The Truth Behind Fear Based Marketing and Modern Agricultural Practices

The other day I decided to treat myself to a large bowl of ice cream. I was feeling like it needed a little extra something, so I decided to add some chocolate syrup and whipped cream. When I looked at the can of whipped cream, I had somewhat of an epiphany when I saw a bold label that said, “No Artificial Growth Hormones.”  I stared at the label as an agriculturalist and an advocate for the industry and began to understand why there is such a distrust between consumers and producers.

GMOBy definition, a scare tactic is a strategy intended to manipulate public opinion about a particular issue by arousing fear or alarm. Scare tactics are used all the time. They are used in politics, in advertising, and even by our own mothers. We have all had our mothers wag their finger in our face with a “do this or else” threat. While these tactics may seem relatively harmless, in some situations they can be incredibly dangerous. The reality we are facing is that most consumers today are three to four generations removed from their family farm. This distance creates space for misconceptions and misinterpretations to take hold and prevent consumers from thoroughly understanding the day to day operations of a farm or ranch and how their food is produced. This becomes worrisome when consumers begin to gravitate towards things such as “non- GMO” foods or foods with a “no artificial growth hormone” label because of scare tactics used by marketers and the stigmas that surrounds these things. There even has been questioning as to if the use of antibiotics is safe in animals meant for production.

GMOs, or genetically modified organisms, have hit the media by storm. Ultimately, this press has created a sense of distrust between consumers and producers regarding their food, where it comes from, and how it is produced. Consumers have legitimate concerns that demand to be addressed. These concerns include risks of exposure to pesticides, fungicides, and insecticides, which could lead to cancer. They are also unsure of the impact that they are making on the environment. Factually speaking, none of these things are true. GMOs have been presented to the public as an evil in our industry, when in fact, they are vital to many agricultural practices. The reality is that GMOs increase crop yields by 21% and cut pesticide use by 37%. Today, 12% of all cropland is planted with genetically modified crops. Highly regarded groups such as the American Medical Association, the American Association for the Advancement of Science, and the World Health Organization have all reported that there are no health risks associated with GMOs. Ultimately, agriculturalists have no choice but to utilize GMOs. With a rapidly growing world population, they are needed to increase food production in order to ensure global food security.

Cow facesAntibiotics and growth hormones have also been used to scare consumers as well. Like any living thing, animals get sick from time to time. Antibiotics are used to keep them healthy, and are only used when needed. It would be inhumane to not treat a sick animal. If your child was sick, you would more than likely take them to the doctor to receive antibiotics. The same is true for animals. Producers utilize antibiotics under the supervision and direction of their veterinarian. Once the animal is healthy again, a withdrawal time must be respected before the animal is taken to slaughter. This withdrawal time allows the antibiotic to completely pass through the animal’s system and ensure that no traces of antibiotics are in the meat that is available to consumers.

chickens-jj-001Growth hormones help increase an animal’s growth rate and feed efficiency. Steroid hormone implants are approved by the FDA because of rigorous testing that showed that these hormones have no negative effects on the treated animal or the environment. Another important thing to note is that the use of growth hormones it prohibited in poultry. This is because they are not practical or effective in these animals. So, the next time you see chicken advertised with an anti-growth hormone label, be aware of the fact that there are no poultry on the market that have been treated with such things. The label is just there to deter you from buying other chicken products and to scare you into buying the one with the label that appears “safer.” The FDA claims that food products that were raised with growth hormones are highly effective and safe for humans to consume.

At the end of the day, we as producers and advocates for agriculture must be proactive in educating the public and consumers about these issues and fear based marketing. Many people see labels advocating against many of the tools and practices used by producers today to protect their animals or to help them grow and become a higher quality product. These misconceptions are not going to go away overnight, but they are important to address. If all agriculturalists band together and make education a priority, this issue will slowly begin to resolve itself.

 

Rebel Sjeklocha (2)Rebel Sjeklocha is a senior at Maywood High School and is active in the FFA Chapter. She lives on her family’s cattle farm near Hayes Center. She shows cattle and horses and does a variety of other projects in her 4-H club. She has also served as an advocate for rodeo and agriculture as the 2016 Elwood Rodeo Queen.

 

 

 

 

 

 

The Big Mac and the Dollar . . .

Economic Tidbits 12.18.17

“The Big Mac and the Dollar” may read a bit like the title of a children’s fairy tale (i.e. Jack and the Beanstalk), but it isn’t.  Instead, it’s an agricultural economist’s not-so-clever way of introducing a discussion on the value of the dollar.  Nebraska agriculture relies on exports, and the value of the dollar is a key determinant in determining the competitiveness of Nebraska agricultural products in international markets.

