Category: Specialty Topics

Severe weather has long threatened farms and ranches. Such incidents, including high winds, are expected to become more frequent and more intense. Fortunately, farmers and ranchers can take steps to reduce the vulnerability of their agricultural structures to windstorms. Tips for reducing the vulnerability of existing structures include:

• Annual inspections should include areas that may be rusted to the point of needing to be replaced as well as cracks in foundations.
• Prior to storms, check structures for loose elements and vulnerabilities. Loose fitting lids, vents, etc. should be secured.
• Doors and windows should be shut tightly. If they cannot be closed, they should be latched in a secure open position (e.g., metal building and Quonset hut doors should be latched closed or fully open). 
• Structures such as movable carports used for livestock shade should be anchored for their own protection and the protection of nearby structures as well as livestock, if they are not moved to safer environments. 

Our 2020-2022 study of farm wind damage found that only 43% of respondents’ farms had fully recovered after two years. The availability of builders and materials were most often cited for delays in construction, followed by cost and insurance coverage. On the other hand, most respondents said they and their insurance adjusters largely agreed on the level of wind damage for agricultural buildings, center pivot irrigators, and steel grain bins. Still, farmers and landowners should review their insurance policies to make sure the coverage meets current business needs.

Most farmers surveyed in 2022 said they intended to rebuild structures with enhanced wind resistance. However, observations of their replacement structures indicate less enhancement. When replacing structures, businesses are usually balancing multiple objectives including cost, capacity needs, and availability of construction materials. Steel grain bins provide an example of trade-offs between capacity and structural integrity. Findings from our assessment of bins, computational modeling of wind loading, and review of other studies finds:

• Taller bins and bins more exposed to wind speed (i.e., not near other buildings or other windbreaks) are more vulnerable.
• Bins are most resilient when full of product distributed evenly throughout the structure. However, even full bins can fail at the wall-roof connection (roof damage or tear off) or experience non-structural damage (e.g., stair damage).
• Vented bins were more vulnerable than bins without vents.
• Steel grain bins with vertical stiffeners tend to perform significantly better during wind storms than unstiffened bins.
• Wind rings around bins do not appear to be significantly more resilient.

Wittich, Christine, Maria Watson, Rebekka Dudensing, Steven Klose, and Dean Mc Corkle. “Improving Ag Structures’ Resilience to Wind Damage.” Southern Ag Today 3(42.5). October 20, 2023. Permalink

Cooperative firms return profits to their member-owners in proportion to their use of the firm.  Those profit distributions are referred to as “patronage refunds”. In contrast,  most other corporations distribute profits in proportion to investment. Cooperative members may be somewhat familiar with patronage refunds but often do not understand all of the structures and issues.  Producers who are not a member of a cooperative may wonder what they are missing.  Patronage refunds are the most unique and, perhaps, the most interesting feature of cooperatives.

In cooperative terminology, a patron is a cooperative customer who qualifies to receive patronage refunds.  That typically means that they are a member of the cooperative.  Patronage refunds are profits that are distributed in proportion to use. Usage can be measured in multiple ways.  Patronage can be based on the dollar amount of purchases or commodity payments or on physical units such as bushels or tons.  A cooperative can track member use as a single patronage pool, or as multiple pools reflecting separate commodities, products or departments.   Each cooperative selects the patronage base that most fairly represents member use.

Cooperatives can pay patronage as a combination of cash and equity. Equity patronage is eventually redeemed into cash and, for that reason, is often called “revolving equity”.  Equity patronage has two functions.  First, it allows members to build ownership without an out-of-pocket investment.  Second, it capitalizes the cooperative, funding the property, plant and equipment.

Patronage refunds have tax implications.  Cooperatives are taxed as corporations but are allowed to deduct patronage distributions.  Those patronage refunds become taxable income for the patrons. Cash patronage is immediately taxable to the patron but equity patronage can be structured to be taxable when issued or taxed at the later date when it is redeemed into cash.

Many local cooperatives are in turn members of regional cooperatives.  Those regional cooperatives issue patronage refunds to the local cooperatives, which becomes part of the local cooperative’s net income.  Therefore, the patronage refunds that producers receive from their local cooperative reflects both the local cooperative’s profits and the pass through share of the regional cooperative’s profits. 

Many younger producers wonder why a cooperative cannot simply offer more favorable prices (more than what competition might dictate) in lieu of paying patronage refunds.  There are some very good reasons.  Equity patronage capitalizes the cooperative.  One way to think of equity patronage is that the members are receiving their share of the total profits and then temporarily reinvesting a portion of those profits in the cooperative. The second rationale for not substituting favorable prices for patronage is the danger of misestimating costs and creating a loss.  Finally, favorable prices would result in zero profits and zero return on assets and equity.  Basically, profits have been given away in the form of prices. Many members will not perceive the price benefit and conclude that the cooperative is poorly managed.  By setting prices at market level, generating profits and then returning those profits as patronage refunds, members can observe the cooperative’s performance and appreciate its benefit, and the cooperative will be capitalized and able to respond to member needs.

Most producers wish they could purchase their inputs a little cheaper and sell their commodities at a slightly higher price.  Most producers would also like to invest for the future.  Producers can achieve all of the goals with no out-of-pocket investment by joining and patronizing their local cooperative.  When you are a cooperative patron, the check really is in the mail!

