Upcoming South Dakota Workshops!

For those of you near Spearfish and Pierre, workshops concerning estate planning are coming to you!

Dakota Rural Action and the Rural Response Hotline are jointly hosting a free workshop on farm and ranch business succession and estate planning, as well as new beginning farmer initiatives in the 2014 Farm Bill.

For Spearfish, the workshop is: Tuesday, July 22, 2014 at Hudson Hall, Room C, 222 West Hudson Street.

For Pierre, the workshop is: Thursday, July 24, 2014 at Best Western Ramkota, Lake Rooms, 920 W. Sioux Avenue.

The program runs from 8:30 a.m. to 12:00 p.m. Presenters include Dave Goeller (Univ. of Neb. Lincoln Beginning Farmer Program Coordinator) and Joe Hawbaker (farm and ranch attorney).

Call the Rural Response Hotline at 800-464-0258 to register.  We look forward to seeing you there!

Cover Crops and Crop Insurance — What do you need to know?

It is no secret that, year after year, more farmers are considering the possible benefits of cover crops for their cash crops.  But the question for many farmers is whether they can terminate the cover crops without sacrificing crop insurance coverage.

To help answer that question, USDA personnel who helped craft the new cover crop termination policy will be speaking at a webinar on January 23, 2014 from 2:00 to 3:30 p.m. E.S.T..  The webinar, hosted by the National Center for Appropriate Technology and the National Sustainable Agriculture Coalition, looks to be a valuable resource for farmers trying to determine the best path forward for their operation.

However, if attending the webinar is not your cup of tea, the cover crop termination policy is also available.  What are the highlights?

  • The linked policy is applicable only to non-irrigated land.  If the land is irrigated, the cover crop must be terminated prior to the cash/insured crop emerging.
  • The policy uses zones to determine when cover crops may be terminated.  Roughly speaking, western Nebraska is in zone 2 and eastern Nebraska in zone 3.  Most of South Dakota is in zone 2, with the exception of a small sliver of eastern South Dakota in zone 3.
  • For zone 2, late spring to fall seeded crops require cover crop termination 15 days or earlier prior to planting the cash crop.  Early spring seeded crops require termination of the cover crop as soon as practicable prior to planting the cash crop.
  • For zone 3, the cover crop must be terminated at or before planting the cash crop.
  • An early spring seeded crop are crops planted as early as possible after the spring thaw.  Examples would be spring wheat, spring barely, sugar beets, and corn.  Later spring planted crops are crops such as soybeans and dry beans.

The policy statement covers frequently asked questions, as well as some technical details.  You are also welcome to contact your resources at the USDA if you have questions about the new policy.  You are also welcome to contact us if you have any questions.

Checking in on the FSA’s microloan program

We’ve previously discussed the FSA’s microloan program, with its possibilities for beginning farmers.   With the end of the year approaching, there is now data concerning how many loans have been made, along with information on how many of the loans went to beginning farmers, veterans, or socially disadvantaged producers.

The National Sustainable Agriculture Coalition has an interesting article that delved into the microloan statistics.  Most pertinent for Nebraska and South Dakota producers is that both states have made microloans, just not to the extent of other states.  NSAC suggests multiple reasons: total number of producers, acreage size of operations, type of operations, FSA outreach and training on microloans, and other factors.

But what I find most interesting about the article is that promise that microloans hold for beginning farmers.  Of all microloans issued, 68% went to beginning farmers.  These microloans can (and did) cover many different operations, production methods, and producer needs.  Of particular import, the microloans covered these expenses without need to resort to higher-interest options such as credit cards, lines of credit, or high interest loans.  Less money paid in interest means more money for the operation and/or living expenses for the beginning farmer.

Ultimately, it is for the beginning farmer to determine whether microloans are a good fit for the operation and farming plans.  If you want someone to discuss your operation with and whether microloans are a good fit, you are welcome to contact us.  We’re happy to help!

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

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.

Offer + Acceptance + Consideration = Contract

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.

What is this I hear about liens?

It is not a topic many people want to think about, but what happens if you do custom work for a farmer and you do not get paid?  Every state has various laws to deal with this scenario. Nebraska and South Dakota have a number of different liens that may be filed, as every state does.

The National Agricultural Law Center maintains a listing of Nebraska and South Dakota liens.  Each state is discussed below:

Nebraska:

Nebraska requires most individuals filing a lien to do so through a financing statement.  A financing statement is part of Article 9 of the Uniform Commercial Code.  What is a financing statement in Article 9 of the Uniform Commercial Code?  It is a form that a creditor (here, the person filing the lien) files to give notice that the creditor may have an interest in the personal property of a debtor (the person who owes the creditor money).  The filing allows the creditor to “perfect” his or her interest, meaning that the creditor has an interest in specific property which would then be given a specific place in the priority of creditors to be paid.

The Nebraska Secretary of State is where financing statements are filed.  To obtain a financing statement to file, the Nebraska Secretary of State provides the form to fill out.  There is a filing fee to file the financing statement; the fees are listed here.

Keep in mind that a financing statement is effective for five years after the date of filing and is considered lapsed.  A continuation statement may be filed within six months of the expiration of the five year period.  Should the financing statement lapse, the lien will no longer be perfected, meaning your place in the priority for payment will be considered to have never existed.

In summary, know what type of lien is applicable to you and whether you must file a financing statement.  If you need assistance answering these questions, contact us!

South Dakota:

South Dakota does not have the Uniform Commercial Code requirements that Nebraska has.  In South Dakota, the county Register of Deeds is where liens are filed.  The procedures under the Uniform Commercial Code are not applicable in South Dakota for agricultural liens.

But just like Nebraska residents, if you have a question about liens, feel free to contact us!