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Iowa Ag Lawyer|Golf is not agro tourism No Kidding??

Published November 29th, 2011 in General | No Comments »

Today, the California bankruptcy court issued a ruling confirming what a real Iowa ag lawyer should already know, that golf is not "agro tourism." A debtor in bankruptcy was attempting to avoid some zoning issues by asserting that the 18 hole golf course was an agricultural use and therefore doesn't have to follow zoning regulations.

I am glad to see that not even the wildly liberal and expansive thinking judicial system of the west coast bought that argument. If they had, it would be what is referred to as " a slippery slope". Bird watching would be next, followed by hiking and photography. Every case serves as a jumping off point for new applications of the law.

Closer to home, Floyd County Iowa is implementing zoning Ordinances for agriculture areas to require farmers to get a permit to build a building. This is a great example of government creep, first is a simple permit, then its building code, then its good bye to the very flexible nature of farm life that draws the hardy spirit to the country side.

I understand about 20 farmers showed up and contested the matter, with the aid of the regional Farm Bureau. I wonder how many of those farmers paid attention to the county supervisor's race that put those rule makers in power. I wonder how many small town lawyers are paying attention.

Iowa Farm Lawyer|Why you shouldn’t dance in the farmland ball

Published November 15th, 2011 in General | No Comments »

Grain and livestock prices have gone up and down in the last quarter decade. Farmland values have gone up every year for during that same time period with interest rates doing exactly the opposite. Bankruptcies in farm operations are rarer than an original prom dress. Some of those years have been slight bumps, but most have been giant leaps, with Kansas City Federal land bank indicating Nebraska land values jumped 40% last year. That type of steady action is the type of dance partner everybody looks for.

Average farmland values in Iowa has moved from upper $2,000s per acre in 2005 to an easily over $7000 per acre in 2011, which choice parcels selling over $12,000-$16,500. Right now 50% of farm ground is rented and the majority of Iowa farm ground is held by those over 65 years old.

Where those purchasers of farm ground buy their pencils is apparently a secret, because the pencils most folks use determine that those prices are solid business acquisitions do not come up with a buy recommendation.
Who is buying the ground? Investor’s see a safe bet instead of the wild party girl of the stock market and farmers are dancing with the partner they know, soil.
What is going to stop the music and send the dance partners home? Corn prices losing ½ of the value back to the $4.00 range (which five years ago sounded great), along with the input industries (seed, crop protection, fertilizer and chemical) continuing to rocket upward costs to capture the high prices of the product produced can quickly change the tune. Companies have invested heavily in GMO products and are now moving to crop protection products outside the seed to keep increasing profits and yield. They will not lower prices when commodity prices fall.

Interest rates also play a key. Some predict 6-7% interest in the post 2012 Election years, other predict 4%, however most agree that low interest rates that we see regularly now are going to be a thing of the past. This cuts into operating cash for the over extended farm operator and makes farm land look way less tantalizing to outside investors. Moving interest from the near nil level of today to 4% can cut deep into the per acre return that has to pay the inputs, the rent, the machinery and the light bill.
Most look at a capital return on investment to determine the value of farm ground. They take the interest rate available and compare it to what the return per acre is available via production or rental. The problem with that model is to sustain the per acre analysis with a change in interest rates, requires an increase in the rent obtained, which is unlikely when prices fall and inputs remain high. A farm lawyer should suggest a pure profit per acre approach, with assumptions built in for rising costs and declining return, reflect the true value in the future of the land. Maybe some of those dancers should stay home and wash their hair instead.

Iowa Ag Lawyer|Congress may be messing with your estate plan

Published November 10th, 2011 in General | 1 Comment »

The Congress of the 2000s just can't let the practice of estate law and planning untouched. The congress has modified estate tax law more times in the last ten years than in any other time period and the changes are often times swift and dramatic. Even when they don't intend to, Congress has a way of fouling up everybody's plans. Putting it writing helps, but keeping your eye on Congress is required.

The drama budget of this late summer created a new law. This law raised the debt limit and created a congressional panel referred to as the “Super Committee". They are required to come up with deficit reduction legislation to be this year. Its recommendations to Congress go public on November 23 with a vote up or down by December 23. Failure to agree triggers some automatic spending cuts. Congress can act awful fast when it wants to and it perceives votes and seats are on the line.

