Finance-Accounting

Turn Repro into Cashflow with These Three Fixes

Wed, 06 May 2026 15:25:58 GMT

There is a hidden cashflow lever that a lot of dairies can pull today to increase income in the next 12 months, and it is buried in your repro program.

With the value of a calf right now, we want cows getting pregnant as quickly as possible and turning as many calves over as possible. Those calves are an immediate source of income as soon as they hit the ground. That makes pregnancy rate (PR) the “North Star” of the breeding program. The target I want to get dairies to hit is 40% pregnancy rate (PR), and if a dairy isn’t there, here are the three areas I focus on to get more cows pregnant sooner:

Training: You may have a skilled breeder inseminating cows, but even a good breeder can benefit from a refresher course to gain PR points. It’s not uncommon for me to spend time along side the breeder and find that protocols have drifted and become costly habits. For example, on a recent farm visit, we found that semen was being deposited in the uterine horn. One simple retraining and repro improved within a couple of months.
Timing: Shot compliance is paramount. While some people may start out in the appropriate time range, by the time they are done giving shots, the timing is way off. Not only is the timing of shots key, but it’s also important to train employees to do some heat detection and catch good standing heats. These cows are the low-hanging fruit for getting additional pregnancies before a cycle passes by.
Technique: Cow handling technique is the other area where errors occur, compliance wanes and efficiency can be lost. I see a lot of people walking the pens and trying to give shots while the cows are moving. You might get the shot in the cow, but not the full injection. Not to mention, the additional stress you are creating for that cow and the entire pen. If you are trying to catch cows coming out of the parlor, try locking up the first group and releasing them to open up lockups for the last cows coming back to the pen, which are the ones most likely to get missed.

Focusing on these three key areas can pull the lever on pregnancy rate and thus, give you more calves on the ground that can turn into cash quickly.

Inside The Tax Return of Your Farm's Future

Thu, 09 Apr 2026 14:31:55 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 Strategic Blueprint for Dairy Expansion: Engineering Resilience in a Volatile Market

Fri, 03 Apr 2026 12:53:06 GMT

In the dairy industry, a period of low milk prices often creates a sharp paradox. While many producers retreat into defensive postures, the “top one-third” of operators — those with a clear vision and a robust balance sheet — often view these downturns as a strategic buy low window. However, transitioning from a stable operation to an expanded one during a market trough is not a matter of intuition; it is a rigorous exercise in financial engineering and operational discipline.

To successfully navigate this transition, producers must look beyond the herd and into the mechanics of their financial engine. By synthesizing the insights of financial industry veterans like Gary Siporski and lending experts like Jim Moriarty, vice president of animal ag lending - dairy for Compeer Financial, we can map out the essential blueprint for growth in the modern dairy economy.

1. The Strategic Audit: “Buy Low” Opportunity Versus High-Risk Gamble

The distinction between a calculated expansion and a reckless gamble lies in the pre-existing health of the farm’s financial ecosystem. Before a shovel hits the dirt, a loan committee looks for a foundation of trust with current suppliers. An operation that is not current with its local vendors is rarely a candidate for institutional growth.

According to Siporski, the primary indicator of readiness is the equity position. Entering an expansion, a top-tier operation should ideally sit at 70% equity. The critical analysis, however, is the pro-forma or post-expansion reality. If the debt required to grow pulls the total equity below 45%, the operation may be over-leveraging its safety net.

Moriarty adds a layer of practical flexibility to this, noting while 50% to 60% equity is a strong starting point, the mission-critical goal is maintaining at least 45% owner equity after the new facilities, cows and equipment are added.

“Dairy farms can be successful at as low as 40% owner equity,” Moriarty explains. “But the operation needs to be performing at a high level when leverage gets in that range.”

The goal is to invest while milk prices are low to be positioned for the rebound, but only if the farm can absorb the stubbornly high overhead of modern expansion.

Moriarty also offers a sobering counter-narrative to the traditional buy low strategy. Unlike previous cycles, today’s low milk prices have not translated into lower costs for construction, equipment or cattle. External economic factors — inflation and supply chain constraints — mean that while the milk check is smaller, the cost of concrete and steel remains at a premium. This creates a unique challenge: the opportunity for well-managed operations to invest during a downturn is still there, but the entry price for that growth is historically high.

2. The Efficiency Mandate: Getting Better Before Getting Bigger

Growth without efficiency is a liability. In a business context, getting better is defined by a specific set of key performance indicators (KPIs) that prove the management team can handle increased complexity.

The financial discipline begins with a monthly cash flow projection completed every December, reconciled against an accrual adjusted income statement at year-end. Operationally, the farm must demonstrate elite-level management across several pillars:

Quality & Health: A somatic cell count (SCC) <100,000, heifer survivability at 95% and a cull cow rate <30%.
Cost Control: An operating expense rate of <80% and a cost of production (COP) ideally under $17/cwt.
Human Capital: Low labor turnover is a hallmark of a stable business.

Moriarty emphasizes expansion is not a cure for existing inefficiencies.

“While new facilities can provide efficiencies, expanding is not a cure for cost of production challenges. If a farm’s cost of production is above [industry averages], it suggests that dialing in on areas of improvement in the existing operation should be the area of focus,” he warns.

High-performing operations today are showing COPs in the $15 to $17/cwt range. Exceeding this suggests dialing in existing performance should be the priority before adding more cows to the system.

3. Capital Structure and the Liquidity Oxygen

Expansion requires a long-term commitment, often referred to as being “in it for the long pull.” Success depends on matching the life of the asset with the term of the debt while maintaining enough liquidity to survive a black swan market event.

Structuring the Debt

Long-Term Debt: Real estate and major infrastructure should be structured on a 15-to-25-year amortization. Securing and locking in the lowest possible interest rates is a defensive necessity.
Intermediate Debt: Cattle and machinery should be amortized over 5 to 7 years, ensuring debt is retired before the asset’s peak utility is exhausted.

The Liquidity Buffer

Perhaps the most vital component is the unadvanced Line of Credit (LOC). A top-tier producer ensures a $500/cow LOC remains available at all times. Moriarty points out a strong working capital position — often exceeding $1,000 per mature cow — provides the necessary cushion for the cash flow disruptions that inevitably occur during an expansion.

Loan structuring tools can further protect liquidity, such as:

Interest-only periods: 12 to 18 months during construction.
Revolving herd loans: Often called borrowing base loans, these require only interest payments as long as the herd value remains within parameters, allowing principal pay-downs during high-price cycles.

4. The Lender’s Perspective: Green Flags in a Down Market

When a loan committee reviews an expansion application, they are looking for proof of concept. In the current economic climate, lenders prioritize several key benchmarks:

Profitability History: Lenders look for net income levels of $800 to $1,200 per cow annually over the last 3 to 4 years.
Capital Costs: Moriarty emphasizes the “financial danger zone” when evaluating capital costs (depreciation, interest and leases).

“Capital costs may increase to $3.25 or even $3.50/cwt for a several-year period but will hopefully be offset by labor and production efficiencies. If capital cost per cwt. gets to $4.00 per cwt or over, the stress on cash flow and profitability can be a significant challenge,” he says.
Transparency: Quality and timeliness of financial information are paramount. Producers who provide up-to-date balance sheets and comprehensive pro-forma budgets receive faster feedback and more favorable terms.

