Many rural landowners, farmers and communities in Georgia are interested in the income and job generating potential of agritourism and nature-based tourism activities. Agritourism refers to recreational, entertainment or educational activities that are directly dependent on agriculture such as pick-your-own fruit and vegetable farms, school-group tours, tasting events, farm produce festivals and county agricultural fairs. Nature-based tourism refers to recreational, entertainment or educational activities that occur in a natural setting, but are not necessarily dependent on agriculture such as hunting and fishing, bird-watching, nature photography, trail riding, hiking and camping.

  A study was recently conducted to assess the potential market and economic impacts of agritourism and nature-based tourism. The study, led by Dr. John Bergstrom of the UGA Department of Agricultural and Applied Economics (AAEC), was funded by the Georgia Agricultural Experiment Station and the UGA Center for Agribusiness and Economic Development. Bergstrom and his AAEC colleagues and coauthors listed below conducted a survey of Georgia residents to collect data on the general publics' interest in participating in agritourism and nature-based tourism activities. 47% of survey respondents indicated that sometime in their lives they or members of their household had gone on an outing to pick fruit or vegetables, sightsee, see farm animals, or otherwise take advantage of a farm setting for recreation and leisure. 61% of respondents indicated that they or members of their household would likely visit a pick-your-own farm sometime in the future to pick fresh fruit or vegetables. 51% of respondents indicated that they or members of their household would likely visit a farm in the future to enjoy the farm setting, including such activities as viewing country scenery, viewing farm animals, learning more about farming methods and experiencing and gaining an appreciation for farm values and lifestyle. 15% of respondents indicated that they would be interested in using a recreational guide service that would provide access to recreational activities in rural areas such as hunting, fishing, camping, hiking, bike riding, canoeing, bird watching or horseback riding.

  As a specific example of the effects of nature-based tourism on a regional economy, the study examined potential economic impacts of rural recreational guide services for hunting, fishing and wildlife viewing on a 14-county southwest Georgia region. Counties in the region were: Baker, Calhoun, Colquitt, Decatur, Dougherty, Early, Grady, Lee, Miller, Mitchell, Seminole, Terrell, Thomas and Worth. People who participant in guided hunting, fishing or wildlife viewing trips spend money in the 14-county region on guide fees, lodging, food and beverages, transportation, bait and ammunition, and recreation equipment and equipment rental. These expenditures support jobs and income in the region. The study results indicated that for every 1,000 days of guided hunting trips from people who live outside of the 14-county region, $36,000 in new labor income and 3.5 new full and part time jobs would be added to the region. For every 1,000 days of guided fishing trips from people who live outside of the 14-county region, $49,000 in new labor income and 5 new full and part time jobs would be added to the region. For every 1,000 days of guided wildlife viewing trips (e.g., bird watching trips) from people who live outside of the 14-county region, $48,000 in new income and 4.5 new full and part time jobs would be added to the region.

  Estimation of the total or aggregate economic impacts of agritourism or nature-based tourism on a regional economy requires information on economic impacts per visitation units (e.g., jobs per 1,000 days of guided hunting, fishing or wildlife viewing) and total visitation. The survey results discussed above suggest that a relatively small, but still significant proportion of Georgia residents (about 15%) would consider using a rural recreation guide service. Participation in a particular recreational guide service such as hunting, fishing or wildlife viewing in the 14-county southwest Georgia region would vary based on the specific services offered and the fees charged. For illustration purposes, suppose a more in-depth study indicated that a marketing program for recreational guides services would generate an estimated 6,000 days of guided hunting trips, 4,000 days of guided fishing trips and 3,000 days of guided wildlife viewing trips per year in the 14-county southwest Georgia region from people who live outside the region.

