Pounds of beef sold is a key number for cattlemen. Late calvers the cows that drag out the calving season, may cost producers more than extra work and management, they may actually be costing dollars. Standardized Performance Analysis (SPA) has been around for decades. This tool helps determine what the actual costs to raise a calf from breeding to weaning. Many producers create a budget for marketing and financing purposes, but SPA calculates the real, final costs.
In early 2017 cattle producers were frustrated by price levels below where fundamental indications suggested they could be. In recent weeks the cash and futures prices have moved higher, finally providing an opportunity for producers wanting solid price protection across different cattle sectors. It may also be a time for any hedgers that implemented protection strategies early in the year to revisit coverage and perhaps roll up to higher floor prices or lock in higher price levels available now.
Two methods of measuring farm income are used and reported on by the United States Department of Agriculture (USDA) and other reporting sources, Net Cash Farm Income and Net Farm Income. While the two use very similar words, the formulas and use of them is different, and should be understood when reading reports regarding one or the other to discuss and understand the current farm income situation.
As family farms and ranches grow, both in dollars handled annually, and the number of individuals involved, a business approach to family and non-family employee management should be considered. This article will focus on hiring and employment policies.
Answering the tough questions about transitioning the operation to the next generation is an important step for farm families. It is also a step that is often missed. “It’s family, it will all work itself out” is a common myth believed by fathers, sons, moms and daughters. This perception sets the family up for discord, unfavorable work conditions and the failure of the operation to pass to the next generation. Those three situations are rarely the goals the family has for personal relationships or the business.
Income tax season is a favorite for producers near and far (note the level of sarcasm in this statement). While it is a time to collect all the forms mailed to you, review all the forms you need to mail out and determine taxable income and deductible expenses, it is also a good time to evaluate the profitability of your operation.
January is behind us, hopefully taking the bitter cold with it. One thing will not move out with the running of the calendar is the need for producers to become better farm managers. The low market price trend is expected to last through 2017, into 2018. Managers will survive, and maybe thrive, based on the decisions and actions they make. Those viewing themselves as “just farmers” may not.
Tax rules and regulations change annually, so it is important for producers and tax professionals to stay up to date. For 2016 there have been some changes to the farmers and ranchers tax guide. This article will highlight the majority of the 2016 updates.
Depreciation is an important part of keeping records in agriculture. Depreciation is a reduction in the value of an asset over time, due to wear and tear. Things such as tractors, trailers, etc. all depreciate over time. Depreciation is also a way to make an income tax deduction to recover the cost of qualifying assets. Careful consideration of how to report tax depreciation helps producers comply with IRS regulations and can result in a reduction of income taxes paid.
During 2016 cattle prices continued to decline from highs observed in 2014 and 2015. There was continued expansion of cattle inventory levels in 2016, ample feed availability (which contributed to heavier slaughter weights), and expanded supplies of competing meats (such as pork). Early in the year is a good time to assess what those changes mean for price levels and basis expectations to help implement a cattle marketing plan.