Month: June 2013

Friday Facts, Fun, and Food

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Congrats to UCLA on winning the College World Series.  I hope all the fans had a wonderful time and it was great to see everyone in town.  Now, onto some weekend reading!

The Center for Rural Affairs released a poll of Rural Americans.  There is an interesting tidbit for everyone in the poll.

Prescott Frost, a Nebraska grass-fed cattle rancher, is profiled in the New York Times.

Nuts, fruits, and veggies are the better choice.

Nebraska preliminary crop prices for June are released and the results are mixed.  Wheat and alfalfa hay is down from May, whereas corn, soybeans, and soybeans are up from May.  South Dakota is similar.  Wheat and sunflower are down, whereas corn and soybeans are up.

The Nebraska Department of Roads is accepting applications for right-of-way hay permits.

In case you need a refreshing adult drink after the temperatures this week, I’d recommend the Porch Crawler.

Noxious Weeds Are Obnoxious

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When I was growing up, my Dad’s favorite reward for unacceptable behavior was tell my brothers and me that we had to spend an hour in the pasture digging up musk thistle.  To this day, I can spot a musk thistle from 300 feet away and feel compelled to dig it up.  This wasn’t a fruitless exercise invented by my Dad.  It was also his method of controlled a noxious week in our pasture.

What are the laws on noxious weeds?

The Nebraska Department of Agriculture operates the Nebraska Noxious Weed Program.  The Program is to control invasive weeds that are dangerous to the humans, livestock, and compete with crops and pasture, substantially reducing yields.

What weeds are classified as noxious?

  • Canada Thistle
  • Leafy Spurge
  • Musk Thistle
  • Plumeless Thistle
  • Sericea lespedeza
  • Giant Knotweed
  • Purple Loosestrife
  • Spotted and Diffuse Knapweeds
  • Saltcedar
  • Phragmites
  • Japanese Knotweed
  • Bohemian Knotweed

If you need help identifying any of the above, pictures of each are here.

But what responsibilities do you as a farmer or rancher have with regards to noxious weeds?  First, it is the duty of any person to control the spread of noxious weeds on lands owned or controlled by him or her.  See Neb. Rev. Stat. § 2-952.  A person is not limited to an individual; it includes partnerships, firms, limited liability companies, corporations, companies, societies, or association.  Land is controlled by a person when the person has the authority to operate, manage, supervise, or exercise jurisdiction over or any similar power.  To control noxious weeds means the prevention, suppression, or limitation of growth, spread, propagation, or development or the eradication of weeds.  Neb. Rev. Stat. ¶ 2-953.

If a person fails to comply with controlling noxious weeds and the weed control authority finds that prompt control of weeds is required, a notice shall be given.  The person is provided fifteen days to control the weeds and a conviction of noncompliance may result in a $100 per day fine not to exceed $1,500.  If more immediate action is required, the weed control authority may proceed as necessary and place a tax lien on the property for the expenses of controlling the weeds.

Long story short?  Keep in eye out for noxious weeds and keep them under control.  You want to maximize the growth in your pastures and fields; one of the ways to do so is keeping the noxious weeds under control.

Agricultural Libraries

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There are several online library resources that you may find useful as you consider starting or building your farming or ranching operation.

First, the USDA’s National Agricultural Library provides a wonderful resource for beginning farmers: Start2Farm.  Start2Farm is an online database of organizations, programs, and events directed towards beginning farmers.  You can find information on education and training, technical assistance, financing your operation, and networking opportunities.  The site allows you to drill down via categories of information to find exactly the information you want.

Second, the University of Minnesota hosts the Ag Risk and Farm Management Library.  The Ag Risk library hosts information on risk management, marketing, financial management, legal concerns, and more.

If you are interested in agricultural and food law, the University of Arkansas National Agricultural Law Center provides a wealth of information, covering everything from current and previous Farm Bills to summaries of various state laws concerning agriculture.

The information in these libraries and resources is extensive and covers a wide variety of topics — it is worth just wandering around the digital bookcase to learn some new information that may be pertinent to your operation.  If you have any questions about anything you read, feel free to contact us — we’re happy to help!

Friday Facts, Fun, and Food

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Another week down!  I hope everyone had a productive week.  For your weekend reading pleasure:

There are many paths for beginning farmers to enter the profession.  In that vein, Dakota Rural Action is offering its Farm Beginnings class in Rapid City this year; classes begin in November.  Spots are limited so sign-up if interested.

