Finance-Accounting

Inside The Tax Return of Your Farm's Future

Thu, 09 Apr 2026 13:41:28 GMT

The traditional process of preparing agricultural tax returns has long been defined by manual data entry and the complex reconciliation of income. However, the integration of artificial intelligence into financial systems is ushering in a more sophisticated era of tax management. For the modern farm, the future of filing lies in a seamless pipeline where software handles the heavy lifting of data organization, leaving the high-level strategy to human experts.

Comprehensive Data Integration

The foundation of a modern tax return is the accounting system. Platforms like QuickBooks, Xero or specialized farm management software are becoming increasingly autonomous. In the near future, these AI agents will do more than simply record expenses; they will analyze them in real-time.

With direct links to bank feeds and digital invoices, AI can categorize expenditures with precision. It can distinguish between capital investments, such as machinery or land improvements, and standard operating costs like seed and fuel. This continuous synchronization means by the end of the fiscal year, the financial records are already in a format that mirrors the requirements of a tax return.

Automated Document Reconciliation

A significant portion of tax preparation involves matching — ensuring the farm’s internal records align with the documents issued by third parties. A preparer of a farm tax return may spend more time making sure all of the income is in the right box then planning to optimize the income tax level.

AI is uniquely suited to handle this high-volume verification. The system can automatically ingest Form 1099-PATR (cooperative distributions), 1099-G (government subsidies) and other Form 1099s and W-2s and verify them against recorded deposits.

If a document is missing or a figure does not match the ledger, AI identifies the specific discrepancy immediately, allowing for a targeted correction rather than a manual search through months of records.

The Role of Human Oversight

While AI provides the technical framework for the return, the final stage remains firmly in human hands. Once the software has mapped the data to the appropriate tax schedules, it produces a comprehensive draft for professional review.

This allows the farmer or a tax consultant to transition from a data entry role to a strategic advisory role. Instead of spending hours verifying line items, the human reviewer can focus on critical tax planning decisions including accelerated depreciation choices or income averaging that require professional judgment and an understanding of the farm’s long-term goals.

The result is a more accurate, defensible and efficient tax filing process. By automating the clerical aspects of the return, AI allows agricultural producers to maintain focus on their operations while ensuring full compliance with the evolving tax laws.

The Mental Pressure of Being an Off-The-Farm Spouse

Tue, 27 Jan 2026 13:09:38 GMT

Being an off-the-farm spouse can sometimes feel like you’re living life in the in-between. You’re not fully involved on the operation, but you’re not removed from it, either.

Most of the time, you’re hearing about the good days and the bad ones secondhand, whether it’s a conversation at the dinner table or a late-night recap of the day as you crawl into bed. Through blurry details, you piece together what happened, how the day went and how your spouse is really feeling. You celebrate the wins, worry through the challenges and carry the stress right along with them, even though you weren’t there to see it firsthand.

That in-between space can be hard to explain to anyone outside the farm, but it’s a feeling many off-the-farm spouses can relate to.

Balance the Comfort and the Pressure of Stability

It’s no secret that an off-the-farm job can come with real advantages.

A steady paycheck
Health insurance
A retirement plan

Knowing when that next check will hit the bank account and having reliable health coverage feels like a safety net when life on the farm is anything but predictable. And for a lot of farm and ranch families, this reliability helps make everything else work. But with stability can also come added pressure. A pressure to provide, to stay employed and to keep everything moving forward.

More often than not, the off-the-farm paycheck carries the heavier load of the responsibility, especially when margins are tight. Per USDA data, in 2023, 96% of farm households earned money from off-farm sources, making up 77% of household income. And USDA states most households, regardless of farm size, work off the farm because it pays better than farm work, and access to health care benefits is often part of that decision.

For off-the-farm spouses working to help keep the farm afloat, this heavy load can take a mental toll.

They’re juggling budgets, weighing the “what-ifs,” and sometimes lying awake at night running the numbers in their heads — thinking through what could go wrong and how to keep the farm and family going. It’s a constant, behind-the-scenes effort to make sure everything keeps running smoothly.

Open the Lines of Communication

When that stress starts to build, one of the most helpful tools families have is simply talking about it. According to the University of Wisconsin’s Farm Management Program, farm couples and families who manage stress well tend to communicate openly, working together to plan ahead and tackle problems as a team. Having honest conversations and sharing information can help bring back a sense of control when finances feel uncertain.

That can be easier said than done. When financial pressure builds, many people try to carry it quietly — thinking they are protecting their family by keeping worries to themselves. But holding it all in can actually create more tension at home. Opening up does not mean sharing every detail or worst case scenario. It can be as simple as letting trusted family members or friends know what you are carrying and being honest about changes that may need to happen at home.

Share the Load

While there’s no perfect way to handle the stress that comes with being an off‑the‑farm spouse, you learn how to carry it in a way that works for your family. Sometimes it means adjusting plans, sometimes it means talking things out and sometimes it just means taking a deep breath and reminding yourself you’re doing the best you can.

Finding small ways to share the load can really help, whether that means talking things out, relying on people you trust or giving yourself a moment to breathe when you need it.

How to Get a Loan Approval: A Banker's Point of View

Tue, 18 Nov 2025 20:28:26 GMT

For most farmers, the next big project on the operation starts with a conversation with your banke, and being fully prepared before you walk into that meeting can significantly increase your chances of getting a loan approval.

Curtis Gerrits, senior lending specialist at Compeer Financial, has spent years helping producers get the financing they need. During a recent Professional Dairy Producers webinar, he shares what truly makes a loan application stand out and how farmers can set themselves up for a smoother approval process.

Get Your Financial House in Order
When preparing for a loan, Gerrits emphasizes lenders look first at clear and complete financial documentation. The process begins with the fundamentals.

“Some of the documents that are top of mind are your profit and loss statement,” he says. “Don’t just stick with the current year. Try to have access to the last three years.”

A profit and loss statement not only establishes whether a business is profitable but also helps lenders understand how the farm manages revenue and expenses over time. Gerrits encourages farmers to follow this with a current balance sheet that breaks down assets and liabilities in detail.

This balance sheet should include livestock numbers, acres owned and leased and a complete equipment list with updated values. Together, these documents paint a picture of financial health and management discipline.

For long-term planning, Gerrits stresses the importance of forward-looking projections.

“Probably one of the last things is to have a detailed projection,” he adds. “What is the business plan, and how is this going to impact your business?”

These projections help both the producer and the lender understand how an expansion, land purchase or capital improvement will affect cash flow and operational stability in the years ahead.

Details Matter
Gerrits says one of the most common pitfalls he sees is overlooking the finer points of financial reporting. Accurate and transparent records build trust and demonstrate professionalism, giving lenders greater confidence in the producer’s decision-making capacity.

“The attention to detail is probably a key thing that maybe gets overlooked from time to time,” he explains.

A lender needs to see exactly what makes up the operation’s income. This could include crop sales, livestock sales, custom work, direct-to-consumer revenue or any other streams that support the business. Clear categorization helps verify performance and gives lenders a better understanding of how the farm is managed.

Build a Strong Relationship
Beyond the numbers, Gerrits stresses the importance of working with a lender who understands the realities of farming. A loan officer familiar with agriculture can better interpret financial statements, spot trends and anticipate challenges.

“Working with a loan officer that understands your day-to-day is really important,” he says. “Having that good relationship where you can bounce ideas off of one another is a really great thing.

Gerrits also encourages producers to bring their lender onto the farm. Sometimes a walk-through can communicate more than a financial packet ever could.

“Put your boots on and take a walk through the barns and show them what you are doing and why the loan application that you are requesting is important,” he says.

Seeing the animals, the facilities and the workflow helps lenders fully understand the operation’s strengths and opportunities, and it gives them greater clarity when evaluating a loan request.

Be Honest About Tough Years
Producers should not shy away from acknowledging difficult financial periods or reporting losses on taxes. Gerrits reassures farmers that losses do not automatically disqualify them from financing.

“Do not get too hung up on the losses out there,” he explains.

A balance sheet can often show how those losses are supported or offset by strong assets, such as land, livestock or equipment equity. What matters most is transparency and context. And demonstrating that you have a plan to manage challenges and leverage your assets can build confidence with your lender.

Plan for the Future
Constant communication with your loan officer can make a big difference in the approval process. Gerrits says checking in periodically, even with a quick touch base, helps avoid surprises.

“Maybe you’ve already talked about: ‘Hey, in a couple of months we might have something come in, and I’m going to have a request for an operating line of credit,’” he says. “That way it’s already in the back of the loan officer’s mind, and they can start preparing or gathering the right information.”

A little preparation can also greatly speed up the loan process. Gerrits recommends giving your loan officer about one month of lead time before funds are needed, along with complete financial documents.

“At the end of the year, we’ll see some borrowers who need to borrow money to do some prepaids to help their tax situation,” he says. “It’s hard to turn things around because a lot of folks are coming in at the last hour. If you give them a month’s lead time with all of the information pertinent, all the financials and balance sheets, that will just help expedite it.”

Looking further ahead, Gerrits encourages producers to think generationally and begin planning for succession well before retirement becomes imminent.

“It is never too early to start a succession plan,” he says.

Early planning gives the next generation clarity about future roles and expectations, helping them prepare financially and personally for the responsibilities that lie ahead.

Own Your Numbers
Ultimately, Gerrits believes successful borrowers take responsibility for knowing and understanding every aspect of their financial position.

“Know your numbers first,” he says. “Don’t just rely on your loan officer to tell you how you are doing.”

Throughout the loan process, preparation and transparency go a long way. Clear financials, attention to detail and regular communication help your lender understand your goals, while on-farm conversations and honest discussions build trust. Being organized, consistent and informed does more than streamline an application, it helps you make better decisions, catch issues early and keep the operation moving in the right direction.

Working With Your Ag Lender

Fri, 13 Jun 2025 11:20:31 GMT

A decade ago, our friends & colleagues, extension economists across the Southern region, developed a comprehensive collection of articles in Surviving the Farm Economy Downturn .

Well… what is old is new again. The issues addressed in that publication are all too relevant today. Today, we’re focusing on one particular article discussing the borrower/lender relationship. While most annual operating loan renewals are in place, it’s a good time to emphasize the idea that the borrower/lender relationship should be ongoing throughout the year.

Key takeaways from Working With Your Ag Lender in Good Times and Bad:

Partnership

The dynamics of the borrower/lender relationship are unique. Much more than a simple customer transaction, both parties are dependent and literally invested in the business of the other. As such, both should consider it a partnership and expect to work together.

Full Disclosure/Trust

A good partnership needs to be built on trust. Both parties should be open about their business as it affects the other. Borrowers should disclose any changes to original plans and/or other transactions that affect repayment capacity. Lenders should fully disclose their processes, standards, credit decisions, and timing, which could affect the borrower’s access to capital and business operations.

Communication

Communication should be continual. Don’t leave your credit discussion to that once a year loan renewal process. Both sides should be willing to have ongoing discussions about progress, ideas, successes and challenges. Importantly, don’t just engage in communication because you have something to say. Start a conversation for the sake of what you need to hear.

Know Your Business

One of the things that makes a borrower a good partner is that they know and can explain their own business very well. A manager who is on top of their game builds confidence in the lender. The same is true for making a lender a good partner. Borrowers want lenders who are well-versed in the operations of their credit institution.

Know Your Partner’s Business

We all remember a grandmother telling us, “Mind your own business.” At some point, she probably also told you to “put yourself in the other person’s shoes.” In this case, it is the business of both partners to put themselves in the other’s shoes. Each should take the time to understand how the other operates, their incentives, their profit structure, and how they make decisions. Listen and learn from each other, and… always listen to your grandmother.