  The study results above suggest that the 6,000 days of guided hunting trips would generate $216,000 in new labor income (6 thousand hunting days x $36,000 per 1,000 hunting days) and 21 new full and part time jobs (6 thousand hunting days x 3.5 jobs per 1,000 days) in the 14-county region. The 4,000 days of guided fishing trips would generate $196,000 in new labor income (4 thousand fishing days x $49,000 per 1,000 fishing days) and 20 new full and part time jobs (4 thousand fishing days x 5 jobs per 1,000 fishing days) in the 14-county region. The 3,000 wildlife viewing days would generate $144,000 in new labor income (3 thousand wildlife viewing days x $48,000 per 1,000 wildlife viewing days) and 13.5 new full and part time jobs (3 thousand wildlife viewing days x 4.5 jobs per 1,000 wildlife viewing days) in the 14-county region. Thus, the total economic impacts of the recreational guide service program in the 14-county region summing across the hunting, fishing and wildlife viewing impacts would be $556,000 in new labor income and 54.5 new full and part time jobs.

  The study results above suggest in general that agritourism and nature-based could have a significant impact on rural economies in Georgia and provide a viable supplemental income opportunity for farmers and other rural landowners. As with any new business enterprise, an in-depth feasibility study is advised for specific agritourism or nature-based tourism enterprises of interest to local communities and farmers and other rural landowners. Assistance with these feasibility studies is available from the UGA Center of Agribusiness and Economic Development. More results from the survey discussed above, as well as other information on agritourism and nature-based tourism in Georgia, are also available from the Center of Agribusiness and Economic Development. Information from the Center as well as faculty contact information can be obtained from the AAEC website: www.agecon.uga.edu. The participation and economic impact estimates reported above are based on data analysis conducted by Wes Zwirn and reported in the M.S. thesis: Wesley C. Zwirn, 2003, "An Analysis of Participation in and Economic Impacts of Agritourism and Nature-Based Rural Recreation", Department of Agricultural and Applied Economics, The University of Georgia. A copy of this thesis can be obtained from Dr. John Bergstrom (jbergstrom@agecon.uga.edu).

John Bergstrom, Wes Zwirn, Warren Kriesel, Jack Houston and John McKissick
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"AGNET is a searchable website that allows visitors to search for all types of agritourism based activities across the state…Please visit AGNET (http://www.iiseyes.org/agnet/) to learn more about the exciting agricultural and nature-based activities Georgia has to offer."

  Agritourism is experiencing resurgence in Georgia and around the country. Agricultural and nature-based tourism is anticipated to grow at 30% over the next ten years. This interest in agritourism can be attributed to two primary factors. The first is that many Georgians no longer reside on a farm. This is coupled with the farmers' desire to generate additional on-farm revenue and educate Georgians on the agriculture's importance.

The "Farm" Attraction

  Many Georgians are one or more generations detached from the family farm. However, many people have fond memories of visiting their grandfather's, uncle's or a family member's farm as a child. Now, with a significant percentage of Georgia's population residing off the farm, they no longer have access to farming operations and activities. As a result, many Georgians have expressed interest in participating in agricultural and nature-based activities such as pick-your-own fruit or vegetable farms, horse riding trails, birdwatching and hunting, etc. A survey administered by The Center for Agribusiness and Economic Development in 2000 found that 60% of Georgians would very likely visit a pick-your-own operation, 64% would likely visit a farm for the enjoyment it would provide and 73% indicated they would utilize a guide or outfitter service to access rural Georgia. In addition, since the September 11th tragedy in 2001, people are continuing to travel frequently, but are now traveling more by car than plane and are avoiding traditional tourist destinations. Tourists are traveling to relaxing places that are easily accessed by automobile. This new trend is a perfect condition for agritourism activities to flourish under.

