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Barb Wire was said to tame the wild west and end the free range. It was a technological break through that rearranged the way ag was conducted in large stretches of the United States. Barb wire is not alone in sweeping changes to ag. The moldboard plow, the Power Take Off, hydraulics, year-round cabs and GPS all have made dramatic changes to how ag operations perform.

Rural broadband will likely join the above list. The question is, when and will it come quick enough to benefit current operations. The USDA predicts a truly connected rural America could lead to an additional $50 million dollars per year for US Ag.

Broadband is defined as at least 25 megs per second download and 3 Megs upload. While only 1.5% of urban America does not have access to broadband, 24% of rural areas don’t have access to fixed broadband. Making that number worse, some studies say that the true number is nearly 50%. Microsoft says 162.8 Million people don’t have access to broadband and broadband doesn’t solve in field access problems.

A companion service, wireless 5G is a cornucopia of different tech platforms and process that work together to get greater bandwidth to a greater number of handheld and other devices. In addition to cell phones and handheld devices that we are familiar with, 5G will support base station antennas that will connect devices directly, using more of the radio spectrum. Mesh networks are also incorporated which will help data flow from one device to another that works well for devices with steady power and are always on. Field sensors and devices that stay asleep don’t perform well in the mesh. It looks like 5G will be a better boon for urban areas over rural applications.

How did we get there? It used to be acceptable that an internet company could report a census block had access to broadband service if they could show one home in given block had service. In the rural spots, those blocks are up to 250 square miles. One wealthy neighbor who has to have Japanese amine delivered to their door could skew the reporting.

What are the steps that the law is taking to support this growth potential? The FCC has advanced over $20 million in funding for rural broad band connectivity. Specifically, the Rural Digital Opportunity fund is designed to put internet infrastructure in 45 states and over 700,000 homes.

The impact on ag is not only in being able to stream movies like the urban areas and check the markets, but connectivity in the fields is a key component of artificial intelligence applications like automated operations. This is because the intelligence network relies upon cloud-based data and mainframes. Losing service because of connectivity is a dangerous proposition that artificial intelligence operators can’t risk.

As law makers allocate dollars to breach the digital divide, the type of purchase is as important to success of the ag operation as choosing between high tensile, three barb or five barb wire.

Skull Sweat

I recently read about a person's estate plan with the following elements. 

  1. Remove my head from my body.
  2. Have it dipped in a substance to preserve the skull
  3. Take the remains of my body and have them carbon cooked and compressed into two blue diamonds to be inserted into the skull.
  4. Place the skull in our living room so that I can watch my descendants grow and prosper.

Setting aside whether that type of post death body sculpting is legal or moral, the plan has a flaw. It fails to account for the changing in tastes , goals and desires.  While the spouse might, and I do mean might, agree with the plan, each succeeding generation has an increasing chance of not agreeing with the plan. This could result in a garage sale find that is straight out of a grade b horror flick.

What is the connection to Ag law?  Far too many senior generation have their own version of a bejeweled skull in a non existent, incomplete, ill advised or overly complex estate plan. Many of these skulls are unintentional.  Do you have a skull in your plan? When was the last time you considered the plan. Many times, its is the "D" events in life that should trigger a review of your plan, those relying upon it, those who benefit from it, and your goals and current status. What are D Events?

  1. Death of someone in the household or operation.
  2. Disassociation that is being fired or terminated from a job, a someone no longer being a part of your operation or life or a beneficiary's disassociation that changes their potential consumption rate of their inheritance. 
  3. Divorce. Ex spouses are by law, removed from their former spouse's estate plan automatically, but not so for others who were leaving things to the former  Plus, divorces generally result in upheaval of capital and in the dust, things life insurance policies that junior has been paying on senior may no longer cash flow with our the former Mrs. Junior.
  4. Disability.  Modern medicine is keeping folks alive longer, that's great. However, some times those extra laps are not taken with full productivity. This can lead to a drain on capital assets. When the diagnosis hits, the plan needs to be reviewed to adjust to the new reality facing individuals.
  5. Da Passage of time. Okay that is  a stretch, but time does not heal all estate plans. Many estate plans still are floating around that were based on an estate tax exemption of $600,000 per person. The current amount is $11.5 million per person. Many folks who had perfectly fine circa 1986 plans have unnecessary trusts (not to mention that  those Atari playing kids have traded Air Jordan high tops for sensible footwear and don't need a restriction on their access to capital) and real estate titling schemes.