The plan may include an attack on $5,000,000 exemption to gift and estate tax. Talks and whispers suggest that the committee will change the exclusion amount from $5 million to $1 million on New Years Day or sooner. That is less than two months away. Quite frankly, it would be low hanging fruit to adjust this amount in the eyes of the representatives who have up to 50% of their voting base not paying any tax at all.

Couple this change with the high level of land prices, commodity prices and equipment values and many farmers who just updated estate plans or those who don’t pay attention at all may be caught unaware. Having an Iowa Farm law attorney may be a wise investment to understand the true value of your assets.

Land prices are up 30 percent in some areas, demand for equipment remains strong and some hint at inflation. These factors can all lead to drifting into tax brackets that you never dreamed you would be involved in.

Bottom line is that if your estate plan include agricultural ground and any sort of gifting plans, you need to contact an Iowa Agricultural law attorney and found out how an Iowa Ag Law lawyer can help you maximize the current exemptions under the law.

Iowa Ag Lawyer|As if we dont’ have enough to do

Published July 21st, 2011 in General, NE Iowa Farmer Articles | No Comments »

Published in the NE Iowa Farmer July 2011

As if we don’t have enough to do

The Federal Government wants input on its latest great ideas. The first is a new interpretation of federal trucking regulations, which would require any one hauling grain that, “is ultimately used in interstate commerce,” to be subject to federal regulation. The US Supreme Court long ago decided Interstate Commerce includes farmers growing wheat on his own farm, grinding, and using it on his own farm. The rationale is that since he grinds his own, some other farmer did not get a chance to sell it to him. That is a wide net to cast.

The practical application is that the federal government could regulate (that potentially means Commercial Drivers Licenses, drug tests, physicals, and logbooks) every farmer who hauls grain to an elevator, even if they do not leave the county. I think even the most liberal founding fathers of this country would rise from the dead if this concept prevails. Nothing is more local than food production.

The government would like to impose commercial driver’s regulation on farm vehicles. I understand newer equipment travels farther than Grandpa’s M was ever envisioned to travel over the road. I also acknowledge that the equipment is significantly larger. Yet, I do not see how requiring a CDL to operate farm equipment will improve anything.

My least favorite concept is requiring crop share farmers hauling the landowner’s portion to the elevator to be subject to federal motor carrier operation standards. That would seem to apply even if the crop share tenant is using a tractor and wagon. Consider the folks cruising across the state in RAGBRI this summer. As the Sag Wagons (which are converted school buses) and RV’s roll along the back roads of Iowa, rest assured no regulation is coming their way regarding hours of operation, driver qualification, etc., as the vehicles are, “for recreation,” and therefore not subject to the same standards as the combine would be. This type of action is exactly what Iowa Ag lawyers are all about, identifying the impact of the law as it relates to production agriculture.

Corn Smacks

When I was a kid, one of the forbidden breakfast cereals was “Sugar Smacks.” It was too much of a good thing that early in the morning (I think it was all sugar with a sugar chaser). Fear not, the Senate will not serve Corn Smacks to the ethanol industry. Ethanol provides too much locally controlled, renewable fuel supply for the country. America’s Nanny, the Senate, is leading the charge on eliminating subsidies for the growing ethanol industry. They wouldn’t want us to get too used to the idea of having our own, homegrown fuel supply. Ethanol only utilizes less than 2% of the world grain supply on 3% of the available acres. Funny, it was an oil state Senator who sponsored the idea and the gargantuan oil subsidies our government authorizes were not up for review. It appears the house will not follow suit. The house has, however, began to chip away at the Ag budget for the upcoming fiscal year.

Tax Breaks

Under Section 179 of the Internal Revenue code, the amount of depreciation expense a business can turn from a long term, slowly expense into an upfront, first year expense remains at high levels. For tax year 2011, this amount is $500,000. In addition, bonus depreciation (letting you take up to another 50% in upfront expenses) is available for 2011 tax year. While it seems like a long way away, operations are now 50% done. For the calendar basis taxpayer, getting an estimate on where your operation stands prior to the crunch at the end of the year is never a bad idea. The IRS is full of good ideas on how to prevent you from taking deductions

Iowa Ag Lawyer|In Bed with the Dragon

Published June 21st, 2011 in General | No Comments »

May 2011 NE Iowa Farmer

Walking the Tight Rope.