Check out the full article (pg. 38), as well as the other articles in Surviving the Farm Economy Downturn .

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The Best Time to Start Your Retirement Plan

Mon, 09 Jun 2025 17:25:09 GMT

Farmers historically have struggled to invest money in anything other than their farm operation. However, by investing in retirement plans including an IRA, a farmer can more easily save up for retirement and make the transfer to the next generation much easier.

The power of compounding is the financial seventh wonder of the world. Based on your annual investment return, you can determine how quickly your investment will double by dividing it into 72. For example, if you average 3% on your money, it will take 24 years to double. However, if you can earn 8%, then it only takes nine years.

The younger you start to invest, even small sums, the more money you will have at retirement. Let’s compare the results of placing $10,000 into a retirement account at either age 20 or 40.

The farmer who does this at age 40 and then pulls the money out at age 70 will have $100,627. However, the farmer who starts at age 20 will have $469,016, and if they can earn 10%, will have $1,173,909.

The cost of maintaining a solo 401k plan is very inexpensive and married couples can set aside at least $14,000 into an IRA each year. The fees on those accounts are minimal and you can make sure to invest in low-cost ETFs or mutual funds. High-cost funds could quickly reduce your returns substantially.

Most of the earnings will result in the last 10 years, so the sooner you get started, the more funds you will accumulate.

Risk Protection Benefits
There’s another big reason to make this investment. Funds in a retirement plan are fully exempt from bankruptcy, and we all know farming can be a very risky business. The full exemption does not apply to IRAs, but the amount that is exempt is fairly large.

This amount gets updated every three years. On April 1, 2025, the exemption amount was raised from $1,512,350 to $1,711.975 through March 31, 2028.

Most farmers have IRAs less than this amount, so it’s likely they will have a full exclusion if bankruptcy was to occur. Amounts rolled over from a 401k plan or other retirement account, including earnings associated on that account, are fully exempt.

In some states, IRAs are fully exempt or at least partially exempt.

The bottom line is to invest in an IRA or retirement plan. I hope you never need the protection, but it is a good insurance policy.

How to Make Ranch Finances Simpler

Thu, 22 May 2025 18:00:00 GMT

How do you make decisions on your operation each day? That’s a question Jason Barnard was posed with when he and his wife, Candice, made the decision to clean up the finances for their diversified operation. However, it’s a question all ranchers should take the time to think about.

Jason and Candice’s operation is in Arizona and includes irrigated forage crops, stockers, raising fat cattle, custom feeding and selling beef directly to consumers. But that’s not where they started.

The Barnards started by doing what their families had done for generations — raise chili, cotton and hay. However, these can be high-risk crops, resulting in really good and bad years financially. In 2011, they moved to their current place and started shifting to a more cattle-oriented business based on the available resources.

“About 15 years ago, I told Candice my dream was to walk all of our feed off the farm in the form of fat cattle,” Jason says.

Today, they have taken that to a whole new level, as what started as running yearlings on stubble and feeding by hand has turned into custom feeding cattle and selling beef directly to consumers.

“Every transition hasn’t been fast, but risks, market prices and other factors kept moving us toward cattle businesses,” Candice adds.

This exponential growth didn’t come with growing pains for the Barnards. Making decisions about what to do for each enterprise became confusing as all the numbers ran together.

“As we grew, nothing was separated like it should’ve been,” Candice says. “It wasn’t clear which entities were making or losing money.”

Instead of getting an instant picture of their finances for each enterprise, they had to reach out to their accountant and wait for a response.

This wasn’t working for their operation or their family. They needed the ability to make decisions faster and clearly to mitigate risk.

“In agriculture, we are having the time of our lives, but we are also experiencing some of the highest risk of our lives,” Jason says.

The solution Jason and Candice decided on was Ambrook — an accounting software designed specifically for agriculture. Ambrook allows them to get a near-instant picture of the finances for each individual enterprise and make it easy to enter, designate and sort through all income and expenses.

“I can see how they can adapt much quicker than their previous systems,” says Maika — an Ambrook customer success specialist.

This newfound organization has allowed Jason and Candice to show up more prepared for their loan officer, make timelier decisions, and even let go of their trucking business of 10 years because they saw how much money it was losing.

“When you have clarity with your numbers, it no longer becomes an emotional decision to let something go, and it becomes empowering as a business owner,” Candice says.

Increased organization can also reduce overwhelm and improve overall mental health for farmers and ranchers.

“In a diversified operation, we can manipulate our numbers to make other enterprises look better, but at the end of the day, you should know which ones are truly profitable and shouldn’t have to manipulate the books,” Jason says.

Deciding to switch from QuickBooks and spreadsheets to Ambrook didn’t come without a lot of time and hard work, but it has paid off for the Barnards.

“It’s been a lot of work to get to this point, but the ROI of that time has been exponential,” Jason says.

Jason and Candice encourage other ranchers and diversified operators to take control of their future by organizing their finances because it has reaped bountiful rewards for their family.

Ranchers can try Ambrook for free by going to ambrook.com/casualcattle

Listen to the entire episode.

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How Your Income Taxes Will Change This Year

Tue, 25 Mar 2025 15:01:31 GMT

The Trump tax cuts, officially known as the Tax Cuts and Jobs Act (TCJA) of 2017, have been a topic of significant debate since their inception. It appears the Republicans might have enough political capital to both extend the TCJA and enact additional tax cuts that could help farmers.

The major tax cuts that have helped farmers since 2017 include (but not limited to):

Reduction in most tax rates
100% bonus depreciation through 2022
Section 199A 20% net deduction on farm income
Doubling the estate tax exemption (currently $13.99 million)
Increasing the child tax credit to $2,000

However, there were also some provisions that penalized many farmers:

Limiting the state and local tax (SALT) deduction to $10,000
Eliminating the tax-free treatment of equipment trades
Reducing 100% bonus depreciation (there will be none starting in 2027)
Dropping the corporate tax rate to 21% (most farmers paid 15%, so this was a 40% tax increase)

The House Republicans passed a budget bill to allow income taxes to rise by $4.5 trillion over 10 years. The Senate is proposing to ignore the budget effect of making the Trump tax cuts permanent, and the House could go along with this proposal.

This effectively allows Congress to make the Trump tax cuts permanent and allows for an additional $4.5 trillion of reduced taxes in other areas such as:

Eliminating taxes on tip income
Eliminating taxes on social security income
Eliminating taxes on overtime
Eliminating estate taxes
Reducing the corporate income tax rate to 15% for domestic production

However, there are many provisions of the Trump tax cuts that some Republicans are not in favor of, such as the $10,000 cap on the SALT deduction. Eliminating this cap would cost about a trillion over 10 years. Most republicans are also not in favor of the Inflation Reduction Act “green” provisions and many of them will be repealed or reduced, that could include the Section 45Z fuel tax credit.

The bottom line is income tax law will change this year, and it will be dramatic. Our crystal ball right now is fairly cloudy as to the final provisions, but for most farmers the changes will likely be beneficial.

Tax Turbulence: How Sunsetting Provisions Could Change Your Bottom Line

Thu, 19 Dec 2024 15:04:41 GMT

With 30 tax provisions set to expire at the end of 2025, the tax liabilities for family farms could increase at a time America’s farm families can ill afford any additional hits to the budget. Uncertainty surrounds the 2017 Tax Cuts and Jobs Act (TCJA) and American Rescue Plan Act (ARPA)–especially as a new administration is in route to the White House.

“The cost of the TCJA is significantly higher than was originally estimated in 2017. The newest estimate we’ve seen is that a full extension of the TCJA is going to cost $7.75 trillion through 2035,” says Pinion’s Beth Swanson. “With the budget reconciliation process and the expected cost, we’re worried that Congress is going to have to pick and choose which provisions of the TCJA are going to get extended next.”

According to research from USDA ERS, the impact of these expiring federal income tax provisions would increase tax liabilities for farm households by almost 9 billion. That’s a $2,200, or 12%, average increase per farm.

Increase in tax liabilities resulting from expiring Tax Cuts and Jobs Act (TCJA) provisions that would increase tax rates, decrease deductions, and restore personal exemptions.

(USDA, Economic Research Service and USDA, National Agricultural Statistics Service, 2018–2021 Agricultural Resource Management Survey)

Broken down by farm size, that looks like:

Low sales farms: Tax increase of about $700
Moderate sales farms: Tax increase of about $2,300
Very large farms: Tax increase of nearly $28,000

“Interestingly, in percentage terms, moderate sales farms are expected to have the greatest increase in tax liabilities at about 16%,” says Tia McDonald, USDA ERS. “They’re in an in-between area where they’re not quite getting some of the exemptions that higher income folks can take advantage of like bonus depreciation and even 179.

Farm CPA and Top Producer columnist Paul Neiffer adds, “Another part of it is the percentage increase of going from a 12% tax bracket to a 15% tax bracket. A lot of those moderate-income farmers also have 2, 3 or 4 kids that, under the current rules, qualify for the $2,000 tax credit, which is going to drop down to a $1,000 tax credit.”

As far as which provisions are the most important for farmers and ranchers, McDonald says the biggest impact will come from be provisions providing reduced individual income tax rates, an increased standard deduction, a cap on state and local tax deductions, and the elimination of the personal exemption, which would create an increase in total tax liability of $4.5 billion for all farm households.

“The reason for that is that it touches almost every farm household. So, the reach is quite broad,” she explains.

The Qualified Business Income Deduction
The second most important provision set to expire that McDonald lists is the qualified business income deduction, which provides farm households with positive business income a deduction equal to 20% of their qualified business income.

“Approximately 40% of low sales farms to almost 80% of very large farms receive that qualified business income deduction,” McDonald says.

Estimated Impact of Expiring QBI Deduction

(USDA, Economic Research Service and USDA, National Agricultural Statistics Service, 2018–2021 Agricultural Resource Management Survey)

Referring to the results of a recent survey, Kent Bacus of National Cattlemen’s Beef Association (NCBA) says even though this deduction hasn’t been around long, it’s been valuable to producers.

“As far as the 199A qualified business income deduction, with that being relatively new, we still had over half of the [1,200] respondents who have used it, and they’ve considered a very important tool,” Bacus says. “I think that’s something that we want to see continue in the next package.”

Child Tax Credit and Bonus Depreciation
McDonald says additional provisions, such as the child tax credit, the estate tax exemption, alternative minimum tax provisions and bonus depreciation, will likely have less of an impact on tax liabilities overall.

“Those are really targeted toward higher income farm households, so they don’t have quite the reach,” she explains.

Swanson, however, says the loss of bonus depreciation would still be notable for many.

“For bonus depreciation, sunsetting is a concern – especially because Section 179 isn’t really a one-for-one trade. With commodities that are heavier on equipment, producers tend to use bonus depreciation year after year,” Swanson says. “It’s more than just a timing difference. The loss of bonus depreciation will be a significant annual effect to many of the farmers that we work with [at Pinion].”

This is echoed by the results of NCBA’s survey as well.

“When you look at Section 179 and bonus depreciation, one of the key things we ask is, ‘If these tools weren’t available, how would that impact you?’,” Bacus says. “What we found is without access to these tools, about 25% to 30% of the respondents would have had to pay an additional $20,000 in taxes.”

The Timeline
Once the new administration is in place, Bacus believes we can expect Congress to act quickly.

“We have new leadership in the Senate and new leadership in the administration. They’re going to try to prioritize a couple of key things that will be important to the new administration, and a couple of those are going to be border security and taxes.” Bacus explains. “We’re looking for a lot of movement in those first 100 days.”

