Category Archives: Business and Financial

Is the third time the charm for Farmer Fair Practice Rules?

Written by Ellen Essman

A new rule proposed by the USDA Agricultural Marketing Service (AMS) covers a topic that has been up in the air for more than a decade.  The 2008 Farm Bill called on the Secretary of Agriculture to create regulations meant to guide the USDA in determining whether or not a packer, swine contractor, or live poultry dealer gave a person or locality “any undue or unreasonable preference or advantage” when purchasing livestock and meat products. The Secretary of Agriculture entrusted the rulemaking to USDA’s Grain Inspection, Packers and Stockyards Administration (GIPSA).  GIPSA did propose versions of the rule in 2010 and 2016, but neither ever went into effect due to congressional prohibitions on such rulemaking and a presidential transition, respectively. (The anticipated regulations have long been referred to as the “Farmer Fair Practice Rules.”) Once Trump came into office, his administration did away with GIPSA and gave its responsibilities to AMS, further delaying the rulemaking.

After all this time, what does AMS propose for the Farmer Fair Practice Rules?  On January 13, AMS published its proposed rule in the Federal Register.  AMS would add a section to the Packers & Stockyards regulations, which would allow the Secretary of Agriculture to “consider one or more criteria” when deciding whether a packer, swine contractor, or live poultry dealer unfairly favored any person or locality over another in their dealings.  AMS developed four criteria to be considered when determining whether a packer, contractor, or dealer’s actions were unfair.  Actions would be deemed unfair when they:

  • Cannot be justified on the basis of cost savings related to dealing with different producers, sellers, or growers;
  • Cannot be justified on the basis of meeting a competitor’s prices;
  • Cannot be justified on the basis of meeting other terms offered by a competitor; and
  • Cannot be justified as a reasonable business decision that would be customary in the industry.

In the rulemaking, AMS provides several examples of fair and unfair practices. AMS also emphasizes several times that the Secretary of Agricultural would not be limited to considering just those four criteria when making a decision, as each situation is unique.  In essence, the proposed language is meant to guide the Secretary’s thinking when making a determination about whether or not an action is unfair.

If you would like to read more about this proposed rule it is available in its entirety here.  Information about submitting comments on the rule is available at the same link.  Comments on the rule may be submitted up until March, 13, 2020.  Will this version of the elusive Farmer Fair Practice Rules finally stick?  We will have to wait and see.

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Filed under Business and Financial, Contracts, Crop Issues, Uncategorized

Ohio Ag Law Blog–New fact sheet describes how to prepare for a crop insurance audit

Written by Ellen Essman

With 2019’s ups and downs in the weather and the marketplace, it’s likely that many farmers used the Federal Crop Insurance Program to mitigate their losses.  Those farmers whose crop insurance claims reach $200,000 or more will be audited by the USDA’s Risk Management Agency.

What’s the purpose of an audit—does it mean you’re in trouble with the government? What can you expect when going through the audit process?  How do you prepare for an audit? What kind of records and documentation do you need?  All of these questions and more are answered in a new fact sheet we recently published through our partnership with the National Agricultural Law Center.  Click here to read the fact sheet to better prepare you for going through an audit.

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Ohio Ag Law Blog–Ohio Legislation on the Move

Written by: Ellen Essman

We haven’t done a legislative update in a while—so what’s been going on in the Ohio General Assembly? Without further ado, here is an update on some notable ag-related bills that have recently passed one of the houses, been discussed in committee, or been introduced.