5. Risk Management and the Professional Network

For the modern dairy, expansion is no longer a solo endeavor. It requires a professionalized board of advisers, including financial consultants to stress-test pro-formas and commodity brokers to manage volatility.

Moriarty advocates for a layered approach to risk management to diversify coverage:

Layer 1 (DMC): Dairy Margin Coverage should be the foundation for the first 6 million lb. of production.
Layer 2 (DRP): Dairy Revenue Protection provides a floor price by quarter while leaving upside potential open.
Layer 3 (Options): Spread positions can offer a higher price floor at a lower cost, though they require more active management.
The Beef Component: With higher beef values today, Livestock Risk Protection (LRP) on beef calf sales is a sound strategy to protect this growing secondary income stream.

Farms do not need to cover 100% of their milk, but a combination covering 50% to 75% of production balances the cost of premiums with the necessity of protecting the expanded debt load.

The Vision of the Top-Third Producer

Expansion in a down market is a hallmark of a visionary producer, but that vision must be validated by cold, hard metrics. By maintaining strong equity, keeping a competitive COP and prioritizing better over bigger, a dairy operation transforms from a family farm into a resilient agricultural enterprise.

As the industry evolves, the successful top-third producers will be those who don’t just see the cows, but the entire financial engine that sustains them. They understand while the milk price is out of their control, their equity position, their cost of production and their risk management strategy are firmly in their hands.

Lock in Gains: How LRP Can Help Protect Beef-on-Dairy Profits

Wed, 18 Mar 2026 19:20:23 GMT

Record-high beef-on-dairy prices have reshaped the balance sheet for dairy farmers, turning a once-small revenue source into a major part of the bottom line. But without protection, those gains could disappear just as fast, underscoring how quickly momentum can shift in today’s cattle markets.

Experts caution today’s opportunity demands a more deliberate approach.

Mike North, president of the producer division at Ever.Ag, and Will Babler, principal at Atten Babler Risk Management LLC, made two points clear during the Professional Dairy Producers conference:

Beef-on-dairy is now a significant part of a dairy’s financial picture.
Tools like Livestock Risk Protection, or LRP, are critical to protecting those profits, especially at today’s historic highs.

Beef-on-Dairy Income Becomes a Major Revenue Stream

In just a few years, beef-on-dairy revenue has expanded dramatically. Strong demand from feedyards and packers, combined with tight U.S. cattle supplies, has pushed prices for beef-on-dairy calves to levels few producers expected even five years ago. For many farms, those calf checks now add several dollars per hundredweight to the milk check equivalent.

“At the end of 2022, the average dairy was getting paid about a $1 to a $1.50 a hundred in beef revenue,” North says. “Today, that number is north of $5. We’ve tripled that part of the financials. It’s a massive, massive opportunity, and with it a massive growing potential risk.”

Babler described beef as a new pillar supporting dairy profitability.

“We now have this other leg to the stool, whether it be black calves or cull cows,” Babler says. “That also has become a major contributor to our revenue stream.”

But as beef revenue grows, so does exposure to market swings. North and Babler say this makes it a smart time for producers to think about expanding their risk management toolbox . Alongside programs like DMC and DRP for milk, tools such as LRP can help protect beef-on-dairy income, letting producers capture strong markets while buffering against sudden drops.

Are Beef-on-Dairy Calves the New $24 Milk?

For many dairy producers, beef-on-dairy calves have become one of the most valuable animals leaving the farm. Day-old calves have averaged $1,500 in some regions and pushed over $2,000 in others — a price that would have been hard to imagine just a few years ago. North says the current market feels similar to $24 milk.

“What should one do with $24 milk?” he asks. “Walk quietly into the sunset and say, ‘We’ll wait to see if it gets better?’”

With prices sitting at all‑time highs, he says this isn’t the moment to step back.

“We’re talking about all-time records, and you just don’t walk away from those and say, ‘Ah, I’ll check back in next month.’ That’s not how we approach markets like this. You’ve got to go after it,” he says.

Lock in Gains

As attractive as today’s beef-on-dairy calf prices are, North cautions markets at record highs rarely stay there forever. When you’re standing at the top of the mountain, the fall can be just as steep on the way down. That’s why he encourages producers to think carefully about risk management tools like LRP to help guard against sudden market swings.

The federally subsidized insurance program administered by USDA allows producers to establish a price floor while still participating in market rallies, functioning similarly to a put option. Unlike futures contracts, which require fixed contract sizes, LRP policies can be written to cover the actual number of animals in a group rather than standardized futures contract weights.

Babler notes how attractive the program has become in the current market.

“When we look at the tools available, LRP really stands out for cross calves right now,” he says. “There’s a lot of reach in the market, and premiums have collapsed. We’re talking about $30 a head floors.”

Babler explains if prices fall below the level you insured, LRP pays an indemnity equal to that gap. Because the program uses national price indexes rather than individual sale prices, it protects against broad market declines, not differences from one sale barn to another.

Recent changes to the program have also helped increase interest among dairy producers. New coverage options now exist for cull cows and unborn calves, including beef-on-dairy crosses that may be sold shortly after birth.

Subsidy levels have also increased significantly, rising from about 13% in earlier versions of the program to roughly 35% to 55%, depending on the level of coverage selected. Premium payments are now due at the end of the coverage period rather than upfront, which improves cash-flow timing for producers.

These changes have also helped to improve the program’s flexibility. Babler says cattle can now be sold up to 60 days prior to the coverage end date without affecting the policy, compared to the previous 30-day window. Producers may also purchase coverage for animals they have under a valid purchase agreement, as long as possession occurs at least 90 days before coverage ends.

Taken together, those updates have reduced out-of-pocket costs and made LRP more accessible as a risk management tool.

Playing Offense with LRP

North and Babler emphasize LRP isn’t just a defensive strategy. It’s also a way for producers to play offense, capturing opportunities when markets are strong.

“Risk management really has two sides,” Babler says. “You play offense when markets give you opportunities, like we’re seeing in cattle right now, and you lock in the gains. At the same time, you play defense to protect yourself from the downside when things turn. In the past, dairy producers mostly dealt with corn and milk, which often moved in opposite directions. But now there are more markets to work with — milk products, protein, and beef — so there’s a better chance that at least one of them is working in your favor. The goal is to capture those strong markets while still protecting yourself when prices drop.”

While prices are expected to remain strong for now, Babler and North emphasize risk management tools provide a safety net, letting producers play offense when opportunities arise, while still playing defense to protect the gains they’ve worked hard to earn.

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

Mon, 26 Jan 2026 20:31:34 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.

Athian Delivers $18 Million to Farmers for Emissions-Reducing Practices

Thu, 20 Nov 2025 18:52:16 GMT

Farmers who reduce emissions on their dairies are now seeing real money in their accounts, thanks to a company called Athian.

Since 2024, Athian has helped farmers collect $18 million for using practices like improved feed ingredients and alternative manure management. The company also recently raised $4 million in a Series A funding round from investors across the food supply chain, showing sustainability can now bring income to farms.

