Here are a few crop insurance updates to note for 2017. Information provided by Williamson Insurance Agency. Learn more at www.cropcoverage.com.
Prevent Plant – Crop insurance will now pay you 55% of your Revenue Guarantee (instead of 60%) if you qualify for a corn prevent plant payment. Popcorn and soybeans remain at 60%.
Replant – The policy now states that you must try to replant the first planted crop through the late planting period. Previously you could replant a different crop prior to the late planting period and still have coverage. The late period for corn now runs through June 30 so you must replant corn through that date if that was your original crop.
Entity Changes – Any entity name changes (LLC, DBA, etc.) had to have been filed with the Farm Services Agency prior to June 1, 2016 to be eligible for premium support on their 2017 crop insurance policy.
It’s important to keep good separate records for all farms in order to maximize potential payments for actual production. Otherwise, an average of all your farms may be used when figuring payments and only 75% of that will be figured as your farm production average.
On Tuesday, January 24 beginning at 8:30 am, Citizens National Bank and Williamson Insurance Agency will jointly offer a free seminar to local farmers and ag businesses. The event will be held at the Delphos Eagles Aerie #471, 1600 E. 5th Street, Delphos, Ohio. A continental breakfast will be served prior to a presentation by Williamson Insurance describing an overview of annual crop insurance changes and what farmers can expect in the upcoming year. Featured speaker, Bryce Knorr, Senior Market Analyst with Farm Futures Magazine, will follow with the main presentation. Lunch will be served immediately following.
About Bryce Knorr: Senior Market Analyst Bryce Knorr first joined Farm Futures Magazine in 1987. In addition to analyzing and writing about the commodity markets, he is a former futures introducing broker and is a registered Commodity Trading Adviser. He conducts Farm Futures exclusive surveys on acreage, production and management issues and is one of the analysts regularly contracted by business wire services before major USDA crop reports.
Those wishing to attend may RSVP to 888-399-5276 by January 21.
Crop Insurance Updates, Senate Bill 1 and the Internet of Agriculture
Wondering what the future holds for agriculture?
Here are a few things to keep an eye out for in 2016.
- Crop insurance trends – Jason Williamson of Williamson Insurance in Convoy, Ohio notes a new trend in crop insurance is whole farm revenue protection. In order to qualify for this protection, you must have 3 commodities; show a 5 year average income, a projected income for the current year and each commodity must be 11% or more of your revenue to qualify for 85% coverage. Livestock is able to be covered with this product. Important to note is if one crop does well and another doesn’t, you might not have a claim because it’s based on an average of the revenue for the entire farm. For more information about whole farm revenue protection or any of the other crop insurance products Williamson offers, visit their website cropcoverage.com.
- Senate Bill 1 – As of February 2016, Senate Bill 1 took effect, which put into place new regulations and restrictions in regard to surface manure and fertilizer application. According to Matt Lane, Pollution Abatement Administrator with the Ohio Department of Agriculture, larger farmers are required to comply now, medium farms have until July 2016 and small farms until July 2017 to provide time to build storage space if needed. Minor violations can cost up to $2,000 per day and major violations up to $10,000 per day. The bill was created to focus on application of products on frozen ground specifically and includes:
a. Ensuring runoff doesn’t go into the western basin,
b. Nothing is applied to the ground with more than 1/2 inch precipitation. (This doesn’t apply if it’s applied below ground or worked in within 24 hours or if it’s a growing crop.)
- Internet of Agriculture – According to Dr. Scott Shearer of Ohio State University the use of data and analytics to manage precision farming will continue to grow. Monsanto recently purchased Precision Planting, which provides the software for all GPS systems on new equipment. All that information they gather from individual equipment now goes into The Cloud and they’re able to use that data to determine what types of seed will be needed and project sales. Case IH and AGCO have agreements to share information and John Deere is now buying Precision parts with Monsanto, effectively locking up high speed planting. They can now map the location of every seed planted and even track skips, double planting, etc… Shearer predicts we’ll eventually see fully autonomous equipment which will strip the need for seats, air conditioning, interior lighting, etc… and that the mechanical/technical life of tractors will be reduced to 6 or 7 years.