But Swanson says it’s possible that movement may not be focused on extending these provisions in the beginning.

“We are worried about President-elect Trump’s varied tax commitments and the distraction those might provide to getting the TCJA extended,” Swanson says. “I think the best thing we can do is wait and see. We will hope that the legislative process goes fairly quickly and Congress is able to avoid all of those distractions that may prevent us from getting TCJA expansion done.

Once these provisions are in focus, Bacus believes there are a few avenues it could take.

“With those tight margins in the House and the Senate, you are going to have to have some kind of bipartisan package that comes together. The big question is, are they going to update the tax code? Are they just going to extend it? Or will we potentially see a default if all these efforts fail,” Bacus says. “I think it’s unlikely that the efforts have failed, but the aggressive timeline that’s been proposed is always subject to the minutia and the swamp nature of Washington. That tends to slow things down.”

Neiffer expects an extension with a few key changes.

“I don’t think we’re going to see a permanent TCJA,” Neiffer says. “We’re going to see another three to five or five to seven years. Some of the provisions may become permanent and some will disappear. And you’re going to see some new ones come into effect.”

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USDA: Family Farms Still Dominate A Majority of U.S. Farms

Fri, 13 Dec 2024 15:43:01 GMT

Here are eight takeaways illustrating the landscape of U.S. farm productivity and financial resources.

Released on Dec. 10, USDA-ERS published its 2024 edition of America’s Farms and Ranches at a Glance . This publication, which pulls from survey data collected at the end of 2023, aims to give a snapshot of the U.S. farm economy.

Takeaway 1: In total, family farms accounted for about 96% of total farms and 83% of total production in 2023.

A big part of the study breaks down different characteristics of farms by type. The first differentiation is between family farms and non-family farms. Per the USDA, a family farm is a farm in which the majority of the business is owned by an operator and/or any individual related by blood, marriage, or adoption, including relatives who do not live in the operator’s household.

Among family farms, farms are divided by farm size measured by gross cash farm income (GCFI).

Most U.S. farms (86%) are small family farms (GCFI less than $350,000); these farms operate on 41% of U.S. agricultural land and account for 17% of the total value of production
Midsize family farms (GCFI between $350,000 and $999,999) accounted for 18% of agricultural land and 18% of the total value of production.
Large-scale family farms (GCFI of $1,000,000 or more) accounted for 48% of the total value of production and 31% of agricultural land in 2023.
GCFI includes sales of crops and livestock, government payments, other farm related income, and fees received by operators from production contracts.

Takeaway 2: Large-scale family farms dominate the production of many selected commodities

Large-scale family farms accounted for the majority of the value of cash grains and soybeans (52%), cotton (71%), dairy (77%), and specialty crops (59%) production
Small family farms produced 45% of the value of hay and 46% of the total value of U.S. poultry and egg output
22% of the value of beef production occurred on small family farms, while 39% occurred on large-scale family farms. Small family farms often have cow-calf operations, while large-scale family farms are more likely to operate feedlots
Compared with 2022, nonfamily farms comprised a larger share of the value of production, with their value of beef production increasing from 11% in 2022 to 26% in 2023.

Takeaway 3: Small family farms and non-family farms are potentially more financially vulnerable.

The data in this report was collected when net cash income was above the 10-year average. USDA measures financial performance by operating profit margin (OPM), with a noted high-risk zone of less than 10 OPM.

In 2023, between 52 and 85% of small family farms, depending on the farm type (retirement, off-farm occupation, low sales, moderate sales), had an OPM in the high-risk zone.
Around 53% of nonfamily farms had an OPM in the high-risk zone.

Takeaway 4: Use of credit and loans is an important resource for all farms.

The share of farms (28%) using credit in 2023 was lower than the previous 10-year average of 31%.
Within every type of farm, on average, 80% or more of debt came from traditional lending sources, including the Farm Credit System, USDA, FSA, and commercial banks, compared with trade credit or other sources.

Takeaway 5: Less than one-quarter of farms use government payment programs.

The percentage of farms receiving government payments ranged from 21% for small family farms to 44% for midsize and large family farms.
Small family farms received 76% of all payments from USDA’s Conservation Reserve Program (CRP)
41% of all USDA, Natural Resources Conservation Service (NRCS) working lands program payments were received by small family farms, which includes Environmental Quality Incentives Program (EQIP) and Conservation Stewardship Program (CSP).
Midsized and large-scale family farms accounted for 66% of the total value of production and received 71% of countercyclical-type payments, which include Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) and 61% of all other payments, which include Dairy Margin Coverage, agricultural disaster, and ad-hoc payments

Takeaway 6: 16% of farms participated in federal crop insurance programs. This is a slight increase from 14% in 2022.

66% of farms producing row crops (cotton, corn, soybeans, wheat, peanuts, rice, or sorghum) purchased Federal crop insurance.
17% of farms growing specialty crops, such as fruits, vegetables, and nursery crops, and 12% of farms producing livestock purchased Federal crop insurance.

Takeaway 7: Many farms rely on off-farm income.

Most (85%) of all U.S. farm households earned the majority of their total household income from off-farm sources
52% of family farm households had negative farming income
Overall, 42% of farm households have income below the US median in 2023.

Takeaway 8: New insights on unpriced stored grain highlight the risk management tool.

For the first time, the study asked about unpriced stored corn, soybeans and wheat.

The largest volumes were in post-harvest months.
The average share of total stocks as of December 2023 that was unpriced was 38.6% for corn, 32.9% for soybeans, and 20.4% for wheat
Unpriced off farm storage is less commonly used

Click here for the full report from USDA-ERS

7 Ways To Be A Lifeline For Farmers

Mon, 07 Oct 2024 14:15:04 GMT

When times are tough is when farmers need their trusted advisers the most, says Greg Martinelli. For the past eight years, he’s coached ag sales professionals specifically in the retail/inputs category.

“When I worked in corporate ag, there was a moment when this idea hit me like a ton of bricks,” Martinelli says. “I was visiting a Midwest row crop farmer in 2011, when corn was $6 and breakeven costs were close to $3.50. He told me, ‘I don’t need you now, I needed you when corn was $3.50.’”

Martinelli says there are opportunities to bring value in this current economic environment. To help refocus your efforts in sales and marketing, he offers seven steps to find success with customers despite the tough economic times of the cycle.

1. Don’t jump into the quick sand with them.
“Farmers love to complain and commiserate about how hard it is. And as sales people we love to commiserate with them on how you understand the farmer’s business,” Martinelli says. “But if you do that, you aren’t doing anything different than what they hear at the coffee shop.”

He equates reiterating the negativity as not throwing them a lifeline but rather jumping into the quicksand with them.

“Farmers are looking for someone with a solution. You show up on the farm with all of your company tools and resources and instead of using them to help, you jump into the quicksand with them. This is where a trusted advisor can set themselves apart,” he says.

2. Keep them moving.
With the magnitude and quantity of factors farmers consider, they can fall victim to analysis paralysis.

“Farmers are seeking ideas but more so clear answers,” Martinelli says “This is where you can—not in a gossipy way—share your insights from other farms. Every day all day you’re on farms. You can share in a professional way what you are seeing and what you are learning.”

This combination of experience and credibility can serve the purpose to keep farmers considering new ideas as well as help prevent someone from going too far or all-in on a risky choice.

3. Provide perspective.
“If you’re lucky enough to be in the middle or late in your career, you’ve gone through downturns before,” Martinelli says. “That means you know things change, and there will be an upturn.”

He cautions sales people from encouraging negativity and rather engaging in a positive way.

“You have to acknowledge what is going on, because the financial pain is real,” he says. “Often as salespeople we can seem like we’re acting like a psychiatrist, and the opportunity is to not let the negativity persist any more in the conversation than it needs to.”

4. Shed light.
“There are places farmers aren’t looking where there are opportunities for you to help them uncover,” Martinelli says.

As an illustrative example, he talks about crop marketing.

“This is a weak area across crop production because there are no right or wrong answers, and the skills required usually mean the oldest person on the farm does the work,” he says. “The thing to do is admit you don’t have the answers, but ask what they are doing with their marketing plan.”

He says many of those conversations unveiled farmers with even 30 years of experience didn’t understand crop insurance, which provided another valuable exploration of additional services.

5. Show them a path.
“Instead of selling an idea, explain why a change of approach is an asset to their business,” he says.

One common trap is to talk broadly about precision agriculture and not detail exactly what product and service fit an individual field.

6. Put your customer on your org chart.
While this may sound a bit off the wall, Martinelli advocates identifying where the customer fits into your business by the simple task of putting them on your company’s organizational chart.

“We all need an org chart to know who manages who, but if you really want to start the engines of the thought process, ask where on your org chart is your customer. Where would you put them.”

This helps illustrate how marketing, accounting and other teams are taking into account what customers are trying to accomplish.

“If things are changing, and times get tough for the customer, it’ll get tough on your agribusiness. How are we organizing around the customer?” he says.

7. Let them know they aren’t completely alone.
“At first, it may not be well received or completely understood that everyone is experiencing this downturn,” Martinelli says. “Farming and making decisions can be a lonely business for our customers. As their trusted adviser, this can be your chance to provide support. Let them know they are not alone in their struggles.”

He says when customers are venting, don’t interrupt them, but rather when they are done ask them with all of the negatively for how things are, what are they going to do different.

With the seven steps, Martinelli coaches advisers to take their three biggest customers, and list the steps they will do in 30, 60 and 90 days.

“Having a plan is certainly better than just showing up on the farm and kicking tires,” he says.

Your Next Read: New Study Looks At The Relationship Between Farmers And Their Advisors

The 3 Biggest Updates to USDA's Farm Loan Programs You Need to Know

Thu, 12 Sep 2024 15:40:27 GMT

With commodity prices down and farm returns expected to significantly decline , USDA’s Farm Service Agency (FSA) has released three major changes to its farm loan programs in an effort to increase the opportunities farmers and ranchers have to be financially viable.

“The analysis of what has gone into these rule changes is nothing short of tremendous,” says Zach Ducheneaux, FSA administrator. “Our team has poured over hundreds of thousands of loans in our portfolio and really identified some things that FSA can, should, and with this rule, will be doing better to support our producers and their economic viability in the countryside.”

The three most notable policy changes, which will go into effect on Sept. 25, include:

1. A new, low-interest installment set-aside program for financially distressed borrowers
According to Ducheneaux, this program was modeled after the Disaster Set-Aside program, but the difference is a borrower doesn’t have to be affected by a declared natural disaster in order to qualify. However, it’s important to note producers must be in FSA’s portfolio by the time these updates go into effect in order to be eligible.

“Oftentimes, what the producer needs is just a little breathing room,” Ducheneaux says. “We have the ability to do that for producers that are in our portfolio as of Sept. 25.”

The program essentially allows eligible, financially distressed borrowers to defer up to one annual loan installment per qualified loan at a reduced rate.

“When we set that payment aside, instead of accruing interest at the already established rate, it’s going to accrue interest at 1/8 of a percent,” Ducheneaux explains. “We’re really setting aside a payment, and it’s not going to balloon on you in a way it jeopardizes your operation as you’re coming to the end of that term.”

2. Access to flexible repayment terms
Some of these more flexible terms include smaller interest-only payments and longer loan terms. The idea behind this change is to allow producers to increase their working capital and give them the ability to save for education and retirement.

“Having a retirement fund built into this can help ease that generational transfer and help enable us to recruit young farmers and ranchers back to the farm,” Ducheneaux says. “Because FSA can make adjustments to our terms, it might help them step out of that job they’ve got in the town 40 miles away for health insurance and pay for that for their family on their own terms.”

