Month: September 2013

Friday Facts, Fun, and Food

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Can you believe it is the last week of September?  It has been a busy week here at Legal Aid of Nebraska’s Farm and Ranch Project but as we fully enter fall, we’re excited about the workshops and clinics currently being scheduled.  When I know more, I’ll let you know!  Now, to whet your appetite for the weekend:

The North Central Region SARE Producer Grant proposals are due November 14, 2013 at 4 P.M. Eastern time.  More information is here.

For those of you near the South Platte River, I hope that flooding is at a minimum for you.  In a small silver lining to the flooding, water diverted will be used for recharging the aquifer in the Platte and Republican River basins.

Land prices may be flattening out.

Some foods have fewer calories than previously believed?  Or, in other words, I can eat more pistachios?

Since fall is here(!), check out these Pumpkin Cheesecake with a Gingersnap Crust.  Nothing says fall like pumpkin.

 

The importance of persistence

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I have been considering a story I heard from a colleague about the beginning farmers who are currently renting his crop land.  The beginning farmers began to cultivate (pun not intended) a relationship with my colleague for a few years.  They would call my colleague, ask if he had any land they could rent without disrupting any current tenants, if he knew of any other landowners looking for a tenant, keeping my colleague up-to-date on their operation and plans, and generally letting my colleague know they were interested should an opportunity ever arise.

The opportunity then came.  My colleague was considering renting his land and, as he had in years past, received a phone call from the prospective tenant.  This time, my colleague indicated he was interested in renting the land and asked for more details regarding the tenants’ operation, their agriculture and educational background, and ideas for maintaining the environmental integrity of the land.  My colleague also discussed the use of the Nebraska Beginning Farmer Tax Credit program and the requirements for both himself and the tenants to qualify.

What have I gleaned from this story from the perspective of a beginning farmer?

  1. Polite persistence is key.  We all know that access to land is the single most difficult barrier for beginning farmers to overcome.  But that doesn’t mean you can’t talk to people in your community, create relationships with landowners, and generally let the word out that you’d like to rent land.
  2. Don’t expect immediate results.  It took the tenants in the above story a few years for their persistence to pay off.  But when my colleague was considering renting his land, the first people he thought of were the people who maintained a relationship with him and let him know about their interest in renting his land.
  3. Have a plan.  Don’t just approach a landowner and state you’d like to rent the land.  Know what type(s) of crops you wish to grow, your ideas on fertilization and pesticide use, whether you wish to pursue cash rent or share rent, your farming background, and any other pertinent details that demonstrate that renting to you is in the best business interest of the landowner.
  4. Be aware of any programs that assist beginning farmers.  A tax credit is a wonderful tool in your plan.  Know about it and discuss it with potential landlords.

What have I gleaned from this story from the perspective of the landowner?

  1. Be receptive to renting to beginning farmers.  Sure, it may be a bit outside your comfort zone to rent to a beginning farmer but it may make business sense as well.  Listen to the ideas and keep them in mind.
  2. Be aware of any programs that assist beginning farmers.  Who doesn’t like a tax credit?  As a landowner, you may qualify for the Nebraska Beginning Farmer Tax Credit.  Calculate the tax credit and consider it in the larger picture of your operation’s financials.
  3. Have a plan.  There may be a time when you can no longer cultivate your own fields.  If that time comes, do you have relationships with other farmers who would be interested in renting your land to maintain your income stream?  More long-term, if you want a successor to the operation, do you have one?  Renting to a beginning farmer may provide you with a mechanism to maintain your operation for another generation.

Ultimately, there are benefits to both beginning farmers and landowners by being persistent and allowing persistence.  You never know — you may just find the perfect fit if you persist.

Pasture, Rangeland and Forage Insurance — A Pilot Project for Nebraska

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Cornhusker Economics has a wonderful overview of the new Pasture, Rangeland and Forage Insurance pilot program in Nebraska.  In summary:

  • If you are a Nebraska producer who uses grazing and hay production in your operation, the USDA’s Risk Management Agency is introducing a new insurance product, the Pasture, Rangeland and Forage (“PRF”) coverage.
  • In the 2013 crop year, PRF coverage changes from a vegetative index to a rainfall index.  This means that, instead of PRF coverage based upon satellite imagery to determine the “greenness” of a pasture, PRF will now be based upon the rainfall received in insured area.
  • Insurance (or, in legalese, indemnity) is paid when the rainfall in the insured area is below the guaranteed level, which is determined as a percent of average rainfall.  This means that coverage is determined based upon the rainfall in the insured area, and not upon the production of the operator.
  • An insured area is based upon a grid.  Per Cornhusker Economics, the grid in Nebraska is approximately 13 miles east-to-west and 17 miles north-to-south.  Thus, the rainfall index is calculated for the grid rather than an individual farm or ranch.

But how does it work?  That requires a few steps.

