Consider Light Bar/Guidance System Investment - GPS light bar and auto guidance systems can increase net revenues above variable and technology costs by up to $30 per acre. These systems increase overall operating speed and reduce fatigue, allowing up to 10% more acres covered. And they reduce application overlap and skip errors by 5% to 10% over traditional methods. This also directly relates to savings in fuel, labor, and machinery depreciation. Precise driving also means better controlled traffic, reducing compaction for higher yields. This means a potential income increase up to $15/acre.

9. Take Advantage of Early Purchase Discounts on Soybean Seed.

Consult variety performance test data – there may be as much as a 5-10 bu difference in yield among soybean variety entries. Select soybean varieties with resistance to diseases)

Savings of 8% on seed purchases or $2.93 per acre.(Roundup Ready System)

10. Decrease Tillage Where Appropriate Net Savings of $3.91 per acre

(No-till versus Conservation till. Combined Machinery Investment, Fuel and Lube, Repairs, and Labor Savings. Other Assumptions: Increased herbicide expense with no-till production and yields are equal in the 2 production systems.)

11. Use Correct Tire Inflation Pressure on Tractors and Combines.

Fuel savings of up to 8% or $0.56 per acre. (No-till system.)

12. Consider Group Risk Insurance (GRP) if Your Farm Fits This Program

Savings of $4.50 per acre. (GRP versus Crop Revenue Coverage (CRC).

13. Access and utilize the OSU Sustainable Ag Team Website at http://sustainableag.osu.edu/

14.  Subscribe and Follow Recommendations of the Crop Observation and Recommendation Newsletter (C.O.R.N.) at: http://corn.osu.edu/

15.  Subscribe to the NEW Ohio Ag Manager (OAM) at: http://ohioagmanager.osu.edu/

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Legal Liability Issues for Handling Manure

Peggy Hall, OSU Agricultural & Rural Law Program

Winter weather hasn't yet made its full appearance in Ohio , but we have experienced weather conditions that pose additional hazards for manure management. Now is a good time to consider the legal liabilities associated with managing animal waste, and to ensure that measures are in place to address liability issues. The following offers a brief review of the laws that affect liability for discharges, spills, odors and other problems resulting from manure handling.

Whose Manure?

A question I frequently hear is “who is liable for the manure – the landowner, the livestock producer, or the manure applicator?” As with many legal questions, the answer is clear: it depends. Several factors can determine allocation of legal liability – language in the applicable statute, private contracts between the parties, or common legal theories. A better answer to this question than “it depends” is that any party might be liable under certain circumstances. This means that all of the parties can benefit from understanding the law and how the law and relevant factors apply in different situations. In the summaries below, I've emphasized in italics specific language in the laws that allocate liability to a particular party.

Laws Particular to Facilities with State and Federal Permits

The size of a livestock facility dictates applicable laws for a manure liability situation. Larger confined animal operations that are subject to Ohio 's Livestock Environmental Permitting Program and the EPA's National Pollutant Discharge Elimination System must comply with separate state and federal laws that require approved permits for a facility. The terms of a facility's permit include limitations on discharges of waste into waterways. The operator of a facility that emits waste pollutants in excess of that specified by the permit, or that otherwise violates the terms of the permit, can be liable for civil and criminal penalties, restoration or repair costs, and reimbursement of the government's response costs.

A key factor in liability for permitted facilities, then, is familiarity with the permit, its restrictions and its management plans. Proper implementation of management plans and careful monitoring of permit limitations can help avoid a permit violation and ensuing liability.

Ohio Agricultural Pollution Abatement Law

All operations handling animal waste need to understand Ohio 's Agricultural Pollution Abatement Law, found in Chapter 1511 of the Ohio Revised Code. This law grants the Ohio Division of Soil and Water Conservation authority to pursue damages caused by incidents of “agricultural pollution.” Agricultural pollution is defined by the law as the “failure to use management or conservation practices in farming or silvicultural operations to abate wind or water erosion of the soil or to abate the degradation of the waters of the state by animal waste or soil sediment.” The local SWCD typically seeks voluntary abatement of a pollution situation by the operator. If the voluntary approach fails, the division chief may order any person responsible for causing or allowing an unauthorized release, spill, or discharge of agricultural pollution to cease and abate the pollution. Those who fail to do so can be liable for costs incurred in investigating, mitigating, minimizing, removing or abating the discharge, and can also be subject to misdemeanor charges and fines.