An individual can give up to $5 million during his or her lifetime without paying a gift tax, and for couples that threshold is $10 million. Before, the limit was $3.5 million per person. As land prices continue to rise, a smart estate plan could utilize the gift tax exclusion to pass on highly valued farm ground to the next generation. Ir a gift recipient decides to sell, that the land’s presumably low basis also transfers with the title, creating a capital gains tax issue It is a delicate balance of interests to decide what is the best course of action and no one course of action fits all parties. The higher gift tax exemption is only on the books until 2013, so those who take a long time to contemplate may be left out in the dust. The capital gains event can be wiped out by holding on to the property until death. The land is then subjects to creditors claims and if the value rises, puts the estate in the position of having to pay estate tax, which is higher than capital gains taxes usually.

In bed with the Dragon: Brazil’s Battle with China

China has become Brazil’s leading trading partner, buying increasing volumes of soybeans and iron ore, while investing billions in Brazil’s energy sector. The demand has helped fuel an economic boom.

Nearly 84 percent of Brazil’s exports to China in 2010 were raw materials, up from 68 percent in 2000. Yet roughly 98 percent of China’s exports to Brazil are manufactured products ( including the latest, inexpensive cars for Brazil’s emerging middle class ) that are beating down Brazil’s domestic industrial sector.

This is an unbalanced relationship. China, however, is not content simply purchasing raw materials, they want to own ground in Brazil. Brazil’s current government is not as China focused as the last one and is trying to rebalance the relationship and move closer to the U.S.

Brazil has taken steps to curb the ability of foreigners to own land outright, but China’s dominate position in the country’s economic structure will make sure it will be tough to tell China. By contrast, China does not allow ownership of much if any of its own soil by foreign concerns.

Brazil is the competitor of US Ag production since we both sell to China. China’s move to control the raw material production in Brazil should serve as a wake up call to US farmers and policy makers. As the government sits on its hands regarding free trade agreements with South Korea, Columbia and Panama, China plows ahead. Once China secures the source of the raw materials it needs to feed its growing populace they will no longer need US products.

In Iowa, foreign concerns can’t own farm ground, in fact Iowa has a stringent set of rules on who can own farm ground. Corporations cannot own farm ground unless it is converted to non farm ground within 3 years of purchase or it is a family farm corporation. An Iowa Ag layer can help you determine if your company fits this exception.

Cuts like a Knife.

The Congress recently moved to reduce the USDA spending levels down to 2008 budget levels. In fiscal year 2012, $108.2 billion is budgeted for “mandatory” programs such as food stamps ($71.2 billion), the Commodity Credit Corporation ($14.1 billion), the Federal Crop Insurance Corporation ($3.1 billion) and the Agricultural Marketing Service ($1.1 billion). Plus $17.25 billion in discretionary spending.

That is a lot of dough, even after it was subjected to the Congressional knife. Somehow, I think there is still fat on the meat that other interests like the EPA, Social Security, military spending are going to want to carve off to their own pet projects.

Buy Big or Go Home

Internal Revenue Service Revenue. Proc. 2011-21 and 2011-26 is not something to be read without access to Five Hour Energy or No Doze pills, however its has some very important implications to agricultural law. CPA Douglas Stives of Monmouth University provides some insightful points in analysis on those IRS documents.

The bottom line: There is a big incentive for businesses to buy a behemoth gas guzzler like a Cadillac Escalade or Ford Expedition this year. They can deduct 100% of the purchase price immediately (minus a disallowance for any personal use, of course). Lawmakers were far less generous with depreciation deductions for purchases of cars weighing less than 6,000 lbs. How can this be?

*The IRS defines a “luxury car” as ,believe it or not, e costing more than $15,300. Such cars are subject to depreciation limits unless they weigh more than 6,000 lbs. and the special 100% deduction applies.

*The maximum first-year depreciation for these “luxury cars” is $11,060. This consists of an annual regular depreciation of $3,060 for the first year plus “bonus” depreciation of up to $8,000. The write-off in year two is normally $4,900, then $2,950 in year three, and $1,775 in tears four and beyond.