The University of Nebraska – Lincoln’s Cornhusker Economics has an interesting article on tools for long-term decisions and management for cattle operations.

How much is a bale of hay worth this year?

Farmland prices have hit the tipping point?

Using goats for fuels reduction in Cleveland National Forest.  Looks like a promising experiment.

Finally, need a simple side dish this weekend?  Balsamic Grilled Baby Carrots may be just the thing.

What is the statute of frauds?

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Nebraska, along with every other state, has what is called a statute of frauds.  The purpose of the statute of frauds is to protect all parties to a contract; it is, as the name suggests, to prevent fraud.

Sales and Leases of Land:

For sales and leases, Neb. Rev. Stat. § 36-105 requires “Every contract for the leasing for a longer period than one year, or for the sale of any lands, shall be void unless the contract or some note or memorandum thereof be in writing and signed by the party by whom the lease or sale is to be made.”

We begin with a discussion of leases.  As § 36-105 states, “every contract for the leasing for a longer period than one year … shall be void unless the contract … be in writing and signed by the party to whom the lease … is to be made.”  If you have a lease for five years, that lease must be in writing and it must be signed by you, the person leasing the property (otherwise known as the tenant).  But what if you have a lease that is only for one year?  A one-year lease does not fall into the requirements for the statute of frauds.

(Keep in mind, however, that there are other good reasons to obtain a written lease, regardless of the statute of frauds.  It is a good idea to memorialize the essential terms of a contract, such as names of the parties, description of the land, price/rent, other general terms, and signatures.  This allows for a reference point in the future about the terms of the contract and can hopefully dispel disputes before they begin.)

The other category of contracts considered by the statute of frauds is the sale of land.  The “sale of any lands[ ] shall be void unless the contract or some note or memorandum thereof be in writing and signed by the party by whom the … sale is to be made.”  Again, this is a seemingly simple statement, that the sale of land must be accompanied by a written agreement signed by the seller.

There is an exception to the above, found in Neb. Rev. Stat. § 36-106.  A contract may be enforced in cases of part performance.  What this means is if a person is seeking to enforce the contract (specific performance), that person is required to prove an oral contract, the terms of which are clear, satisfactory, and unequivocal.  Additionally, the person must prove acts done in part performance of the oral contract were referable solely to the contract sought to be enforced, and not such as might e referable to some other or different contract.  Finally, the person must prove that nonperformance of the oral contract by the other person would amount to a fraud upon the person seeking specific performance.  See American Central City, Inc. v. Joint Antelope Valley Authority, 281 Neb. 742 (2011).

What does that mean?  To be frank, it means that you should get a written contract and not rely upon the exception in § 36-106.

Uniform Commercial Code:

If you are a farmer who is considered a merchant, the Uniform Commercial Code (“UCC”) provides that a contract for the sale of goods of $500 or more is not enforceable without some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his or her authorized agent or broker.  Neb. U.C.C. §2-201.  There are specialized provisions in § 2-201 and we will discuss those at a later date.

A merchant, for our purposes, is defined as “a person who deals in goods of the kind or otherwise by his or her occupation holds himself or herself out as having knowledge or skill peculiar to the practices or goods involved in the transaction.”  Neb. U.C.C. § 2-104.

Keep in mind that this provision is for ‘goods’, such as crops, dairy, or livestock.  It is not for land leases or sales.  If you want to read an in-depth discussion today, this publication from the Farmers’ Legal Action Group is great.

Clearly, this is not a simple topic and we’ve only scratched the surface.  Feel free to contact us if you have specific questions, especially if you are a beginning farmer!

Offer + Acceptance + Consideration = Contract

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I have been reading a number of articles on contracts entered into by farmers for their produce, crops, and/or livestock at the same time I was writing last Thursday’s post about leasing land.  It got me to thinking that perhaps a blog post about the elements required to form a contract was in order.

First, what are the elements of a contract?  A contract requires:

  1. Offer;
  2. Acceptance; and
  3. Consideration.

An offer is an intention to be contractually bound upon the acceptance of another party.  In other words, Person A offers certain terms to Person B as an offer.  Person B can then accept the offer.  Consideration is when Person A makes a promise, Person B makes a promise in return.  The promise must be something of value and can take the form of money, action, abstaining from action, services, and other valuable consideration.

Lets use some examples to illustrate offer, acceptance, and consideration.