  • House Bill 7, “Create water quality protection and preservation”

This bill passed the House in June, but the Senate Finance Committee had a hearing on it just last month.  HB 7 would create both the H2Ohio Trust Fund and the H2Ohio Advisory Council.  To explain these entities in the simplest terms, the H2Ohio Advisory Council would decide how to spend the money in the H2Ohio Trust Fund.  The money could be used for grants, loans, and remediation projects to address water quality priorities in the state, to fund research concerning water quality, to encourage cooperation in addressing water quality problems among various groups, and for priorities identified by the Ohio Lake Erie commission.  The Council would be made up of the following: the directors of the Ohio Department of Agriculture (ODA), the Ohio Environmental Protection Agency (OEPA), and the Ohio Department of Natural Resources (ODNR) the executive director of the Ohio Lake Erie commission, one state senator from each party appointed by the President of the Senate, one state representative from each party appointed by the Speaker of the House, and appointees from the Governor to represent counties, municipal corporations, public health, business or tourism, agriculture, statewide environmental advocacy organizations, and institutions of higher education. Under HB 7, the ODA, OEPA, and ODNR would have to submit an annual plan to be accepted or rejected by the Council, which would detail how the agencies planned to use their money from the Fund. You can find the bill in its current form here.

  • House Bill 24, “Revise Humane Society law”

HB 24 passed the House unanimously on October 30, and has since been referred to the Senate Committee on Agriculture & Natural Resources.  The bill would revise procedures for humane society operations and require humane society agents to successfully complete training in order to serve.  Importantly, HB 24 would allow law enforcement officers to seize and impound any animal the officer has probable cause to believe is the subject of an animal cruelty offense.  Currently, the ability to seize and impound only applies to companion animals such as dogs and cats.  You can read HB 24 here.

  • House Bill 160, “Revise alcoholic ice cream law”

Since our last legislative update, HB 160 has passed the House and is currently in Agriculture & Natural Resources Committee in the Senate.  At present, those wishing to sell ice cream containing alcohol must in Ohio obtain an A-5 liquor permit and can only sell the ice cream at the site of manufacture, and that site must be in an election precinct that allows for on- and off-premises consumption of alcohol.  This bill would allow the ice cream maker to sell to consumers for off-premises enjoyment and to retailers who are authorized to sell alcohol. To read the bill, click here.

  • House Bill 168, “Establish affirmative defense-certain hazardous substance release”

This bill was passed in the House back in May, but there have been several committee hearings on it this fall.  HB 168 would provide a bona fide prospective purchaser of a facility that was contaminated with hazardous substances before the purchase with immunity from liability to the state in a civil action.  In other words, the bona fide prospective purchaser would not have the responsibility of paying the state of Ohio for their investigations and remediation of the facility. In order to claim this immunity, the purchaser would have to show that they fall under the definition of a bona fide prospective purchaser, that the state’s cause of action rests upon the person’s status as an owner or operator of the facility, and that the person does not impede a response action or natural resource restoration at the facility. You can find the bill and related information here.

  • House Bill 183, “Allow tax credits to assist beginning farmers”

House Bill 183 was discussed in the House Agriculture & Rural Development Committee on November 12.  This bill would authorize a nonrefundable income tax credit for beginning farmers who attend a financial management program.  Another nonrefundable tax credit would be available for individuals or businesses that sell or rent farmland, livestock, buildings, or equipment to beginning farmers.  ODA would be in charge of certifying individuals as “beginning farmers” and approving eligible financial management programs. HB 183 is available here. A companion bill (SB 159) has been introduced in the Senate and referred to the Ways & Means Committee, but no committee hearings have taken place.

  • House Bill 373, “Eliminate apprentice/special auctioneer licenses/other changes”

HB 373 was introduced on October 22, and the House Agriculture & Rural Development Committee held a hearing on it on November 12. This bill would make numerous changes to laws applicable to auctioneers.  For instance, it would eliminate the requirement that a person must serve as an apprentice auctioneer prior to becoming an auctioneer; instead, it would require applicants for an auctioneers’ license to pass a course. The bill would also require licensed auctioneers to complete eight continuing education hours prior to renewing their license.  HB 373 would give ODA the authority to regulate online auctions conducted by  a human licensed auctioneer, and would require people auctioning real or personal property on the internet to be licensed as an auctioneer. To read the bill in its entirety and see all the changes it would make, click here.

