February 2005

How good are your advisers? asks the “Tools for Profit” feature in Dairy Herd Management (Feb. ’05). The author, ag financial consultant Darrell Dunteman, advises, “Protect yourself . . . even a trusted adviser can become involved in a situation beyond his capabilities. Most good advisers know their limitations. . . . If something seems beyond an adviser’s ability, do not hesitate to seek the advice of another firm.” Five tips are offered for selecting and adviser suited to handle the task at hand: word of mouth; ask your other advisers; never delegate total responsibility; always discuss any concerns with your adviser; and when interviewing a potential adviser, always ask for the names of clients as references.” Read the complete article at Advisers (registration is free).

Why we need to speak up for ag in Dairy Herd Management (Feb. ’05) notes, “Dairy farms have a multiplier effect on the local economy. For every $1 in sales, a dairy farm boosts the local economy by $2.69, according to the U.S. Commerce Department’s bureau of Economic Analysis. . . . Can the other businesses on Main Street do that? . . . . The only way the public will understand what we do, how we do it, and our benefit to society, is if we tell them. Unless we speak up, people are free to draw their own conclusions about what we do, or even worse, many environmental and animal-rights groups are quite happy to fill in the blanks for them—no doubt distorting the truth.” Read the complete article at Speak Up for Ag (registration is free).

5 Mistakes to Avoid When Building an Investor Dairy (Dairy Herd Management, Feb. ’05). “It’s no secret that some investor dairies have failed. That’s why building on the experience of others is so important when it comes to investor dairies, or even expanding your won dairy.” The top five mistakes listed in the article are: unrealistic financial expectations; poor facility planning; failure to plan cow flows; not defining roles up front; and waiting until start-up to hire a dairy manager. Read the article at Investor Dairy (registration is free).

Estate Planning—Why You Need to Think About It Now (Minnesota Fruit & Vegetable Growers Assn., Feb. ’05). “A recent study by Successful Farming magazine shows that two-thirds of all US farmers and food producers have not named a successor for their business. In addition, more than half of those producers have no estate plan. If you think about the billions of dollars in assets held by farm producers, the findings of the survey are certainly concerning. If your family and business goals are to keep the farm business in the family and insure the business continues on, a current transfer plan and associated estate plan are essential. Read more at Farm Survival.

Easement Purchasing Programs: How do they affect you? asks Farming (Feb. ’05). “With growing popularity and a slowly increasing pool of funds from federal, state and local sources, easements are sold to restrict or prohibit commercial development of farmlands by paying farmers an assessed difference between the commercial and agricultural value of their lands.” The article notes that “every New England state and New York have adopted their own easement purchasing programs. . . . As many as 130,000 acres in Connecticut are protected, 50,000 in Massachusetts, 10,000 in New Hampshire, 4,000 in Rhode Island, 3,500 in Maine, and 500,000 in New York . . . .” The article discusses how the program is structured and funded in several New York communities and asks, “With the ability to reverse the old farming axiom, ‘penny poor and land rich,’ why aren’t all farmers jumping on the bandwagon?” It answers by saying, “Some are wary of giving up control of their land. Some are hedging their bets, hoping that increased encroachment will push the price of their farmland even higher. Finding the balance is a personal decision.”

SWOT: Defining Your Business for 2005 (Country Folks Grower, Feb. ’05) recommends SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis as “a good way to measure your business success from many different angles and in doing so, look for ways to improve your performance and bottom line. . . . If you face a number of weaknesses and threats to the business, you need to begin figuring how to turn the threats into opportunities. . . . Likewise, utilize your important strengths and opportunities to seize new customers and sell more product or services. In other words, capitalize on what you already do well and improve on those features even more. . . . There’s no magic or mystery to a SWOT analysis, in fact the process can be a fun way to engage your family and employees in a brainstorming session that will ultimately pay dividends in the long run.”

Climate Change and Agriculture (Farming, Feb. ’05) asks “Scientists have found that even a little change in temperature has a powerful effect. The frost-free growing season in New England is one week longer than it was a century ago. Lake ice breaks up about five days sooner. Across the Northeast, lilacs and apples have been shown to be flowering earlier in the spring than they were in the 1960s. . . . many scientists believe the main culprit behind climate change is human activity that generates carbon dioxide (CO2), primarily by burning fossil fuels. . . . The United States currently leads the world by generating over 5 tons of CO2 per persons per year. . . . There are many ways that farmers can cope with climate change. This could be with a different mix of crops, modified production systems and changes in pest management.” The article also details things farmers can do to “work to mitigate their contribution to the problem.” Read the complete article at Climate Change.