He adds that the concern this could add more interest to the loan over time is valid, the point is to increase available cash flow for the operation.

3. Reduced additional loan security requirements
This update reduces the collateral requirements for direct loans from requiring available security equal to 150% of the loan amount down to 125%. One of FSA’s main goals with this change is to reduce the frequency borrowers need to use their personal residence as additional collateral for a farm loan.

“If you think back to 40 years ago, some of the most heart-wrenching stories you hear are when you’re losing the family home,” Ducheneaux says. “With this rule, if we do not need it to get to a one-to-one security position, we will not take the primary residence as additional security.”

In addition, FSA will release liens on collateral the borrower initially provided as additional security after establishing a history of on-time payments.

Additional improvements include streamlining and automating the Farm Loan Program process with a loan assistance tool, online loan application, online repayment feature and a simplified direct loan paper application.

“We think these changes to the terms are really transformative,” Ducheneaux says. “Any of these three provisions on their own would be a great transformation, but taken as a collective, this really signals a new day in ag finance, where FSA is going to position itself as the leader and the example for how our friends in the lending community might consider doing this.”

Ducheneaux explains a robust training process on the changes is underway for FSA employees and asks for patience and grace as the team comes to understand the new tools they have.

Is Agriculture on the Brink of a Farm Economy Cliff? The Emotional Testimonies from Capitol Hill this Week

Thu, 12 Sep 2024 15:40:14 GMT

Is agriculture on the brink of an impending farm economy cliff? A panel of experts testified before the House Ag Committee this week about the severe challenges facing agriculture, all the way from the farmer to the supply chain.

The hearing on Capitol Hill comes as net farm income is forecast to decrease by $43 billion from 2023 to 2024, marking the most significant two-year decline in history. Meanwhile, production expenses are forecast to increase by $17 billion.

During the hearing the Chair of the House Ag Committee expressed his concerns about another farm financial crisis brewing.

“We are living through the largest two-year decline in farm income in history,” said Rep. G.T. Thompson (R-PA), House Agriculture Committee Chair during the hearing on Tuesday. “At the end of 2024, total farm sector debt will be the highest the U.S. has seen since at least 1970. 3:45 Most farmers and ranchers, including those here with us today, are likely to be worse off financially by years’ end.”

Dana Allen-Tully provided insightful comments and testimony during the hearing that captured the anxiety and price downturn in U.S. agriculture She and her family run a diversified farm in Eyota, Minnesota, producing dairy, corn, soybeans, and alfalfa. She also serves as President of the Minnesota Corn Growers Association, representing 7,000 farm families across the state.

“Unless conditions change we’re facing a ‘perfect storm’ although I don’t think it will be fully understood until next year when farmers are unable to secure loans because they can’t cash flow,” said Allen-Tulley. “Plummeting crop prices, high production costs, doubling interest rates, natural disasters and tightening credit are just some of key culprits, as well as depleting working capital.”

She discussed the importance of passing a stronger farm bill this year, and shared the economic challenges producers are facing. We’re heading into a “perfect storm” of plummeting crop prices, high production costs, rising interest rates, natural disasters, and tightening credit, leading to depleted working capital, she stressed.

She noted recent analyses by the Federal Reserve Bank and the Farm Bureau highlight the brewing trouble, with John Deere’s layoffs as an early warning sign. An extension of the current farm bill won’t prevent economic issues, she informed, and a new farm bill, while essential, may not be timely enough. She said Sen. Martin Heinrich (D-N.M.) recently emphasized the need for a disaster supplemental to address these challenges.

Alley-Tully cited USDA estimates projecting a drastic fall in farm income this year, marking the largest year-to-year drop ever recorded. From 2022 to 2024, net farm income will have fallen by 40%, explaining the declining farmer sentiment and increased mental health issues in rural America.

For farmers to break even this year, she detailed, national average corn yields must be 219 bushels per acre, and soybeans 56 bushels per acre — both significantly higher than the past 10-year average. Losses per acre are projected to be over $150, with even higher losses in Minnesota.

Her bottom line: Farm and ranch families need help. The Commodity Title and Crop Insurance provisions in the House farm bill, she concluded, provide a meaningful safety net, with a $4.10 PLC/ARC reference price and improved revenue thresholds. These measures are crucial, especially under current conditions, she said. While she supports these provisions in the next farm bill, she added it’s important to resume ERP payments for 2022 and consider a disaster supplemental for near-term assistance.

Other witnesses pointed out a host of economic issues are converging to lower net farm income by 25 percent from 2023 to 2024, which is depleting working capital and worsening credit conditions.

“With rising input costs and lower commodity prices farmers and ranchers have worked through the liquidity and working capital they built up over the past few years at a more rapid rate than anticipated and are now beginning to leverage equity through refinancing debt,” said
Tony Hotchkiss, Chairman, Ag and Rural Bankers Committee, American Bankers Association. “This has made ag bankers feel like they are looking over the cliff when it comes to the farm economy.”

Other witnesses urged policymakers to enhance risk management tools through a new farm bill to avert a crisis. And the Chairman agreed that is his goal.

“There are a few pundits that have taken the last few months to spread misinformation about this committee’s bipartisan product in an attempt to sow division. 5:00 Let me be clear; this is a farm bill that provides significant improvements for all producers,” Thompson said.

Thompson also said resources dedicated to the total farm safety net have declined 30 percent in the last 22 years with the commodity title seeing an 81-percent reduction. He says they want to change that with the new farm bill and he’s still open to trying get a bill passed in 2024 to avert a farm financial crisis.

Beyond the farm bill, Allen-Tully noted issues like trade deficits and flawed regulations impact farm families. She urged new trade agreements and better rules for biofuels to support domestic producers. “We face high stakes in farming, risking everything annually for thin margins. This discourages young people from farming, posing a problem for food security. Policies must reflect modern farming realities to address global hunger.”

Ag Economists Weigh In On the Biggest Opportunities for the Ag Economy in the Months Ahead

Tue, 02 Jul 2024 13:13:50 GMT

Ag economists are growing more negative regarding the financial health of the crops sector of agriculture, but their views on livestock is becoming more positive. The latest Ag Economists’ Monthly Monitor , a survey of nearly 70 ag economists from across the U.S., shows the lack of exports, as well as the current crop prices, are eroding outlooks on the crops side. While strong beef demand and cheaper feed prices are creating more optimism in cattle.

The June Ag Economists’ Monthly Monitor, which is a joint survey between the University of Missouri and Farm Journal, continues to track the volatility in ag economists’ views of not only what’s impacting agriculture today, but what to watch on the horizon. The June survey marked the one-year anniversary for the monthly survey, and it showed the risks to agriculture remain a major concern.

Even though economists’ views on the ag economy eroded slightly in June, their projection for net farm income in 2024 actually increased to $113.9 billion, which is up from the $110 billion in projected by economists in May.

Ag economists’ project a slight increase in net farm income, compared to the previous month. The June projection rose to $113.9 billion, up from the $110 billion in May.

(Lindsey Pound)

Weighing in on the Most Negative and Positive Aspects of the Ag Economy

When asked what economists view as the most negative aspect of their outlook of the ag economy, economists said:

Crop output prices retreating more rapidly than input costs
Commodity prices below economic break-even production costs
Export outlook from the U.S., specifically the lack of Chinese demand
U.S. trade policy regardless of party affiliation with more international trade competition
Constant challenges to demand and policy that adds barriers to existing and potential new demand streams

“Some farmers made production and investment decisions assuming that earlier wider margins would persist,” noted one economist.

While the negativity seems to outweigh the positives of the ag economy right now, the June Ag Economists’’ Monthly Monitor also asked economist to weigh in on the most positive aspect regarding the outlook of U.S. agriculture. Economists said:

Over the next couple of years, cow-calf operators should have good profitability, especially in areas of the country with good forage conditions
Adverse world weather boosting U.S. exports
The possibility of good yields that will help farmers hit their financial goals
Discipline by producers to keep acreage expansion in check and U.S. prices being more competitive in the global market.
Farmers eager to make adaptations necessary to stay in business

“There are some really bright producers that are positioned for some quick growth in the next 5 to pp10 years,” said one economist in the anonymous survey. “They will be positioned to buy farmland as older producers transition.”

Ag economy outlook in the June Ag Economists’ Monthly Monitor.

(Lindsey Pound)

The outlook for the U.S. production picture is anybody’s guess right now, but Scott Brown, interim director, Rural and Farm Finance Policy Analysis Center (RaFF), University of Missouri who helps author the Monthly Monitor, says weather continues to be one of the biggest variables in what happens with commodity prices in the months ahead.

“Number one, at the top of the list of almost all of these commodities, of course, is weather,” says Brown. “I think some are seeing some demand weakness as a big factor with soybean prices in particular, and seeing some other vegetable oil substitutes entering the picture. What’s maybe even a bigger factor on the soybean side is Brazilian supplies. A strong dollar continues to be important, in terms of our ability to move product out of the United States.”

Brown says one prime example of this is with cotton where the lack of Chinese trade has had an impact on prices.

“As we look at this month’s Monitor, and when you look at the survey results that comes through with almost all of these commodities with the exception of cattle, survey respondents are saying we’re slightly more pessimistic this month than we were last month,” Brown adds.

The June Ag Economists’ Monthly Monitor showed economists think the following factors will have the biggest impact on the outlook for corn prices:

U.S. and world weather
Better precipitation across the Corn Belt compared to the previous growing season
Growing end stocks continuing to a burden on prices

As for soybeans, economists say U.S. and world weather will also play a significant role in the direction of soybean prices, but other factors that are impacting outlooks on soybean prices include:

Demand is soft and imports of cheaper vegetable oil substitutes is creating more competition
Biofuel and sustainable aviation fuel (SAF) developments will have a bigger impact on prices in the months and years ahead
Expectation for larger soybean supplies in Brazil
Strong U.S. Dollar

The bright spot in the ag economy continues to be cattle prices. According to ag economists, the outlook for prices in the months ahead really hinges on three main factors:

If record beef demand can continue
Growing crop supplies creating lower feed costs
Strong U.S. Dollar

“It‘s hard to keep suggesting higher prices when we’re already at record levels, but when you look at where we’re at in terms of cattle inventory, we’re only going to get tighter,” says Brown. “USDA’s 2025 estimate for beef production is a decline of more than 1 billion pounds. That tells me we’re not done getting tighter.”

Brown says the one wild card for beef prices is demand. So far, demand has seem unfazed, despite record prices. Export demand remains strong, but so does demand for beef within the U.S. Those are underlying factors that are also supporting cattle prices. keep saying I’m not sure we’re done with record prices. So I think all hinges on demand staying strong for us beef, especially here in the United States.

The “Why” Behind a Growing Ag Trade Deficit in the U.S.

While meat exports have been strong, other commodities continue to struggle and at the same time, the U.S. is importing more ag products and goods. USDA’s Ag Economic Research Service (ERS) now projects the agricultural trade deficit to climb once again to $32 billion in fiscal year 2024, an increase of $1.5 billion from the February projection.

What factors are most important to the increase in the trade deficit? The June Ag Economists’ Monthly Monitor asked economists that exact question. Nearly every ag economist noted the strong U.S. dollar as one reason the trade deficit continues to grow, but other factors, according to the economists, include:

Increased used cooking oil imports for renewable diesel
Increased imports of horticulture products
Softer U.S. ag exports

ERS also projects Mexico to beat out China as the top buyer, with China projected to fall to third biggest importer of U.S. ag goods at $27.7 billion. ERS expects Canada to claim the number two spot and Mexico to reach number one at $28.7 billion, an increase of $300 million.