*Changes to the law last year left first-yext goround, so if the big vehicle is something your business operation needs, this may be the time to take the plunge.ar depreciation for “luxury cars” unchanged, but the congress reduced the out-year deductions for those costing less than $30,625. For example, a $20,000 car would get a second-year deduction of only $3,200 instead of $4,900. The higher deductions still apply to cars costing more than $30,625 (and weighing less than 6,000 lbs.).

I would think something will be done about this the new tax rules. The IRS is always looking for revenue, it is in their nature and their name.

Iowa Ag Lawyer|What Shape is Your Hat

Published June 21st, 2011 in General | 1 Comment »

What shape is your hat

NE Iowa Farmer June 2011

The old joke that farmer’s seed corn caps are curved because of looking into the mailbox for the government check may become a thing of the past, and not because of electronic deposit.

With high prices for key agricultural commodities and rapid global increases in food demand, farm programs developed years ago in an era of low prices appear to be heading for the hangmen’s’ noose. Dan Glickman, former USDA Secretary of Agriculture confirmed that sentiment at the recent Economics Food and Agriculture Policy Conference.

Agriculture built a commodity surplus that lasted until a few years ago, but that’s no longer the case. Also with a national debt of $1.6 trillion, lawmakers have to examine all programs, including agricultural ones. The latest tax proposal calls for an increase of taxes on those who make over $200,000 with a net result of $80 Billion in revenue. That is a drop in the bucket. It is like a company that is loosing $16,000 a year going to the bank and saying the only change we are making is we are taking $80 from our top sales guys. Would you lend money to that company? Yet, that is the proposal for our government to right itself. Program cuts are coming.

With key commodity prices strong, the next farm bill will be written under different circumstances all together. People live in largely urban areas, and “fly over” states where the majority of ag production (outside of California) exists are losing, not gaining, seats in the House and its Senators don’t seem to be all on the same page. Take for example, Senator Tom Harkin’s recent participation as a co chair of a conference whose focus is on reducing meat consumption that is backed by the Human Society of the United States and foodie Michael Pollan. Hardly seems like that is representing Iowa in the least bit.

Crop insurance will play a larger role, and while the upper Midwest largely uses crop insurance, the deep south distains it. Either it doesn’t pay for the premium invested or they know that the federal government will gin up an ad hoc disaster bill for them in the event of true emergency. The response to the request for federal disaster area in Texas (denied) should serve as a warning.

All is not lost for commodity supports, Senator Saxby Chambliss of Georgia has indicated that he saw the destruction of the southern textile industry because of government policy changes, and he will not witness the destruction of southern agriculture. Southern states rely heavily on commodity programs.

Different forces such as health, national security and energy have entered the farm policy debate. It wasn’t always like that. It used to be the farm states handled it. Now it is everybody’s business what is going on in the farm bill, not just Iowa Farm lawyers.

Even Prince Charles, fresh off of not paying for his son’s wedding, is getting in on the debate. He is an ardent organic advocate. He believes that growing populations, rising commodity prices, increased demand for meat as incomes grow, a changing climate, and limited water supplies are best dealt with by organic farming because of its ability to maintain soil fertility reliance on chemical inputs. In a recent conference he called for pulling subsidies from conventional farmers and increasing their energy costs to provide more economic incentives for organic agriculture.

The United Nations says a billion people go hungry on this planet each day. And the overall population is growing. Experts expect we'll top 9 billion by 2045. Noted food prize winner Norman Borlaug has embraced technology as a means to meet the growing demand, I don’t see what the Prince has against technology. As a zealous Irishman, I am already prone to not listen to the Prince, but this really doesn’t make sense to me. I could take some jabs at the Crown’s citizen’s health care, dental care and perhaps personal hygiene standards as further evidence of reluctance to adopt technology not resulting in positive results, but I digress. Organic farming has its place in the market as a “food choice” as does conventional farm operations who will continue to feed the masses. Any wonder that Whole Foods (a national organic retailer) is just now getting around to opening a store in Iowa? I don’t think it is about feeding the masses.

The bottom line is that agricultural operators should anticipate that the way the FFA instructor and their grandfather did things will not likely cut the mustard in the future. And maybe they should consider what type of hat they wear.