– See more at: www.cnbohio.com/AboutUs/CNBNews/ExecutiveNewsletter
Earlier this year, Citizens National Bank introduced an improved leasing program which we offer to commercial and agricultural customers. Leasing offers the opportunity to acquire equipment and machinery in a cost-effective manner with often-times a smaller payment amount than purchasing. Here’s what you should know:
Why should I lease equipment instead of buy?
Leasing is flexible. Whether you have irregular cash flow or simply want to keep your line of credit free for other uses, a lease can be designed to fit your payment needs. A lease provides the use of equipment for specific periods of time at fixed rental payments. Leasing is also practical. By leasing you transfer the uncertainties and risks of equipment ownership to the lessor, which allows you to concentrate on using that equipment as a productive part of your business. Your equipment needs can change over time and leasing allows you to stay on the cutting edge of technology by not getting caught with obsolete equipment. Leasing also has possible tax advantages – check with your tax advisor. Rather than deal with depreciation schedules and Alternative Minimum Tax (AMT) problems, you, the lessee, may be able to simply make the lease payment and deduct it as a business expense.
Lessees vary from small, one-person operations to Fortune 100 corporations. And the kinds of equipment being leased are just as diverse. Transactions range from a few thousand dollars’ worth of equipment to farm buildings and silos to medical equipment. 85% of companies in the US lease equipment.
How does it work?
You determine what you would like to purchase and work directly with the bank for financing. Terms can be set in a variety of ways, but typically equipment leases are made for up to five years and grain bins/barns may be made for up to ten years. For municipal and agricultural purposes, there are no taxes required on leases. They are typically set up on either annual or monthly payments. For annual payments the lease may be made for up to 80% of the value of the equipment. So for a five year lease, 20 % of the cost of the equipment would be due up front as the first payment and then four subsequent payments would be made annually over the course of the lease. Monthly payments typically require two payments up front.
Featuring Tony Gill, Owner- Gill Dairy
A native of India, Tony Gill came to America to fulfill his dream of becoming a large dairy farmer. Tony has found great success in the agricultural area, owning several types of farms and market animals in various states. Citizens National Bank has been able to help Tony fulfill his dreams with its unique expertise and history in working with agricultural customers. Besides helping with acquisitions and expansion projects, Tony looks for financial planning advice from his banking experts Brock Burcham, SVP/Springfield City President, and Eric Faulkner, VP, Business Development, Loan Participation Specialist.
Keeping the Farm in the Family
There are currently 2.1 million farms in the US and 97% of those are family-run. Collectively farmers are growing older with a median age of 57 and according to the USDA, 70% of the entire farmland in the US will transition ownership over the next 20 years. The bad news is statistically only 30% of those transitions will be successful.
Donald Schreiber is an agent with Nationwide Insurance and they have established a program specifically geared towards educating farmers in regards to succession planning and helping them create a transition that makes sense for the family farm. The program, titled “Land as Your Legacy”, provides information on developing a transition plan that protects the farm.
According to Schreiber there are five elements to making a successful transition.
- Succession Planning – “Really think about what’s best for the farm”, states Schreiber. That might mean considering your heirs’ personalities and determining what roles they will take in the farm accordingly. “If one child is bad at handling financial affairs, don’t put him in charge of the farm’s accounting. Just because he is your oldest child, does not mean he has the best skill set to run your business. On the other side of that, be sure you’re having family meetings to discuss your plan so there are no surprises and ill feelings after you’ve passed.” If you do not want the farm to be split up, make sure you are structuring it correctly and working with a lawyer to make that happen.
- Business Planning – Take steps to ensure the farm remains profitable through the transition. Schreiber recommends setting up the farm as an LLC to ensure an easy legal transition and that bills can continue to be paid without interruption. He cautions that personal ownership of the farm is not a good idea and that operating agreements should be established to identify the roles of each participant.
- Risk Management – Be conscious of structuring the farm responsibly without one person having too much power. Have adequate insurance coverage and mitigate risk by keeping all machinery in good working order.