The Economist magazine created the Big Mac index as a way of measuring the value of the world’s currencies relative to the U.S. dollar.  The Economist states, “The index is based on the idea of purchasing-power parity, which says exchange rates should move towards the level that would make the price of a basket of goods the same in different countries.”  The basket of goods chosen by the magazine to compare across countries is a McDonald’s Big Mac.  The cost of the hamburger in different countries is converted into U.S. dollars and the local cost compared to average U.S. cost to determine the relative value of each currency.  Countries where the hamburger costs more compared to the U.S. have currencies more expensive than the dollar; and countries where it costs less have currencies less expensive relative to the dollar.

The Economist found the average cost of a Big Mac in four U.S. cities was $5.28.  According to the index, the cost of a Big Mac in Switzerland, Norway, and Sweden is greater than the cost in the U.S., thus these countries’ currencies are more expensive relative to the U.S. dollar.  In all other major countries, particularly in some major agricultural competitors (i.e. Canada, Brazil, Australia, and Russia) the Big Mac costs less, indicating a currency cheaper than the U.S. dollar.  Based on the index, the value of the dollar remains high but the gaps between the dollar and other currencies narrowed since the last time The Economist calculated its Big Mac index, a positive sign for U.S. exports.

Big mac and dollar

Most observers believe the U.S. dollar will continue to drop in value through 2018.  Economic growth in other countries is relatively strong, putting upward pressure on other countries’ currencies.  Also, the dollar continues to remain relatively high historically, suggesting its due for a correction.  All in all, a continued decline in the value of the U.S. dollar in 2018 should work to support growing U.S. agricultural exports.  (The big Mac index: The Mac strike back, the dollar’s decline is a small victory for burgernomics, The Economist, Jan. 20th, 2018.)

 
Jay RempeJay Rempe is the senior economist for Nebraska Farm Bureau. Rempe’s background in agricultural economics, years of experience in advocating at the state capitol, and a firm grasp of issues allow him to quantify the fiscal impact of a regulatory proposal, and provide an in-depth examination of key issues affecting Nebraska’s farmers and ranchers.

2016 Farm Program Payments . . .

Economic Tidbits 12.18.17

Nebraska crop producers received $646 million in Price Loss Coverage (PLC) and Agriculture Risk Coverage—County (ARC-CO) payments last fall for the 2016 crop year.  In total, the USDA distributed $6.9 billion in payments to participating producers under these two programs.

The maps below show the final payment rates in each county for combined yield, irrigated, and non-irrigated rates under the ARC-CO program for corn, soybeans, and wheat.  In Nebraska, 97 percent of farms producing soybeans participate in ARC-CO, 95 percent of farms producing corn participate, and 65 percent of farms producing wheat participate.  The average ARC-CO payment per base acre for the 2016 crop year was $53.89 per acre for corn, $5.65 per acre for soybeans, and $11.46 per acre for wheat.  As shown on the map, many farmers were in counties which did not receive payments under ARC-CO for soybeans.  In addition, farmers in many counties with separate irrigated and non-irrigated corn yields did not receive payments for non-irrigated corn.

 

Dr. Brad Lubben, agricultural economist at the University of Nebraska-Lincoln, expects payments under ARC-CO for the 2017 and 2018 crops to be much less because average prices for program commodities have fallen.  He projects no payments for soybeans or sorghum for this year, but the lower prices will trigger substantial payments for those wheat and grain sorghum producers who enrolled in the PLC program.  Lubben projects total crop program payments for this year (2017 crop) will equal $200 million and will be less than $100 million for the 2018 crop year.

 

Jay RempeJay Rempe is the senior economist for Nebraska Farm Bureau. Rempe’s background in agricultural economics, years of experience in advocating at the state capitol, and a firm grasp of issues allow him to quantify the fiscal impact of a regulatory proposal, and provide an in-depth examination of key issues affecting Nebraska’s farmers and ranchers.

Federal Tax Saga Enters Next Chapter . . .

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The federal tax reform saga has turned a page and is moving into the next chapter in the U.S. Congress.  On the House side, the Ways and Means Committee advanced H.R. 1, the Tax Cuts and Jobs Act, to the House floor with a committee amendment.  The full House is expected to take up the bill later this week.  On the Senate side, Senate Republicans last week released a draft of a reform proposal which differs markedly in some provisions with the House plan.  The Senate plan will be taken up by Senate Finance Committee this week.

