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marketeye
Veteran Advisor

Flush farmers

I'm hearing that the Morton company is sold out of buildings for this year. In addition, farmers are so flush with cash that tax problems are popping up. As a result, farmers are buying equipment, buildings, and even building new homes, to avoid tax issues this year. Let me ask you folks. Is this the scenario in your neighborhood?

 

Thanks for sharing,

 

Mike

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9 Replies
Kay/NC
Honored Advisor

Re: Flush farmers

Taking into account some disastrous wind damage during Irene, and hearing some of the projected loss stats, one would surmise that many NC producers will be harvesting an insurance claim. Doubt that is as lucrative, or as one row cropping neighbor said this spring when walking past the house to chop a few errant weeds in his drought-stressed field, " Ain't a pound of that high-dollar cotton been made yet....".
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Jim Meade / Iowa City
Senior Advisor

Re: Flush farmers

I don't see any of that around here.  The number of buildings and bins going up based on driving down the interstate is not exceptional.  Not many new pickups or new iron.

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SpringBrookFarm
Veteran Contributor

Re: Flush farmers

I have made a few purchases this fall, including a new grain cart that was a hold over and the dealer made a good offer to get it off their lot. A new grain cart was more of a need though. We went from two straight trucks to one semi and a bigger grain cart was needed to make that happen. I look forward to paying down debt after fall harvest. Ill feel a lot more comfortable with less debt going into next year where i think we have learned anything can have, markets and weather. I also am looking forward to catching up on some maintanence items. Id rather take care of what i have then add more things to take care of on top of what i have now. I have been looking at finishing out a cement floor in our shop though, but thats more of a luxury item for me.

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Kay/NC
Honored Advisor

Re: Flush farmers

Some of what you have noted does not sound remotely like tax planning to me. A new home is not a tax advantage...home mortgage interest write-off is an endangered species, Obama has said as much, I believe.

I had conceptualized for a decade or so that a lot of farm program payment strategy was to bridge my generstion onto Social Security...that is, programs were a form of public assistance that looked or functioned like commodity subsidies, held in place until the few independents still shuffling along give up the ghost. Conversion to contract ag has taken over so many enterprises here...tobacco, peanuts, hogs, poultry, etc., that not much remains.

Maybe this is the older farmer's opportunity to cash out happy, instead of totally bitter and broke. Everyone is a great farmer at certain price points, and precious few are at others. As we have already agreed, the main difference in those prices right now is a
manipulation of the market in forms of energy mandates and subsidies to select endusers.
Strange times we are living in....

Is a boom just the sound a bubble makes as it breaks?
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kraft-t
Senior Advisor

Re: Flush farmers

This reminds me of the "budget surplus" at the turn of the century. If you are not going to retire debt when you have a budget surplus, just when do you expect to do it?

 

Kicking the can down the road is not only being done by government. Many are doing the same thing in their own businesses. No wonder government has that mindset. So do the people.

 

Even many so called conservative type farmers are not committed to debt reduction when they have the option to do so. It reminds me of so many years ago our neighboring dairy farmers that worked so hard all of their lives and finally got that milking parlor that they always wanted. A few years later they all sat empty because the aging dairymen were not considering that they didn't want to continue milking for long into the future. Now a days you have to have a search warrent to find a dairyman in our part of the country.

 

 

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Nebrfarmr
Veteran Advisor

Re: Flush farmers

I see quite a few bins being built, but I think that has a lot to do with the new grain policy that the local Co-ops have initiated last year.  If you bring in corn at harvest, you must sell half of it (whatever you brought in) within 60 days, which would be before new year's.  I think a lot of these bins are being put up to 'defer' the income into next year.  They get to deduct the bin, and have their own storage to use to play the markets.

What the BTOs will do next year, if prices stay high, is beyond me.  I know of a couple new combines & tractors, but not as much as I thought I would.  My guess is that they contracted a lot of corn with a 4 in front of it, and are hesitant to sell much right now until they see how much they harvest.

 

Personally, I am going to do everything I can to pay down debt, and built up equity in my land.  I booked my fertilizer with 20% down, and I can pay any amount up to the balance in December if I want to, so I'll play with the numbers a little with my accountant to get the right balance between income, taxes, and debt reduction.  Neighbor wonders why I worry about debt reduction since interest is so 'cheap', but honestly, I think buying iron you don't need just to not pay taxes might not be the smartest thing to do.  Especially now that anything used seems to have shot up in price (I don't even bother looking at prices of new, my heart probably couldn't take it).

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Blacksandfarmer
Veteran Advisor

Re: Flush farmers

I just went equipment shopping today...... Kicking tires more than anything. The JD dealer said if a guy wanted a new planter they wouldn't be able to get it made and delivered in time for next year because demand is soo high. I don't know if taxes have anything to do with that or if farmers just recognize the need for larger planters to deal with increasingly smaller planting windows that seem to be the norm these days. In my particular area the past 2 years have been wet in the spring and very hot and dry in the summer making income pretty low per acre of corn. New equipment is more common around here than buildings. Most guys I know of that can afford new are not looking for buildings, most of those guys are older and the buildings have been long paid for. New equipment makes it easier for these folks to continue farming.

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smokeyjay
Advisor

Re: Flush farmers

Some guys that were able to market their wheat at current prices might have a reason to kick the tires.  Other than that, not likely.  We just broke the 1936 record for most days over 100 degrees, and counting.  Beans are turning brown, milo is all but done, corn was a no-show in most places.  Crop insurance and the DP are going to come in handy for most farmers to pay the bills this year.

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smokeyjay
Advisor

Re: Flush farmers

A boom is a "pre-bust" explosion.....Smiley Happy

 

Well, if the new home is owned by the corporation, it is a capital asset subject to depreciation, provided it meets the technical requirments that the resident must reside on that farm site.  At least, that's my (limited) understanding of tax law.

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