Inside this Issue
but yes, you are getting something from the state! OSU has some of the most knowledgeable researchers in dairy science and one of the top extension systems in the nation. We thought that it was time for Ohioans to learn about it.
Buckeye Dairy News will be published 12 times a year around the 15th of the month. We intend to keep its content factual, informative and to the point. We will feature monthly columns on milk, grain, hay and culled cows pricing. Some of the best brains with two legs will explain new knowledge acquired through research and will provide you with tips to help you in all dimensions of modern dairy herd management. This month’s invited contributions deal with forage inventory management, pasture, farm measures of competitiveness, and a great update on the ugly tax law. Next month’s feature article by Dr. Bernie Erven should be a classic. We are bullish on the Ohio dairy industry, so our tone will be upbeat, positive, yet challenging.
This first issue is not perfect, but it is out! We will improve with time. The next issue, however, will not come automatically to you. There are three ways that you can keep receiving this newsletter. (1) Fill out the form on page 3 and return it with a $10 check. Each issue will cost you less than a slice of pizza at the county fair… (2) Contact your county extension office. The cost will vary depending on the county. (3) Buy it in bulk and save! Group rates (>10) are available and we are only a phone call away.
Sit down, learn and enjoy!
Normand St-Pierre
Dairy Extension Specialist, Editor
Six things to do … to reduce income tax pains.
David Miller
District Specialist, Farm Management
In planning for the upcoming tax season, farm business owners will need to look at what tax law provisions will affect this year?s returns. Although there are many tax law changes, the following are tips to help you prepare for filing your 1997 tax return.
1. Get the business? records up-to-date. Most people don?t like keeping records, but waiting until the last minute increases the stress level of the record keeper and increases the chances of mistakes. Up-to-date records are the basis for deciding about tax management strategies that are to be carried out before Dec. 31. Good decisions cannot be made on records that are not current.
2. Separate breeding and dairy livestock sales into sales made before May 7, 1997 and sales made after May 6, 1997. The rates for long term capital gains have been reduced to 20% from 28%, and 10% from 15% for sales after May 6. Sales of breeding and dairy livestock made prior to May 7 will be taxed at the higher 15 and 28% rates. The holding period for cattle to qualify for long term gains is still 24 months. Sales of dairy cattle held less than 24 months will be taxed at the higher rates (15 or 28%) for short-term gains. All breeding and dairy livestock sales subject to capital gains treatment are not subject to self employment tax.
3. Carefully review expenditures made for repairs. Repairs are made to keep the property or equipment in a normal, operating condition. Capital expenditures extend the life of the property or equipment, increase the value of the asset or adapt the property to a different use. Repairs are fully deductible in the year of the expense. Capital expenditures are recovered over a period of years as a depreciation allowance.
4. The section 179 expensing allowance increases to $18,000 for 1997. It increases each year to a maximum of $25,000 in 2004. The qualifying assets purchased must contribute to the profitability of the dairy business.
5. The self employed health insurance deduction increases to 40% of qualifying expenses for 1997. The percentage deducted increases each year to 100% in the year 2007.
6. Capital gains may result in exclusion from the earned income credit.
Dairymen may often show a loss or little profit on Schedule F, but have
significant capital gains income from cull cow sales reported on 4797.
Capital gains income of $2200 or more will keep the taxpayer from qualifying
for the earned income credit. Even though 1997 may have been a bad
year, cull cow sales exceeding $2200 will keep you from taking advantage
of this refundable credit.
Who's Who
Bruce Brockett
(330) 533-5538
Bruce is currently our Northeast District Dairy Specialist. In
the early 90’s, many in the OSU Extension were concerned about the Ohio
dairy industry and the lack of management expertise and training programs
for our dairy farmers. Bruce showed strong leadership in establishing
and becoming team leader of the successful Dairy Excel program in northeast
Ohio. This program has had a significant impact on our industry.
Bruce has since served on two educational missions to the Tchech Republic
and Ukraine. Many agents and industry personnel in Northeast Ohio
seek Bruce’s talents and expertise in dairy production and management.
If only he could switch to Windows…
Bill Weiss
(330) 263-3622
Bill is currently a faculty in the Department of Animal Sciences at OSU, with primary responsibilities in dairy nutrition research and extension. Few individuals have had such a significant impact on a discipline in such a short time. His research contribution on the energy evaluation of feeds is already a classic, demonstrating eloquently how research can address and solve “real” problems. Bill has also conducted extensive studies on vitamin E nutrition, forage production and evaluation. Currently, he is serving on the National Research Council committee responsible for the re-writing of the widely known publication on nutrient requirements of dairy cattle. His knowledge is frequently used in various extension programs throughout the world. Bill is well known for his natural aversion to neckties. He is a stellar example of the outstanding quality of resource people available to the Ohio dairy industry.
15- Measures of Competitiveness
Dianne Shoemaker
This Month: Cost Control:Operating Expense Ratio
Competitive Level: Less than 70%
Calculation:(Total cash operating expenses - farm interest expense)
/ gross farm income * 100
Example:
$700.000 cash operating expenses
- 100,000 interest
= 600,000 total operating expenses
/ 900,000 gross farm income
= 0.67 * 100 = 67 % operating expense ratio
The operating expense ratio indicates the percent of gross farm income
used to pay operating expenses. Monitoring this ratio can help a
farm manager detect an emerging cost, size or financing problem before
it gets out of control. Dollars not used for operating expenses are
available for principal and interest payments, family living, improvements
and savings. It is important to adjust gross cash farm income for
changes in inventories.