U.S. Capitol night2The Ways and Means Committee amendment . . . Perhaps the most significant change in H.R. 1 for farmers and rancher with the committee amendment concerns the treatment of pass-through income.  The initial draft of H.R. 1 created a 25 percent rate on a maximum of 30 percent of pass-through income.  The committee amendment instead creates a 9 percent rate, phased in over five years starting with 11 percent, on the first $75,000 in pass-through income for any person earning less than $150,000 in income from the business.  The 9 percent rate is phased up to 12 percent (the lowest rate for individuals under the proposal) for income levels above $75,000 and fully phased out at $225,000.  The committee amendment also clarifies farmland rental income would not be subject to self-employment taxes.

The Senate plan . . . For individual filers, the plan would maintain seven tax brackets and adjust the rates slightly.  It would repeal the deduction for state and local taxes, including property taxes, claimed by individual filers on Schedule A.  In tax year 2015, Nebraska individual filers claimed deductions of $145 million for state and local taxes-of this, $30 million was for real estate taxes; $1.2 million for sales taxes; and $109 million for state income taxes.  Itemized deductions for home mortgage interest for homes valued up to $1 million and medical expenses would be maintained.  The plan would also double the standard deduction and double the estate tax exemption.

The Senate plan . . . For businesses, the Senate plan lowers the corporate tax rate to 20 percent, but not until 2019.  The bill would also establish a 17.4 percent deduction for pass-through income based on the Section 199 domestic manufacturing deduction.  It is unclear how these proposed changes would affect farm and ranch taxes, particularly as the plan also repeals the Section 199 deduction.  More information is necessary to fully analyze potential impacts.  The Senate bill would allow equipment put in service before 2023 to be fully expensed, and expands the Sect. 179 business expensing to $1 million in property.  The present limit is $500,000.  And finally, cash accounting would continue for businesses with less than $25 million in gross receipts and businesses would be able to deduct state and local taxes paid by the business as an expense.

Both Houses of Congress have pledged to have legislation passed before the end of the year.  No doubt there will be several more page-turning chapters left in the federal tax reform saga.   Stay tuned for how the twists and turns could impact agriculture producers’ bottom lines.

 

Jay RempeJay Rempe is the senior economist for Nebraska Farm Bureau. Rempe’s background in agricultural economics, years of experience in advocating at the state capitol, and firm grasp of issues allow him to quantify the fiscal impact of a regulatory proposal, and provide in-depth examination of key issues affecting Nebraska’s farmers and ranchers.

Five Tips That Can Make Life Easier for Crop Insurance Claims.

Whether its rain, hail, or heavy winds, fall harvest has been rough in Nebraska. Tough weather can mean yield loss and reasons to look at whether losses are covered by your crop insurance.

“Just because you didn’t buy coverage for wind damage, your multi-peril insurance may have you covered depending on your situation,” says Farm Bureau Financial Services agent, Shannon Hannappel.

Hannappel says there are five things farmers should keep in mind if crop insurance claims are on your horizon.

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1. Communicate with your agent right away if you think you have experienced even a slight loss.

“There’s no need to wait. Getting connected with your agent even when you aren’t sure there’s a loss is always the best course of action,” says Hannappel.

2.  Keep good production records.

“If you’re commingling crops in your grain bins, make sure you can clearly identify what crops came from specific fields by marking your bins.

3. Keep irrigated and non-irrigated production yields separate when recording your production.

“At harvest, everyone wants to keep rolling, but taking the time to differentiate between irrigated and non-irrigated yields is important for your APH history and sometimes can determine if you get paid for a loss or not.” 

4. Report your production levels to your agent right away, even if you’re not sure if there’s a loss.

“Don’t wait till February to report production numbers. The sooner we can get the information the better to move a claim.”

5. Post-harvest, be sure to line up a year-end planning conversation with your agent.

“It’s always better if we have the opportunity to visit about what risks your concerned about for the upcoming growing season; especially if you’re looking to make some changes in your operation for the upcoming year, i.e. adding specialty crops or moving from traditional to an organic practice.”

 

 

Hannappel says the goal is to make sure you are protected in a way that meets your operation’s needs.

Property Taxes Can Still Be Expensed . . .

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Last week the House Ways and Means Committee released its long-awaited federal tax reform proposal.  The proposal would change how farmers and ranchers are taxed both as individuals and as businesses.  Many farmers and ranchers are wondering if property taxes paid on land, buildings, and equipment could still be expensed as business expense under the proposal.  Yes-the ability to deduct property taxes as a business expense by farmers and ranchers on Schedule F would continue.  The changes made to the state and local taxes deduction only applies to itemized deductions claimed on Schedule A filed by individuals.  The deduction for state income or sales taxes would no longer be allowed, but property taxes of up to $10,000 on the principal residence could be deducted.  The limit would, however, apply to any property taxes deducted on a farm or ranch residence claimed on Schedule A.  The average tax rate paid on residential property in Nebraska was roughly 2.0 percent in 2016.  At that rate, the limit on property tax deductions would affect Nebraskans with homes valued at more than $500,000.