The rise of Mexico’s imports have come in spite of the ongoing GMO corn battle between the U.S. and China. In 2023, Mexico officially banned GM corn for human consumption. That same year, Mexico also made its largest corn purchase from the U.S. of 15.3 million metric tons.

Some economists say Mexico is treating U.S. corn as a threat, and while exports are up, it’s having a big hit on GM corn demand.

“It has impacted white corn demand specifically, and the reason that when we look at overall corn demand and we still see Mexico as being a big buyer, is because white corn is such a small percentage of our total corn,” says Krista Swanson, lead economist for National Corn Growers Association (NCGA) who also participates in the Monthly Monitor survey. “So, if you look specifically at white corn exports, you do see that impact. When we talk about the total corn complex, though, Mexico’s had a drought that has reduced their production. They already consume quite a bit more than they produce, so they tend to be an importer. But this year they’ve had to import more than normal. And so that’s where we’re seeing those big buys coming in from, from Mexico and where that’s really boosted U.S. corn exports this year.”

Future of Interest Rates

Higher interest rates are impacting farmers and major equipment manufacturers. On the heels of the Federal Reserve deciding to leave interest rates unchanged during their June meeting, the June Ag Economists Monthly Monitor asked the economists how many rate cuts, if any, we will see this year. 73% said one. 18% think two rate cuts this year. And 9% say there will be no rate cuts in 2024.

73% of ag economists think the Federal Reserve will make one interest rate cut this year, according to the Ag Economists’ Monthly Monitor.

(Lindsey Pound)

With the expectation for higher-for-longer interest rates, farmers are scaling back on big-ticket item purchases, which includes buying equipment.

The May Ag Economists’ Monthly Monitor asked economists to rank where they think farmers will look to cut costs. While all economists said scaling back on equipment purchases is either most likely or somewhat likely, 65% of economists think farmers will look for lower operating interest rates and 17% think it’s most likely.

Purchase changes

(Lindsey Pound )

Here Are The Notable Changes In The House Farm Bill

Tue, 04 Jun 2024 19:04:11 GMT

The House Ag Committee recently released and approved their initial version of the long-awaited 2024 Farm Bill, which included changes to several areas important to production agriculture – such as reference prices, base acres and federal programs. During an episode of the Top Producer podcast, Farm CPA Paul Neiffer explained how farmers could expect those changes to affect them.

Reference Prices
According to Neiffer, the proposed farm bill would increase reference prices across the board, with the smallest increases in barley, oats and corn and the largest in rice. The changes for other crops include:

• Legumes: ~19%
• Peanuts: 17.8%
• Cotton: 14.4%
• Wheat: 15.5%
• Soybeans: 18.5%

It’s important to note, however, these likely won’t be the final numbers in the farm bill.

“I think this is going to increase the cost of the farm bill by – over a 10-year period – maybe $15 billion to $20 billion,” Neiffer says. “If they need to cut some, they can cut it out of here.”

Base Acres
Another update includes base acres. In the new House-approved language, if you have planted more acres than you have base acres, the excess acres will now qualify to be increased to reflect what your plantings were over the average of 2019 to 2023 crop years.

“This is a pretty good deal. It’s a one-time opportunity – not a reallocation of your current base,” Neiffer says. “Let’s say you have corn and soybeans, but the last five years you only planted corn. This base acre update will be based on what you planted. So, if you only planted corn, you’ll get an increase in corn base acres.”

In addition, non-covered commodities, such as potatoes or onions, can now be used on up to 15% of total farm acres.

The House proposal does not restrict who qualifies for the program.

Agriculture Risk Coverage Program
Like reference prices, the Agriculture Risk Coverage program (ARC) also sees an increase in this proposal.

The guarantee of benchmark revenue jumps from 86% to 90% and the maximum payment also rises from 10% of benchmark revenue to 12.5%.

Marketing Loans
Neiffer says that while some may go up slightly more than others, almost all marketing loans increase by about 10%.

“There are a couple of situations where that helps. If you want to get a loan, you can get more of a loan,” he says. “But it could also hurt you in a way.”

He goes on to explain price loss coverage (PLC) payments are calculated as the difference between the effective reference price and market year average (MYA) price and the MYA price cannot drop below the loan rate. So, with the increase in the market loan rate, PLC payments could be smaller.

Livestock Programs
On the animal side, changes have been made to the dairy margin program and livestock indemnity payments.
“The big one [for the dairy margin program] is the tier one coverage gets more of a subsidy from 5 million lb. up to 6 million lb. That’s a 20% increase,” Neiffer says.

The payment rate for livestock indemnity payments is also increased to up to 100%. Neiffer says that increase is for animals that have been killed by a federally protected species, such as wolves.

He adds if a pregnant animal is killed in this situation, the owner could be paid up to 85% of the unborn animal’s lowest weight class.

Partnership Tax Payments
Another payment change to watch involves how operations are classified. In the past, Neiffer says, operations taxed as partnerships – such as an LLC or S corporation – were limited to one payment. The new proposal does not have a payment limit for qualified pass-through entities, which could be any LLC not electing to be a C corporation, any S corporation or any general partnership or joint venture. The one-payment limit would still apply to C corporations.

“I don’t know if this will happen,” Neiffer says. “The 2018 Farm Bill had certain provisions similar to this in the House bill but didn’t happen.”

Farm Income Definition
The House proposal also broadens the definition of what counts as farm income.

“Under the current definition of farming, gains from trading in farm equipment typically is not considered to be farm income. This farm bill specifically states that is farming, as well as agritourism and direct-to-consumer marketing,” Neiffer says. “That’s good news.”

Conservation Reserve Program
The maximum Conservation Reserve Program (CRP) payment more than doubles in this draft – jumping from $50,000 to $125,000.

“For farmers who maybe have acres that really shouldn’t be farmed, this is allowing more of those acres to get enrolled,” Neiffer says.

Crop Insurance
The final area Neiffer highlights with notable changes is supplemental crop insurance.

He shares the 85% cap on revenue protection policies is increased to 90% for individual yield or revenue coverage, but it’s aggregated across multiple commodities. The supplemental coverage option (SCO) is also increased from 86% to 90%.

“This is really welcome news for farmers in North Dakota, Texas, Oklahoma or southern Missouri where the cost of crop insurance is so high,” Neiffer says. “By increasing the subsidy, this is probably going to allow a lot of those farmers to buy revenue protection at 60% or 65% and then use SCO to go up to 90%.”

There’s also a 10-percentage point subsidy increase for those who qualify as beginning or veteran farmers. This has been expanded from five years to 10 years as well.

2024 Top Producer Of The Year Christine Hamilton: Driven For Excellence

Mon, 12 Feb 2024 19:51:52 GMT

At Christiansen Land and Cattle, they’re committed to excellence and continuous improvement, a mindset that started when Christine Hamilton’s family homesteaded in South Dakota in 1891.

“We’re always looking for opportunities to grow,” says Christine, co-owner, Christiansen Land and Cattle, Ltd. (CLC). “However, we can respect what the land can produce for us and work in tandem with that to create opportunities as we go along. I think it’s an honor.”

Christine came back to help transition the operation in 1993. Today, she serves as co-owner with her husband, Eddie, and enjoys her role of overseeing CLC’s vision, but she attributes their success to a management team of nine full-time employees who run the day-to-day activities.

Their accomplishments have led Christine and the team to be named the 2024 Top Producer of the Year, sponsored by BASF, Case IH, and Rabo AgriFinance.

This diversified operation is comprised of nearly 26,000 acres of range and cropland.

“We farm 14,000 acres and with a diversified rotation, mainly corn beans,” says Matt Huizenga, crops manager at CLC.

They use cutting-edge technology to push yield potential, while protecting the land. They have an intensive precision ag system that involves strip-till, and satellite imagery to help variable rate their fertilizer, Huizenga explains.

CLC also has 11,000 acres of rangeland and runs 1,100 head of cattle, managed by Shawn Reis, with a holistic approach.

“We are cow-calf mainly to offset the markets,” Reis says. “We background two different times a year, we have run stalkers, we’ve even finished some cattle just trying to use our resources to the full advantage —rotating pastures, staying away from season long grazing, we rotate our cows probably monthly and try not to be on the same pasture two years in a row.”

CLC uses activity-based accounting, which they adopted in 2001 following the Hamiltons’ involvement with the Farm Financial Standard’s Council. The intensive approach helps them know their costs and understand their business progress.

“One of the things that’s really unique to the accounting side of this operation is our cost accounting and managerial accounting,” says Christy Rasmussen, CLC’s accounting manager. “We have a very extensive system for that that really helps the whole management team know where their costs are at any given time.”

“Christine has always led the organization into taking a look at opportunities both traditional and nontraditional,” says Steve Hofing, CLC’s chief financial officer, “and not afraid to examine things that might be a little bit riskier as long as they have the opportunity to provide returns, and the organization has had good success in doing that over the years.”

One of those opportunities is their wholesale beef business.

“We have a business in Las Vegas called Dakota Packing, and we provide spec meat to casinos and restaurants in Nevada,” Christine says.

The Hamilton’s are also part owners in SAB Therapeutics, which is now publicly traded.

“SAB Biotherapeutics is technology that is one of a kind, that is unique,” says Edward Hamilton, co-owner of CLC. “It’s a source of human polyclonal antibodies outside of the human.”

It’s through CLC’s business innovation that ensures all these companies as well as the farm are financially sound.

“So, we are always looking at measuring costs and analyzing our performance,” Christine says.

In 2015, they also started a sustainability management plan, creating a living document representing the goals of the stakeholders and the community, part of the legacy Hamilton hopes CLC will be remembered for in years to come.

“I think first and foremost, we care,” she says. “We care a lot about each other and about the land, and about our communities.”

Congratulations to Christiansen Land and Cattle, the 2024 Top Producer of the Year.

How to Communicate with Your Ag Lender

Tue, 12 Dec 2023 16:40:21 GMT

Question of the Week: Do you call yourself a businessman?

This week’s podcast episode brings to light the importance of communicating with your team and running your ranch like a business. But, how often do we call ourselves businessmen or women? Or maybe a better question, do we associate the term farmer or rancher as being a businessman or woman?

Try telling yourself you are a businessman or woman regularly. See how your attitude and decision-making shift or don’t shift by making this change.

How to Communicate with Your Ag Lender

Communication is key to any and all relationships, but what does good communication look like between cattle producers and their ag lenders? Mark Sand is the location president for his bank and was raised in the business of farming ranching. He shared the key components of building a strong relationship with your ag lender in Season 6, Episode 51 of the Casual Cattle Conversations podcast.

Good communication relies on equal effort and honesty from all parties involved. To receive the best advice or feedback possible, everyone has to be honest about what happened in the past and what is happening currently.

“Communication is the most important to me and it goes both ways. If you come in and want to borrow money, you need to be honest about what happened on the farm last year. The toughest conversations I have are when people don’t communicate well and aren’t organized. Even if you are going to be late on a loan payment, just call and let your lender know what it is going on,” said Sand.

Ranchers know how to wear many hats in any given day. Whether they are feeding, treating sick animals, fixing fence or doing a number of other things; they have to be knowledgeable in many areas. Throw in being a diversified operation and the number of jobs increases exponentially. Being diversified is important, but you need to be organized and prepared for meetings with the people on your team. Review the materials they send you in advance, be able to update your balance sheet and have your tax files from last year on hand and ready to review.