Civil liability protection is another important part of this law. Where an operator is in substantial compliance with an operation and management plan approved by the chief or the local Soil and Water Conservation District board, the law provides a defense that may be raised in response to a civil lawsuit for nuisance. While the law doesn't require the operation to have such a plan, it rewards those who voluntarily implement a plan prepared in partnership with the division and its regulations and guidelines (and also offers cost-share funds). This provision of the Agricultural Pollution Abatement Law can be quite valuable for operations handling manure, which is often a basis for allegations that an operation is a nuisance.

Ohio Steam Litter Act and Wildlife Protection Laws

A few other state laws come into play where there's been a spill or discharge of manure. The Ohio Division of Wildlife, through Ohio's Stream Litter Act and wildlife protection laws, may pursue criminal prosecution, fines, and investigation and response costs against any person who places or disposes of waste in a ditch, stream, river, lake, pond or other watercourse or any person who causes or allows an unauthorized discharge of material into the air, ground or surface water that results in the death of a wild animal.

Land Application of Animal Waste

Discharges and spills of waste resulting from land application create the possibility of liability through any of the above-described laws and permits. Where the applicator, landowner and livestock operator are different parties, these situations often present the question of “which party is liable?” As stated previously, several factors dictate the outcome to this question: the terms and restrictions in a permit, the agreement between the parties, who has authority and control over the waste application, and the chain of events that resulted in the discharge or spill. Clearly written agreements between the various parties could address most of these factors and help alleviate the uncertainty of liability allocation.

The Threat of Civil Nuisance

One area in which we can clearly identify the potentially liable party is that of nuisance. A nuisance claim based on manure should be made against the owner of the property or business containing the manure. Where the manure causes an “unreasonable interference with the use and enjoyment” of other property owners, liability could result through a civil action. Several liability protection mechanisms apply to agricultural nuisances, however. Enrollment with the County Auditor in Ohio 's Agricultural District Program and compliance with applicable laws, regulations or generally accepted agricultural practices gives the landowner a defense to a civil nuisance suit. Permit holders under the Livestock Environmental Permitting Program also receive nuisance protection if operating in accordance with the permit, as do those in the above-mentioned Agricultural Pollution Abatement Program.

Manure Storage

We typically think of manure liability in terms of environmental and nuisance risk, but manure storage also poses the risk of harm to property visitors. A landowner or facility owner has a duty to keep property visitors safe from dangerous conditions on the property, with the exception of adult trespassers. Failure to do so could create liability by way of a negligence claim. A manure storage structure could be considered a dangerous condition, particularly to children, so the owner or operator should take reasonable efforts to minimize the dangers and keep property visitors away from the storage structure. Simple measures, such as fences, signs, lighting, covers and locks, can go a long way in reducing liability risk.

Manure on Roadways

A final area of manure liability risk concerns manure on roadways. Two Ohio highway laws come into play. The laws prohibit the placing of any earth or mud on a public roadway and the dropping or placement of any material on a roadway that can cause harm to a vehicle or person. Both laws allow for criminal misdemeanor prosecution. Additionally, the legal theory of negligence could be advanced by a party harmed by manure on the roadway. In this case, the party would have to prove that the manure handler's failure to uphold the legal duty to keep manure off the road caused harmed to the party. If successfully advanced, damages could be awarded to cover the party's losses and injuries.

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Easing the Burden of Credit Card Debt

Mike Gastier, Extension Educator, Huron County

The disciplined use of credit has helped our country grow for the last century, so it's rather ironic that the undisciplined use of consumer credit has serious implications for our future economic health. Credit card users are charging and carrying more debt every year. In 2005, a typical American household had over $8000 of credit card debt. Among households that did not repay their entire balance each month, the average balance was over $12,000. For more statistics concerning consumer credit in this country, see the web site of the US Federal Reserve at http://www.federalreserve.gov/ .