“Athian’s original vision was to bring together companies from every step in the food supply chain to deliver a more resilient and sustainable product to consumers,” says Paul Myer, Athian founder and CEO. “Our new funding partners are helping us achieve that vision by supporting our industry-wide effort to give credit to farmers, processors and food companies for their sustainability efforts.”

New investors in the program include Ajinomoto Group Ventures, Chipotle Mexican Grill’s Cultivate Next Fund and Mondelēz International through its Sustainable Futures platform. Athian’s original investors, including California Dairies, Inc., Elanco Animal Health, the Australian Agriculture Company, dsm-firmenich Ventures, Newtrient, LLC, and Tyson Ventures, also continue to support the company.

Make Sustainability Pay
For farmers, making changes that reduce emissions can now come with a direct financial reward. Athian verifies the results and sells the reductions, called Scope 3 insets, to food companies, grocery stores and restaurants. Those payments go back to the farm, turning improvements like feed adjustments and manure management into real income. At the same time, the system tracks reductions across the supply chain, giving both farmers and companies measurable results.

“Chipotle’s Cultivate Next investment in Athian furthers our mission to cultivate a better world by addressing emissions from areas like animal agriculture,” says Curt Garner, Chipotle’s chief strategy and technology officer. “Tools that incentivize on-farm GHG reductions will help companies like ours achieve ambitious goals, including a 50% reduction in greenhouse gas emissions by 2030.”

Athian recently completed its first verified inset sale with Dairy Farmers of America in early 2024 and has since added more options, including feed additives, manure management projects and a carbon intensity protocol developed with the National Milk Producers Federation and California Dairies. An expanded scientific advisory board now includes expertise from Australia to help guide protocols for farms of different sizes and systems.

For farmers, practices that improve the herd’s environmental footprint can now also improve the farm’s bottom line. With its new funding, Athian plans to add even more protocols, make emissions reductions accessible to smaller farms, and pilot programs in beef operations and international markets.

Feeling the Price Pinch: Young Adults are Eating Out Less

Wed, 19 Nov 2025 21:39:53 GMT

Rising costs are making life feel tighter for many Americans. Inflation, higher food prices and growing debt burdens have all eaten into budgets, and young adults especially are feeling the squeeze. To stretch their dollars, many in this age group are cutting back on dining out.

A recent report from Ever.Ag, published by the International Dairy Foods Association, shows that when young adults do spend money at restaurants, they are looking for ways to save. They split appetizers, order from kids menus, choose lower cost items, skip premium add-ons or avoid the meal entirely. And major restaurant chains like McDonald’s and Chipotle are seeing the effects.

Customers aged 25 to 35 once made up roughly a quarter of Chipotle’s sales, but traffic from this group has fallen for three straight quarters, including a 0.8% decline in the third quarter, according to Scott Boatwright, CEO of Chipotle.

“We believe that this trend is not unique to Chipotle and is occurring across all restaurants as well as many discretionary categories,” Boatwright says. “We’re losing them to grocery [store] and food at home. They feel the pinch, and we feel the pullback from them as well.”

Is McDonalds too Expensive?
Many consumers are also wondering if McDonald’s has priced itself out of the affordable category. The Times reports that a Big Mac sold for $2.24 in 2000 now averages $6. Adjusted for inflation, it should cost about $4.22, which means today’s price is roughly 40% higher than its inflation adjusted equivalent.

Other menu staples have climbed just as sharply. FinanceBuzz found that the price of a Quarter Pounder with Cheese meal more than doubled between 2014 and 2024. And a 10-piece McNuggets meal rose from $7.19 in 2019 to $9.19 in 2024.

The Times notes McDonald’s is not the only offender. The same FinanceBuzz study found that Popeyes prices have climbed an average of 86% and Taco Bell’s about 81% over the past decade, with Chipotle close behind, up about 75%. Wendy’s briefly held the title of most expensive major fast-food chain in 2022, with the average menu item at $6.63 after a 35% jump in just over a year.

Job Market Pressures
Labor market challenges in this age category are adding to the strain.

A recent PYMNTS Intelligence report shows an increase in joblessness among young adults and notes wage gains for workers ages 25 to 29 are currently among the weakest since 2011. Bloomberg reports recent college graduates are struggling to find entry level work in what executives describe as a low hire labor market.

This financial pressure is showing up in spending patterns. PYMNTS Intelligence notes the share of Gen Z consumers living paycheck to paycheck jumped from 57% in January 2023 to 69% in January 2025, a higher share than the general population. Another PYMNTS analysis found that purchases by 18-to-24-year-olds dropped 13% year over year as student loan repayments resumed and credit card delinquencies increased.

Eating Out No Longer ‘Worth It’
For many young adults, eating out has become a luxury rather than a routine. Rising menu prices, coupled with stagnant wages and a tougher job market, are forcing this group to rethink small everyday purchases. What used to be an easy stop for a quick meal now feels like a splurge, and at-home meals often come out ahead.

These financial pressures are reshaping spending habits in a big way. Younger consumers are not choosing new restaurants; they are choosing to skip eating out altogether, and until their budgets have more breathing room, home-cooked meals are set to rise as the more affordable option.

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

Tue, 18 Nov 2025 20:28:25 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.

Unlock Financial Success: Working with Your Ag Lender

Wed, 10 Sep 2025 14:50:25 GMT

The latest USDA farm cash receipts forecast has corn, soybean and wheat prices driving a 2.5% decrease for 2025 crop receipts compared to 2024, and the agency’s forecast shows an 11.2% increase for total animal/animal product receipts. Pair that with production expense increases calculated at 2.6% for crops and 21.5% for livestock. Farmers are financially pinched.

“Good decision-making, good risk management are always differentiators in any market, but they’re especially true today,” says Jase Wagner, president and CEO of Compeer Financial.

This fall into the winter, farmers will meet with their lenders to discuss operating loans, cash flow and capital expenditures. And the risks feel higher than ever. While greater transparency may reveal vulnerabilities in the business, it is the No. 1 thing lenders say will help them get farmers through what could be a very tough series of years.
“Really be open and honest with your lender,” Wagner says. “Being honest with yourself about where you are and what your abilities to execute over the next couple years will be really important as things get tighter.”

To prepare yourself for working with your ag lender, Kelly Hardy and Jim Halvorsen, with CLA, share these tips from the accountancy perspective:

1. Build a team of outsiders that work together. That should include:

Banker
Accountant
Attorney
Grain Buyer
Marketing Advisor
Crop Insurance Agent
Mentors
Successors

2. Be proactive in who you work with.

“Work with lenders who understand farming,” Halvorsen says. “You should expect to give them information about [the] farm, answer their questions and have them understand your goals.”

As for how often to meet with your lender, Halvorsen says it’s a best practice to meet with your financial partners once a quarter.

3. Know the type of information needed to make the best decisions for your business.

“If your banker only wants your tax return, it’s a red light,” Hardy says. “You need to provide a financial statement.”

She says tax returns are not a measure of the business’s profitability or assets.
“Tax returns don’t say how much grain you have in the bin,” she says.