  • Senate Bill 2, “Create watershed planning structure”

Since our last legislative post, SB 2 has passed the Senate and is now in the House Energy and Natural Resources Committee. If passed, this bill would do four main things. First, it would create the Statewide Watershed Planning and Management Program, which would be tasked with improving and protecting the watersheds in the state, and would be administered by the ODA director.  Under this program, the director of ODA would have to categorize watersheds in Ohio and appoint watershed planning and management coordinators in each watershed region.  The coordinators would work with soil and water conservation districts to identify water quality impairment, and to gather information on conservation practices.  Second, the bill states the General Assembly’s intent to work with agricultural, conservation, and environmental organizations and universities to create a certification program for farmers, where the farmers would use practices meant to minimize negative water quality impacts. Third, SB 2 charges ODA, with help from the Lake Erie Commission and the Ohio Soil and Water Conservation Commission, to start a watershed pilot program that would help farmers, agricultural retailers, and soil and water conservation districts in reducing phosphorus.  Finally, the bill would allow regional water and sewer districts to make loans and grants and to enter into cooperative agreements with any person or corporation, and would allow districts to offer discounted rentals or charges to people with low or moderate incomes, as well as to people who qualify for the homestead exemption. The text of SB 2 is available here.

  • Senate Bill 234, “Regards regulation of wind farms and wind turbine setbacks”

Senate Bill 234 was just introduced on November 6, 2019.  The bill would give voters in the unincorporated areas of townships the power to have a referendum vote on certificates or amendments to economically significant and large wind farms issued by the Ohio Power and Siting Board. The voters could approve or reject the certificate for a new wind farm or an amendment to an existing certificate by majority vote.  The bill would also change minimum setback distances for wind farms might be measured.  SB 234 is available here.  A companion bill was also recently introduced in the House.  HB 401 can be found here.

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Filed under Animals, Business and Financial, Conservation Programs, Environmental, Food, Property, Renewable Energy, Uncategorized, Water

Bachelor moves on to private practice

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Evin Bachelor at OSU Farm Science Review

Mentoring is a rewarding part of my position with OSU, but it is often a bittersweet experience to see young people come and go.  Such is the case with our law fellow Evin Bachelor, whom I’ve had the privilege of mentoring for the past two years.  Evin left the Farm Office on September 30 to pursue private practice.

While I’m happy to send Evin off to serve farmers with his brilliant legal mind, I’m sad to see him go.  I will miss his passion, his cleverness, his analytical gifts, and his hearty laugh.  But it’s been a joy to help Evin evolve from a law student curious about agricultural law to an attorney prepared to impact the world of agricultural law.  He has deftly exceeded every challenge I’ve given him.

One of those challenges was to co-author a set of law bulletins on legal documents used in farm financing arrangements, his final project.  The Financing the Farm law bulletin series, which specifically targets new and beginning farmers, is now available.  The series includes explanations of mortgages, promissory notes, installment contracts, leasing arrangements and secured transactions, and how they’re used in farm financing.  Access the law bulletins in the Financing the Farm series here.

Evin will be practicing law with our good friends at Wright & Moore Law Co. LPA in Delaware, Ohio.  He’s an excellent addition to an already outstanding agricultural law firm.  You’ll continue to see his work on the Farm Office, however, as I’ll be contracting with Evin on a few more finance and farm transition projects in the next year.  The mentorship and Evin’s time at OSU is over, but the relationship will continue.  A bittersweet ending, to be sure.

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Fun in the Fall: Minimizing Liability at Your Agritourism Operation

Written by Evin Bachelor, Law Fellow, Agricultural and Resource Law Program

Whether we’re ready or not, Labor Day traditionally marks a transition from summer to fall.  Pumpkin flavored everything will soon be available at a coffee shop and restaurant near you, and Ohio’s agritourism farms will surely be busy.