Increasing credit card debt is not only a sign that we, as a nation, are spending beyond our means, it also signals that the current generation of wage earners is not saving or investing money for later use. In order to save or invest effectively, a household must have disposable income. Revolving credit card debt, in effect, eliminates disposable income and therefore greatly reduces the ability of a household to build savings or investment accounts.

Farm families are certainly not immune from the reckless use of credit cards that seems to be sweeping the U.S. Farmers do differ from the general public however, in the manner in which they use charge cards. Many farm businesses do not have separate credit cards exclusively for farm purchases.

As machinery dealerships and other agricultural suppliers shift away from the “open account” system, many purchases made by farmers end up on some type of credit card. Consequently, many farm families may have sizable amounts of farm debt carried on personal credit card accounts. Add to this the household expenses that the average American family may charge, and the result can be potentially threatening to the financial stability of both the family and their farm business.

If your credit card debt continues to increase from one month to the next, it's time to take a proactive approach to reducing that burden. First, identify the source of the problem. If farm expenses are the root of the credit card problem, then perhaps other financing options are available at more reasonable terms. Does the farm have an operating line of credit, or have credit cards been used for this purpose?

If family living expenses are to blame for the ever increasing card balance, at least two questions must be asked. First, does the household have sufficient income for a reasonable standard of living, and second, how are household dollars spent? Are dollars spent on needed items that are part of a family budget, or are the dollars spent on frivolous items outside of a carefully planned budget?. In either case, the farming operation must not contribute to the personal credit card debt in the future, and must manage and repay farm-related debt, if the farm family is to thrive.

Ultimately, it comes down to one very solemn question: Is the farming operation providing adequate income to family members that are employed by the farm? If not, the credit card debt is just a symptom of an underlying problem: lack of profitability. It is extremely important to be honest with yourself at this point, because trying to reduce credit card debt (or any debt for that matter) without turning a profit is unrealistic and probably impossible. If credit cards have been serving as a crutch to keep the farm afloat, it's time to seek other opportunities for employment.

In most instances this is not the case. Most of us are able to eliminate revolving credit card debt if we really want to. Remember, this process is not about pride - it's about business and the long term well-being of your family and your farm operation. It will take more fortitude than we normally like to display, but the long-term benefits will be worth the effort.

Where should you start?

First, seek sound advice from a professional credit counselor. There are many consumer credit counseling groups that are available to anyone. Most credit card companies offer some type of assistance to cardholders that request it. The phone number for assistance should be on your statement. In many cases, interest charges can be reduced by requesting assistance and agreeing to make regular payments.

If a good share of your credit card debt is for farm purchases, talk to an agricultural lender. Be frank with the lender. Many times debt can be consolidated or moved to a lending instrument with more favorable terms. This should only be done after carefully evaluating the future profitability of the farm business and considering changing unsecured (credit card) debt to secured debt (a loan that holds some of your assets as collateral). A lender can also help you to set up an adequate line of credit as an alternative to credit card balances.

If you have resisted approaching your lender out of fear of embarrassment, try to overcome your reservations. In all honesty, your lender usually knows that you have a problem even before you do.

Second, stop making charges on your credit cards. If you seek assistance from a credit counselor, this will no doubt be their advice as well. This will require more discipline than most of us exercise routinely, but it is the crucial step in reining in consumer debt.

Next, while keeping current on all of your obligations, use any extra cash to repay the credit card that carries the highest interest rate. This won't happen overnight – it will take persistence. Once you get that card paid off, cancel it and begin paying off the card with the next highest rate. Continue this process until most of your cards are eliminated all together. Reduce the number of credit cards that you keep to the bare minimum, preferably one.

If you can muster the discipline to pay off your credit cards, you will reap an added bonus: there will eventually be money left in your budget for savings or investment. If you are facing a mountain of credit card bills right now, that day seems light years away, but it can be done. Use the thrift that our grandparents practiced to break the cycle of revolving credit and regain the ideal of having disposable income. Today is a good day to start.

