A Farmers' Market

Extension helps Pennsylvania producers make the most
of their resources

By Deborah A. Benedetti

Voices for the InnocentPenn State Extension educators tour a Marshlands, Pa., natural gas drilling site with landowners.

For some Pennsylvania farmers, what’s under their fields can be as valuable a resource as their crops. That’s true for Jackie Root and her neighbors in Tioga County, who live above a geological formation that holds natural gas deposits. Until recently, this underground resource wasn’t worth much to the landowners. Gas drilling and exploration companies were offering them just $2 an acre per year in 2000 for the right to drill at a future date.

And then there are grain farmers seeking to increase the profitability of their crops but are hindered by a basic lack of knowledge of national and global external factors.

Penn State Extension is working with both groups of farmers to help them better understand the marketplace in order to gain the most from their assets.

Visits From Leasing Agents

Natural gas is a major energy source for homes and industry, with U.S. natural gas consumption 22.2 trillion cubic feet in 2005. Worldwide, natural gas consumption is projected to increase by nearly 91 percent through 2030.

In Pennsylvania, natural gas drilling companies are following the Trenton/Black River Carbonates geological formation running through the Allegheny Mountain chain in search of natural gas deposits. Higher natural gas prices, increasing demand and new drilling technologies are driving renewed interest in drilling. “We were hit first in Tioga County in 2000 by companies sending landmen—leasing agents—to lease as much land as they could,” explained Tioga County Extension Director Earle Robbins.

Getting landowners to sign leases giving companies the rights to the natural gas underground can mean millions of dollars in profits to companies, if drilling results in a productive source of natural gas. In return, landowners receive payments for five- to 10-year leases ranging from $10 to $200 an acre or more, depending on proximity to known gas formations, for the rights to explore for gas on their property. If natural gas is found, landowners in the production unit will then receive a royalty payment that is generally 12.5 percent of the value of the gas for as long as the well is productive.

When the leasing agents approached Root with the $2 offer, she decided not to sign and instead began researching her options, contacting neighbors and her Extension office.

Understanding Rights

In response to a wave of requests for help with leases, Robbins put together an educational workshop in 2001, based on Cornell University Cooperative Extension’s format and materials. He expected 40 people, but more than 200 attended.

Root’s research and her work with Robbins led her to organize one of the first Pennsylvania landowners groups, composed of 35 landowners, in 2005. With a company on the brink of a major exploration project in the landowners’ area, she negotiated a lease for the group that paid them more than $175 an acre for a five-year lease. Root credits the group’s success to Robbins’ workshops. “Earle was instrumental in this,” she said. Root now serves as a landowner gas leasing consultant and as a panelist for Extension workshops.

As energy companies moved south with leasing activity, Robbins teamed up with Thomas Murphy, associate Extension educator in Lycoming County, and Kenneth L. Balliet, Snyder County Extension business management educator. They expanded the original workshop into the Natural Gas Exploration and Leasing for Landowners Series, offering it to an increasing number of counties. To date, more than 3,500 Pennsylvanians have participated in every region of the state, with an impact of more than $15 million in lease fees alone. A DVD of a recent statewide video-teleconference held at Penn State Public Broadcasting’s WPSU studios has been produced to aid other Extension offices in helping landowners.

“Penn State Extension has put together a good program that goes far beyond the basics” in helping landowners understand their mineral rights, noted Dave English, chief of enforcement and administration for Pennsylvania’s Bureau of Oil and Gas Management.

Grain Marketing

Extension educators are doing similar work for farmers who want to gain the most from their crops. As Mike Braucher knows firsthand, grain farmers face tremendous uncertainty. “In 1999, my corn was eight feet tall and beautiful in July,” said Braucher, a farmer in Mohrsville, Pa., with 1,100 acres of corn, soybeans, wheat and other grains. Then a drought ruined his crop. Fortunately, Braucher is still in business, thanks to the Lehigh Valley Grain Marketing Club.

That club as well as the Central Susquehanna Grain Marketing Club gives grain farmers opportunities to learn from grain marketing experts about the factors that impact their profitability, such as weather, fuel prices, tariffs, currency values and commodities trading on the Chicago Board of Trade. Extension educators John Berry and Murphy (from Lehigh and Lycoming counties, respectively) host the clubs, which feature experts from Penn State and the Pennsylvania and U.S. Departments of Agriculture.

Grain ProductionMilton, Pa., farmer Bob Pardoe Jr. has been farming for 40 years and now chairs the Central Susquehanna Grain Marketing Club. “The club purchases options on the Chicago Board of Trade, and that helps us learn how the process works,” with little risk to club members, Pardoe explained.

To reach even more farmers, Berry and Murphy also have introduced the University of Minnesota’s Center for Farm Financial Management’s (CFFM) Winning the Game workshop series, which encourages farmers to develop a written grain marketing plan. According to CFFM Grain Marketing Specialist Ed Usset, the goal is “to leave farmers thinking ‘I can do that.’”

So far, 400 farmers have participated. During the one-day workshops, farmers determine the price they want for their grain and when they want to sell it. Then they participate in a simulation game using their plan and information from one year of an actual market history. “They watch what happens and see how it compares with their plan,” Berry explained. “They get to practice in a safe environment.”

Protecting Against Loss

Another key risk management tool is federal crop insurance, according to Gene Gantz, risk management specialist with the USDA’s Risk Management Agency. The insurance provider agrees to protect the insured farmer against losses that occur during the crop year. The USDA pays about half the cost of the premium, and in Pennsylvania, the Department of Agriculture pays part of the premium, making insurance more affordable for farmers.

In spite of support and readily available information about crop insurance, only about half of Pennsylvania’s 2.8 million eligible acres are insured. The reason, Gantz said, is some farmers just aren’t as interested in the financial end of farming. If all Pennsylvania farmers eligible to insure their land did so, their net income would have been boosted by about $300 million since 1980, he added.

Crop insurance is a vital component of every grain marketing plan, so Extension educators include information about it during the workshops.

“Grain farmers who want to be successful need to understand the local, national and global factors influencing the grain marketplace,” Murphy said. “Our Extension workshops give them the tools to achieve greater profits.”