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Senior Advisor

Re: Lower incomes ahead -- what are you doing to prepare?

Then don't use rye. I can't answer your questions on cover crops, I'm not an expert. I only tried them this year for the first time on my farm. When I no-till drilled my winter wheat crop a couple weeks ago the ground was completely different than any of the rest of my no-till ground it was unbelievable. I haven't walked the wheat fields yet, but looking at them from the window of my pickup it appears that the ground that had the CC is the best looking stance. We had 2" rain this evening so maybe the rest will catchup.

In my opinion, nothing "Pays" every year, you'll need to figure out your own CC strategy, mine might be a complete failure on your operation.
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Honored Advisor

Re: Lower incomes ahead -- what are you doing to prepare?

It should not be all that difficult to get so e nutrient values, then overlay current fertilizer prices for comparative nutrients if purchased, pretty much the way we can place a $ figure on value of manure.

The increased organic matter, potential imrovement ofvtilth and other less tangible assets like earthworms that survive on thevorganic component, would be harder to quantify. My father explained green manure's many benefits, as he had seen his father relying upon them...not the least of which was heat to boost crop germination, as the turned-in vegetation decomposed.

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Senior Contributor

Re: Lower incomes ahead -- what are you doing to prepare?

Shaggy, if I were in a position of little to no debt to worry about, I would likely be doing the same thing.   However, in my case, it makes sense to do the 'necessary' repairs, and see what is left.

I have been using the higher income of the last couple years to rebuild a few fences, etc, and prepay some things, to average out income (it makes no sense to pay little to no tax in one year, then in a higher bracket the next, when you can average yourself out, in the lower bracket for both years, IMO).

After the necessary repairs, and a 'few' improvements, I take my numbers to the accountant, who punches them into the computer.   We can then, to all sorts of 'what if' scenarios, to find the most advantagous balance of taxes, debt reduction, and farm improvement/updates.  Debt needs to be repaid with after-tax dollars, and while interest rates are low right now, I fear that there is potential for the rates to spike up fairly quickly.   Besides, I'm a pretty fair fix-it person, and have no qualms running old machinery, as long as it works well, and is reliable (my cattle feeding tractor I use every day dates from the 1960s - cheap, easy to fix, and stone cold reliable with the maintanence/repair regimen I have for it - my only 'breakdowns' during cattle feeding times in the last two years, were a leaky loader hose, and a flat tire).

Now, someday, when I get debt-free (or at least quite a bit of built up equity) I will be in a stronger position, if things get better.

I know some people will gamble on the 'get big fast' line of thinking, and win, but others who do that, may not.   Besides, right now I live in a hard area to grow in right now, with what I consider to be cutthroat rents.   I see no reason to wear out myself, and my equipment, just for the sake of $5 an acre profit.   My extra time would be better spent, working for someone else, or even doing custom work.  I can make more money custom planting odd sized/shaped fields that big planters won't fit on, than I could paying going rent most years.

I have small kids, and I am constantly trying to balance how much time to spend chasing a dollar, and how much time to spend chasing butterflies with the kids.  FWIW, I think once I make enough money to pay the bills, and have a little left over, both the kids, and myself, are better off spending a little time chasing the butterflies.

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Senior Contributor

Re: Lower incomes ahead -- what are you doing to prepare?

Hobby.   Many of us who have bins, sold much of our 2012 crop this year, for a good price.   We still have the rest of this year, to average the income from that crop, and the 13 crop.

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Veteran Contributor

Re: Lower incomes ahead -- what are you doing to prepare?

On our operation in NC Iowa corn and soybeans, have been 5 to 10 percent better than average which will help take the sting out of lower prices. My small hog operation(5000 hd )raised per year is finally making real decent profits. Rents have not come down here, but I pay another farm off this year and we all know if you own ground you can still make a ton of money. Bottom line is we are going from rockstar unbelievable income to just a good old living income.

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Honored Advisor

Re: Lower incomes ahead -- what are you doing to prepare?

There is something truly different about being able to put your head down on the pillow at night, knowing that everything in your little world is debtfree. Debt creates a stress, whether we realize it or not, even if we handle every payment in full and on time.

We grew a huge increment in one fell swoop, when we bought snd built this farm in 1994. The first time those tiny piglets walked off of the livehaul truck, I turned to Mike and said, "We expect these babies to carry a million dollars off our backs? We are CRAZY! "

The proportional burden seemed insurmountable, but those tiny buggers did the job, and then some. Over time, we paid every cent every month for the land and hog facilities, added equipment and support structures like a small farm shop, hay barns, horse barns, our entire house and my office, all out of pocket without additional debt.