“Very few of my ranchers come in with business plans. My best clients come in with a plan and know what they are going to change in the coming years. Ranchers are good workers. They work hard and there is no doubt about that. However, they need to work on being more organized on the financial side and remember they are businessmen and women too,” said Sand.

If you are stretched too thin, look at hiring someone to do your book work. Yes, it is an added expense but having updated records is crucial to making accurate management decisions.

Staying organized and prepared is something cattle producers can control. Weather, market prices, input costs and inflations unfortunately fall into the category of influencing factors that cannot be controlled by farmers and ranchers. However, there are steps producers can take to mitigate risk and survive the challenging years.

“Typically, on every farm or ranch, their income is more diversified. Someone is usually working off the farm to provide an income source. People with diversified income sources are typically the ones who can weather a bad year. This is especially important for small and mid-sized producers who don’t have high cattle numbers,” said Sand.

Take a look at your business model as a whole and think through different options to create multiple revenue streams.

Improving business management skills is especially important for the younger generation of beef cattle producers. It’s a capital-intensive business and without help from family, mentors or neighbors it becomes even harder to get started and maintain momentum.

“One of the biggest differences between the senior generation and the rising generation is that the younger, rising generation thinks they need new equipment right away. Equipment is expensive. You need to budget for that expense and understand how you will pay for it,” said Sand.

When it comes to being a successful cattle producer who is younger or in experienced know the genetics on your herd, treat everything like a business and find people to partner with to reduce costs where possible.

As you work through your end of year bookwork and begin to review your goals for the coming year. Remember to use or save your income from the higher markets wisely, stay organized and be honest with everyone on your team about where you’ve been and where you want to go.

KC Fed: Credit Conditions For Livestock Producers To Improve, Deteriorate For Crop Farmers

Tue, 21 Nov 2023 18:06:27 GMT

In its third quarter report, Nate Kauffman and Ty Kreitman of the Federal Reserve Bank of Kansas City predict 2023’s farm income will be reduced due to elevated production costs and a drop in commodity prices. Notably, for the second quarter in a row, farm income and loan repayment rates were lower than a year ago.

“Expenses in all categories (fuel, chemical, repairs, etc.) remain high while commodity prices have dropped,” reports a banker from Southeast Colorado quoted in the report.

The softening of the agricultural economy is more pronounced in row crop areas effected by drought, but Kauffman and Kreitman note areas with concentrations of cattle production are comparatively stronger.

“Drought has significantly hurt our agricultural borrowers and rising interest rates and lower commodity prices are adding to the struggles,” said a banker from Southeast Kansas.
An ag lender from Central Missouri shares, “Severe drought and higher funding costs are concerns for community banking. Most farmers are in good financial condition, but the drought will impact everyone, and inflation is also a big factor.”

As margins have tightened for row crop producers, strong cattle prices have boosted margins for many ranches and feedlots.

“Crop prices have been reduced to breakeven prices or less and dryland crops will be dependent on revenue insurance payments that most likely will be below the cost of production. The bright spot in our economy is the historically high cattle prices,” reports a banker from Southwest Nebraska.

The KC Fed authors report agricultural prices remained above historical averages, but have decreased by about 5% from the previous quarter.

The past two years of strong markets have bolstered the current ag loan performance standard. In the coming months, credit conditions for row crop producers are expected to deteriorate, but survey respondents anticipate conditions to improve for cattle producers with improved repayment conditions for cow/calf producers and feedlots.

The KC Fed reports about 80% of lenders reported repayment was unchanged from a year ago. While 10% of banks reported lower repayment rates during the quarter, it’s worth watching that 20% expect a decline in the coming months.

(Farm Journal)

Despite signs of a reduced rate of loan repayment, credit quality of agricultural loans remained strong across the region and problem loan rates remained at or near historic lows.

As 2023 harvest wraps up, a banker from northeast Nebraska sums up this year’s challenges and next year’s outlook, “Key concerns have been lack of moisture, higher interest rates, lower commodity prices and higher input costs.”

The Future of Agricultural Lending

Wed, 26 Jul 2023 17:11:29 GMT

Be ready for new ways to finance your farm

Change is brewing in the agricultural lending system. Bank consolidation, a dramatic shift in farmer profitability, technological advances and more are driving how you will finance your operation in the future. Some changes will happen rapidly while others could take years — but you should prepare now for these issues.

FINANCIAL METRICS

The past few years of low commodity prices and financial stress make some lenders adjust the structures and requirements for their farm loans, says Ashley Arrington, Ag Resource Management real estate director.

“We saw financial ratios, such as debt to asset or the current ratio become lax, because no one could get approved,” she says. “With higher prices, bankers want to see improvement in the balance sheet. Bankers feel entitled to know how you will spend profits because they helped you through the bad times.”

DIGITAL BANKING

The digital world has finally hit ag lending, says Curt Covington, senior director of institution credit at AgAmerica Lending.

“Without a question, cloud-based scorecards and desktop appraisals will be the way of the future for ag credit,” he says. “The average farmer who qualifies for financing may not sit down with a lender. They will have access to capital on platforms where they put their loans out to bid and look for the best structure options.”

COLLATERAL OPTIONS

Expect alternative lenders to play a bigger role in financing, Covington says. These types of institutions provide fi-nancing options without the policies that often constrict the typical loan process. They don’t have the regulatory pressures of traditional banks.

With the cost to own land dramatically increasing, alternative lenders can offer farmers who rent most of their land another option, Arrington says. For instance, some use crop insurance or other risk management strategies as loan collateral.

RELATIONSHIPS

The changes above all point to a major shift where you might not have the same kind of close relationship with your banker in the future.

“This shift will be over time, and it will be a difficult process for farmers and bankers,” Covington says. “I’m not say-ing relationships will go away, but there will be situations where the relationship won’t be as tight. Having spent 40 years in this business, I’m not happy about that. But ultimately you have to accept reality.”

Many farmers use their bankers as a trusted financial adviser, he adds. These changes mean farmers will need to fill that role with a different person or service.

How do Covington and Arrington advise farmers to accept and gain from these changes? Keep an open mind and talk to financial consultants who can give you guidance.

Rural Economy Posts Growth for 15 Straight Months

Tue, 25 Jul 2023 16:54:16 GMT

For 15 straight months, the rural economy has posted healthy and consistent growth. That’s according to the January Rural Mainstreet Index (RMI) from Creighton University.

For February 2021, the RMI sits at 61.5. That is up from January’s 61.1. The index ranges between 0 and 100 with a reading of 50 representing growth neutral and is generated by a monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

“Strong grain prices, the Federal Reserve’s record-low short-term interest rates, and growing agricultural exports have underpinned the Rural Mainstreet Economy,” says Ernie Goss, who chairs Creighton’s Heider College of Business and leads the RMI.

This month, bankers were asked to project corn and soybean prices out six months. On average, bank CEOs expect corn prices per bushel to fall by 2.6% and soybean prices per bushel to drop by 2.3% over the next six months.

The region’s farmland price index decreased to a very strong 78.8 from January’s 88.5 and December’s record high of 90. February’s reading represented the 17th straight month the index has moved above growth neutral.

The February farm equipment-sales index slipped to a healthy 72 from 72.4 in January. This is the 15th straight month that the index has advanced above growth neutral. Readings over the past several months are the strongest string of monthly readings recorded since Spring 2011.

On average, bank CEOs expect the Federal Reserve to raise short-term interest rates in 2022 by one percentage point which is up from 0.70% (70 basis points) recorded last month. Approximately one in five bankers, or 19.2%, project more than four rate hikes of one-quarter percentage point in 2022.

“Hopefully the Fed will do three or four (based on what is warranted) 25 basis point hikes starting in March and not 50 in March,” shared Jeff Bonnett, president at Havana National Bank in Havana, Ill.

Bonnett said the Fed should start slow and evaluate the impacts as they are implemented and not be saddled with a fixed plan.

After moving higher for two straight months, the confidence index, which reflects bank CEO expectations for the economy six months out, sank to a weak 51.9 from January’s healthy reading of 61.1.

The RMI, which started in 2005, represents an early snapshot of the economy of rural agricultural and energy-dependent portions of the nation. It focuses on 200 rural communities with an average population of 1,300.

Use Portability to Avoid a Potential Multi-Million Dollar Estate Mistake

Thu, 20 Jul 2023 18:37:49 GMT

A common financial mistake married farm couples make occurs when the first spouse dies, and the surviving spouse fails to “elect portability.”

It’s a process by which any unused federal gift or estate tax exemption can be transferred from the deceased spouse to the surviving spouse, according to Polly Dobbs, founding partner of Dobbs & Folz, LLC Peru, Ind.

What portability helps the surviving spouse achieve, ultimately, is to put the farm assets in the best position to be transferred upon his/her death, to the next generation without estate taxes being owed.

For 2023, each spouse has a $12.92 million exemption from federal gift and estate taxes, but that amount is set to “sunset” to around $6.6 million each in 2026. Electing portability can lock in that high exemption if a spouse dies before the sunset date.

Straightforward Process
To elect portability, the surviving spouse must file Form 706 Federal Estate Tax Return with the IRS.

“It’s not something that happens automatically, and it’s a crucial action to take – even if all the assets were jointly owned and no taxes are owed when the first spouse dies,” Dobbs says.

“Many certified public accountants (CPAs) and lawyers are unaware of portability, or don’t believe it’s worth checking into, but it is,” she adds. In fact, she tells advisers for their own protection to get it in writing if a surviving spouse declines to elect portability.

Portability is a recent process available to married farming couples, which is why many CPAs and lawyers are not aware of it.

One Form To Complete
IRS has simplified the process to elect portability in recent years.

“A certified public accountant or a lawyer can help the surviving spouse use shortcuts when filing a Form 706 just to elect portability, like skipping appraisals and valuations. The value of the assets may be estimated only to the nearest quarter million dollars of value at the first spouse’s death,” Dobbs says.

Form 706 generally must be submitted to the IRS within nine months of the first spouse’s death. That deadline can be extended automatically with Form 4768, however, for an additional six months.

Additional Time Available
If a surviving spouse missed the initial deadlines for filing, they can still elect portability up to five years from the date of their spouse’s death by invoking “Relief under Revenue Procedure 2022-32,” Dobbs notes.

Dobbs estimates the costs to have an adviser’s help to complete the form and submit the paperwork will total less than $3,000, depending on the assets that need to be reported.

“The costs incurred are minimal when compared to the millions of dollars of estate taxes that could be saved,” she says.

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What in the World is Going On With Glyphosate Prices?

Wed, 19 Jul 2023 22:55:24 GMT

An explosion at a Dow Chemical plant in Louisiana isn’t expected to disrupt ag chemical supplies in the U.S., according to Rabo AgriFinance. That’s as the industry seems to be swimming in supplies of key inputs such as glyphosate, forcing suppliers and ag retailers to cut prices in an effort to get rid of unused supply.

An explosion and fire broke out at a Dow Chemical plant in Plaquemine, Louisiana late Friday night. The site produces several different chemicals, including one used as a fumigant in agricultural products. There hasn’t been any information released about a possible cause, but reports indicate at least six explosions occurred Friday night at a Dow manufacturing site that covers 883 acres. The incident caused a large mushroom cloud of smoke.

The plant is one of Louisiana’s largest petrochemical complexes, and the disruption is sparking flashbacks to what happened in 2021 when Hurricane Ida’s direct hit on Bayer’s largest glyphosate plant pushed the manufacturing site offline for nearly two months. The one event sent severe supply shockwaves through the entire agriculture industry.