Dairy Secures a Safe Haven in New Federal Dietary Guidelines by MD&VA President Steve Graybeal (Pipeline, Feb. ’05) reports, “The food guide pyramid has been re-stacked and I’m pleased to report that for the first time in 25 years, the federal government recommends more dairy in the diet. The newly released 2005 Dietary Guidelines for Americans increased the recommendation to three servings of lowfat or fat-free dairy foods every day, compared to the two to three servings recommended in the 2000 Dietary Guidelines. . . . The complete Dietary Guidelines Meal Plan and recipes can be found at www.3aday.org.

Dairy Farm Odor is the Root of Many Evils is an “Editorial Comment” in Hoard’s Dairyman (Feb. 25, ’05). The editors write, “(O)ne thing is certain. Air quality, including odors, must be a front-burner issue for every dairy operation. Air quality regulations are coming…regardless of how realistic and well-founded they may be. . . . We have long believed that many of the actions taken by people against livestock operations have their root in odor problems. We may all find that we’re behind the eight ball when it comes to air emissions. But, we can prevent a lot of problems by being good neighbors, good housekeepers, and controlling odors.”

Can his son afford to dairy? is “The Dairy Business” feature in Hoard’s Dairyman (Feb. 25, ’05). Charles E. Gardner, D.V.M, writes, “If your return on assets is far below the 12 percent listed as ‘superior,’ then it is difficult for another party to take over the operation and buy the assets. Average return on assets on dairy farms is only around 4 percent, so many farms do have difficulty transferring assets to the next generation at fair market value. . . . One way to get a better idea of profitability when land is a large part of the assets is to deduct the value of the land from the assets, and add a fair rental value into expenses, and then recalculate Net Farm Income. Since land tends to appreciate, it often generates its own return. After subtracting land value, a more reasonable evaluation of the return on cows, buildings, and equipment can be determined. . . . This last point highlights why asset transfer is usually done in stages. The return on non-land asserts is more likely to be high enough to allow the next generation to purchase those assets and still draw a reasonable salary for living expenses. If this is done, then land can be transferred at a later date, perhaps at a discounted value.”

Extension Programs Need Our Help is an “Editorial Comment” in Hoard’s Dairyman (Feb. 10, ’05). The editors write, “Since their establishment in 1862, Land Grant colleges have conducted unbiased research and worked to implement the results of their work through their associated Extension programs. Extension agents host educational workshops, develop regional conferences, and even solve farm problems one-on-one with producers. However, support for these programs is waning. Federal support for agriculture programs as whole continues to decline. . . . To compound the problem, funding for Land Grant schools has been cut in many states to deal with budget deficits. . . . . Let your state and federal representatives know how important the future of agriculture is to you and this country. Remind them of the important role that Land Grant schools and Extension play in that future.”

Net Farm Income up 24% in 2004 reports a feature article on the ERS-USDA website. “2004 was an exceptional year for U.S agriculture. Net farm income, value of production, value-added, and net cash income all registered historic highs, substantially topping their previous highs in 2003. (Net farm income was up 24 percent; value of production, up 12 percent; net value added, up 16 percent; and net cash income, up 13 percent.). . . . In 2005, net farm income is forecast to be $64.4 billion, down $9.2 billion from the record $73.6 billion estimated for 2004. Income is forecast down in 2005 only because in 2004 income rose $14.4 billion to an unprecedented level. In 2004, both crop and livestock commodities experienced exceptionally favorable market and/or production conditions. 2003 and 2004 were truly exceptional years for U.S agriculture. Net farm income, net value-added, and net cash income registered historic highs in successive years. Two consecutive years of record high corn production and large harvests for other major crops and unusually high prices for livestock and milk created record earnings for the farm sector, and participants who assume the risks of production (farmers, partners, and contractors) reaped the benefits.” Read the complete article at http://www.ers.usda.gov/briefing/farmincome/nationalestimates.htm.

Administration Budget Proposal Includes Agriculture Spending Cuts and Program Changes reports NCFC Update (Feb. 11, 2005). “The President's FY 2006 budget proposal. . . would cut farm programs under the 2002 Farm Bill by $587 million in FY 2006 and $5.7 billion over 10 years (FY 2006-2015). A number of other programs would be impacted, including USDA's Market Access Program (MAP) which would be reduced to $125 million, down from this year's $140 million, and significantly below the $200 million provided under the Farm Bill for 2006 and 2007. At same time, it would extend for 2 years the dairy MILC (milk income loss contracts) program, which expires September 30, 2005. . . . Both the House and Senate have now begun hearings on the President's overall budget proposal, which marks the beginning of what can be a lengthy process for consideration and action by Congress. Under the Budget Act, Congress has a target date of April 15 to reach agreement on a budget resolution with a final date of June 15 to complete action on any spending or tax changes that may be required under what is known as the budget reconciliation process.”

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