Also, she advocates for the financial discussions to be centered on investments in the business — not taxes.

4. Transparency is the quickest way to establish a long-term, successful strategy despite any short-term challenges.

“No lender wants to take your farm. They are there to help you,” Hardy says.

She says having honest discussions with the full set of information is what reveals opportunities, even if the discussions may show weakness in the current business.
With lower commodity prices, Hardy says the drop in income will be evident on balance sheets this year. Having a true state of the business discussion will also unveil a strategy for how to manage the current farm economy.

The Best Time to Start Your Retirement Plan

Mon, 09 Jun 2025 19:35:34 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.

Steering Farm Succession Planning: A Roadmap for the Next Generation

Tue, 10 Jun 2025 15:05:00 GMT

Succession planning is an essential, yet often daunting, task for farm owners. The idea of transitioning a family farm to the next generation involves careful planning, strategic financial practices and, most importantly, open communication. Independent dairy financial consultant, Gary Sipiorski, offers invaluable insights into effective succession planning for farms. Here’s a comprehensive guide based on his advice.

Recognizing the Signs of Interest
One of the key indicators that it’s time to start thinking about succession is when children on the farm begin to show genuine interest in its operations. Participation in 4-H projects, eagerness to help at young ages and an overall enthusiasm for farm life can signal a potential future for the next generation on the family farm.

Educating the Future Generation
As children begin to engage with the farm, it is crucial to use teachable moments to explain the intricacies of farming. Demonstrating the importance of detail-oriented work is essential. Moreover, when they are old enough to grasp financial concepts, share the farm’s financial records with them. Introduce them to the checkbook, monthly cash inflows and outflows and annual balance sheets. Encouraging them to manage their own personal accounts fosters financial literacy and responsibility.

The Importance of Positive Communication
Continuous, positive communication among all family members involved is fundamental to the success of succession planning. Open dialogues help manage expectations and ensure everyone is on the same page.

Engaging with Professionals
Around the age of 55, it’s time for the parents to engage professionals like lenders, accountants, consultants and attorneys to discuss farm transfer strategies. These discussions pave the way for viable transfer plans starting by age 60, leading to a potential 10-year transition period.

“There are a lot of assets on the farm today,” he says. “Gifting will be part of the picture in the future.”

Ensuring Financial Viability
It is critical to assess the farm’s financial capacity to support both generations before proceeding. This involves running detailed cash flow analyses to ensure sustainability.

Documenting and Structuring the Transition
Accountants and attorneys play crucial roles in documenting the various aspects of the transition. Clarity in the process helps avoid misunderstandings and disputes. Initial steps may involve forming separate LLCs for livestock and transitioning income and expenses to the new generation. The first generation can also rent machinery and land to the newcomers as part of this initial transition phase.

Implementing a Probation Period
Once signed documents are completed, a one-year probation period is advised. This allows all parties to assess whether the chemistry between generations translates into successful collaboration.

Long-term Transfer Strategies
Assets can eventually be transferred through gifting or loans, forming the backbone of a successful, structured succession that benefits all parties involved.

Farm succession planning might be complex, but by following these steps and maintaining open, positive communication throughout, families can ensure a smooth and successful transition to the next generation.

5 Key Areas that Dairy Producers Need to Mindfully Protect in 2025

Tue, 25 Mar 2025 13:16:33 GMT

2025 has been anything but smooth sailing for dairy producers. With immigration reforms and pending tariffs creating uncertainty, it adds to the difficulty for producers to strategically plan their dairy’s next steps. Independent dairy financial consultant, Gary Sipiorski, suggests five key areas that producers should focus on to successfully navigate the year ahead.

1. Prepare for Uncertainty
Producers should set themselves up to expect anything in 2025. Currently, the milk prices for Class III and Class IV are hovering around $20 and $22, respectively. Despite lower U.S. milk production, the dairy herd remains stable at around 9.3 million cows. The shortage of heifers would typically suggest that prices should be at least 20% higher. However, the future market continues to fluctuate, with tariffs (or the absence thereof) potentially impacting dairy exports.

2. Projections Are Key
Despite the unpredictable market, it remains crucial to making projections. Using last year’s expenses as a base along with a conservative milk price can help in completing these projections. It’s important to make an informed estimate to understand your path forward.

3. Monitor Interest Rates
Producers need to be acutely aware of interest rates. Many five-year interest rate locks are due for renewal after being established in 2020. Lender relationships remain of paramount importance, especially considering that some lenders are becoming hesitant about extending agricultural loans.

4. Engage in Best Guessing
When engaging with lenders, it’s vital to bring along the year-end balance sheet, year-end income statement, and your best projections. A written business plan detailing 3 to 5 major items and any necessary purchases is key. Ensuring lines of credit are approved can provide financial stability amidst uncertainty.

5. Leverage Artificial Intelligence
Artificial Intelligence has permeated various aspects of our lives, and dairy production is no exception. When considering any equipment purchases, producers should explore how this technology can provide better information and support more informed decision-making.

By remaining adaptable and mindful of these key areas, dairy producers can better position themselves to handle the uncertainties and challenges that 2025 presents.

Key Metrics for Dairy Profitability
According to Steve Schwoerer, vice president of animal ag lending for dairy with Compeer, three important metrics separate the top 25% in profitability from the bottom 25%.

• Feed benchmarks. These might include feed cost per cow or feed cost per hundredweight (cwt). Benchmarking feed conversion—how much milk is produced for every pound of dry matter a cow eats—and the cost of the dairy ration per cow per day in dry matter, are critical. Some dairies achieve high milk production but at a cost that undermines profitability.

• Labor cost. Either labor cost per cow or labor cost per cwt.

• Net herd replacement cost. Are producers getting enough money for cull cows and beef calves in comparison to what it costs them to raise a dairy replacement.

By focusing on these metrics and strategic areas, dairy producers can not only survive but potentially thrive in a challenging economic climate.

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How Your Income Taxes Will Change This Year

Tue, 25 Mar 2025 14:14:15 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.

What to Do and Not to Do to Endure Financial Tough Times

Thu, 20 Jul 2023 17:54:20 GMT

Producers are challenged paying the bills with the lack-lusting prices that have shown up on milk checks so far this year. Independent financial consultant, Gary Sipiorski, shares six tips to focus on during financial tough times.

Conduct family and staff meetings so everyone understands what’s going on. Be realistic, not pessimistic about your dairy’s financial situation.
Reconsider all expenses.
Cows don’t understand that milk prices are considerably less. Keep taking care of your cows. Now is not the time to make shortcuts.
With the high price of beef, take a hard look at culling that will take a minimum hit to the bulk tank.
Gather with your lender to talk about finances. Have the funds approved for an operating loan, even if you don’t need them right now. Make sure you bring a financial projection for the remainder of 2025 to the meeting.
Keep on leading. The owner sets the atmosphere for all.

“It is hard to say how long milk prices will be low, where the bottom is and how long before markets turn up,” Sipiorski says.

Curtis Gerrits with Compeer Financial concurs with Sipiorski, adding the importance of staying connected with your professional team.