Whether you are just getting your agritourism farm up and running, or a seasoned agritourism veteran, it never hurts to take a moment to think about your liability risks.  The OSU Extension Agricultural & Resource Law Program has developed a number of resources, available on our publications webpage, that can help you think about ways to minimize the legal risks to you and your farm.  These resources include:

  • Ohio’s Agritourism Law – Ohio law grants liability protection for personal injuries suffered while participating in an agritourism activity.  It also provides for special taxation and zoning of lands where agritourism activities occur.  This law bulletin explains what your farm needs to do to be covered by the immunity, and how much protection it provides.  Click HERE to read the law bulletin.
  • Farm Animals and People: Liability Issues for Agritourism – Farm animals can be a valuable attraction for an agritourism operation, but having people and animals interact on the farm creates liability risks.  This factsheet explains a range of animal liability risks and provides a checklist to think about what you can do to reduce the risk of injury to your visitors, as well as reduce the risk of a lawsuit.  Click HERE to read the factsheet.
  • Agritourism and Insurance – Even with immunity laws in place, a farmer must carefully consider the farm’s insurance needs and ensure that it has adequate coverage.  This factsheet explains agritourism insurance, why it may be needed, and more.  It also provides a checklist that may help an agritourism farmer make sure that certain important insurance questions are addressed before an accident occurs.  Click HERE to read the factsheet.
  • Agritourism Immunity Laws in the United States – Many states, including Ohio, have taken steps to encourage agritourism by providing agritourism farms with some degree of immunity to liability.  We explain Ohio’s law more in depth in our law bulletin titled “Ohio’s Agritourism Law,” but this factsheet compares approaches taken in other states and provides a checklist that helps an agritourism farm think about how much protection it has under these laws.  Click HERE to read the factsheet.
  • Agritourism Activities and Zoning – Zoning is a force to be reckoned with in many states, but many states, including Ohio, have taken steps to encourage agritourism through zoning regulations.  This factsheet explains how zoning and agritourism interact across the country, including an explanation of Ohio’s current approach.  Click HERE to read the factsheet.
  • Youth Labor on the Farm: Laws Farmers Need to Know – Many Ohio agritourism farms provide employment to youth, who are able to learn about agriculture, business, and customer service through working at the farm.  Those hiring youth under the age of 18 want to make sure that they are following federal and Ohio labor laws.  Our latest law bulletin explains the youth labor laws that are unique to agriculture.  Click HERE to read the factsheet.

Food sales present some special issues that you will want to think about if you wish to sell food at your farm.  Depending upon the foods you sell, you may have to obtain a retail food establishment license for food safety purposes.  The following resources can help you think through the steps you must take to sell food at your agritourism farm:

  • Food Sales at Agritourism Operations: Legal Issues – Whether you sell fresh produce, cottage foods or baked goods, or prepare and serve food on-site, there are legal risks and requirements that may come into play.  This factsheet explains some of the legal issues you should consider before selling food at your farm, and provides a checklist of things to consider before you begin selling food.  Click HERE to read the factsheet.
  • Selling Foods at the Farm: When Do You Need a License? – This Ohio-specific factsheet explores farmers, including those operating an agritourism farm, need to register or obtain a license in order to sell food at the farm.  Click HERE to read the law bulletin.

Beyond our website, many of our peers at OSU Extension have developed a number of helpful resources for agritourism farms.  OSU Extension’s Agritourism Ready webpage, which you can access at u.osu.edu/agritourismready/, is designed to be a one stop shop for preparing an emergency management plan.  You can also read factsheets on Ohioline related to agritourism ranging from “Creating Signage for Direct Food and Agricultural Sales” to “Grants and Low-Interest Loans for Ohio Small Farms,” and “Maps, Apps and Mobile Media Marketing” to “Selling Eggs in Ohio: Marketing and Regulations.”

As new legal issues arise, we will continue to create resources that help farmers understand and mitigate their risk.  In the meantime, we wish everyone a fun and safe fall at Ohio’s agritourism farms.

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Ohio Ag Law Blog – Congress ups the Chapter 12 bankruptcy debt limit

Congress must be concerned about the financial state of farmers.  A bill to increase the Chapter 12 debt limit to $10 million has languished in Congress since March, but recently gained traction and passed through both houses quickly.  Congress forwarded the bill, known as the Family Farmer Relief Act of 2019, to the President after the Senate approved it late last week.  The House passed the change to Chapter 12 on July 25.

