Meetings to Explain Dairy Margin Protection Program

What is your plan to handle dairy milk price volatility and feed cost shifts over the next 3 years? Informational meetings are planned for October 13-17  throughout Vermont to explain the program to dairy farmers and business specialists.

Click this link for a list of sessions and locations: October Schedule: Dairy Margin Protection Program Meetings

New Guide on How to Set Farm Rental Rates

UVM Extension’s new How to Determine the Right Farm Rental Rate Guide was developed to support both farmers and landowners through the process of determining a fair cash rental rate for farmland, equipment and infrastructure in Vermont.

“Farmland and farm infrastructure rental rates can be tough to determine because there are many variables to consider,” says Ben Waterman author of the guide and land access coordinator at the UVM Center for Sustainable Agriculture. “However, the process can be simple. The guide explains common methods so farmers and landowners can forge lease arrangements with confidence.”

Divided into five sections, the 31-page guide describes approaches to:

  • Assess market rental rates;
  • Assess landowner’s costs of owning land;
  • Value equipment and infrastructure in a lease;
  • Factor the farm business’ net returns in the rental rate; and
  • Assess the farmer’s contributions to the lease arrangement

To download the guide now, go to:  http://www.uvm.edu/newfarmer/land/RentalGuide.pdf

Broiler Chicken Demand Research Report

Download the full report here:

[PDF] Broiler Demand at Small Grocers 2012-2013, FBRR-011

In the fall of 2012 University of Vermont Extension distributed a survey to a group of small  grocers  asking about chicken and egg demand in their stores with a focus on regionally-produced products. Follow-up phone interviews were conducted through the fall of 2013 to get additional feedback from the buyers in these stores. The goal of this work is to understand the demand for local poultry products and to also provide guidance for poultry farmers preparing to conduct their own market research.

Broiler AttributesThe reports provides details about which attributes consumers are looking for in poultry products and also the specific service expectations that small grocers have for farms selling them them poultry.

Click here to view or download the full report:

[PDF] Broiler Demand at Small Grocers 2012-2013, FBRR-011

 

Disaster Assistance for 2012 Fruit Crop Losses

USDA Farm Service Agency recently announced that disaster assistance for 2012 fruit crop losses in available in 3 Vermont counties:  Addison, Bennington, and Rutland.  There is a limited enrollment period, ending 9.22.14.

Did you experience a crop loss in 2012, if yes click the links below for more information:

VT approved Frost Freeze news release

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$30,000 Prize for Rural Entrepreneurship

The American Farm Bureau Federation and Georgetown University have launched a challenge program to support entrepreneurship throughout the rural United States. They will award a $30,000 prize to the winner.

Do you have a creative business or business idea? Check out the details for this challenge and imagine what $30,000 would do to get your idea launched.

Rural Entrepreneurship Challenge

Irish Visitors meet Vermont’s Ag Lenders

Last week I had the pleasure of bringing 3 colleagues from Ireland’s extension service

Kevin Connolly and James McDonnell, Teagasc, discuss the finer points of chattel loans with Alan Curler, VT Ag Credit Corp.

Kevin Connolly and James McDonnell, Teagasc, discuss the finer points of chattel loans with Alan Curler, VT Ag Credit Corp.

around Vermont. They are part of Teagasc, an Irish organization that is similar to our Land Grant college system.  I studied last year with James, Fintan and Kevin, financial management specialists, when I was on sabbatical study leave in Ireland.

During the week we visited with lenders from USDA’s Farm Service Agency, VT Ag Credit Corporation, and Yankee Farm Credit. Several concepts came up that were very interesting to ‘the lads’ and may help the reader understand ag lending here in Vermont.

1. Each of the lenders talked about a ‘relationship’ with the farm borrower. They called it one of the Five Cs of Credit (see the second page of this article). Borrowers often have a difficult time understanding this, until they have a couple of years of borrowing experience- then they see how important it is to be able to pick up the phone, or send an email to their lender about a certain situation. ‘The lads’ from Ireland said that ‘relationship’ is out the window in their country. It evaporated a few years ago when Irish banks took a direct hit with the bad economy. They miss it- a lender can’t go out on a limb for a farmer who has had a little slip, and the lender knows the farmer will be able to make it right in a year or so. A farm lender sits on the opposite side of the table when a farmer wants to borrow money. But the farmer does not see the lender when the lender is trying to get approval for the farmer’s loan from the loan committee.