“Have continued discussions with your veterinarian, nutritionist, commodity broker, and banker on how to continue to improve your operation,” he says. “With these discussions keep margin management at the front of mind on any operational adjustments you may be considering.”

Gerrits adds to keep looking towards the future.

“Look out 12-18 months for areas of opportunity with managing your margins,” he says. “DRP, LGM, DMC and other hedging strategies may present opportunities to capture some positive margins even when prices are low today as you look out into the future. Review your dairy’s budget for this year and think through your budget for the rest of 2025 and into 2026. Explore areas of opportunity to lower your cost of production whether that be on the income or expense side of your operation.”

What Not to Do

Wayne Knoblauch, professor in the Dyson School of Applied economics and Management in the SC Johnson College of Business and the College of Agriculture and Life Sciences at Cornell University adds the following 11 things to avoid when dairy farmers are facing financial difficulty.

Making decisions that will cause the problem to be worse a week, month, or year down the road.
Continuing the same practices simply because you’ve always done it that way.
Neglecting needed accounting tasks because there isn’t time right now.
Utilizing farm-produced feeds so rapidly that they are used up without a replacement plan.
Reducing purchased feed just to save money.
Purchasing products that promise to be a cure-all unless you have hard data and the experiences of others to confirm.
Making capital investments to reduce tax liability or because “it is a good buy.”
Borrowing money unless the profitability of the farm is reasonably expected to increase in order to provide for repayment.
Neglecting the details; cleaning and maintaining equipment, detecting heats, etc.
Using alcohol to excess. Alcohol and other drugs can make a tough situation even worse.
Assuming a management strategy that worked for one farm will be effective on yours.

How To Budget For Your Farm's Transition

Tue, 28 Jan 2025 18:27:03 GMT

In 2023, I said the most important thing for your farm business is build your transition plan. Recently, we’ve focused on knowing your numbers, and now it’s time for cost of living and budgeting for retirement.

When I work on transition planning with family farms and businesses, I often start by asking whether or not the senior or junior partners have met with a certified financial planner. Usually, but not always, the answer is no. But almost every time, the senior partner needs a clearer picture of their needs in the next chapter of transition or retirement. They think they will be OK, but until it is put on paper, there is still this massive fear about the unknown. Thankfully, it’s easy to navigate.

Anticipate Your Lifestyle
The first step is understanding what your cost of living looks like in retirement. Yes, this means budgeting and anticipating expenses.

I put together a one-page, farm-centric worksheet so you can easily calculate your budgetary outlook. This includes expenses such as healthcare, vacation, groceries, basic needs, and even that new fishing boat you want to buy. I don’t care what your budget is, but you should. You need to have an excellent idea of what that number is. In fact, it is one of the most respectful things you can take the time to calculate for you, your spouse and your transitioning partner.

Put It On Paper
The next and final step (I’m a simple man) is mapping out the long-term business needs and other specifics for your long-term income and expenses. For most of you, the income will include farming for a while, including grain sales, equipment sales and then cash rent and other income such as social security, investments and diversified income from other sources or businesses you work in. The expenses include land, equipment and housing notes, primarily.

The important part is physically putting the numbers in to see what the next 10, 20 and 30 years look like on paper. The worksheet calculates the income and expenses you input and allows you to select your ‘crystal ball’ inflation rate, investment return and anticipated tax implications.

I want peace of mind in your retirement and transition planning. I want you to know where you stand and what your needs are. I want you to feel comfortable with the hardest thing you have to do once in your life. And I’d like your transitioning partner, whether family or not, to know your needs and expectations as you navigate these next steps.

Do yourself a favor and take an hour or two to put on paper what you might have been putting off for too long or have yet to take the time to think about.

Shay Foulk
shay@agviewsolutions.com

Tax Turbulence: How Sunsetting Provisions Could Change Your Bottom Line

Thu, 19 Dec 2024 15:47:00 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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How To Leverage The 0% Tax Bracket

Wed, 27 Nov 2024 16:53:05 GMT

There are many situations where farmers can sell assets they have held for over a year and owe no federal income taxes on the gain.

Capital gains that are taxed in the old 15% tax bracket are actually taxed at a zero rate. For 2025, single taxpayers hit the top of this tax bracket at $48,350 of taxable income. Married couples top out at twice that amount, or $96,700.

Remember, these taxable income numbers are after itemized deductions or your standard deduction. The standard deduction for 2025 increases to $30,000 for a married couple, which means a farm couple could have long-term capital gains of $126,700 and owe no federal income tax (assuming they have no other income).

This can have great planning opportunities.

First, if a farmer has a C corporation and a personal income that is low for the current year, then paying a dividend from the corporation makes sense because the divided will be tax free. Plus, the corporation does not even need to pay out any cash. It can instead elect to distribute a “deemed” dividend, which is simply a paper entry to debit dividend and credit paid in capital. This also has the result of increasing the tax basis in the corporate stock, which can be helpful if the corporation is liquidated or converts into an S corporation.

Capital Gains Planning Example
Jim and Sara estimate their taxable income for the year will be about $50,000. Their corporation issues a deemed dividend to them of $75,000 because they would like to keep the cash in the corporation for operating purposes. They can also elect to pay a cash dividend to themselves and then loan the proceeds back to the corporation. This income added to their personal return will be taxed at zero for federal income tax purposes. They will pay state income if their state has such taxes.

Another option involves selling stock investments at a gain if you know the gain will be tax-free. There is a rule against repurchasing stocks within 30 days if you have sold the stock at a loss, but in this case, you are actually locking in long-term capital gains to be taxed at zero. The worst that can happen is you might be out a little bit of a bid/ask spread on repurchasing the stock if you use an online no-commission company.

Selling Assets Example
Andy and Gretchen estimate their taxable income at zero. They were early investors in Tesla and elect to sell Tesla stock that generates a long-term capital gain of about $125,000. They decide to not repurchase Tesla but will elect to use it as working capital for their farm operation. This gain will be tax-free at the federal level.

The bottom line as you do your tax planning at year-end is to review any assets you have held for at least a year to determine if your taxable income remains in the 15% tax bracket. If so, you might want to consider selling all or part of that asset to lock in tax-free money (at least at the federal level). Or, if you have a C corporation, always review that each year to determine how much of a tax-free dividend you can pay out.

USDA’s Latest Farm Income Data Looks Brighter Than Early 2024 Numbers

Thu, 12 Sep 2024 15:42:03 GMT

USDA–Economic Research Service (ERS) has released updated projections for 2024 farm income, and though it’s still anticipated to decline, the outlook doesn’t look quite as dim as it did earlier this year.

The new numbers show net cash farm income for the 2024 calendar year will fall $12 billion, which is about 7% down from 2023, and net farm income will fall $6.5 billion or 4.4%. This is compared to projections released in February of this year that suggested net farm income would fall 26%.

“There are a lot of factors going on here, but to me, the primary ones are that the revisions reflect expectations that animal and animal product cash receipts will increase while production expenses will fall,” says USDA–ERS economist Carrie Litkowski. “This is largely due to the incorporation of new data.