What's Popcorn Really Worth?

Mike Gastier, Extension Educator, Huron County

Although popcorn production was down significantly in Ohio for the 2006 crop year, there will be some opportunities for contract production in 2007. At least initially, contracts will be offered to growers that have contracted in the past; however, this is always dependent upon the acres committed. At this point, two major popcorn companies (Weaver in western Ohio and ConAgra in central Ohio ) do have plans for contract production in Ohio . If you are a contract grower and a contract is offered to you, what's popcorn really worth considering the uncertainty in the grain market?

Many variables have to be factored into the equation. Let's start with the price versus hybrid conflict. Contract prices that I have heard range from $12.50/cwt to $15.25/cwt depending on the variety. Typically, the contractor offers a higher price for hybrids that historically have lower yields, however, an experienced grower may know of a particular variety that is well suited for his or her operation and is also on the top end of the payment schedule. Certainly a known variety is preferable to an unknown variety. If growers can raise a variety that they feel comfortable with for $15.00/cwt, they owe it to themselves to at least consider popcorn production this season. Conversely, an unproven variety looks very unattractive if it is on the low end of the scale.

The second factor to consider is RISK. Additional risk has always been inherent to popcorn production, but this year, the risk factor seems even more significant because the weather outlook is surrounded by talk of El Nin?o. Popcorn, when compared to field corn, suffers much more during periods drought stress. Hopefully a drought scenario is purely speculation, but at this point in the season, it's a very real production risk. The impact of production risk is even more significant if we factor in the opportunity cost of cropland. With the price of corn firmly above $3.50 per bushel for fall delivery, and the lower risk associated with field corn, it may be difficult to make a good case for popcorn production, but we can guard against some of this risk.

Federal crop insurance is a good method of reducing some of the risk of popcorn production. Depending on the county in which you raise popcorn, the options for insuring the crop will vary significantly. The federal government has set the 2007 popcorn insurance price at $12.00/cwt. compared to $3.30/ bushel which the feds have set for field corn. For the sake of argument, I equate a 4000 # popcorn crop to a 140 bushel field corn crop on a per acre basis. At a 70% crop insurance level, field corn coverage would be equivalent to $323.40 per acre while popcorn would ensure $336 of income per acre. Now let's assume we encounter rather severe drought stress during the growing season. Again, I'm taking some liberties here, but let's say that field corn yields 95 bushels per acre while the popcorn yields just 2000# per acre which is realistic for popcorn under stress. Total income from field corn ($3.50) and insurance (70%) would be $342/acre while total income from popcorn ($15/cwt) and insurance (70%) would be $396.

I know that there is doubt circulating, so let's look at a really bad drought. This time field corn averages 70 bushels/acre and the popcorn yields just 900#/acre. Assuming that the insurance coverage and prices remain the same, the field corn plus insurance will return $337/acre while the popcorn plus insurance will return $363. While the $12/cwt price for popcorn seems low compared to the contract price, it actually is not as detrimental to producers as it first appears. One obvious oversight is that if we had wide-spread drought this season, the corn price could go off the charts, meanwhile popcorn is locked in at $15/cwt.

These scenarios assume that the popcorn is grown under a fixed price contract for 100% of the crop produced and that insurance is available for popcorn in the production area. This is not always the case. In many cases the entire crop can not be priced prior to delivery. Moreover, in some areas it is not practical to insure a crop of popcorn. Both of these situations add significant risk to an already risky crop.

If you review a crop budget, the cost of producing popcorn has actually decreased relative to the cost of field corn. This is due mainly to marked increases in the prices of seed (field corn) and nitrogen. Popcorn seed has always been relatively expensive, but it has increased at a slower rate than field corn particularly if you use genetic traits. Nitrogen should be a savings for popcorn growers because of the lower N requirements of popcorn versus field corn. In practice however, many producers apply N as liberally to popcorn as they would to field corn. In most cases it is not warranted, so lower N is a potential cost savings. All of the other cost advantages favor field corn. Depending on your location and the insect pressure on any given year, a popcorn producer should expect to spend between $5 and $55 more per acre as compared to field corn on that same acre.