2. Each of the lenders talked about ‘Chattel Loans.’ This is making a loan for livestock or equipment (or another asset) using the livestock or equipment at partial collateral for the loan. Lenders in Ireland do not do this anymore. After the Irish economy hit the skids a few years ago, one of their banks had to hire people in the US, and on 2 other continents to try and find the large construction equipment that had been sold (illegally) and moved. The lenders do not want to go through that again. So farmers in Ireland are facing very strict lending rules and regulations. Ireland, as part of the European Union, is under the EU’s Dairy Marketing Quota, that has limited the amount of milk that a farmer can sell since 1984. In the spring of 2015, this quota ends. The Irish government wants an expansion of dairy- this is a product that can be easily exported to bring much-needed cash into the Irish economy. Irish dairy farmers are looking to expand to make more profits. Irish farmers who have not been dairying are considering dairy, since it has been the most profitable sector of the Irish economy. Not having Chattel Loans makes this more difficult.

3. Each of the lenders also talked about Guaranteed Loans. USDA’s FSA can guarantee farm loans made by other lenders. This protects the lender in case the borrower cannot repay the loan. This encourages lenders to make loans. Some lenders (like VACC and Yankee, and some private banks) understand how this works and use the guarantees, others do not understand. Several years ago in the economic downturn in Ireland, one bank failed, and the government decided to rescue other banks. ‘The lads’ did not think that the average person in Ireland would be in favor of guaranteed loans at this time.

4. Yankee Farm Credit is a cooperative, owned and run by farmers who have loans from Yankee. (Yankee also provides various financial services to farmers- members and non-members alike.) There is no coop farm lender in Ireland, but there are credit unions. While we were visiting with people at Yankee in White River Junction, one of ‘the lads’ thought that maybe local Irish credit unions would be interested in and able to lend to area farmers for chattel loans.

These were just a few of the ideas on their list to bring back to Ireland. In a few weeks, I hope to share what is going on in Ireland with farm business plans.

Setting a Price for Your Farm Business

A farm is worth money and a farm business could be worth money too. Can you imagine selling your customer list to an eager young  farmer and putting $20,000 the bank? Most farm owners have put in hours upon hours to oversee the business.  We often call these efforts the “sweat equity” that an owner contributes to the business. Here is the catch…the farm owner must sell something in order to recoup any of that sweat equity. (skip to the Business Valuation for Sale methods guide by Rosalie Wilson)

Many farms are reliant on large amounts of land and equipment and it can take many years of paying down loans to build up equity  in the business. The benefit of all those years of hard work and deferred owner draws (cash draw) is that the farm owner owns land that has appreciated (gone up) in value. Accurate appraisal of your land and other assets is an essential step in setting a price on your farm.

Farm business models have evolved in the past 30 years. Many viable and profitable farm businesses have more to sell than land and equipment. Owners can recoup the sweat equity of product development, establishing a customer base and creating an opportunity for a new owner through the process of  business valuation and sale. This is an essential step for brand based products  or farm businesses with innovative market strategies. Remember, sweat equity doesn’t mean anything unless you make a plan to get paid for it.

Follow this link to download the Business Valuation for Sale methods guide by Rosalie Wilson. It describes 5 key valuation methods: Capitalization rate, comparable analysis valuation, asset based valuation, land use valuation and the honest “real life” valuation.

Investing Time in Market Research

On May 15th  the Vermont Farm and Forest Viability Program organized a meeting of statewide farm business specialists for a training session on farm marketing plans. Participants included service provider organizations,independent consultants and a guest presentation by Myrna Greenfield (Good Egg Marketing). Here is a summary of the conversation when advisers were asked, “How much time should a business owner spend to develop a marketing plan?”

Adviser A: One  successful business spent up to two years completing the market research and developing a plan before they began farming. They researched the population demographics and competition in various regions in order to select a location to farm and a strategy to sell their products.They grew a vegetable business to $250,000 in sales in five years.

Adviser B: It depends how much is at stake. Owners that can afford to lose all their investment might take their vision, launch the business and try to develop a plan on-the-fly. This happens more than we realize and most times the business will fail. If you can’t afford to take that risk you need to determine an overall break even level for the entire farm first. Before you start the business you need to complete the market research and confirm you can generate the needed sales to reach break even. A smart manager can then adapt a new plan once you have passed the break-even target.