Litkowski shares the primary cause for the fall in 2024 farm income comes from commodity prices. Cash receipts or sales are expected to decrease by $27.7 billion. When combined with the inventory adjustment for crops, the value of crop production is forecast to decrease $25.6 billion from 2023. The largest decline comes from corn and soybeans, though wheat producers are expected to have a nearly 50% decline in average net cash farm income in 2024.

USDA ERS Row Crop Cash Receipt Projections 9-5-24

(USDA ERS)

But it’s not all bad news for crop farmers. Fertilizer expenses are expected to fall almost 10%.

Better News in Livestock
The outlook for livestock producers is more positive. Total animal and animal product recipes are expected to increase by $17.8 billion, or 7.1%, with the main driver coming from egg prices.

“Receipts for eggs are perhaps the biggest story here, in that they are forecast to see the largest increase in 2024 at 35%, or about $6 billion. Eggs alone account for a little more than half of the total increase in animal and animal product receipts,” Litkowski says. “Back in February, we did not anticipate that egg prices were going to increase as much as they have. That’s due to supply restraints we’re seeing due to the avian flu.”

Dairy farm businesses can expect to see the largest increase in average net farm income at 47.2%. Litkowski attributes this to higher milk receipts and lower expenses in 2024.

Farm businesses specializing in hogs are forecast to have an 11% increase but remain low relative to prior years. Beef farm businesses are projected at a 9.7% increase and poultry will see an 11.7% increase.

USDA ERS Livestock Cash Receipt Projections 9-5-24

(USDA ERS)

These operations should see big savings in feed as well, with an anticipated decline of 12%.

Geographic Breakdown
Looking at the data by region, six of USDA’s nine regions will see lower average net cash farm income. Farmers in the heartland states will be hit the hardest with a 23% decline.

Income increases are forecast for producers in the northern crescent and fruitful rim regions — between 1% and 4%. Litkowski says this is where many dairy farms are located and can be attributed to the expectations for higher dairy receipts and lower expenses.

“Regional performance of farm businesses can vary considerably due to the strong geographic concentration of certain production specialties or average farm size,” she explains. “Across all farm businesses, average net cash farm income is forecast to decrease 9% from 2023 to 2024 in nominal dollars.”

USDA ERS Farm Income By Region 9-5-24

(USDA ERS)

Household Income Remains Unchanged
Total farm household income is projected to increase 1.7% in 2024 to $99,683. However, when inflation is taken into consideration, Litkowski says she categorizes it as “relatively unchanged”.

“1.7% is less than the expected rate of inflation in 2024, so it’s really more like a decline of 0.7% in real dollars,” she explains.

The Big Picture
While this year’s income projections may have producers concerned about their bottom line, USDA–ERS stresses the importance of looking at the numbers with the past 20 years in mind.

“The farm sector balance sheet is projected to remain strong,” Litkowski says. “Net farm income fell 22% from 2022 to 2023, and in 2024 net farm income is forecast to fall nearly 7%. Even with these expected declines, both sectors in 2024 are forecast to remain above their 20-year-average.”

USDA ERS Farm Income 20-year Average 9-5-24

(USDA ERS)

Click here for the full report.

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Essential Tips to Financially Plan Ahead

Tue, 10 Sep 2024 14:04:49 GMT

This time of year, farmers start spending a good chunk of their day in the seat of a tractor or combine. As the harvest season continues, ‘windshield time’ provides a great opportunity to start thinking ahead for the next year. Producers who begin planning for 2025 early will have a competitive advantage over those who don’t. Now is the time to learn the financial pulse of how your operation is performing.

Independent financial consultant, Gary Sipiorski understands it is tough to ask a farmer to stop working and turn their attention to numbers, especially this time of year. He recommends farmers to:

Set aside time. Two hours a week to strictly focus on financial planning. “When you are fresh, in the early mornings is best and before the to-do list is delegated out,” he says.

Focus without interruptions. “These four hours a week may be the most profitable hours for understanding where the money is coming from and going,” he notes. “You don’t have to do it all in one sitting. Nights are difficult when the mind is tired. “

Making time to carve out conversations. “Even if they are just being planned from a tractor seat. It will put you ahead of the curve when it comes to initiating your business plans for the upcoming year,” he shares.

Two Things to Do Right Now for Solid Plans in 2025

Start implementing quarterly reviews.
According to Sipiorski now is a good time to touch base with the person responsible for the financial records of your operation. “Quarterly reviews are best for Cost of Production (COP), along with Profit and Loss (P&L) projections,” he says, noting that it would be nice to have had an end of the second quarter tea meeting with your lender, accountant, veterinarian, nutritionist, etc. “If not then, by the end of the third quarter. There should be some serious evaluation. I understand how busy cropping gets in October, but a November meeting should be set to talk with your accountant to help you with year-end taxes.”

Projections need to be finalized in December.
“Balance sheets should be started in December with an accurate completion in January,” Sipiorski suggests.

Four things to help maximize a margin in 2025.

Put extra attention to expenses. Pay attention to each expense item. Sipiorski suggests paying extra attention to the larger expenses and discussing them with family, managers, and employees to all consider if any savings can be found.
Analyze custom work. Custom tillage, manure handling and harvesting should be visited with a pencil to see if owning, renting or custom work makes sense.
Maximize components and milk quality. Maximizing milk components and quality should be worked on, especially with limited bases for shipping milk pounds.
Marketing Discussions. Milk marketing using government-supported programs and discussions with brokers should be researched to find a margin. Remember owners always make the final decisions.

90 Days to Find a New Lender?

Mon, 09 Sep 2024 15:45:52 GMT

Dairy farmers across the United States are finding themselves at a financial crossroads. I don’t have to read a report to tell you that. All I have to do is look at the call log on my phone.

More now than ever before, more and more dairies are reaching out because they have received 90-day notices to find new lenders. The current economic climate makes it extremely challenging to switch from one lending institution to another, especially within tight deadlines set by the banks.

Here is how I’m helping these dairies navigate through their financial challenges and what other dairy farmers can do to position their businesses for a sustainable and profitable future.

1. Cost Management: A major factor impacting dairy profitability is feed cost. Feed expenses can be dramatically reduced by optimizing the use of farm-grown forages and eliminating unnecessary feed additives. With harvest season upon us, take the time for additional planning now and save yourself money in this area for the rest of the year.

2. Labor Efficiency: Labor costs are another significant expense. One approach to reducing labor is for the owner to be more active in doing day-to-day operations. Another is to cross-train employees so they have the skills in multiple areas and you can fill their day with tasks to maximize the value of each hour you are paying them to work.

3. Speak Now: If you haven’t had a conversation with your lender yet about how your dairy farm ranks among the clients in their portfolio, have that meeting now. Find out what you must do to be at the top of their list, and then do those things.

For some dairies, this may be a time when they sit down and look at their financials and choose to exit the dairy farming business at a time when cattle are commanding top dollar. If that’s the case, be sure to have a plan for the debt, not just the sale.

Most importantly, if you are in this situation right now with a 90-day notice letter on your kitchen table, don’t wait. Ask for help and get some outside eyes to enable you to see the opportunities and your next best actions.