Get off your Farm

The execution for over 100,000 acres of farm land and 90 homes and farm building sites in southeastern Missouri was in the middle of the night and without a final meal or request. With water flowing at 550 feet per second, the destruction was swift. At the time the levee was breached, acreage in the affected area was selling for between $4,000 and $6,000 an acre. Corn prices were about $6.75 a bushel and the land was producing about 200 bushels an acre. Wheat was selling for between $8 and $9 a bushel and the land was producing about 75 bushels an acre. Soybeans were selling for between $12 and $14 a bushel and the land was producing about 70 to 75 bushels an acre. The Corps of Engineers' own estimates place damage to the property at more than $300 million.

Shortly thereafter attorneys filed a class action suit alleging the government violated the farmers' property rights protected by the 5th Amendment of the Constitution. The Corps lacked the easement over the affected property in the floodway. The class action complaint charges that the action violated the "takings clause" of the 5th Amendment which prevents the government from taking private property without due process of law the government must pay for the taking.

In Iowa, such an easement would have been reflected in the abstract and brought to the purchaser’s attention via title opinion. Iowa is the only state that still uses abstracts and title opinions to make sure a purchaser of property knows exactly what encumbers the property. Other states just sell “title insurance” which , to me, is a form of legalized gambling that you actually own the property and that no easements will impact your use of the same.

The counter argument is that those farmers knew the corps could blow the levee at anytime and benefitted all these years from its protection. Therefore, they should just lump it and move along. I don’t think that will hold water with the courts. The actions of the government in this situation are little different than when the State of Iowa wanted to build Volga Lake into a destination recreation lake. The government took property of a private citizen and in both cases, the citizen needs to be compensated.

Iowa Ag Lawyer|Trying to Boss me around

Published April 21st, 2011 in General | No Comments »

NE Iowa Farmer April 2011

As 24 row planters with row unit shut offs and GPS guided crop inputs become routine and not a white elephant, the concept of hiring cheap labor to cover lots of acres becomes more mainstream.

Employees, especially ag employees, have a their own set of rules to abide by. Previously we have discussed the differences between independent contractor and employee and what your Ag Lawyer can do to help you with that, so I will skip that discussion and focus on the relationship between employees and employers.

Being a better boss primarily requires us to communicate with our employees effectively. Recognizing that the leader and the led are only two portions of the puzzle, the message and the goal must also be considered when developing an effective communication relationship with employees. If you don’t communicate the goal, the led will substitute their own goal and when the goals don’t match, conflict results.

For example, during the spring, just prior to planting, your employee reports to work a 6 AM as normal, expecting to be gone by 2 PM, as per normal arrangement. The employee tells her husband to plan her to be home to prepare their own equipment for spring planting. However, you have decided to move equipment to your equipment to the field in hopes of calibrating all the electronics so that you can start when the crop insurance planting window opens up. Your goal is to make sure that on the first available day you are running hard, and you view this prep day as critical to get it all done, regardless of time spent. As mid afternoon approaches, two very different sets of expectations are brewing, which could have been avoided by cluing the employee in at the start of the day or beginning of the week on the things you, the employer, wanted accomplished.

On your organizational structure, it is extremely important understand how far your “aura” of control goes. In most organizations, about 5-6 people is as many as should report to one person. It is interesting that the lowest level of leadership in the military is a team, which is 4-5 solider element lead by a team leader. Battle and time tested is good litmus test for any recommendation. If everyone of your employees report directly to you and you have more than 5 employees, you probably need to reassess.

In disciplining problem employees, it needs to consistent and follows the same procedures or it will not be perceived correctly. Many of these reasons for underperformance relate to you as the employer versus the employee. Make sure that you can correct these issues first and then see if the employee remains an under performer. These issues can be lack of realistic expectations, lack of clear guidance, improper or incomplete training, or lack of delegation authority to the actual decision maker.

In dealing with under performers, make sure to DO SOMETHING about it. Refuse to allow the problem to fester. Stop the negative effects on the business, the worker’s happiness and the worker’s effectiveness.

As an employer, you want to be friendly and fair with all employees, but be a buddy of no employee.

Some key concepts to consider are

Get rid of the thought "I can do it better and quicker".

Delegate the results, not the method unless the method is crucial to the success.