There were better years and worse ones, but every month, income has exceeded expenses. We have been comfortable enough not to ever feel deprived, except for not being able to travel, which is a livestock lifestyle, we had both grown up with and accepted.

We were never this secure financially, when crops were our emphasis. If you look.back at our financial statements that I prepared for our lender twice a year, our net worth was a steady upward graph line, which I think may be a rare thing in agriculture.

Still, I attribute some of the health issues I deal with daily now to worrying about the " what ifs", those worst-case scenarios that whisper in your ear. Right now, For example, think this PED virus is going to be devastating for swine producers across this country. There is a world of hurt when every piglet dies in the crates for some weeks, and the climb out of that abyss takes weeks more;but, we won't have a missed payment or two or several to work out with Farm Credit.

Every bad management decision made by someone trying to make his name with the company you depend upon for your put-through ( in our case, weaned pigs) becomes real grist for the worry mill. Not the first damned one of them seems capable of leaving well-enough alone. I can point back to notes and memos in my files that reflect several reinventions of the wheel over the past 20 years, and it somehow still has to be round to run.

Once you write that last check in payment to your lender, you can tell the whisperers to go hang from a high branch. I wish some days now that we had saved more, but we have stashed a fair amount, while enjoying what we've been working for while we've been working for it, too. That was important to us, after seeing two sets of parents who realized it too late to enjoy their lives while they had good health to do do.

None of our kids carried a cent of student loan debt out into the world on their backs. That was extremely important to us, too. We are trying to lay down at least the beginnings of that advantage for our tiny grandson, too.

I would tweak things a bit differently in some respects, because hindsight is crystal clear. Overall, though, I think we have done okay. Still, the big leap of faith we took came with certain costs. We all have to be honest about how much risk we can tolerate, and how much takes too high a toll.

It might not be on your mind, but ask your wife....





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Senior Advisor

Re: Lower incomes ahead -- what are you doing to prepare?

Husker, I completely understand.  It's not that I am trying to avoid a tax bill, but if I can make capitol improvements on my current operation and pay cash for it, I will continue down this road while I am able too.  My equipment lineup is older as well, my newest piece is a 2000 model year.  I'm not rewriting the laws, but I would be a fool if I didn't take advantage of them while I can.  I too have kids younger than teenagers at home, so I find it a challenge to balance work and family time as well.  I'm not looking to expand, I'm only attempting to improve what I've already got.

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Senior Contributor

Re: Lower incomes ahead -- what are you doing to prepare?

Kay, I think you described what I'm shooting for.   To be debt free, or nearly so would be a big stress reliever, knowing that if things get bad, I only have to come up with grocery money, not grocery money, land payments, car payments, house payments, tractor payments, combine payments, etc. I would like to be in a debt-free position, or at least close to it, for the freedom it allows.   I could bin my corn and sell it 'whenever' the next year, not having to worry about when this bill or that bill is due.   Even if my price goal is hit in March, I could contract it for June or July, and put the carry in my pocket, instead of needing to sell when the fertilizer is due.

One thing that is ironic, is that my yields have been very good, so far in my top 3 ever, and if the yields continue through all my fields, and I can get $4.75 for my corn, my profits on the corn will be equal to last year's (due to my expenses being so high, combined with my yield loss).

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Frequent Contributor

Re: Lower incomes ahead -- what are you doing to prepare?

I quit drinking!

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Honored Advisor

Re: Lower incomes ahead -- what are you doing to prepare?

When you analyze basic living expenses - not what you usually spend, but what you could get by on and not suffer - it really isn't all that much. Once things are paid for, if you want to draw in and live a possum lifestyle, it can be done.

Mike and I have figured that if we ever left this place behind, the small home we use for a getaway on his home farm in VA costs next to nil to inhabit. I mean as in less than $50 per month for electricity. Let's double that if we are there with AC cranked every day in hot weather. Add on taxes and insurance, and it's about $100 per month more, at most.

Given excellent sites for gardening, a small orchard already planted, a smokehouse and many other what I call Mother Earth amenities, and plentiful fishing and game resources, a family could eat well for nearly zero cost. Firewood galore, three producing rental houses, and grazing leased...not a bad retirement property.

The bear for us is this place. Taxes here are just god-awful! We are good as long as we grow pigs, or if timber prices rebound a bit, and daughter is gearing up her horse enterprises, with our blessing. You just never know, with China in the driver's seat at Smithfield now. They promised us all a great future with this deal, and I would hate to see the manure that would hit the fan if that goes into the ditch....

I think you are smart to accept that we have to pay something to live in America, and don't need to impress anyone with whatever we chhose to live in or drive, or what we wear.



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