Click here to listen to the entire conversation:

It's Not too Early to Think about Tax Planning

Thu, 29 Aug 2024 20:16:42 GMT

Does it seem too early to start planning for taxes? Not according to Bethany Johnston, Nebraska Extension Educator and Aaron Berger, Nebraska Extension Beef Educator.

Even though many crops still stand in the fields, September and October are excellent times to meet with your tax accountant and start looking ahead for tax purposes, say Johnston and Berger.

They encourage producers to begin tax planning before the end of the year as it allows discussions about upcoming income and expenses.

By pre-tax planning, producers better understand if they should make or hold off on major equipment purchases, and sell or wait to sell livestock and crops. The planning process can help producers avoid unforeseen tax implications.

What should you do when planning a pre-tax meeting with your tax accountant? Johnston and Berger offer these tips.

Start early. Set an appointment with your accountant. September and October will allow for time to make end-of-the-year decisions. Planning in advance is an advantage for cattle producers, where livestock are not as easy as crops to sell quickly, if needed, and sale checks are sometimes larger.

Come prepared. Get your books up to date and bring these to your pre-tax meeting. Email your tax accountant any reports for the year. Electronic bookkeeping programs, like Quickbooks and Quicken, have templates for reports, or you can create a custom report, and share information in Excel or PDF form.

Look ahead. What are estimated future expenses? Will any additional income come in before Dec. 31?

Did you purchase or trade any equipment? Bring the purchase agreements/trade papers for this year’s equipment purchases.

After reviewing the numbers, if your operation has a surplus, what sound business decisions can you make with the profit?

Estate and transition planning for your operation. Some of your attorney’s fees may qualify as tax-deductible expenses.
Maintenance and repairs. Schedule a time before the end of the year to repair equipment, buildings, pivots, or make land improvements, such as fence, new tanks or stock wells, or control invasive species.
Pay down debt, with a plan. According to Tina Barrett, Executive Director of the Nebraska Farm Business Inc, “excess funds are tricky.” To have extra cash to pay down debt, you need taxable income. “But if someone takes $100,000 and pays down a land note, they may get to the end of the year and realize their taxable income is $100,000 higher than usual. It is not a pleasant surprise, when there is no money to pay expenses,” explains Barrett. Every situation is different, so ask your accountant about your position.
Do not spend money on tax deductible expenses, just to reduce tax payments. “If you didn’t spend that $100,000 on stuff that’s not needed, and if instead, you could have spent $30,000 on taxes and $70,000 to reduce debt you would be further ahead financially,” Barrett comments. Again, each tax situation is unique, so ask what works best for your operation.

Ask your accountant how hard it has become, or if it’s still a good plan, to try and meet the March 1 deadline to submit taxes for agricultural producers. An alternative is to make an estimate by Jan. 15, pay the estimate, then producers have until April 15 to file and pay the difference. This can be beneficial with late information, or if income is higher this year than the previous year.As we begin Q4, it’s not too early to consider tax planning with your accountant.

For more information, visit check out the beef producers toolkit.

Your Next Read: ‘Cheap’ Corn: Economists Encourage Producers to Pack the Bunkers and Plan Ahead

Four Experts You Need On Your Succession Planning Team

Wed, 31 Jul 2024 18:14:24 GMT

When it comes time to get serious about succession planning, many operations turn to their lawyer to kick off the process. And while that’s a good place to start, Matt Gunderson, vice president of Farmers National Company, wants to make sure your journey doesn’t end there.

“A lot of times when folks think about estate planning, they think, ‘Well, I just need to go see an attorney, right?’ And to some degree, that answer is correct. But what we try to talk about is how to set up a good team,” he says.

Gunderson recently joined an episode of the Top Producer Podcast to share the four professionals he recommends for any succession plan, likening the process to building as sturdy of a stool as you can.

“What’s the best, most sturdy type of stool out there? Well, it’s a four-legged stool,” he says. “Think about that farm or ranch land asset as the seat. Then we start looking at the four legs.”

The Four Legs
1. Attorney
Gunderson stresses the importance of choosing the right lawyer for this process.

“There are different types of attorneys out there. So one, finding an attorney who does estate planning is important. But two, it really comes down to finding an attorney who understands estate planning and agricultural assets,” he says.

Be sure to also consider the state your land is in, and not just where you reside.

“We’ve seen where attorneys in one state drafted something according to that state’s laws, but where the land is at as a completely different example in terms of what that looks like from an estate standpoint,” Gunderson says.

2. CPA
He shares the second leg of the stool should be a CPA. This expert will help you understand the plan’s current tax implications and will also stay up to date on how that could change.

3. Financial Planner
The third leg is a financial planner. Financial planners can help you in some ways a CPA can’t. According to Gunderson, this role looks at future considerations for the plan, such as what it looks like for the upcoming generations.

Just as with attorneys, however, there are different types of financial planners, and it’s important to find one familiar with agriculture and the various accounts you will have.

4. Professional Manager
The fourth leg of Gunderson’s estate planning stool is a professional manager for the property.

“A professional manager can help take care of that land asset for the next generation if they’re not actively engaged in farming or they’re not actively near the property,” he says.

Gunderson adds that after this team is formed and your plan developed, you shouldn’t set it and forget it.

“Don’t throw it on the shelf or put it in a drawer. You better get that team back together every three years to look at that plan because things change, laws change and family dynamics change,” he says. “Was there a birth? Was there a death? Was there a marriage or divorce? Get that team back together to make sure that it’s up to date or it can still come back and bite you in a negative way.”

Catch up on episodes of the Top Producer Podcast

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

Fri, 26 Jul 2024 18:25:04 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.”

Profitability on U.S. Dairy Farms Looking Up

Wed, 03 Jul 2024 20:44:13 GMT

Dairy producer margins have risen to the highest level in a year and a half, according to the Milk Margin Above Feed Costs as calculated in the Dairy Margin Coverage (DMC) program.

“Increasing margins are good news for dairy producers and should send signals to them to increase output,” Monica Ganely, analyst with the Daily Dairy Report and founder and principal of Quarterra, an agricultural consulting firm in Buenos Aires. “However, well-publicized barriers, including animal health challenges, expensive financing, and a lack of replacement animals, are impeding the ability of U.S. producers to expand and capitalize on higher margins.”

May’s Milk Margin Above Feed Costs jumped to $10.52/cwt., an increase of 92 cents from April and the strongest margin since November 2022. “Depending on the level of coverage selected by a producer, the DMC program can result in payments when the margin falls below $9.50/cwt.,” Ganely said. “And May marked the third month in a row that no payments would be made.”

Stronger milk prices were responsible for much of the gain in dairy producer margins, but weakening feed costs also played a role. May’s All-Milk price rose to $22/cwt., up $1.50 from the previous month and the highest All-Milk price since January 2023, Ganley noted. The All-Milk price moved higher in response to increases in the Class IV price but especially in the Class III price, which climbed more than $3/cwt. compared to April. While spot dairy product prices have remained resilient, Ganely noted that futures markets suggest lower prices, especially Class III prices, could be on the horizon, she added.