Delegate every decision down to the lowest-ranked employee capable of making the decision. Remember, you can delegate authority, but not responsibility. Once you have delegate a task, DO NOT EVER take it back unless there is truly an impending disaster.

All employee’s capable of delegating a task should remember that concept as well.

Acknowledge the work, no matter how trivial it might seem. We all want to feel like we are contributing to the team. However, avoid pandering and baseless praise. A simple acknowledgement goes a lot farther that empty rhetoric.

Ever Wonder about flashing lights and what is required for

self propelled farm equipment but never wanted to ask an Iowa Ag Attorney.

Sunset to Sunrise-1 white light to the front, one red tail lamp to the rear and one amber flasher to the rear

Towed Implements

One red tail lamp lighted at the rear of the towed implement

Amber flasher on the towed implement if the flasher from the towing equipment is not visible

All lights need to be visible for 500 feet.

Towing:

Registered vehicles (i.e. pickups) -Safety chain and drawbar required

Farm equipment towing farm equipment- drawbar, no safety chain required, though recommended.

Vetting the Vet case

Published March 16th, 2011 in General, NE Iowa Farmer Articles | No Comments »

Vetting the Veterinarian Case

NE Iowa Farmer March 2011

It is easier to use a vet you trust or find somebody who can give you a referral to a good vet than it is to sue a poorly performing vet. If the animal is valuable enough to sue over, insure it. When considering a lawsuit against a veterinarian, here are some things you should consider:

Veterinary malpractice cases are difficult for plaintiffs for two main reasons:

1) It is hard to find a veterinarian who will testify against another veterinarian; and

2) Animals are personal property. You usually cannot recover pain & suffering or damages based on the sentimental value. That takes the wind out of most plaintiffs’ cases right away.

The burden of proof in a veterinary malpractice action is always on the plaintiff.

The plaintiff must prove:

1) A veterinarian’s acts or omissions failed to meet the standard of care;

2) Acts or omissions were negligently performed;

3) Negligently performed acts or injuries caused the animal’s injury or death; and

4) As a result, the plaintiff was damaged.

The professional duty of a veterinarian usually begins with obtaining a history of the animal (which assistants can be used to develop) and a physical examination. The veterinarian is required to use professional leaning, skill, and care, beginning with the initial contact, the diagnosis of the problem, the decision and execution of treatment and follow-up care.

In obtaining permission for treatment, there should be disclosure of the risk of the treatment or drugs. However, in one case where a horse died within fifteen minutes of being injected with a drug, the court held that there was no duty to disclose or warn when the odds of a lethal out come were 1 in 25,000. I think people bet on horses to win races with worse odds.

For example, Vet uses a “punch" test rather than a rectal test during a preg check. The owner sold the cow for $170, rather than the $550. The issue was not whether the method of exam was done properly, but whether the appropriate test was used

Also, you have to proof the act caused the injury or death. If you are calling a vet, the animal is likely sick already. You have to establish that the vet’s act is the reason for the injury or death, not just that the steer died when the vet gave it a shot.

For example, Vet mixes the lye and P&G soap wrong, treats dogs and dog die. Sheep dipped incorrectly and die. Vet loses in both the cases, as the act was done incorrectly.

Some of the other considerations against vets may include

1. Res ipsa loquitur. Some mistakes are so obvious that the average person can make an informed judgment. I was taught in law school that if you are arguing Res ipsa case for the injured party, you are arguing a loser.

2. Administrative Action for Malpractice. A person may file an action against a veterinarian with the state administrative licensing board that oversees veterinarians.

3. Negligence. If the actions in question are not within the realm of malpractice, then there may be common negligence. For example, if a veterinarian was overseeing the loading of a bull into a head gate and did not properly secure the head gate, the standard of care is that of negligence, not a professional malpractice claim.

4. Gross negligence. If a dog came in for a treatment for heartworm check up, and the veterinarian removed a lung that would be gross negligence. A claim of gross negligence may support different kinds of damage awards, but it just doesn’t happen a lot. Again, super hard to prove and hard to find a plaintiff’s lawyer willing to take that on.

5. Intentional and negligent infliction of emotional distress (on the owner). This may arise when the actions (against an animal) are intentional and likely to produce a strong reaction in the owner. Iowa hardly recognizes it for people; I think it is a non starter for animal cases.