Sam Taylor, Farm Inputs Analyst for Rabo AgriFinance, says the incident at the Dow Chemical location on Friday shouldn’t impact availability of ag inputs for farmers.

“I’ve not been given that indication that it will. That’s the feedback that I’ve received,” says Taylor.

Why was the hurricane’s impact such a heavy weight on the entire industry? As strict Covid-19 protocols in China continued to restrict production of active ingredients essential to make products like glyphosate, the hurricane compounded already strained supplies.

According to Reuters, Bayer saw herbicide sales jump 44% in 2022 after Hurricane Ida damaged rival producers and constrained Chinese suppliers failed to plug the gap. Farmers felt the impact in terms of pricing and supplies. In the fall of 2021, glyphosate prices were up as much as 300%, but finding the supply was an even bigger problem reported by farmers. As competitors have been able to return to the market this year, prices have been dropping.

Ag Herbicides’ Supply Problem

Taylor says herbicide prices aren’t falling because of demand issues, it’s a supply problem. A major reason is China. AI production coming back online was a huge boost for overall production as the country accounts for 60 to 70% of global production. With such a production monster now back online, Taylor says it’s also led to a significant drop in global benchmark pricing.

“I think that the global pricing, at the moment, is sub $4 a gallon in China. So, you’ve had that drop from about $16 to $17 a gallon in 2022. It’s now about 25% of what it was,” says Taylor. “That’s the main catalyst of it, and that’s why we’ve seen the kind of the cost curve and shift down as Chinese production is back online. They account for about two-thirds of global production.”

Retailers and suppliers continue to cut the price of glyphosate to help offload expensive inventory in preparation for the fall months. While the prices of both generic and PowerMAX glyphosate products continue to vary widely, it’s a sizable decline from even the beginning of the year.

Glyphosate Prices Tank

In May, one major ag company started offering retailers a $5 per gallon rebate just to push more glyphosate inventory onto the farm level. This week, FBN started offering a pricing special on Willowood Glypho 5, a generic glyphosate product. FBN’s promotion is being advertised as “glyphosate stock up,” offering the product at $13.50 a gallon, if pre-purchased by July 31st. The special only applies to product that will be delivered September to October.

Taylor says while wholesale and retail prices vary, he expects wholesale glyphosate and chem prices to stay low throughout the remainder of the year, especially with the supply situation.

“I would also say that I don’t think the issue is going to resolve itself overnight. I think you’re going to see this rumbling through 2023,” says Taylor.

Taylor points out hints of growing input supplies started at the beginning of the year. Several publicly traded companies mentioned inventories in their earnings report saying it was an industry-wide issue. That created the situation today where input suppliers across the U.S. are sitting on inventory that was purchased at a much higher price than where wholesale and retail prices are today.

Bayer’s most recent earnings report in May signaled the company expects its 2023 financial results to come in at the lower end of the targeted range, not only because of inflation, but a slump in prices of glyphosate-based herbicides from last year’s highs. Bayer’s then CEO told investors the company was forced to reduce expectations of what it can command for glyphosate products.

The Industry is Upside Down

It’s an issue companies and retailers of all sizes are grappling with. AgriTalk’s Chip Flory spoke to the Eric Cowling who’s the CEO of Helena Agri-Enterprises, a large U.S. ag retailer that has more than 350 sales locations across the U.S. Cowling told Flory the supply issue is one that’s still impacting the entire industry.

“It’s one of those things you couldn’t predict. It’s really about supply and demand,” Cowling said on AgriTalk. “We’re probably putting together one of the highest input crops that we’ve ever seen, so that is an impact of the supply situation. We had to buy product to take care of customers for the last two years. Now, you heard the term ‘we’re upside down.’ I think the industry is upside down. If anybody could have predicted the decline over the last 12 months, I’d like to have that conversation to know exactly how they predicted that. I think there’s plenty of inventory. I don’t think there’s excessive inventory. And I believe we’re in a good spot to take care of customers for the next six to eight months, but I’m not sure I can say we’re in a spot to do it for 12 months.”

A Global Supply Chain

Just as Taylor points out, the fluctuations in crop protection and input prices for farmers are ones driven by what’s happening on a global scale.

“I tell our teams that it’s become a global supply chain. So we’re reliant on supplies of things we need to produce products globally, some from China, some from other sources like India,” he says. “As their world changes, so does ours. I don’t think there’s any one blueprint today that we could follow to say this is what we do.”

He says the big input suppliers in the U.S. are dealing with the same issues, which then compounds the supply chain issues for retailers such as Helena.

“When their issues are compounded, it compounds our issues, because we’re looking for the same inert ingredients or things that have to be imported,” he says.

Cowling also told Flory he doesn’t think the industry is in the recovery process yet, something Helena thinks will continue to change the way ag retail does business with farmers in the future.

“We’re in a state of turmoil, so we don’t know what the real world looks like today, and I think the way we’ve procured product in the past, I don’t believe we’ll see those days again,” says Cowling. “We have to use more intelligence tools, the AI tools available, to be better predictors of what we’re going to sell.”

Related News:

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EPA: Glyphosate Can Still be Used Through 2026

Bayer to pull Glyphosate from U.S. Lawn and Garden Markets

Lusk Named New Dean of Oklahoma State's Division of Agricultural Sciences and Natural Resources

Tue, 20 Jun 2023 20:41:51 GMT

Oklahoma State University announced Dr. Jayson Lusk as the new dean and vice president of its Division of Agricultural Sciences and Natural Resources. Lusk will succeed Dr. Tom Coon in early August.

The announcement was made by OSU President Kayse Shrum and Provost Jeanette Mendez at the OSU/A&M Board of Regents meeting on June 16.

Lusk currently serves as Distinguished Professor and Head of the Department of Agricultural Economics at Purdue University. Prior to that, Lusk served as a tenured professor and holder of the Willard R. Sparks Endowed Chair at Oklahoma State University. He earned the title of Regents Professor in 2013.

“It has been an honor and privilege to serve as the head of the Agricultural Economics Department at Purdue University, and I will miss my friends and colleagues in West Lafayette. Now it’s time for a new challenge,” Lusk said on his blog . “There are many exciting things happening at Oklahoma State University, including the near completion of the New Frontiers campaign and building, a new University strategic plan that has clear emphasis on agriculture and the land grant mission, and the opportunity to work with the faculty and staff to identify some key strategic opportunities to raise the impact of the division.”

Lusk has spent a significant portion of his professional career at land-grant institutions, is recognized as a preeminent scientist and advocate for agricultural research and innovation and has received national recognition for his research, including the Lou Ann Aday award, Purdue University’s most prestigious research award in the humanities and social sciences.

During his time at Oklahoma State University, Lusk led a project that surveyed consumers about their attitudes on meat purchases at both the retail and restaurant levels. The Food Demand Survey featured the opinions of a thousand plus consumers monthly. He has been interviewed and published editorials in outlets such as the New York Times, Wall Street Journal, USA Today and the Washington Post, and has appeared on numerous network and national cable television shows. Lusk has published more than 270 articles in peer reviewed journals, including several of the most cited papers in the agricultural economics profession. He has authored five books, the latest being Unnaturally Delicious.

He has served on the executive committee of the USDA National Agricultural Research, Extension, Education, and Economics (NAREEE) Advisory Board and has testified before the U.S. Congress on multiple occasions. He is a fellow and past president of the Agricultural and Applied Economics Association.

Lusk earned a bachelor’s degree in food technology from Texas Tech University and a PhD in agricultural economics from Kansas State University. He held previous appointments at Mississippi State and Oklahoma State Universities and the French National Institute for Agricultural Research.

Read More:

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Small-Town Bank CEOs are Cautiously Optimistic, says Rural Mainstreet Index Survey

Fri, 26 May 2023 01:48:43 GMT

For the second month in a row, the Rural Mainstreet Index (RMI) showed a positive sentiment in general among rural bank CEOs located across a 10-state region, with emphasis in the Midwest.

The region’s overall reading in May climbed to 55.8 from April’s 50.1, says Ernie Goss, chair in regional economics at Creighton University’s Heider College of Business. Even so, only 11.5% of the bankers reported improving economic conditions for the month, with 88.5% indicating no change in economic conditions from April’s slow growth.

The Index ranges between 0 and 100, with a reading of 50.0 representing growth neutral.

Interest Rate Hikes Put Pressure On Farmers

“Things are looking more positive for businesses on rural Main Street, but less positive for the agricultural sector,” Goss told AgriTalk Host Chip Flory earlier this week. “Farming is not quite as strong now as what we saw at this time last year, and even earlier this year. With the higher costs for the farm sector – especially interest rate increases – that’s putting a little pressure on farmers. When we asked them about farmland prices, these CEOs are not nearly as positive looking forward.”

Bankers reported that non-pasture farmland prices in their area grew by an average of 4.3% over the past 12 months. However, they project 0.0% price growth for the next 12 months. Read more about the issue here: Sudden Slowdown? Farmland Expert Sees Fewer Buyers, More No Sales And a Plateau in Prices

Goss helped develop and implement the monthly RMI survey, which gathers economic insights from bank CEOs in approximately 200 rural communities with an average population of 1,300.

Will More Banks Report Insolvency Challenges?
Flory raised the question of whether rural banks are healthy or entering any financial headwinds, given the expectation of lower farmland prices and lower commodity prices this year. In the process, Flory also referenced the farm crisis of the 1980s. “The farm crisis got really, really serious when it turned into a Savings & Loan crisis, as well,” he recalls.

Goss’s take is that rural banks are doing reasonably well, though their deposits are down—at the second-lowest rate since the RMI monthly survey began in 2006.

“That’s not good, of course, but when we come to the overall health of rural banks, they remain very positive, but they’re very concerned about having to pay for the failures of the regional banks—Silicon Valley Bank, Signature Bank and First Republic,” Goss told Flory.

The RMI survey reports that only 15.4% of bank CEOs anticipate the end of the banking insolvency crisis, while the remaining 84.6% expect some banks to continue to report insolvency challenges.

“The liquidity problem will continue for some time, and we will see more regulation because of it,” said James Brown, CEO of Hardin County Savings in Eldora, Iowa, in a news release Goss’s office distributed. “And as a bonus for their (regulators) being late to the table, we will all pay higher FDIC payments for as long as we can see.”

Likewise, Jeff Bonnett, CEO of Havana National Bank in Havana, Ill., said: “I hope that the ICBA and state community bank associations can be successful in clarifying my point as ‘community banks’ should NOT pay for this big bank mess with increased FDIC assessments.”

Mergers Are One Likely Outcome
Goss says part of the concerns bankers have dates back to the banking crisis in 2008-09, when the region surveyed lost between 40% and 42% of rural banks through mergers and insolvencies.

“Now, that’s not going to happen this time, but nonetheless, we will see some mergers,” Goss told Flory.

Looking ahead to June, Goss says bank CEOs are concerned about the potential impact a potential rate hike by the Fed on June 14 might have on farmers and other rural business owners who are dealing with increasing costs and specific to commodity prices, weakened revenues.

“These rate hikes are just creating more problems than solutions right now,” Goss says. “Unfortunately, inflation continues to be much higher than the Fed’s target, even while they’ve raised interest rates by five percentage points over the last year plus a few months.”

Mike Van Erdewyk, CEO of Breda Savings Bank in Breda, Iowa, echoed Goss’s concern. “Federal Reserve rate changes are being perceived as ‘paper cuts’ and not solving the problem.”

Debt Crisis Deliberations Could Influence Rate Hikes
Goss ventures the likelihood of a rate hike in June by the Fed at about 50-50.