For example, if you have three more heifers than last year worth a
total of $5,000 add $5,000 to gross farm income. If you
have $3,000 less feed on hand than last year, subtract $3,000.
Low operating expenses are good only if production and income are satisfactory.
If expenses are low, income is low and cash flow is tight, the business
may:
> be too small to generate sufficient income
> have too much debt
Look at other measures that evaluate the business such as milk sold
per worker (rate of production), and debt to asset ratio (solvency).
If the operating expense ratio is higher than 70%, it may indicate
high expenses, low income, or both. Indicators to check include:
> feed costs (the biggest expense on most farms)
> costs reported in wrong year (feed paid for this year, but fed last
year)
> milk sold per worker (is low income the problem?)
Announcement:
Dairy Excel's 15 Measures of Dairy Farm Competitiveness. Bulletin 864
How do I know if I am competitive? What are really good farms doing? These and similar questions are repeatedly asked. The NE Ohio Dairy Excel Team compiled 15 of the most important financial and non-financial factors affecting competitive dairy farms into an easy-to-use format. Each measure comes with a suggested competitive level, an equation and an example of how to calculate.
The 42 page bulletin is available at your local Extension office. At $2.00, it is a steal!
Milk Price Outlook
Gary Schnitkey
Location
first
second
third
fourth
Damascus (/bale) $1.25-3.25
$1.25 - 3.75
$1.60 - 4.00
$1.50 - 2.00
Ashland County (/ton) $100 - 152
$102.50 - 150 $110 - 165
$155.00
Farmerstown (/ton) $132.50-180
$170 - 190
$170 - 190
Rogers (/bale)
$1.05 - 3.10 $1.25 - 2.20
$1.70 - 2.00
Kidron (/ton)
$60 - 170
$115 - 170
$140 - 230
$170 - 185
Mt. Hope (/ton)
$90 - 195
$120 - 220
$140 - 240
$140 - 240
Transition From Grazing
Tom Noyes, Extension Agent, Dairy
For most dairy grazers the season is about to end, if it hasn't already
for many. The transition from grazing to barn feeding need not be
difficult with no change in milk production if one follows a few simple
procedures.
11/20/97
7:00P.M., Knox Co. Extension
How do I get her bred back?
Nutritional Influences on Reproduction & Hormonal Breeding Programs.
For more information call 614-397-0401 or 614-668-4831.
11/25/97
11:00 A.M., St. Henry
Dairy focus 2000
Dr. Andy Johnson DVM. For more information call 419-586-2179.
3/24-26/98
ATI, Wooster
Dairy Farm Employee Short Course
For more information call Tom Noyes 330-264-8722.
4/15&16/98
Hyatt Regency, Columbus
Dairy and Food Industry Conference
4/21&22/98
Fort Wayne, IN
Tri-State Dairy Nutrition Conference
For more information call 614-688-3143.
Announcement:
A Dairy Farm Employee Short Course will be held March 24-26 at ATI
in Wooster. The course will begin at 1:00 PM on Tuesday, March 24
and conclude after lunch on Thursday, March 26. Enrollees can select
from two modules: milking management or feed management. The
course is designed for development and improvement of skills by dairy farm
employees. Enrollment will be limited because of the small group
needed for the intense, hands-on experiences. A course registration
flyer will be available soon. Your help in publicizing the program
would be appreciated. For more information contact Tom Noyes, Dairy
Extension Agent, Wayne County (330) 264-8722.
Managing Forage Inventory
Dr. Maurice Eastridge, Associate Professor, Dept. of Animal Sciences
As the cropping season comes to a close, farmers need to take stock of the forage inventory. After all the forage is harvested in the fall, farmers need to make some business decisions relating to the herd's feeding program.
Forage Supply. Farmers need to determine the total supply of stored forage on the farm. This includes silage and hay, and it should be assumed that 10 and 15% of these feeds will be lost during storage and feeding.
Forage Demand. Feed intake of lactating and dry cows and heifers and feed allocation plans to the different animal groups need to be known. Allocation of forage should occur based on supply, animal's nutrient needs, and quality of the forage.
Extending Forage Supply. The supply of corn silage should be extended
to next fall as long as sufficient amounts can be taken off the face of
the silo to keep the forage from spoiling.
The feeding rate for hay or haycrop silage should be determined
based on projected first-cutting of the forage in the spring (project late
in case of adverse weather).
The forage supply can be extended by minimizing storage and feeding losses, adjusting forage levels in diets (levels of haycrop versus corn silage versus hay; level of forage versus concentrate), or culling some undesirable cows. If some hay needs to be purchased, the quality of the hay should be dictated by the type of animals to which it will be fed, and it should be purchased NOW, not in the winter when hay prices are at peak. According to USDA reports, premium quality hay is limited this year in the east, and summer prices for hay have been unseasonably high.
Plan Now! Farmers should work with their dairy nutritionist to plan
the use of the forage supply on the farm, decide if additional hay needs
to be purchased, and to begin planning for the next cropping season.
All educational programs conducted by The Ohio State University Extension are available to clientele on a nondiscriminatory basis without regard to race, color, creed, religion, sexual orientation, national origin, gender, age, disability or Vietnam-era veteran status.
Issued in furtherance of Cooperative Extension work, Acts
of May 8 and June 30, 1914, in cooperation with the U.S. Department of
Agriculture, Keith L. Smith, Director, The Ohio State University Extension