Take the time to invest in some skull sweat now and review your plan so that your beneficiaries don't have your own version of blue synthetic diamonds staring at them on the mantle.

Other Ag News of Interest

China continues to have massive swine heard reductions due to disease. While the initial impact for US Pork is a postive b/c the demand cannot be met, it remains to be seen if this latest outbreak is China's housecleaning and upgrading phase where inefficient operators using older methods such as feeding table scraps to hogs will be pushed out and in thier place, modern feeding facilities will return.

Iowa Federal court put halt "ag-gag" law

A lawsuit filed by advocacy groups claims that the law passed to punish those who lie to obtain access to animal facilities.  The claim is the law threatens animal welfare and food safety. This is Iowa’s second attempt at the law as the first one was struck down in 2012.

Animal Advocacy

Florida is considering a provision to appoint attorneys to represent animals. This would potentially allow any “concerned party” to file on behalf of the animal. While this sounds innocent enough on first blush, it is an open door to animal activism groups that seek to end livestock production as we know it.  It isn’t just livestock.
Consider the 2020 legislative proposals floating around in Florida. They include banning the declawing of cats, requiring each county to have a pet friendly emergency shelter and prohibiting the leasing of certain animals. Stewardship of animals is important and essential.

Don’t cry for me, Sandra…

Sandra, an orangutan,” who had lived at the Buenos Aires Zoo for over 20 years, in 2015 was deemed “a non-human person, subject of rights and consequent obligations towards her,’ by an Argentine court.  The court also ruled that the Buenos Aires government had to guarantee Sandra adequate conditions of her habitat and the activities necessary to preserve her cognitive abilities. It was recently moved to a Florida facility. No word on whether the foreign court’s determination will be given any weight by the US court system.

 

Ag Law Issues of the Year

Outside of the less than ideal crop season, ag issues in the law continue to have an impact on production ag, whether or not we see them immediately as muddy fields, rain-soaked crops, and lack of L.P.

Special Thanks to Tiffany Dowell Lashment for identifying these issues as being important to ag this year. Here are my thoughts on them.

Hemp.

The 2018 Farm Bill has opened a pathway for legal hemp production, which is slated to be used not for pirate ships (ropes used to be hemp in many cases) but rather for the production of CBD oils and other hemp-based consumer products.  State-level production plans need to be created, approved, and approved by the USDA. For the want to be hemp growers in states without a plan, the USDA has a fall back plan. I am not convinced that this isn’t the latest sunflower, ostrich, emu, aquaculture, Aronia berry fad that sounds great but needs more work to make it work when the smoke clears and the true market for the product is established. Yeah, I said smoke…… but not that kind of smoke.

Beef checkoff litigation.

Under the checkoff program, a $1/head assessment is paid when cattle are sold.  Producers don’t get a choice. Half of that payment is retained by the state beef council and the other half goes to the Cattleman’s Beef Board.

R-Calf, a group that decidedly does not like the check off or Beef Boards. They initially filed suit in the United States District Court in Montana, challenging the requirement. R-Calf argued this violates the First Amendment because the Montana Beef Council is a private entity and its members are being forced to pay for its speech (i.e. advertising).  They don’ t have a way avoid that half their full assessment paid to the Cattleman’s Beef Board.

The beef councils say their messaging is not private speech but is instead government speech. This is because a memorandum of understanding entered into between the Montana Beef Council and other state beef councils with the USDA allows USDA control and oversight of their speech.  This issue of whether the speech is private, or government is critical, as prior United States Supreme Court rulings have found that compelled government speech does not implicate the First Amendment, whereas compelled private speech does raise First Amendment concerns.

R-Calf was granted a preliminary injunction requiring all checkoff payments made by Montana producers be sent to the Cattlemen’s Beef Board unless producers specifically indicate they wish for a portion of their checkoff payment be retained by the Montana Beef Council.

The fight on who control checks off dollars has been engaged in many different commodity groups over the years. It won’t stop. OPM… Other People’s Money (that is the producers who have to pay the fee) is always a source of control issues.