“A lot of it depends on what happens with the debt crisis deliberations going on right now in D.C.,” he told Flory. “If that gets settled very quickly and positively, that would push the Fed toward a rate hike. Any other bank failures or bank problems could facilitate a pullback and less of a chance of a rate hike.”

Listen to the entire discussion on AgriTalk here:

USDA Confirms Farmers’ Fears: Net Farm and Net Cash Farm Income Expected to Fall This Year

Tue, 07 Feb 2023 21:04:08 GMT

Even with the rise in fertilizer and fuel prices, net farm income hit a record in 2022. Now, USDA ERS says 2023 could be a different story, forecasting net farm income to fall nearly 16% this year.

USDA’s first official net farm income forecast of the year shows higher costs will drive down 2023 net farm income, but the bigger factor is the forecast for a decline in commodity prices. If commodity prices can at least hold where prices sit today, the picture won’t turn bleak, at least for this year, but it’s still a changing scenario from 2023.

Initial Forecast Points to Expected Drop in Cash Receipts, Government Payments

Farm Journal Washington correspondent Jim Wiesemeyer says his biggest takeaway form the initial net farm income forecast is both net cash and net farm income forecasts are lower for this year, with an expected drop in cash receipts, government payments, but an increase in expenses.

“Working capital is also falling as farmers have eaten into their cash reserves, much like consumers have burned through their savings, but to a lesser degree in agriculture,” says Wiesemeyer. “But working capital at $118.45 billion is still nearly double the recent low of $65 billion in 2016. Financial health remains solid even as debt-to-asset and debt-to-equity ratios are both expected to rise in 2023 versus 2022.”

(Farm Journal)

ERS forecasts cash receipts from the sale of agricultural commodities to drop $23.6 billion, or 4.3%. That’s after a record high forecast for last year of $543.4 billion. USDA says those specializing in dairy and hogs are expected to see the largest decline relative to 2022.

The breakdown of cash receipts broken down by commodity includes:

• Total crop receipts are expected to decrease by $8.9 billion (3.1 percent) from the forecast 2022 level
• The drop is led by lower receipts for soybeans and corn
• Total animal/animal product receipts are expected to decrease by $14.7 billion (5.7 percent)
• The decline in livestock is driven by lower receipts for milk, eggs, broilers and hogs.

“The impact of lower receipts is actually greater than that of higher costs,” points out Pat Westhoff, director of the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri . “On the cost side, the overall increase in expenses is 4.1%, after a 18.5% increase in 2022. Purchased livestock costs (think feeder steer) are projected to increase quite a bit; most other increases are fairly modest, and some categories (e.g. fuel) actually show a decline relative to 2022.”

Expectation for Fewer Government Payments

Another factor at play is the forecast for lower government payments. USDA’s forecasting:

• Direct government payments to fall by $5.4 billion (34.4 percent) from 2022
• Direct government payments are expected to reach $10.2 billion in 2023
• The decrease is largely due to expectation of lower supplemental and ad hoc disaster assistance in 2023 compared to the previous years

“USDA shows more than a $5 billion drop in payments this year,” says Westhoff. “That’s reasonable given current policies and projected prices, but Congress or the Administration could always provide new programs not included here.”

A Lot Can Still Change for Net Farm Income

While the initial forecast shows a drop in net farm income, Westhoff points out much can change in a year’s time.

“Weather always matters, as does the health of the general economy,” says Westhoff. “And, as we’ve learned the last few years, there will be wildcards, think China trade war, COVID and the Russian invasion of Ukraine.”

Farmer Sentiments Inch Higher in January

Despite the waning outlook for net farm income, farmer sentiment seems to be improving. The latest CME Group/Purdue Ag Economy Barometer , which was also released on Tuesday, shows farm sentiments improved 4 points from December to January.

“An improvement in future expectations was the driver behind the modest rise in sentiment, as the Future Expectations Index rose 5 points in January,” authors of the barometer stated.

The also pointed out that while sentiments did edge higher, the majority of farmers report they expect tighter margins in 2023 than in 2022.

“Just over one out of five producers expect to have a larger operating loan in 2023 than in 2022, with higher operating expenses being the most commonly cited reason,” the January Ag Economy Barometer stated.

USDA expects total operator dwelling expenses to increase 4.1% to $459.5 billion in 2023. Of that, interest expenses and livestock/poultry purchases make up the largest dollar increases year-over-year.

Read the full USDA forecast and report here.

Related Story:

USDA Forecasts Farm Sector Profits to Remain Above Average in 2022

Tyson Ventures Invests in Food Safety Testing Firm Clear Labs

Thu, 22 Sep 2022 04:17:20 GMT

Tyson Ventures has already made splashes buying stakes in alternative protein companies. Now, the venture capital arm of giant Tyson Foods Inc. is betting the meat industry will beef up its food-safety platforms.

The unit is investing in Clear Labs Inc., a food safety testing company that uses a robotic platform to detect pathogens like salmonella. The technology shortens turnaround times of current methods to 24 hours from three-to-five days. It’s Tyson’s first investment in the food-safety space, and likely not the last, said Reese Schroeder, managing director at Tyson Ventures.

Companies like Tyson use microbiology labs to test large volumes of raw-meat samples and other foods from processing plants along with equipment to ensure nothing contains food-upoisoning culprits like E. coli before entering commerce.

“If all goes as planned, this will be in lab settings and help us do that better, faster and more accurately,” Schroeder said. “We worked closely with our microbiology lab in evaluating companies, and this was a good first choice for a first investment in food safety.”

Tyson Ventures is looking to make investments in areas including innovative protein products, disruptive delivery channels, emerging brands and categories, and operations enhancements including food safety and sustainability, Schroeder said.

The venture capital fund made headlines as one of the first meat companies to invest in alternative proteins. It has stakes in plant-based burger firm Beyond Meat, and cultured meat companies Memphis Meats and Future Meat Technologies.

The terms of the deal aren’t being disclosed.

Prep Your Farm Business for the Year’s End

Wed, 10 Nov 2021 15:34:29 GMT

The days left on the calendar are quickly dwindling away, and it’s time to start preparing your farm business for the end of the year. With the hustle and bustle of the holiday season hastily approaching, now is the time to look over business details to help make your transition into the new year much smoother.

Cheri Hoffman, a volunteer business mentor with SCORE’s Tip of the Mitt chapter, recommends these tips:

Prepare Financial Documents

Gather your key financial documents. These should include:

The balance sheet report, showing all the assets, liabilities and equity.
The income statement report, showing revenue, expenses and profit.
The cash flow statement report, showing opening and closing cash within a specific period, with inflow and outflow itemized.

Verify Employee Information

Now is the time to confirm all your employees’ information is up-to-date.

“Verify all employee information, including, name (if anyone got married or divorced), address and Social Security number. You need to do this for all current and former employees in preparation for distribution of W-2s,” Hoffman says. “Employees can be reminded to update this information through an email or by a message on their pay stub. Issue new W-4s for any employees who need to make changes in their withholding status.”

Within the coming weeks, employees will likely want to use up any remaining time off. According to Hoffman, verify your employees use of paid time off, including vacation, personal and sick days. It’s also important to go over time off policies with your employees. “Does unused time roll over, get paid at a discount, or is it a matter of use it or lose it? Notify your employees of their status,” Hoffman says.

Review Insurance Policies

Taking the time to review your operation’s insurance policies might seem like a daunting task, but it’s important to review these annually to make sure they fit your business’s needs. According to Hoffman, some questions to ask include:

Are there any significant changes to your worker’s comp policy since your last audit?
Is your business auto policy coverage adequate based on your current circumstances?
Do you have a liability policy? Is it adequate?
Have you shopped for competitive quotes?

Review Lease Agreements

Similar to reviewing insurance policies, lease agreements should also be reviewed annually. Will there be any changes with the new year? Sit down with landlords or tenants to discuss possible adjustments.

Backup Data

“While this should be standard practice all year long, now is a good time to make a point of ensuring that you have a backup copy of all records, including contacts, financial information, etc.,” Hoffman notes.

List Accomplishments

An important part of looking toward the future is noting how far you’ve come. Make a list of your business accomplishments this year and share it with all stakeholders. Be sure to thank everyone for their contributions, Hoffman notes.

“A little appreciation goes a long way and does not cost anything. Set goals for next year and share those as well,” she adds.

HSAs Offer Health Care, Retirement Savings

Wed, 14 Apr 2021 15:39:17 GMT

Health insurance coverage and healthcare costs are among the greatest challenges for self-employed Americans, including farmers.

One avenue that provides for cost containment combined with the opportunity to save for the future is the Health Savings Account (HSA). “More people are becoming aware of HSAs and using them as a strategic approach to managing their healthcare,” said Nathan Link, Employee Benefits and Individual Health Specialist for PDCM Insurance, Waterloo, Iowa.

To qualify for an HSA, you need to carry a High Deductible Health Plan (HDHP). According to the IRS website , that’s a health insurance plan with a deductible of no less than $1,400 per person or $2,800 per family, with a maximum annual deductible and other out-of-pocket expenses (like co-pays) of $7,000 per person and $14,000 per family.

“HDHPs often have lower monthly premiums than traditional health insurance plans,” said Link. “Clients can save the difference into their own HSA account and use those funds to pay out-of-pocket expenses as needed. With traditional plans, you pay a higher cost whether you use the services or not. An HSA allows you to keep that money if you don’t have to use it.”

As a savings tool, HSAs offer a triple tax advantage*, in that:

Money deposited into an HSA is not taxed.
Account balances are allowed to grow tax-free; and
Funds can be withdrawn tax-free, provided they are used to pay for Qualified medical expenses , including those not covered by health insurance, like vision and dental care.

While your HDHP will be accessed through a private agent or the Healthcare.gov marketplace, you will have to open your HSA account separately through a financial institution. Many banks and credit unions offer them, and most provide options to invest your balance in stocks or mutual funds for larger growth opportunities.

Employers of a spouse working off the farm also may offer an HDHP/HSA package, in which case they likely will have the HSA structure already set up for the company’s employees.

HSAs are individual accounts. If you are married, the account is in one spouse’s name, but the fund can pay for expenses for your spouse and children covered on your health insurance policy. The annual contribution limit applies to the entire couple or family. In 2021, it is $3,600 per individual or $7,200 per family. That limit includes contributions that may be made by an employer.

If you will be 55 or older by the end of the tax year, you can contribute another $1,000 annually as a “catch up” contribution. If your spouse also is 55 or older, he or she can open a separate HSA and contribute another $1,000 to that account, according to OPTUMbank .

When you start using Medicare – typically around age 65 – you can no longer contribute to an HSA. But at this point you can continue to utilize the funds tax-free for medical expenses and/or your Medicare Part B or Part D premiums. You also have the option of using the money for any other purpose you please after 65. But those funds will be taxed as regular income, just like a traditional IRA.

“Before age 65, it’s never a great idea to use your HSA as an emergency fund for non-medical expenses,” advised Link. “You’ll be assessed a 20% penalty, plus the withdrawals will be taxed as income at your regular rate.”

You also cannot use your HSA funds to pay health insurance premiums before age 65. You can, however, tap them tax-free to pay premiums for long-term care insurance.

“If you can cash-flow your medical expenses and leave your HSA untouched, it will be a tremendous retirement savings vehicle thanks to its many tax-advantage features,” shared Link. “But even if you can’t, there is great peace of mind knowing that you have the funds set aside to cover medical expenses if you need them, and that you can maintain control of that money if you don’t.”

*There are exceptions to these exemptions in a few states. New Jersey and California assess tax on both your HSA contributions and they earnings they generate. Tennessee and New Hampshire tax earnings only.