Changes to VT Current Use Tax Program

Changes have been made to the Vermont Use Value Appraisal Program (Current Use) that guides the taxation of land and buildings used for agriculture, forestry and conservation.

Click this link for a resource sheet that explains the new changes: Changes in VT Current Use Tax Program _July 2015

Key changes include:

  • A new calculation for the Land Use Change Tax (LUCT) (beginning Oct. 2, 2015)
  • A temporary “easy-out” period in which landowners can remove a parcel, or portion of a parcel, without paying the full LUCT liability (between July 1 and Oct. 1, 2015).
  • A new annual requirement for owners of agricultural lands and buildings to certify in writing on or before September 1 of every year that all enrolled agricultural land and buildings meet the requirements for enrollment at the time of the certification (form will be available in August).
  • Authority given to Agency of Agriculture, Food and Markets to direct the Vermont Department of Taxes to remove agricultural land and farm buildings from the Current Use Program when the land or buildings are used by a person who has violated water quality requirements (beginning July 1, 2015).

The Winery: Keys to Financial Success

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uvm hort whites 1

In June I attended the National Farm and Ranch Business Management Educators annual conference in Rochester NY. Steve Richards, manager at Casa Larga Vineyards and Winery (Fairport, NY), shared his expertise on managing a winery. Steve also worked for many years at Farm Credit East and the Winery Benchmarks Program: https://www.farmcrediteast.com/winerybenchmarks

New York State Wine Overview

• Influence of international trade: when Australia grape/juice prices go down, wineries will increase usage of this supply up to the allowable thresholds under current regulations
• 60% of wine volume produced is non-varietal sweeter wines
• Riesling is the top NYS varietal, about 10-15% of overall wine volume produced
• A good way to forecast wholesale wine sales is to research the general restaurant sales forecast for the upcoming periods.

Keys to Financial Success:

Inventory Turnover: a typical winery will to have 1.5- 3 years max of annual sales in inventory. Larger inventory is less favorable and wineries must work to increase the number of inventory turns per year to over 1. Successful wineries move inventory faster and bottle final product as close to sales date as possible (accounting for any bottling/conditioning factors influencing final quality). Aging inventories over 3 years old is less desirable.
Labor Efficiency: Wineries track cases per worker and this is a key focus of scaling the business. The biggest cost factor as a winery grows is the overhead costs of marketing and regulatory compliance. There are labor efficiency sweet spots at different scales

  • 500-2,500 cases is a good place to be. Labor efficiency ranges from 6k-10k  cases per full time worker.
  • At ~5,000 cases the retail only establishment has maxxed out on sales. The winery begins to wholesale product. This creates an increased administrative burden to serve these new markets.
  • 5,000 – 10,000 cases tends to be poor scale for labor efficiency, possibly down to 4k cases per worker
  • At around 15,000 cases the labor efficiency curve begins to get better.
    Labor efficiency peaks at the scale of ~35,000 cases per year, with the labor benchmark approaching 10,000 cases per full time worker.

What Farm Business Advisors are Talking About

This week the UVM Extension Farm Viability program and statewide VT Farm and Forest Viability Program partners got together to discuss current topics impacting farms.

Dennis Kauppila lead a discussion on farm business partnerships. We reviewed an older but still relevant resource guide that leads farm business owners that are setting up a partnership. Click here to download  Michigan State University: Farm Partnership Agreement Worksheet

Food safety is on our minds with the expectation of new federal  produce safety regulations this fall and the existing GAP’s/buyer-based verification programs. Ginger Nickerson explained the different post harvest packing and storage investments that produce growers are making  that can improve product quality in addition to meeting safety requirements. Click this link for a  fact sheet on building open packsheds. If you are thinking bigger, then click this link on renovating old barns .