Adviser C: That all sounds great but many farms are already in operation and they want to launch new enterprises. I advise them to try things out on a small scale. Run a test year to produce and sell the goods. You’ll need to set aside part of the “farming” day to initiate relationships and learn how to sell the product.  Identify how much risk you are willing to take and test out the idea at a scale where you can sustain the losses if it fails but also get enough information to understand if it is feasible to continue.

Adviser D: A farm owner needs to calculate cost of production on the farm in order to set accurate prices and production targets. That information is needed to identify the most appropriate buyers (either direct or wholesale) for your products. Cost-based pricing is essential to developing a feasible marketing plan.

Navigating Federal Laws on Farm Labor

This morning agency representatives and professionals hosted a session at the Vermont State House devoted to understanding labor laws for agricultural employers. Agricultural employers cannot expect to be experts on these topics but they must be aware of the important issues and understand when it is essential to contact specialists to assess specific situations.

Today’s topics included key provisions of the Federal Labor Standards Act (FLSA) and an introduction to potential exemptions for agricultural businesses. It was explained that the Wage and Hour determinations are based on a week of work. So if you have an agricultural employee working 38 hours in the field picking strawberries and that same worker spends just 3 hours in the farm retail store running a register…that entire week could be considered non-agricultural and subject to FLSA (wages and overtime were the most common discussion topics). Notice I said “could be” as it could vary based on if the store sells strawberry jam or if other products from other farms are resold in the store. There are a variety of agricultural exemptions that should be understood thoroughly to ensure a business remains in compliance with the law.

And for the details… here are several of the resources that were referenced.  US Department of Labor Fact Sheets: #71 Interships, #13 Relationship Determinations, #26 H-2-A, #12 AG Employees, #14 Coverage, #50 Trasportation, #49 Migrant and Seasonals, #40/43 Youth.

To access these sheets, click this link to the DOL Wage and Hour Fact Sheets online.

The US Department of Labor has a district office in New Hampshire that can be contacted at information listed here: http://www.dol.gov/whd/america2.htm#Vermont

Milking Pigs: An Emerging Market

This was posted as an April Fools joke on April 1, 2014.

We are not aware of any activity that resembles the post written below but we had quite a bit of fun exploring the possibilities. Enjoy.

Here in Vermont we have a small number pig milk start-ups that are combining new research and some good-old creativity to find a niche.Farm business adviser Sam Smith at the Intervale Center says, “I see pig milk and the related products as the next big opportunity for our producers here in Vermont.  We have a couple of farmers who have been experimenting and their success has led me to think this is going to be a very lucrative market.  If you look at it purely from the perspective of the number of teats per animal, you have three times the amount of teats than a cow, which means three times the profitability!”

What are the reasons for pigs milk? First is the potential to ramp up production quickly.  Pig breeding cycles are relatively short making it easy for a farmer to build a herd of milking pigs quickly.  Smith says “This is another game changer when compared to cow or goat dairies.  You can have a pig dairy online in under six months with a lower capital investment, a great option for beginning farmers. And when you need replacement pigs you have plenty to choose from.” 

 Pigs, like humans, are a mono gastric species that digests  food with one stomach. With a diet closer to humans than cows, pigs milk is also more similar to human breast milk. This amounts to a more digestible and less allergy prone-product.  Artisan cheese makers have also been experimenting with the milk as a potential way to further diversify their offerings.  Alison Lancet, who operates the farmstead cheese operation magnolia dairy said “We have produced some wonderful blooming rind cheeses with pig’s milk, and plan to have them for sale within the next three months.” Pigs milk is high in fat and is considered ideal for new products like restorative health products. These are part food and part medicine to assist in treating nutritional problems and skin conditions.

Locavore groups nationally have noted that many regulations placed on direct on-farm milk sales are specific to cow or goats milk. Pigs milk is seen as a way to promote community access to farm based products without conflicting with current regulations.

Industry leaders have quietly been evaluating other products too. Many people don’t know that the once iconic 100% pig-skin football has been replaced with mix of natural and synthetic materials to improve it’s grip. Recent pig breeding programs focused on improvements to meat yields had the trade-off of leaner animals which impacted the texture of pig skin. Since 2002 a partnership between American football companies and several in Australian have been evaluating pig skin trials from heritage pig breeds. These are the same breeds being evaluated for dairy production! What a great fit for high school sports programs re-evaluating ways to integrate sustainability into student learning!