Chapter 12 allows eligible family farmers and fishermen to stay in business and reorganize their debts through a repayment plan.  The recent action by Congress more than doubles the debt limit for Chapter 12 eligibility from its current amount of $4.4 million, adjusted for inflation from the original $1.5 million limit established when Congress created Chapter 12 in 1986.  If the President signs the current bill, a family farmer or fisherman with an aggregate debt of no more than $10 million will be eligible to use the Chapter 12 bankruptcy process.

The bill’s sponsor, Rep. Antonio Delgado (D-NY), explained that the increase to the debt limit reflects higher land values and the growth over time in the average size of U.S. farming operations. He stressed that the changes are necessary so that farmers have additional options to manage the current farm economy, because farmers are “currently facing a fifth year of declining net farm income…. [p]rices are low, inputs are high, and current trade policies make the future unknown.”

According to the U.S. Bankruptcy Courts, farmers and fishermen filed a total of 535 Chapter 12 bankruptcies from June 2018 to June 2019, up from 475 in the previous year and 482 in the 2017 period.  Ohio had nine of those cases in each of the past two years and six in 2017.  These numbers will likely continue to grow with the recent change made by Congress, as more farmers will qualify for the special protections of Chapter 12.

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Risk Management Agency moves date for harvesting cover crops on Prevented Planting acres

With many farmers in Ohio unable to plant before the Final Planting Date for crop insurance, questions are arising about planting and harvesting cover crops on those prevented planting acres.  USDA Risk Management Agency (RMA) rules allow operators to plant cover crops on prevented planting acres and to hay, graze, or cut the cover crops for silage after the posted “harvest date.”  In previous years, the harvest date for cover crops was November 1.   If an operator harvested the cover crop before that date, the prevented plant payment would be reduced from 100% to 35%.

The RMA has changed the harvest date for 2019, however.  In response to reduced livestock feed supplies that will result from the loss of planted acres this year, the RMA has moved up the cover crop harvest date to September 1.  An operator who plants a cover crop after the Final Planting Date and then cuts the crop for forage on or after September 1 can still receive 100% of the prevented plant payment, even if the operator sells the forage and regardless of whether the operator planted the cover crop during or after the Late Planting Period.  The Final Planting Date in Ohio was June 5 for corn and June 20 for soybeans; the Late Planting Period ended on June 20 for corn and runs until July 15 for soybeans.  Note, too, that a cover crop that was in the ground before the Final Planting Date but was not terminated because the operator couldn’t plant the intended corn or soybean crop can also be harvested for forage on or after September 1.

The RMA’s chart below illustrates payment scenarios for cover crops planted and harvested on prevented planting acres.

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Other requirements for cover crops

While the cover crop harvest date seems pretty straightforward, don’t be fooled–crop insurance provisions can be tricky.  Farmers planning to put out cover crops on prevented plant acres should work closely with their crop insurance agents to ensure that all policy provisions and documentation requirements are met.

An initial requirement is that the cover crop planted must meet the definition of an “acceptable cover crop” for crop insurance purposes.   The RMA considers an acceptable cover crop as one that is recognized by agricultural experts as agronomically sound for the area for erosion control or other purposes related to conservation or soil improvement and planted at the recommended seeding rate.  OSU agricultural experts can help provide guidance on acceptable cover crops.

Operators should also be aware that many seed licenses, particularly for bio-engineered seeds, restrict the use of the seed to grain production only.  In those situations, planting the seed for a cover crop or harvesting it for silage would violate the seed licensing contract and create a liability situation for the operator.

Additionally, note that crop insurance provisions prohibit harvesting the cover crop for grain or seed, and an operator who does so will lose all of the prevented plant payment.  The cover crop harvest can also impact other provisions, such as the farm’s Actual Production History (APH) yields.  These and other provisions highlight the importance of a close working arrangement with the crop insurance agent in order to comply with RMA’s cover crop provisions.

For RMA’s guidance on Prevented Planting Flooding, go to this page.  The site contains a comprehensive list of questions and answers on prevented planting, along with information about the 2019 cover crop provisions.

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