Educating Guests and Enhancing Farm Revenues

  Declining and/or stagnating commodity prices have forced farmers to look for creative and innovative means of generating additional on-farm revenue to supplement marketing receipts generated from more traditional agricultural operations. Many farmers in Georgia have turned to agricultural and/or nature-based tourism activities to generate additional on-farm revenue. Other farmers have the desire to provide educational opportunities to Georgians, especially children to expose them to agriculture and its importance. Farmers can expand their business and increase farm income by offering people the opportunity to visit their farm and experience agricultural and/or nature based entertainment activities. Georgia offers a variety of agricultural and nature-based activities across the state, such as:

• Horseback/hiking/biking trails
• Hunting /fishing
• Boating/canoeing/rafting
• Farm tours/ working farm demonstrations
• Farm museum
• Haunted corn maze/house
• Hay rides
• Seasonal festivals (apple, sorghum, music, crafts)
• Pick-your-own fruit/vegetable
• Petting zoo/farm
• Nature walks/bird watching

Success Factors

  The success of an agritourism operation depends on the farmer's ability to attract people to their farm. The important challenge for the farm owner is to create an atmosphere in the farm that will provide people with entertainment and unique experiences, not just to enhance farm revenues and bring back food to their dinner table. No two agritourism operations are the same as these businesses reflect the farm family's unique personality. However, successful agritourism businesses in general provide people with the opportunity to escape their daily routines, experience agriculture and nature, and enjoy themselves.

  It is also essential that an agritourism operator and his/her employees are amiable and enjoy interacting with people. This is important because part of the agritourism experience is interacting with the people associated with the operation. Visitors like to ask farmers questions about the products they are producing and/or the farm's activities.
It is also necessary that the agritourism operation is appealing to the eye. According the results of the CAED study, three-quarters of the respondents indicated that viewing the farm scenery was a more important part of a farm visit than picking produce or seeing farm animals.

  A farmer must also be able to advertise effectively and extensively his/her agritourism business. A recent survey of elementary school teachers across Georgia revealed that a significant percentage was unaware of the existence of agritourism operations in their area but expressed an interest in visiting one on a future school field trip.
Finally, it is really important for agritourism operations to have liability insurance. Chances are good that during the life of a business, someone will be injured at the farm and liability insurance provides the operator financial protection.

Marketing Assistance

  The Center for Agribusiness and Economic Development (CAED) is currently involved in helping Georgia's agritourism operations market their activities. The recent launch of the AGNET (Accessing Georgia's Natural and Environmental/Agricultural Treasures) website is one tool the CAED is utilizing to help agritourism operators reach potential customers. AGNET is a searchable website that allows visitors to search for all types of agritourism based activities across the state. Visitors can search for a particular activity; search a county or group of counties; or search under defined categories such as educational agriculture or environmental experiences. The search results provide the user with a description of the operation, contact information and travel directions.

   Please visit AGNET (http://www.iiseyes.org/agnet/) to learn more about the exciting agricultural and nature-based activities Georgia has to offer. Also visit the Center for Agribusiness and Economic Developments website (www.agecon.uga.edu/~caed) to learn more about agritourism.

Kent Wolfe
Marketing Specialist
The Center for Agribusiness and Economic Development
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Summer Management and Marketing Options
for Beef and Cattle Producers

  As summer approaches many producers are considering the various management and marketing options they have. Two options often considered are summer stockering with either purchased calves or on a custom grazing basis and custom finishing. Summer stockering is an attractive alternative to many producers because they can make use of highly productive and nutritious summer annuals or established bermuda grass pastures. The disadvantage to summer stockering with purchased calves is the very severe buy-sell margin from spring until late summer/fall (Figure 1).

   Custom finishing during the summer can be an attractive alternative to many producers because feeder cattle tend to gain fairly well through the summer and cattle with carcasses grading choice or better can profit from the increased choice-select spread. However, custom finishing during the summer also has its disadvantages as hot temperatures can significantly reduce cattle performance and fed cattle prices tend to decline through the summer.

Summer Stockering and Custom Finishing

  At current prices neither purchasing stocker calves nor custom finishing appears to offer much profit potential. However, custom grazing does look like it could generate positive profits. Returns above variable costs, the chances of covering variable expenses, and breakeven price per pound are shown in Table 1. Fully detailed budgets available in PDF format are available at http://www.ces.uga.edu/agriculture/agecon/printedbudgets.htm.