6. Duties of bailee. When a veterinarian boards animals they are acting as a “bailee” of an animal then legal liability may arise either out of negligent care of the animal or failure to redeliver the animal to the owner. This is like when you give your coat to coat check, you aren’t giving the coat away and you expect to be returned in about the same condition that you gave it to them. In one case, an insured veterinarian was bailee of an elephant “Sparkle”, who died from poison while in his custody. A claim based upon a bailment does not require an expert witness.

7. Violation of a contract obligation. This may be a useful approach if there is a written contract. However, oral agreements may also constitute a contract but are harder to prove. A contract claim can not be based on general statements of reassurance, i.e. "I will take good care of Sounder." Rather, it must be a specific promise to do something or obtain a specific result. Again you are limited on damages.

Farming.. its not a lifestyle

Published February 17th, 2011 in General | No Comments »

NE Iowa Farmer Feb 2011

Farm Planning Its not a life style, it’s a business

70% of North American farms will change hands by 2025. This is not just ownership, but who farms the land. This provides plenty of opportunities for American farmers.

We need to get over the concept that farming is a lifestyle that deserves special provisions protections and romanticism. It is apparent that it is a business to the non farm sector, and unless the operators of farms act like business men and women, they will be consumed by those who do. Direct payments and counter cyclicals will be under attack and likely crop insurance will be offered up to replace the guarantee payments.

Farming has 3 golden times in the last 100 years (1) during the 1910′s (when the US fed Europe as Europe shot each other into the stone ages, (2) during World War II (when every body wanted to be like Europe and shot everything back into the stone ages) and the period thereafter and (3) during the mid 1970′s (again when our competitors abroad couldn’t meet the demand). Drive through the country and look at when houses were built. Lots of 1915 builds still dot the country side, with plenty of post world war II expansions and 1970’s ranch style houses. Coincidence, I think not.

Perhaps another set of good times is happening right now. Number crunchers indicate that for the last ten years indicate that farmers have had the best overall profitability over the last three years and 2011 appears to be just as good. The economy in 2011 is expected to be recovering with growth possibly around 4% with low inflation. I think that is pretty optimistic. It used to be normal for baseline unemployment near 4%, as the economy always wants some people looking for work. This number is now expected to be closer to 6%. If this ends up being incorrect, then inflation may become more of a factor. Currently unemployment remains near 10%. Right now, housing starts are running behind normal trend line on an annualized basis. Without housing, recovery doesn’t do well. Manufacturing is growing, but that could be just be inventory replacement. Christmas time sales in Retail were solid. But retailers always seem to find a reason to whine.

Good times are defined by the lack of good times that follow. If we are in a good time, it is important for agriculture business operators to take advantage and prepare for the bad that follows. As long as prices stay steady, the “land bubble” that everyone is concerned about will be held off. However, the market charts look like Six Flags roller coaster schematics lately, so that is not entirely comforting. If oil prices continue their trend above $90 and exceeds $100 per barrel, it could easily send us back into a second recession. Kuwait oil officials indicate that $80-$100 a barrel is just fine with them and other OPEC nations seem to agree.

So how does a farmer operator behave like a business operator? Acknowledge the elements you need to be successful, assemble those elements and place them into action.

Acknowledge that you must consider management of revenues, farm input costs and your interest rate management. These will need to be balanced. Obsessing over one will hurt the other two. Getting a handle on costs of production will help you make sales decisions that are rationally based, not emotionally based on who has the best bragging rights at the Co-op.

Another item to watch is your repayment capacity. This is calculated by taking your net farm income adding non-farm income plus depreciation and interest expense on long-term debt and capital leases. From this total, subtract long-term debt and capital lease payments, net cash incurred for equipment purchases required annually and family living expenses. This math formula this tells you how liquid you are for this year and the upcoming year. If this ratio is less than 1, you will have liquidity problems. It should be greater than 1.5 to 1 to be comfortable and above 2 will give the liquidity to expand, etc. Knowing this will take a lot of drama out of going to see the banker.

Farm operators should consider three areas when they conduct business planning, Investment of capital, management decisions and day to day director actions. The difference between buying a replacement tractor, selling on the board and deciding on fixing the combine today or grinding feed are in how you view each area. Identifying who makes each of these decisions is critical in long term multi generational family. Each of these roles interact this can be the time when the most conflict if roles are not clearly defined.