Wheat Field2One of the bigger changes proposed under the plan affects “pass-through” entities like sole proprietorships, partnerships or S-corporations.  Today, income from pass-through entities is reported on individual returns and taxed at individual rates.  Under the proposal, such business entities could claim 30 percent of the pass-through income as a “return to investment” and be taxed at a maximum rate of 25 percent. The remaining 70 percent would be taxed at individual rates like today.  It is unclear whether the 25 percent tax rate is a flat-rate, or if rates would phase-up until reaching that level.  This provision could potentially reduce taxes on farm business income depending on where individuals fall in terms of brackets and rates.  It has been suggested that nearly one-half of the farm and ranch operations in Nebraska could experience tax reductions with this provision.

A couple other provisions in the proposal are worth noting.  First, the plan would allow businesses with less than $25 million in gross receipts to use cash accounting for tax purposes and deduct interest as a business expense.  According to USDA data, only 0.40 percent of farms have gross receipts which exceed $25 million, so a large majority of farm and ranch operations would continue to be able to use cash accounting and deduct interest expenses.  Second, the plan would double the exemption for estate taxes and eventually repeal the tax in 2024.  At the same time, the plan would maintain the stepped-up basis for heirs.

The Ways and Means Committee is expected to mark up the bill yet this week and the full House will consider it shortly thereafter.  The U.S. Senate will have its turn at the wheel as well.  Stay tuned as Congress hopes to have a package passed by the end of the year.

 

Jay RempeJay Rempe is the senior economist for Nebraska Farm Bureau. Rempe’s background in agricultural economics, years of experience in advocating at the state capitol, and firm grasp of issues allow him to quantify the fiscal impact of a regulatory proposal, and provide in-depth examination of key issues affecting Nebraska’s farmers and ranchers.

Forecast State Receipts Adjusted Downward . . .

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The Nebraska Economic Forecasting Board (NEFAB) on Oct. 27 adjusted its state revenue forecasts downward resulting in a budget shortfall of roughly $195 million for the current budget biennium.  NEFAB revenue forecasts are used by state senators to set the state spending.  Senators adopted a biennial budget earlier this year, but because they are required by the constitution to balance the budget, the decrease in forecast revenue means budget adjustments will be necessary during the 2018 legislative session in order to balance.

NEFAB revenue forecasts declined $100 million for the current fiscal year and $123 million for fiscal year 2018-19.  NEFAB projects revenues to grow, but at a slower rate than it forecast in April when it last met.  In April, it projected revenues to grow 5.6 percent in FY2017-18, and 5.4 percent in FY2018-19.  Most of the slowdown in revenues is due to lower individual income tax revenues.  Actual revenue growth averaged 0.3 percent over the last two fiscal years.  Historically, state tax revenues have grown at an average rate of 4.7 percent.  The chart below shows the state’s percentage revenue growth since 1982.  Note, the chart still reflects the NEFAB forecasts made in April.
tax receipts and budget

The state’s revenue growth is generally thought to be a good reflection of economic activity in the state.  The Legislative Fiscal Office said in its August budget report, “Beside inflation, this revenue growth over time reflects the ebb and flow of economic activity and economic cycles.  It reflects new businesses created and existing businesses that close.  It reflects new products and services added to the tax base and existing products and services that are eliminate or expire.  The key is the net impact.  The new or expanded businesses, products or services more than offsets those that decline or disappear.”  In looking at the chart, it’s easy to spot the economic downturns which have occurred in the past, 1986, 2002-03, and 2009-10.  The most recent decline in revenue growth, though, is different in that it has occurred while the state’s overall economy continues to grow.

So how does the latest NEFAB forecasts reflect on the Nebraska economy?  First, it’s probably reflective of the ongoing struggles in agriculture, which accounts for over one-fourth of the state’s gross domestic product.  While there are signs farm income may have hit a bottom, nobody is forecasting robust growth in near future for agriculture.  Second, it’s probably a reflection that the Nebraska’s economy is like the overall U.S. economy.  Economic growth is expected to continue, but at sluggish pace.  Thus, the projections of revenue growth greater than 5 percent like those made by NEFAB in April just isn’t in the cards.

 

Jay RempeJay Rempe is the senior economist for Nebraska Farm Bureau. Rempe’s background in agricultural economics, years of experience in advocating at the state capitol, and firm grasp of issues allow him to quantify the fiscal impact of a regulatory proposal, and provide in-depth examination of key issues affecting Nebraska’s farmers and ranchers.