   As is usually the case, the biggest problem with the purchased stockers is the large negative buy-sell margin (BSM) from spring until late summer/early fall (Figure 1). On average, sales prices for 700-800 pound steers in September will be about 85 percent of the purchase price of 500-600 pound steers in May. For instance, if a 500 pound steer sells for $85/Cwt. in May, he can be expected to bring about $73/Cwt. in September.

   At current futures prices custom finishing does not appear to be profitable. However, it is very possible that as summer goes, futures prices could increase enough to offer a profit. Also, producers who market on a carcass basis and have cattle that will grade choice or better may be able to realize a profit because of the wide choice-select spread the often occurs in the fall.
Custom grazing appears to offer the most potential for the summer as the calves can take advantage of the good grazing conditions without having the steep buy-sell margin.

Summary

  At current prices purchased summer stockers or custom finishing do not appear to be profitable ventures. However, with slight changes in futures prices, custom finishing could easily become profitable. Custom grazing appears to offer some profit potential this summer.

   As is always the case, producers should develop their own cost estimates for their specific situation.

Curt Lacy, Extension Economist-Livestock

Income Tax Issues of the Peanut Quota Buyout
and the Purchase and Sale of Peanut Bases

  Editor's Note: This article is based on Keith Kightlinger's presentation at several Farm Bill workshops conducted last year in a number of locations throughout the state. His materials can be accessed through the following web address: http://www.ces.uga.edu/Agriculture/agecon/fbill/fbillpres.htm

Basis of Peanut Quota

   The peanut marketing quotas "bought out" as a part of the Farm Security and Rural Investment Act of 2002 are considered by the Internal Revenue Service to be an "interest in land." As such, the cost or other basis of peanut quota should have been held in an asset account until the quota is disposed of. Since peanut quota is considered to be an asset used in a trade or business, any gain resulting from the quota buyout will be treated as a long-term capital gain, while any loss which may result is treated as an ordinary loss. Gain or loss will be determined by comparing the buyout proceeds to the basis of the peanut quota.

   Determination of the taxpayer's cost or other basis in peanut quota is essential to correct tax reporting of peanut quota "buyout" payments. Determining basis in peanut quota has been a challenge for some quota holders and income tax practitioners.
Purchased peanut quotas or allotments have a basis equal to the price paid for them. Peanut quotas or allotments received through inheritance have a basis equal to their fair market as of the date of the death that created the inheritance.

   If the value of the quota or allotment was not determined separately from the value of other assets acquired in the same transaction, the quota holder should make an effort to determine what the fair basis of the quota or allotment would have been at that time. This may be accomplished by accessing records on sales of quota for cash at the time and in the locality of the quota inherited, or by accessing records of sales of comparable land at the same time and in the same area which were sold without quota. If records of comparable transactions are not available, it may be possible to make a fair and reasonable determination of basis through the process of capitalizing the reasonable rental value of the quota or allotment.

   Rent is a cash return to the investment in an asset. Rent can be expressed as a percent of asset value. If this percentage of asset value, known as the "rate of return on investment," can be determined, the annual rent for a given year can be divided by the rate of return attributable to that year to estimate the value of type of asset for which rent was paid. This method of capitalizing rental values to determine asset values is one accepted method of appraisal. For peanut quotas, rental rates have generally represented an annual return on investment ranging between 15% and 25% per year, with the majority of rents falling into the 16% to 20% annual rate of return range.

  It is the taxpayer's responsibility to prove the accuracy of any information reported on his or her income tax return, so time spent to accurately determine basis in peanut quota will be rewarded by both the knowledge that only the correct amount of tax, if any, is paid when the "buyout" is reported, and by the assurance that the information provided on the tax return is accurate and truthful.

Note: A few quota holders have a zero basis in their quota. This is the case for quota holders who were original recipients of peanut production allotments from the USDA, which was converted to quota in the 1970's. Quota holders who received their quota as a gift made during the lifetime of an original peanut production allotment recipient also have a zero basis.