The reason the military has so many officers in planning cells to support combat operations is because strategic planning is hard work but it pays dividends. To borrow from the military consider the following planning techniques.

SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis will help assess the current situation of the farm. Then, applying the analysis to the Enemy (competing operations and weather) Terrain (what ground is available), Troops and supply available (equipment and employees and inputs) and civilian considerations (your family) will help you determine what opportunities exist.

It is difficult to manage output, but inputs we can manage with some degree of certainly and you can’t manage what you don’t observe. Seeing what impacts output will pay off. For example you can’t manage the weather, but you can manage how you let the weather impact your operation.

Be mercenary in your evaluation. Running a rabbit enterprise may be the way grandpa always ran the farm, but unless you are the supplier of rabbits feet lucky charms to Wal Mart and are turning a profit, you need to let it go. By doing this, you free up resources to expand those operations that are profitable. This can be a double benefit.

To grow your farm revenues, you have several opportunities to consider:

1. Increase sales – same customers; same product mix (more bushels/more head)

2. Existing products; new customers-Ethanol plants, direct sales

3. New products – same or new customers Niche Markets

4. Increase sales with better delivery / channel management. Owning the transportation as opposed to paying for it.

5. Expand geography owning farms and production sites in new markets.

6. Change industry structure via acquisition/alliances-do you need to own the hogs or just raise them for a per head rate.

7. Cross industry boundaries- buying elevators, marketing grain for others, buying inputs and reselling to others.

Horses.. We can’t afford to loose no horses!!

Published January 19th, 2011 in General | No Comments »

NE Iowa Farmer Jan 2011

Horses… We can’t afford to loose no horses…! Send two…. Congressman

In 2006, two Texas plants and one Illinois plant slaughters 105,000 horses for human consumption in Europe and Asia. By 2007, court action effectively closed the Texas plan and a state ban in Illinois closed that plant. Not satisfied with this result, activists have continued to press Congress for a federal level ban on the slaughter of horses.

Using the backdoor power of the purse, Congress has prevented funds from being used to inspect horse slaughter, going a long way towards the industry. Now, legislation making it a criminal event to slaughter horses has been introduced. Fairly certain of the victory here in the US, the activists have turned to making it harder to export horses to Canada and Mexico where the slaughter houses are still open.

Not all is going the way of the activists, North Dakota, South Dakota and Tennessee are currently considering legislation to allow processing of horse’s under state authority. Market demand is increasing according to veterinary articles.

The problem is the ban on horse slaughter has effectively made old, tired and skinny horses that are no longer the dreams of Derby attendees, ripe to be abused and neglected.

The number of animal neglect cases seems to be growing. Mental health professionals are starting to consider whether the destructive relationship of acquiring animals and then failing to feed them properly or care for them is a form of mental illness.

Recently, a woman was convicted of neglect of horses in Virginia. She has previously given the horses to a shelter and when the shelter failed, they were dumped back into her lap. She was partial paralyzed and had to hire people to feed the old nags. When a winter storm hit that blocked her drive for several days, her contractors didn’t show up. Animal welfare folks showed up soon after and criminal charges were filed when surprise surprise, the animals were not in good shape.

What’s the lesson here for agriculture. Horses have long occupied the fancy of the non farm section of the world. Black Beauty, Flicka, Sea Biscuit, and the wild horses of the Delmarva peninsula are the stuff of school girl readers and warm hearted movies. Our national ethos is easily swayed that horse slaughter is the stuff of dark, perverted ner do wells and filthy corporate greed mongers.

Cattle, Sheep and Swine producers should take note. Notice how many stuffed sheep a child gets? The Chik Fila Cows (while not popular here in the Midwest) aren’t just shilling for the chicken sandwich shack, they are slowly winding themselves into popular culture as something other than a source of meat. Even Wilbur the pig and his friends made a pitch that he was “SOME PIG” not some bacon.

As our society looses touch with production ag sites, the events of the horse meat industry will provide an easy road map to the potential fall of meat production without engaging society and educating our consumers that Milk comes from cows, not from the dairy case, Bacon tastes good because we are using sound production practices and care about the animal from semen to cellophane and Hamburgers aren’t made in a factory, they are made in field.