- Financial Independence Planning – Consider how you will maintain adequate income after you have transitioned the farm operation to another owner. Educate yourself regarding retirement planning and diversification of your investments.
- Estate Planning – Determine the distribution of all your assets after you have passed and the tax implications for that plan.
Schreiber notes “It’s important to go through this process in writing.” Determine your priorities, your goals and the objectives of your plan in order to make the decisions that are best for you. Rely on a team of advisors, such as lawyers, accountants and financial planners, to keep you on track and then periodically review and modify your plan if necessary. The goal, according to Schreiber, is to “strive for harmony within your family after your death.”
For more information about the Land as Your Legacy program, visit http://www.nationwide.com/farmer-estate-planning.jsp
Jeff Harrison and Trevor White of lobbying firm Combest, Sell & Associates recently spoke to area farmers at an event co-hosted by Citizens National Bank and Williamson Insurance. Harrison had previously been lead counsel for the 2002 Farm Bill and White is an economist. The topic was the 2014 Farm Bill.
Harrison discussed the changes in Washington since the November elections. Despite some fundamental differences in belief, he does feel some headway will be made in regards to addressing the Highway Fund shortage and that a budget may be passed by Congress for the first time in a long time. The Affordable Care Act will continue to be a focus on both sides of the aisle, with Democrats defending it and Republicans looking to chip away pieces of it to make it easier for businesses to afford. He is hopeful that tax extenders will be put into place, such as the section 179 deduction, which would allow for higher amounts of equipment purchases to be deducted. The House and Senate Ag Committees will need to address several issues this year including school lunch requirements, the Grain Standards Act and Country of Origin Labels required by the World Trade Organization. However, he feels their biggest concern will be defending crop insurance subsidies and not limiting payments for those with more than $250,000 in income as has been proposed by some opposing economists as a means to cut the budget. Harrison encourages farmers to contact their senators and congressmen to protect farm policy and crop insurance, stating “You (farmers) have a lot of power.”
Trevor White spoke specifically about the Agricultural Act of 2014, otherwise known as the Farm Bill. He stated there were 3 programs (direct payments, counter-cyclical program & ACRE) that were repealed as part of this bill and 2 programs that took their place. These programs are Price Loss Coverage, known as PLC and Agricultural Risk Coverage, known as ARC. PLC is a price-based program and allows for the purchase of Supplemental Coverage in addition for added price protection. ARC is a revenue-based program and can be based either on the county’s average yields or an individual farm’s average yields. He notes you are able to choose different options by commodity and by farm, so one size does not necessarily fit all for your entire operation. While he admits making the decision which option to choose can be confusing, he says multiple options are available to address different types of risks and recommends a couple different websites which offer decisioning tools to help you; Texas A&M’s and the University of Illinois’s.
New this year is the option to choose to update your own farm yields, your base allocation of crops or both. This has not been allowed since 2002. The yield is based on your records or plugs 75% of your county average in for years 2008-2012. If you choose to reallocate your base it uses a 4 year average of what you have actually planted and compares it to your total acreage farmed to determine a percentage base of that crop. White notes you will want to review this carefully though, because if you have a lot of base in a crop that is predicted for higher yields, you may want to leave your allocation the same. The deadline to update your yield or reallocate your base acres is February 27, 2015.
Comparing price coverage of the old programs to the new ones, White feels farmers are better protected now than with the direct payments system. He does caution farmers not to bank on a maximum payment however when determining which coverage to choose. “If you get a higher yield than expected, you may not qualify for the maximum payment, even with lower prices.” He also notes the owner of the farm is the one who must make the decision whether or not to update yields or make base reallocations, but it is the producer that decides whether to choose PLC or ARC. The decision of which coverage to enroll in will be in effect until 2018. He encourages farmers to not rely on hearsay or to just copy what other area farmers are doing, “Do your own research. It’s your farm,” he emphasizes. To help you get started, the Farm Service Agency, FSA, has created a timeline of the 4 steps to enrollment in either program by the March 31, 2015 deadline. Visit their website to learn more.