Peanut Base


  The creation of the peanut base as a part of the elimination of the peanut marketing quota system departed from the creation of other crop bases in one important respect. For all crops except peanuts, the crop base has been assigned to the owner of the land upon which the crop had been historically produced. In the case of peanuts, however, the base is issued to the historic producer.
The Internal Revenue Service considers crop bases to be interests in land. Since the peanut base was created by USDA and issued to peanut producers at no cost, it has no value for income tax purposes. In tax terms, it is considered to be a zero basis asset in the hands of the original recipient.

   A peanut base recipient who sells the base to another individual will be selling an asset used in a trade or business. Because the asset will have been held for less than one year, the gain on the sale of the asset will be a short-term gain. Since peanut base has a zero basis for income tax purposes in the hands of the original recipient, the entire sale proceeds will be taxable. Short-term gains are taxed at the same rates as ordinary income. The sale will be reported on Form 4797, rather than on Form 1040 Schedule F, or Form 4835, and it will not be subject to self-employment tax if the taxpayer is a Schedule F filer.

   The rules established by IRS for farm income averaging specifically exclude the sale of land, interests in land, and timber from the definition of eligible farm income, so any amount realized from the sale of a peanut base is not eligible to be treated as elected farm income for the purpose of farm income averaging. However, if the taxpayer has sufficient eligible farm income (Schedule F or Form 4835 net income, and gains from the sale of breeding or dairy livestock, machinery and equipment, and depreciable farm improvements), he or she may be able to elect to have sufficient income taxed at his or her tax rates for the three prior years to reduce the overall income tax liability for the peanut base sale year.

   If a farm, including a peanut base, is sold more than one year after acquisition, it will receive special treatment under Internal Revenue Code Section 1231 when it is disposed of. If the disposition results in a gain, it will be considered to be a long-term capital gain, and will be taxed at the preferential long-term capital gains tax rates (currently 20% maximum for individual taxpayers). If the disposition results in a loss (the amount realized is less than the basis of the assets), the loss is considered to be an ordinary loss, and can be used to offset any income on the taxpayer's return for the year of disposition.

   If a peanut base is not assigned to a farm by March 31, 2003, it is lost. IRS limits losses for income tax purposes to the lesser of either the loss of value, or the basis of the asset. Since peanut base is a zero basis asset in the hands of the original recipient, there is no loss for income tax purposes.

  The purchase of a peanut base receives the same treatment as a purchase of land. Expenditures for the acquisition of land, and interests in land, are not recoverable through current deduction, depreciation, or amortization. The full amount expended to purchase peanut base must be carried on the taxpayer's books until the base is sold or otherwise disposed of.

Keith D. Kightlinger
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Calendar/Announcements/Recent Publications

For more information, contact your local county extension agent. We can be reached at:

Agricultural Economics Extension Offices

Conner Hall, Athens, GA 30602
Tel. No. 706-542-1861
Fax No. 706-542-4131

Rural Development Center
PO Box 1209,
Tifton, GA 31793
Tel. No. 229-386-3512
Fax No. 229-386-3440

Georgia Southern University, Landrum
Box 8112, Statesboro, GA 30460
Tel. No. 912-681-5653
Fax No. 912-681-0376

The Center for Agribusiness and Economic Development
202 Lumpkin House, Athens, GA
30602-7509; Tel. No. 706-542-0760

All this and more on the Web!

¨       http://www.ces.uga.edu/Agriculture/agecon/agecon.html

        For our extension programs, publications, commodity outlook reports, presentations, decision tools

¨       http://www.agecon.uga.edu/~caed/

        For feasibility, marketing, policy studies, as well as agricultural, natural resource and demographic data prepared by the Center for Agribusiness and Economic Development

• AGECON 03-81: "Crop Enterprise Cost Analysis" by N. Smith
• CR-03-03: "Passport to Georgia" by S. Boatright"
• Agricultural Land Sale Prices in the State of Georgia" by J. C. Bergstrom, I. D. Clifton and Y. M. Mohamed