WOTUS definition.

   The Clean Water Act gives federal jurisdiction to the Environmental Protection Agency and the US Army Corps of Engineers over “Waters of the United States” AKA WOTUS.   WOTUS waters require federal permits.   What the Clean Water Act failed to do, however, is define the meaning of “WOTUS.”  This has been the source of legal disputes lasting several decades.

In 2015, the EPA made a new regulation that did define WOTUS. Lawsuits were filed related to this definition, including most recently Georgia v. Wheeler, where the United States District Court for the Southern District of Georgia hold that the rule was both procedurally and substantively invalid.

2015 Rule has been rescinded by EPA effective December 23, 2019. Now we are back the pre-2015 WOTUS approach that led to years’ worth of litigation.

The White house released their proposed draft to the public last December and took public comment through April 15, 2019.  After reviewing the comments received, the government will issue a final rule imposing a new WOTUS definition.  Vegas says litigation is highly likely.

Another issue year is whether indirect discharges from a point source into groundwater that eventually reaches a WTOUS is covered by WOTUS rules, which means a permit is needed.  There have been a number of federal court rulings on this issue, which are not consistent with one another. Again, smart money is on more ligation on how much the fed can be involved in local waterways and what locals can do to stay out of another level of government control (i.e. the Federal system).

As a farm operation, this question is a central driving factor to profitability and sustainability. It ties up capital, is hard to acquire, and often comes with factors that are hard to mitigate, like poor neighbors, bad drainage, irregular shaped fields, and prior use restrictions. Each one of those factors has a unique score to any one potential buyer of land based on their tolerance for obnoxious neighbors, access to more capital to insert tile, size of equipment and desired crop. No one answer will fit all.

It is interesting to consider the long-standing observation of they are not making any more land. A more telling observation might be, we are losing production acres every year. Consider the population on July 1, 1970 was 3.7 billion people. Since then, we have added 4 Billion people and are projected to be at 10 Billion people on the planet by 2055. The take away from that is that those people need to live some where and those people all want to eat. In the next 40 years, it is projected that farmers must produce more food than the previous 10,000 years combined. That requires resources like land.

Since 1982, land developed for residential/commercial and industrial use has risen 58% in the United States but still only accounts for 5.8% of the total land use in the United States. Of the 1.94 Billion acres in the US, the federal government owns 20.6%, 2.6% is water, and 71% is classified as rural, with 18.5% in crop and 27% in rangeland or pasture.

Who owns the land other than the government? John Malone and Ted Turner (Of Turner Broadcasting Station) each own about 2,000,000 AC and 1.35 billion is owned privately all together, with 30 million of those acres held by 100 persons or companies. Ag focused investment funds are putting billions of dollars into landownership.

Why are they buying? They believe in general land provides stable long-term returns, they recognize that the global demand for food is on the rise between population and increased buying power of emerging nations. The resources under the ground (which is the only other place to get something if we can’t grow it) like natural gas, oil, and a place to site a wind generator, are going to increase in value as demand for energy increases. These investors also recognize the loss of land that can be put to farming and, in the US, specifically, despite our political theatre, is a stable environment to do business in.

Returns on farm land investing have run between 7% and 12% since 2014, while a 4.7% average since 1990. And a 40-year average return of over 10%, which beats the stock and bond market on an annualized basis for the same time period.

Sometimes, we are busy with the tactical level of farm ownership such as can we make the payment and how does this work with our crop cycle, we fail to contemplate the long term advantage of holding the ground for its own sake.

Friday, February 28, 2020
  • Patrick B. Dillon
  • Jill Dillon
Dillon Law PC
Patrick B. Dillon enjoys finding solutions to legal issues and catching problems for clients. Pat practices in the Sumner office regularly represents clients in district, associate district and magistrate courts for agricultural, real estate, criminal and collection issues. He drafts wills and trusts, creates estate plans and helps clients through the probate process.
Dillon Law PC
Jill Dillon focuses on family law, estate planning and IRS matters. Jill is a University of Northern Iowa undergraduate (Political Science Cum Laude) and a Drake University Law School graduate. Jill spent extensive time advocating for low income tax payers in front of the IRS and the State of Iowa Department of Revenue while at Drake.

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