A business planning meeting would not be complete without a discussion on risk management and crop insurance programs. Jake Jacobs, UVM Extension Crop Insurance Educator, provided an update on whole farm revenue insurance, Margin Protection for Dairy and the NAP program that could be used for maple producers. Click this link for a USDA Risk Management Agency (RMA) 2014 Farm Bill Crop Insurance Modifications

 

Free for Farmers! Workplace Services and Counseling

Farm First is a free and confidential  program available for Vermont farm owners and family members seeking assistance on a  personal and workplace issues. The program can provide assistance when dealing with farm labor issues  that are difficult to resolve on your own.

The program can also provide confidential counseling services related to stress, anxiety, depression,addiction and other situations where the guidance of a professional is needed. The program is available to farm owners and related family members involved in the business. Farm owners can also consider if they want to enroll in expanded employee assistance programs (EAP) to make similar services available for their employees at a very low cost.

Call Farm First at  1- 877- 493- 6216

Click this link for the Farm First description at the Vermont Agency of Agriculture website: Farm First for Vermont Farmers

Follow this web link to Invest EAP

 

Conservation Stewardship Grants at NRCS

Farmers can apply for funding to advance  their conservation investments. Click this link to see the full press release: CSPSignUP_Jan2015 

“CSP is a way of incentivizing farmers, ranchers, and private forest managers who maintain a high level of conservation on their land and agree to adopt higher levels of stewardship,” said Vicky Drew, Vermont State Conservationist for USDA’s Natural Resources Conservation Service. “By focusing on multiple resource concerns, landowners are able to achieve a sustainable landscape and maintain or increase the productivity of their operations.”

Through CSP, participants take additional conservation steps to improve the resource conditions on their land, including soil, air and habitat quality, water quality and quantity, and energy conservation.

Click here to view the full press release: CSPSignUP_Jan2015

February Class: Intro to Ag Finances

Intro to Ag Financial Management

Dates: Feb. 4, 11 & 18, 2015 (Snow date, Feb. 25)
Locations: Berlin or Rutland, VT
Times: 1-4 pm.

Make this the year you bravely step into the world of farm finances!  With two top-notch ag financial management specialist to lead the way, Intro to Ag Financial Management  will help you approach farm finances with confidence. This course provides farmers with the knowledge they need to understand and complete a balance sheet, income statement and cash flow statement. Participants will learn the basics of budgeting and skills to anticipate the financial needs of their farm operations. Participants can choose to participate in a clinic with one‐to‐one assistance at no additional charge. Classes will be offered simultaneously in Rutland and Berlin, Vermont, with an on-site instructor at each location.

Course fee: $150. Registration discounts are available for people who have completed Growing Places and for two or more people attending from the same farm/business. Scholarships are also available.  For more information and to register visit http://www.uvm.edu/newfarmer and click on “Classes.”  You can also email or call Heidi Krantz at newfarmer@uvm.edu, 802-223-2389 x 203.

Family Systems and Farm Business

Emotional Anxiety, Entanglement, Conflict…finding a Family Leader, Neutrality and Coach-ability. These were the concepts discussed at a December training for Farm Viability business advisers provided by Erik Thompson ( http://www.thompsonleadership.com/ ). Dr. Murray Bowen described the natural emotional processes that shape how families and social units function. Bowen Family Systems Theory provides valuable concepts for farm families and farm business advisers seeking to advance common family goals and aspirations in a productive way. It is not easy! Some of the highest risk forms of chronic anxiety in a family system manifest themselves in forms of avoidance and “over-tolerance of irresponsible behavior.”

To move past that, families and family coaches need to test their own emotional maturity to promote the best outcomes. Family leaders will develop , according to Bowen ” ….with the courage to define self, who is as invested in the welfare of the family as in self….whose energy goes to changing self rather than telling others what to do….”

Family coaches and  business consultants work to establish emotional neutrality and emphasize coachability from their clients. For more on Family Systems click this link to the Vermont Center for Family Studies :   http://www.vermontcenterforfamilystudies.org/

You can also check out trainings for Social Sustainability on Farms training programs through Northeast SARE: http://www.uvm.edu/~vtsare/?Page=projects.html&SM=submenu.html

Milk Prices Dropping: New MPP Deadline Dec 19th

The USDA has extended the application deadline for the Dairy Margin Protection Program to December 19th. Milk price forecasts are showing significant decline in prices over the next several months.