Example 1:

Person A approaches Person B and states, “I’d like to rent your 300 acres to plant corn and I will pay 40% of the input costs and receive 40% of the profits.”  Person B agrees to Person A’s terms.

In Example 1, the Person A makes the offer and Person B accepts the offer.  Person A’s consideration is that she will pay 40% of the input costs and 60% of the profits to Person B.  Person B’s consideration is agreeing to Person A renting his land and paying 60% of the input costs.

Example 2:

Person A approaches Person B and states, “I will not grow crops on my land for ten years if I receive $100 per acre per year.”  Person B agrees to Person A’s terms.

In Example 2, Person A makes the offer and Person B accepts the offer.  Person A’s consideration is that he will abstain from using his land for ten years to grow crops.  Person B’s consideration is that she will pay $100 per acre per year for Person A not to grow crops.

Example 3:

Person A approaches Person B and suggests renting 80 acres for cow/calf grazing from May 1, 2013 to October 31, 2013.  Person B replies that she is willing to rent 50 acres from May 1, 2013 to September 30, 2013.  Person A agrees to Person B’s proposal.

Here, Person A makes an offer to Person B.  Person B, however, rejects Person A’s offer and instead, issues a counter-offer.  Person A then accepts Person B’s counter-offer.  The consideration by Person A is the payment of rent.  The consideration by Person B is permitting the use of her land.

Example 4:

Person A contracts with Person B to custom harvest hay for $2,000.  When Person B has partially completed the custom harvest, she approaches Person A and says she will only complete the custom harvest for an additional $2,000, for a total price of $4,000.

Here, Person A is obligated only to pay $2,000, the price originally agreed because a contract existed (as there was offer, acceptance, and consideration) and thus, Person B was under a contractual obligation to perform the custom harvesting for $2,000.  In other words, Person B had a pre-existing obligation to perform the work in exchange for $2,000.

Example 5:

Lets change the facts of Example 3 a little bit.  Person A contracts with Person B to custom harvest hay on a quarter section for $2,000.  When Person B has partially completed the custom harvest, Person A approaches Person A and suggests that Person B custom harvest hay on a second quarter section.  Person B responds that to do so will require an additional $2,000.  Person A agrees to pay the additional $2,000.

Unlike Example 3, Person A and Person B entered into a new, second contract.  The offer from Person A is to custom hay the second quarter section.  Person B counter-offers that to do will require $2,000.  Person A accepts.  The consideration from Person A is $2,000 and the consideration from Person B is completing the custom hay work.

Offer, acceptance, and consideration are bedrock elements of contract law but the specifics of contract law varies by state.  Thursday we will discuss implications of the Uniform Commercial Code and the statute of frauds for contracts.  If you are from Nebraska or South Dakota, feel free to contact us if you have questions.  If you are from a different state, contact a licensed attorney should you have questions.

Friday Facts, Fun and Food

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Another week has passed and it seems like it was just Monday.  However, it has been a fairly slow news week which is understandable — everyone is working on the farm!  If you have a moment this weekend for some reading, here are some ideas:

The Omaha World-Herald published an interesting article on value-added agriculture.

Want some practical information about crop insurance?  Click here and here.

Have a photograph of a national wilderness area you want to enter into the 50th Anniversary National Wilderness Planning Team?  Winning photographs will be displayed at the Smithsonian.  Find out more information here.

ArtPlace America recently awarded grants for Using Art To Bring New Life To Rural Communities.  The projects funded look fascinating and a wonderful opportunity for the cities selected.

And for Father’s Day, just try to get Dad to say no to a Roast Beef Sandwich with Melted Cheese and Caramelized Onions.

Maybe leasing land isn’t a bad option?

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I was planning a different topic today but the release of the Kansas City Federal Reserve’s Main Street Economist Report “Financing Young and Beginning Farmers” caused me to reverse course.

Of interest to me in the report is that more beginning and young farmers are turning to lease agreements to enter farming or ranching.  This is not surprising given the economic conditions discussed in the report: higher fixed costs, higher land costs, and higher debt-to-income ratios for beginning and young farmers.  But entering farming or ranching via leasing may not be the worst idea.

First, leases allow a beginning farmer to cultivate a relationship with a landowner.  This relationship, especially if it is with an established farmer or rancher, can lead to mentoring and education for the beginning farmer.  You have the opportunity to learn from someone, ask for advice, and develop a mentor/mentee relationship.