  • First, each grid area has a base dollar value of production determined by RMA for grazing or haying.
  • Next, the producer selects a productivity factor.  The productivity factor adjusts the base dollar value up or down, from 60 percent to 150 percent of the base dollar value.
  • Third, the producer will also select a guarantee level.  The guarantee level is the percentage of average rainfall at which insurance payments are triggered.  The guarantee level can range from 70 percent to 90 percent, ranging in five percent increments (i.e. 70, 75, 80, 85, and 90 percent).  Thus, if a producer selects an 85 percent guarantee level but the grid receives only 82 percent of average rainfall, the insurance is triggered.
  • With the base dollar value, productivity factor, and guarantee level, it is possible to calculate the maximum payout.  Liability is calculated per acre and is calculated as the productivity factor multiplied by the guarantee level.  In other words, if there is a base dollar value of $30 per acre and a productivity factor of 120 percent, the productivity value is $36 per acre.  (30 x 1.2 = 36).  Then you multiply the productivity value by the guarantee level.  Assuming a guarantee level of 80 percent, the total payout would be $28.80 per acre.  (36 x .8 = 28.8)

But wait, there is more!

  • The producer not only chooses the productivity factor and guarantee rate, but the producer must also select time period of coverage called index intervals.  An index interval is two months long.  If PFR insurance is selected, a producer must select two index intervals during the calendar year.
  • Once the intervals are selected, the total payout must be allocated across the intervals.  How does this work?  Well, our producer above has $28.80 of total payout available.  Thus, our producer must allocate part of the $28.80 to separate index intervals.  For example, our producer can allocate 60 percent (or $17.28) to one index interval and 40 percent (or $11.52) to a different index interval.  Keep in mind that if an index interval is selected, at least ten percent of the total payout must be assigned to the index interval and the maximum allocation for any index interval is 60 percent of the total payout.
  • Premiums are subsidized and the amount of the subsidy depends upon the guarantee level.  For a 90 percent guarantee level, 51 percent of the subsidy is paid.  An 80 and 85 percent guarantee level has 55 percent of the subsidy paid.  For 70 and 75 percent guarantee level, 59 percent of the premiums is subsidized.

Keep in mind that any indemnity paid is based upon the grid system and the index interval selected.  That means it may not rain adequately on your acres but the grid may have enough rain that coverage is not triggered.  Also keep in mind that two index intervals must be selected.  Cornhusker Economics suggests selecting the two index intervals in which precipitation has the greatest impact upon production.

If you are curious as to your grid, click here.  Also feel free to contact your crop insurance representative or, if you have any other questions, you are welcome to contact Legal Aid of Nebraska!

A short guide on South Dakota law for leasing agricultural land.

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South Dakota has a few wrinkles in their laws that are unlike Nebraska’s laws regarding the lease of agricultural land.  What do you need to know?

  1. South Dakota does permit oral leases, but those leases are only year-to-year leases.  South Dakota does not permit an oral multi-year lease.
  2. If there is no contract or usage to the contrary, rent is payable yearly at the end of each year.
  3. If your oral lease is for forty acres or more, special provisions apply to terminate the lease.  A landlord must give written notice on or before September 1 to terminate the lease or it is renewed automatically.  If notice is given on or before September 1, the lease terminates on March 1.  This is applicable to tenants leasing crop land and grassland, either native or tame.
  4. If you have a written lease, the above provisions regarding notice to terminate are not applicable.  The termination provision(s) in your written lease determine how and when the lease is terminated.
  5. If you are seeking a multi-year lease, it must be in writing.  Keep in mind that any lease for agricultural or wildland may not exceed twenty years.

The takeaways from above?  While oral leases are permitted in South Dakota, it is only on a year-to-year basis.  Further, if more than 40 acres is leased, notice to terminate the lease must be given prior to September 1st.  Written leases are preferred in the law, although a lease for agricultural land may not last longer than twenty years.

Resources for the ag community about the Affordable Care Act

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Well, after a two week vacation, the blog is back and we’ll ease back into the conversation.  As we approach October 1st, there have been some questions from the agricultural community about the Affordable Care Act, aka Obamacare.  While I am no expert concerning this topic, there are some new resources that you may find helpful as you think about the Affordable Care Act.  First, the University of Nebraska-Lincoln’s Institute of Agriculture and Natural Resources has launched a resource center about health care decision making for small businesses.  You can find forms, regulations, information videos and factsheets, and other resources.  You will also find a section devoted to farm and ranch employment and the requirements under the Affordable Care Act.

DTN/The Progressive Farmer has been running an interesting series of articles about the Affordable Care Act.  The latest article discusses whether the health care exchanges may save farmers money on health insurance and the questions farmers may want to ask regarding the health insurance exchanges.  Additionally, the Center for Rural Affairs has a series of common questions and answers about the Affordable Care Act.

This blog is not offering legal or financial advice about your specific situation, but rather, providing resources for you to learn about the Affordable Care Act and then bring legal and financial questions to your trusted legal and financial counselors.  Legal Aid of Nebraska’s Farm and Ranch Program is happy to help with any questions you may have.  Feel free to contact us!

Update:  The website for the healthcare exchange is now open at healthcare.gov.