Kenkel, Phil. “Demystifying Patronage Refunds.” Southern Ag Today 3(41.5). October 13, 2023. Permalink

As a continuation of the “How Much Can I Sell This For?” series, this article focused on evaluating market potential. Part I, Part II. 

Producers may have different opportunities with CSAs, restaurants, farmers markets, wholesale markets, on-farm, and retail outlets. So how can these avenues be evaluated? It will likely look different depending on the producer. For risk management purposes, it is recommended to set up multiple marketing channels. If one market is lost, there are still opportunities to make sales and find buyers for all of your products.

Important questions to ask include:

• How much product do I need to move?
• What options are available to me?
• What type of customers are in that market?
• Am I charging a low, middle, or high price?
• Are there additional costs to participating in that market?

Typically, there will be an inverse relationship between quantity of product versus price. Meaning if you have few products, you will need a higher price per item to offset cost. Conversely, having greater quantity means lower cost per item but greater number of sales to make. A successful producer who builds relationships with multiple buyers will utilize several outlets and tiered pricing to hit their sales targets. Your marketing mix may also look different over time as you adapt to changing market needs and preferences.

Here is an example of how to evaluate market potential. Assume there is $100.00 additional cost to participate in a farmers market each week. This may include a fee for the market, paying an employee to go to the market, and fuel for traveling to and from the location. That $100.00 would need to be covered by sales that week (or over the course of the season) for the market to be viable. Some weeks you may hit the target and other weeks you may not. If a market consistently failed to meet your goals, it may be time to look at other options. 

If you were to charge average pricing for tomatoes ($1.25 per pound), what would be your breakeven for the market given this scenario? Recalling the examples shared in Tables 1 and 2 of our article titled “How Much Can I Sell This For? (Part II)”, the cost of production for tomatoes (at 38,000 lbs./acre) is $.31 cents per pound. Remember the $100.00 of marketing cost that needs to be covered. With the current scenario, $1.25 (sales price) – $.31 (cost of production) = $.94 per pound goes toward marketing (and hopefully ultimately profitability). Only when the $100.00 from marketing is covered does the business move into profitable sales. So, with the current cost of production and marketing expense you would need to sell roughly 106 lbs. of tomatoes for the market to be viable (see Table 1). 

Table 1. Example: Evaluate Market Potential including Marketing Costs for Field-grown Tomatoes (one acre)

Perhaps that sounds like a lot to sell, so you decide to raise the sales price to $2.00/lb. Perhaps you determine the marketing cost is simply too high and it would be hard to recoup the cost. Perhaps you have three other vegetables you are selling and so the $100.00 is spread over additional items. This example looks at one product and one week at the market, but we know the season is longer and there are other markets and decisions you can make over that time period. If your price is high, you may have to adjust or find other markets. If your price is low, you may be hurting your bottom line and bringing down the overall prices others may charge in your market. Some markets have little to no marketing costs while others may charge a substantial amount. While it may be profitable, you may need to move higher volumes, so you decide to combine the farmers market and other market channels to move all your product. The analysis may be done with multiple variations, and the same principles apply but the process can become more complex with more variables present. The decision to market your own products presents additional challenges beyond agriculture production decisions, and these factors can change during the season. 

To compete in the world of agribusiness often requires flexibility. Entering the market with a base level of knowledge provides information for you to be able to make informed decisions. Finding a particular crop or market is not viable can sometimes happen on paper before it becomes a reality. Additionally, being able to pivot and negotiate, because of your level of knowledge, is a business advantage. We hope this discussion has been useful as you think of your own goals and plans for profitability on your farm.

Burkett, Kevin. “How Much Can I Sell This For? Part III.” Southern Ag Today 3(40.5). October 6, 2023. Permalink

Citizens across the nation feel increasingly removed from our system of governance. Even at the local level, they may wish to be engaged but may feel they need more time and resources to help resolve local issues. In addition, people often believe they need more information to offer a knowledgeable opinion about what should be done to improve their community. To address these fractures in democratic governance, Florida Agricultural and Mechanical University and the University of Florida partnered to develop the Community Voices, Informed Choices (CIVIC) program. CIVIC prepares Extension faculty to help communities address challenging community issues through deliberative discussions. It complements other Extension programs by creating a platform for community members to learn about and discuss community issues they care about but cannot solve individually. 

To date, CIVIC has delivered at least 18 in-person or virtual deliberative forums. Unfortunately, the COVID-19 pandemic significantly impacted our ability to recruit participants, so although participation has been limited, the small groups have generated meaningful conversations that have led to important outcomes. For example, in a discussion on water quality in the Indian River Lagoon, the discussion pivoted from environmental health to human health. From there, a partnership was formed with a nearby organization researching fish toxicity, and a youth fishing clinic was held to raise awareness of water quality issues and collect fish for their research. CIVIC will soon pilot deliberative discussions on food security in three locations around the state, and a climate change issue guide is being developed.

For more information, visit https://programs.ifas.ufl.edu/civic/about/.

Seals, Linda. “Using Deliberative Dialogue to Address Florida Community Challenges.” Southern Ag Today 3(35.5). September 1, 2023. Permalink