May feed costs rose slightly compared to April levels but remain well below the lofty levels of the past few years, Ganley said. Feed costs as calculated by the DMC program rose 58 cents from April levels to $11.48/cwt. in May. All three feeds used in the calculation, corn, soybean meal, and premium alfalfa, rose. Despite the increases, though, May’s feed costs were nearly $3/cwt. lower than at the same time last year and were the lowest since 2021, she added.

“Despite higher margins, U.S. producers continue to face many barriers to expanding, but the longer margins stay at current levels, the greater the likelihood that resourceful producers will find ways to mitigate these challenges and increase production,” Ganley said.

One bearish factor for milk prices is lackluster U.S. dairy exports. In May, total U.S. exports fell below prior-year levels after growing in April, according to data from according to data from USDA’s Foreign Agricultural Service. U.S. exporters sent a total of 504.8 million pounds of dairy products offshore, 1.7% less than in May 2023. “Ongoing weak demand from Asia weighed on total exports, even as exports to Mexico continued to soar, Ganley said.

Cheese exports climbed 46.6% in May to 504.8 million pounds, the most ever recorded for the month. More than 40 million pounds of that cheese was sent to Mexico. Whey exports rose 15.2% as China’s demand for permeate and dry whey picked up, she added, but other dairy categories fared less well. Exports of nonfat dry milk, for example, slipped 24.2%, and butter exports fell 19.4% under the weight of high prices.

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.

3 Strategies to Increase Cash Flow on Dairy Farms

Mon, 25 Mar 2024 17:34:59 GMT

In the world of dairy farming, maximizing profits and ensuring financial viability is a constant challenge. However, as a dairy farm consultant who gets shoulder-to-shoulder with employees in the barn, and also sits down at the table to evaluate income and expenses, I’ve developed a strategic approach to help dairies improve profitability and efficiency for short-term gains and long-term success.

Here are three of the key strategies I use:

Money is made in the milking parlor.

My first strategic priority to increase cash flow for any dairy farm is to evaluate the milking parlor. Is it running at maximum capacity? Do we need to reorganize labor to improve cow flow and milking efficiency? Do we have downtime, and if so, which groups of cows could we run through 4x to grab those extra pounds of milk without increasing labor costs?

Labor Optimization and Cross-Training

I also look for the good employees. My definition of a “good employee” is one who performs well in their current role, and also enjoys being challenged. They are the most valuable players on the team, and often, I find these are also the ones who welcome being cross-trained to do other jobs on the dairy. This strategy may even allow you to eliminate positions and save significant dollars on labor costs.

Financial Management and Risk Mitigation

Operational efficiencies are only part of the strategic approach to increasing income and reducing expenses. We must tie that together with the financial side. That includes looking at the current costs for each area of the dairy and determining where opportunities are to cut back on unnecessary expenses.

From there, we create a budget and follow it. Managing risks and keeping debt levels low are also part of this strategic approach.

By tightening up on these three key areas and applying a strategic approach to both increasing income and reducing expenses, I believe it is possible to lower your breakevens, even during the most challenging times. To hear more on these strategies, listen to this Uplevel Dairy Podcast: Dairy Farming with a $15 Breakeven

For more on milk prices, read:

How to Pinpoint Farm Management Issues

Mon, 29 Jan 2024 20:15:44 GMT

With past experience as a veterinarian, dairyman and entrepreneur, Bruce Vande Steeg works to help farms experiencing growth and management pains.

“My consulting practices are based around what I would call organizational health,” he says. “How do we have a healthy, profitable business?”

Vande Steeg shares his work on the farm often begins when the operation’s owners think they’ve hit a ceiling and aren’t sure how to get past it. They may want to grow, but currently feel overwhelmed and unsure where to go next.

“I typically start with the question of “What does winning look like for the owners or the management team?’ Not just financially, but where they want to go with the company,” Vande Steeg says. “It’s a very holistic approach to how to create a vibrant business that’s good for them and good for the employees.”

Vande Steeg has found many of the issues in a farm business revolve around management processes – or lack thereof.

“You start looking at the different problems and what you think are the underlying root causes,” he says. “I could tell every client there’s not a problem with a cow that doesn’t have a human attached. So, you’ve got to fix the human side and the cow problems go away.”

This proved to be the case on a dairy operation Vande Steeg was consulting for that had high rates of employee turnover and animal loss.

“There was a disconnect between management and labor. When people think you don’t really care about them and you’re just there to use them, they cease to care. They’re just putting in time,” he says. “We had to change management’s perspective and get the right people leading. Once they knew the leaders cared about them as people, things really started to turn around.”

Vande Steeg shares the operation decreased turnovers from over 200% to about 30%. They also turned a $500,000 per month loss into a positive cash flow situation in six months.

He encourages owners and managers to start with the basics, such as which employee does which task and when. Then move on to the details of good leadership: how to have meetings, the best way to communicate, how to interview and hire employees well, and how to train and retain employees.

“Leadership, in my opinion, is where everything rises and falls. With good leadership, the rising tide lifts all ships,” he says.

To hear more about Vande Steeg’s background and experiences, listen to this episode of the Top Producer podcast.

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Automated Document Reconciliation

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The Strategic Blueprint for Dairy Expansion: Engineering Resilience in a Volatile Market

1. The Strategic Audit: “Buy Low” Opportunity Versus High-Risk Gamble

2. The Efficiency Mandate: Getting Better Before Getting Bigger

3. Capital Structure and the Liquidity Oxygen

Structuring the Debt

The Liquidity Buffer

4. The Lender’s Perspective: Green Flags in a Down Market

5. Risk Management and the Professional Network

The Vision of the Top-Third Producer

Lock in Gains: How LRP Can Help Protect Beef-on-Dairy Profits

Beef-on-Dairy Income Becomes a Major Revenue Stream

Are Beef-on-Dairy Calves the New $24 Milk?

Lock in Gains

Playing Offense with LRP

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

Balance the Comfort and the Pressure of Stability

Open the Lines of Communication

Share the Load

Athian Delivers $18 Million to Farmers for Emissions-Reducing Practices

Feeling the Price Pinch: Young Adults are Eating Out Less

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

Unlock Financial Success: Working with Your Ag Lender

The Best Time to Start Your Retirement Plan

Steering Farm Succession Planning: A Roadmap for the Next Generation

5 Key Areas that Dairy Producers Need to Mindfully Protect in 2025

How Your Income Taxes Will Change This Year

What to Do and Not to Do to Endure Financial Tough Times

What Not to Do

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Tax Turbulence: How Sunsetting Provisions Could Change Your Bottom Line

How To Leverage The 0% Tax Bracket

USDA’s Latest Farm Income Data Looks Brighter Than Early 2024 Numbers

Essential Tips to Financially Plan Ahead

90 Days to Find a New Lender?

It's Not too Early to Think about Tax Planning

Four Experts You Need On Your Succession Planning Team

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

Profitability on U.S. Dairy Farms Looking Up

Here Are The Notable Changes In The House Farm Bill

3 Strategies to Increase Cash Flow on Dairy Farms

Money is made in the milking parlor.

Labor Optimization and Cross-Training

Financial Management and Risk Mitigation

For more on milk prices, read:

How to Pinpoint Farm Management Issues