Insurance and taxes are a part of every business, but terms are sometimes confusing. Are you technically a new producer or beginning farmer? The designations come from two different places, so it’s even possible to be both. Learn more about each designation and the vital components of each.
A Broader Definition for Beginning Farmer
According to the IRS’ 2017 Farmer’s Tax Guide, farming is “if you cultivate, operate, or manage a farm for profit, either as owner or tenant.” That’s a very straightforward definition! Insurance-wise, you’re a beginning farmer if you haven’t practiced or invested in the business for more than 10 years. The 10-year distinction remains under the proposed 2018 Farm Bill, which goes into effect at the end of September 2018. The new law still keeps the same exclusions to those years, as per the current Federal Crop Insurance Act. You don’t have to count farming years if you were also:
- Younger than 18 years old
- Participating in college studies
- Active military
Note, though, that different support agencies may have other criteria. The USDA’s FSA (Farm Service Agency) Farm Loan, for example, also considers acreage. You have to measure your land and see that it does not exceed 30% of your county’s average farm size. Nevertheless, these details are part of the important information new farmers should know, along with the following insurance benefits:
- Catastrophic coverage without an administrative fee
- Bonus of 10% subsidy for the initial 5 years of operations
- Yield adjustment of 80% compensation for loss of currently insured crops (was previously 60%)
Specific Criteria for a New Producer
A new producer is a bit more specific, as it pertains to the particular crop(s) and location.
Whether you’re cultivating wheat or soybeans, two of Ohio’s top agriculture products, or something more small-scale, consider its APH. You’re a new producer if the crops’ annual production history is less than two years within your designated county. Learn which are insurable crops and which are not, and to maintain accurate production records.
Whether a New Producer or a Beginning Farmer, Have a Business Plan
After determining your company status (LLC, partnership, etc.), and obtaining a tax ID, it’s essential to create a business plan. A detailed spreadsheet and report should echo local ordinances and may help prevent common crop insurance mistakes and miscalculations. Include the following:
- A brief summary of who you are and your applicable skills, knowledge, and experience
- Short and long-term goals
- Target audience
- Distinctive categories, such as organic certification or CSA
- All operation, production, selling, and transportation costs
- Risk management proposals for human and livestock illnesses, injuries, infestations, drought, natural disasters, and other unpredictable emergencies
- Breakdown of finances (assets/savings, liabilities/debts, expenses, tax returns, etc)
Know Your Local and Government Programs
In addition to the intricacies of starting a business and obtaining comprehensive crop insurance, familiarize yourself with vital programs. For Ohio farmers and producers:
- Ohio Ecological Food and Farm Association, which includes workshops and the National Organic Certification Cost Share Program
- North Central SARE (Sustainable Agriculture Research & Education) grants – they also have information for limited-resource producers
- USDA’s National Resources Conservations Services of Ohio – certifications, hoop houses, Farm & Ranch Lands Protection Program
Should you need or be interested in more nationwide assistance, check out:
- USDA’s New Farmers Department – also includes information for women and veteran farmers
- VAPG (Value Added Producer Grants) – additional ways for producers and farmers to increase income (items made from crops? livestock, eg)
As a new producer or beginning farmer, you’re part of a critically valuable market to the community. We’re here to help you keep that dream and mission going.
PHOTO: Pixabay / CC0 Public Domain