Bob Parsons, University of Vermont Ag Economist, has shared these figures below that show the probability of margins dropping below various coverage levels….

“From the table below, the % numbers are the probability of return over feed cost dropping below the amount on the left hand column.  For example while the expected return over feed costs for March-April is $8.52, the probability of it dropping below $7 is 18% and 10% chance of dropping below $6.50. Remember that in the past that when milk prices drop, they tended to drop further than the markets predicted.”

Margin Level Nov-Dec 2014 Jan-Feb 2015 Mar-Apr 2015 May-Jun 2015 Jul-Aug 2015 Sep-Oct 2015 Nov-Dec 2015 Jan-Feb 2016
Expected $12.91 $9.20 $8.52 $8.64 $9.18 $10.13 $10.12 $9.79
< $8.00 13% 39% 39% 30% 15% 21% 29%
< $7.50 6% 28% 29% 21% 10% 15% 23%
< $7.00 2% 18% 20% 15% 6% 10% 17%
< $6.50 10% 12% 10% 3% 6% 12%
< $6.00 5% 7% 6% 1% 4% 8%
< $5.50 2% 4% 3% 1% 2% 5%
< $5.00 1% 2% 2% 1% 3%
< $4.50 1% 1% 1%
< $4.00 1%

December 5th Deadline, Dairy Margin Protection Program

The deadline for enrollment in the Margin Protection Program for Dairy has been extended to Friday December 5th. MPP is a  revenue risk management tool for dairy producers when the difference between the price of milk and price of feed falls below coverage levels that farmers themselves choose. Dairy producers should contact their local USDA Farm Service Agency office to get information on enrollment this week. This weeks deadline marks the last chance dairy farms will have access to this program until 2016.

Information about the MPP-Dairy is available from USDA Farm Service Agency at this website: USDA FSA , MPP DAIRY

An online decision tool is available for farmers to use at this website: MPP DECISION TOOLThe tool allows a farmer to see the financial impact of how MPP enrollment would impact their business at different selected coverage levels. Instructions on how to use the tool are available on the website.

Farm Business Specialist Dennis Kauppila (UVM Extension) has created a simple worksheet that can be filled out while using the online decision tool. The sheet allows you to see how this program would impact your farm had the program been running in 2009 and 2012. Download the worksheet here: MPP-Dairy 3 year tables-1

Here is a list of Vermont FSA offices: VERMONT FSA COUNTY MAP (click your county on the map to get contact information)

Crop Storage Workshops and Profitability

UVM Extension Ag Engineer Chris Callahan will be offering crop storage workshops this fall. Click this link for details on events in October: Crop Storage Workshops

Inventory turnover and asset turnover are key factors to consider when you make the investment in crop storage. “Turnover” ratios provide efficiency measures that reveal how much bang you get for your buck. Here are two possible ways to improve these ratios: a) select high “value per volume” products for long term storage and b) move more product through the storage unit over the course of the year (more turns).

Quick example 1: Farmer Mark grows $25,000 of potato and has them all in storage on January 1. He sells them all winter and hits gross sales of $22,000 (there are always losses!). The cooler sits empty until next season. Thats 1 turn on the inventory, not so great. How could he improve? He could  grow a  $15,000 beet crop that fills the storage unit from July – October before the potatoes go into storage. Now he’s moving more product and increasing efficiencies by getting more product sales from the same storage investment.

Quick Example 2: Farmer Beth fills a walk in cooler with a variety of root crops in October, turnips, carrots, beets and even some cabbage. She wants to increase her profits next year. She wants to figure out which crop is worth the most in relation to the volume it requires. To keep it simple, she fills a .5 bushel box with each crop and multiplies weight x sell price. She could drop the lowest value per volume crop and grow more of the higher value per volume crop. She better factor in her marketing plan the selling costs though, high value crops may cost more to market…better keep the calculator out.

Click this link for October Crop Storage Workshops