If you have raised popcorn in the past, you are probably an optimist by nature, so let's look at a really good year. I equate 5000# per acre of popcorn to 185 bushels per acre of field corn. If corn prices soar to $4.00/bu, 185 bushels/per acre produces a return of $740. This seems like a lofty figure, but probably about what we should be shooting for given current conditions. Let's add $20 per acre for addition cost. Popcorn must gross $760 /ac in this scenario to compete. $760/acre divided by 5000#/ac comes to $15.20/cwt. You must look at your own situation and factor in the additional risk that you can not offset via insurance or other avenues. Remember that the opportunity cost for that acre of cropland is the highest that we have seen in decades… That makes production risk more of a factor than it's been in decades. Protect your profits when you can.

Disclaimer: This article is written as an illustration rather than as financial advice. Use your own budgets to see how popcorn stacks up to field corn in your operation. Thanks to Andy Kleinschmidt, ANR Van Wert County, for his input for this article.

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Transition Planning Workshops Planned for Ohio

David Marrison, Extension Educator, Ashtabula County

OSU Extension would like to remind Ohio and Farm Businesses that two “Building For the Successful Transition of Your Agricultural Business” workshops remain this month.  Each of these two-day workshops is designed to help family businesses develop a transition plan for their family business. The sessions will challenge you to examine your business to the core and to actively plan for the future. These sessions will help farm families come together to develop a plan for the farm's future, discover ways to increase family communication, plan for retirement, and learn strategies for transferring management skills and the farm's assets from one generation to the next. These workshops are made possible by a grant received from the North Central Risk Management Education Center .

The program dates and locations are:

February 26 & 27 ( Pickaway County )   

Deer Creek Resort         

22300 State Park Road 20   

Mt Sterling , Ohio 43143       

February 27 & March 6 ( Marion County)

All Occasion Catering

989 Waldo Delaware Road

Waldo , Ohio 43356

All sessions will be held from 9:00 a.m. to 4:30 pm. A special evening program is being developed for the sessions in Carroll and Pickaway Counties . The registration fee for attending the two-day workshop will be $75 for the first member of a family and $50 for each additional family member attending. Registration includes workshop notebook, refreshments and lunch for both sessions.

Registration brochures can be obtained by calling the Extension Center at Lima at 419-422-6106 or by accessing the registration flyer at:

http://ohioagmanager.osu.edu/resources/RME Grant Flier 2.pdf

For specific details about the workshops, contact the Ashtabula County Extension office at 440-576-9008.

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Ohio Valley Marketing Conference

Christina Leighfield, Ohio Cooperative Development Center

The Ohio Cooperative Development Center would like to make everyone aware of the upcoming Ohio Valley Marketing Conference.  Agricultural leaders from Kentucky, Ohio and Indiana have partnered to organize the 5th Ohio Valley Marketing Conference, a valuable and affordable educational conference for growers and agricultural stakeholders.  The conference is scheduled for February 19-20 at the Holiday Inn-Hurstbourne in Louisville, Kentucky geared towards growers that are looking for strategies for marketing their products.  The conference will offer a valuable and affordable day and a half of presentations, workshops, and discussions, focused on agricultural marketing. The conference will include general session speakers, breakout sessions, panel discussions and trade show exhibits.  The conference registration fee is $30 for the 2-day event which includes all conference activities, 2 meals and the reception.  Registration for one day is $20. 

For more information, please contact Christina Leighfield at 740-289-2071 ext. 231 or leighfield@osu.edu or Tom Snyder at 740-289-2071 ext. 220 or snyder.11@osu.edu .

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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.

All educational programs conducted by Ohio State University Extension are available to clientele on a nondiscriminatory basis without regard to race, color, creed, religion, sexual orientation, national origin, gender, age, disability or Vietnam-era veteran status.

Issued in furtherance of Cooperative Extension work, Acts of May 8 and June 30, 1914, in cooperation with the U.S. Department of Agriculture, Keith L. Smith, Director, Ohio State University Extension.

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TDD # 1 (800) 589-8292 (Ohio only) or (614) 292-1868