Second, leases allow for flexibility with changing market conditions.  Leases can be drafted so the beginning farmer shares the risk with the landlord.  Thus, if the drought continues or commodity prices dip, the beginning farmer will not be locked into a debt repayment; instead, there is flexibility in the lease price if the lease is drafted to share risk.

However, even if the lease is not drafted to share risk with the landlord, a lease provides more flexibility than debt repayments.  Instead of being obligated to repay the purchase price for a parcel of land, you may be able to stagger your leases so they are renewable on different dates, allowing you to determine which parcels of land provide the most bang for your buck and let go of parcels that are not producing to your standards when the lease ends.

Third, at least in Nebraska and Iowa, there are tax programs available for landlords who rent to beginning farmers.  These tax programs can be a strong incentive for landlords to rent to a beginning farmer and beginners should consider approaching possible landlords with a lease proposal with these tax programs incorporated into the proposal.

There are risks with leases, namely that the landlord will not renew the lease.  As a result, a beginning farmer has to weigh the risks and rewards of a lease with the risks and rewards of ownership.  Keep in mind your debt-to-income ratio, especially when considering purchasing land.  Your debt-to-income ratio affects everything from whether you can obtain a loan to what interest rate will be used to whether you will qualify for future loans you may need/want, such as for machinery.  In short, beginning your operation with a lease may allow you to build up a nest egg to purchase land at more attractive terms than would be possible without the lease.

To know whether it is better for you to lease or own depends upon financial knowledge of your operation.  As discussed earlier this week, that requires good financial recordkeeping.  And to know whether you are obtaining good lease terms also requires knowledge of the income your operation generates, meaning you need good financial recordkeeping.

Need some help deciphering the above information or perhaps need some help drafting a lease or purchase agreement?  Then contact us — it is what we are here for!

The necessity of financial recordkeeping

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I was driving back to Omaha today, letting my mind wander about possible blog topics and it hit me: we have not yet discussed the necessity of financial recordkeeping.  Most people do not find the work of managing finances all that exciting but without it, you will have no idea whether your operation is profitable, where you can grow your operation or, even more basically, apply for loans or other financial products.

What is involved in recordkeeping?

  • You must know the cost of your inputs, such as seed, fertilizer, or hay.  This allows you to project your costs and know the amount you must recoup to break even.  Also calculate any lease payments, the cost of maintenance on machinery, fuel, insurance premiums, and any other expenses related to your operation.
  • Know the market history for your commodities.  How many bushels of corn can you realistically produce and what is the price per bushel?   How many cattle do you have, what weight do you wish to sell them, how long does it take to get to that weight, and what is the market price?
  • Know the details of your loans.  What are the interest rates, what is the term (number of years to payoff), what is the principal balance.
  • Know the cost of your own labor — how much time are you willing to expend on certain products and is the time worth the return?
  • Know your family expenses — how much income do you need, both on-farm and off-farm, to live the lifestyle you want?

With the above knowledge, you can make both short-term and long-term plans for your operation.  You can also calculate your balance statement (or net worth statement).  Such documentation is typically required when applying for loans.  If you have the information readily available, it will expedite the loan application process.

Later this week, we will discuss some of the other information you can glean from your records.  But first, you must have the records!  If you need any help beginning the process of recordkeeping, contact us!  We’re happy to help.

Friday Facts, Fun and Food

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Another week down — the University of Nebraska – Lincoln’s Drought Monitor is showing the drought improving across Nebraska and South Dakota.  Now we just need some sunshine.

The University of Nebraska – Lincoln’s School of Natural Resources has a new temperature app called Climate App — it informs farmers of high and low temperatures, 7 day average soil temperatures, 1 day soil temperature, and 1 day precipitation total.

It is amazing that something as seemingly simple as corn cobs could be the future of more cost-effective biofuel production.

FSA County Committee Nominations begin June 17; the deadline is August 1.

Geotourism is on the rise, especially in rural areas.

June 8th is National Get Outdoors Day — I’m sure the farmers and ranchers reading this will not have a problem with getting outdoors that day.  The South Dakota Outdoor Expo is an official National Get Outdoors Day site; the Expo is at the State Fairgrounds in Huron on June 8-9 and a free event.

After you burn off some calories at National Get Outdoors Day, I can’t recommend these Chocolate Chip Brown Sugar Rolls enough.