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

Cheapest I can think of.

 

Multi-coulter zone tillage in 30" rows, corn and soy rotation.

 

150# dry through the planter on both crops, sidedress N as NH3.

 

Non GMO beans with directed band post of generic herbicides during cultivation.

 

Non GMO corn with generic rootworm insecticide (question there, we're in a tough 1st gen RW area here.)

 

Probably adds up to $75/scre or so savings compared to doing all the bells and whistles and should sacrifice no yield to speak of. Assumes a more moderate acreage, tougher to do on big acres.

 

 

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

Did a quick look at that against the U of I Farmdoc 2014 budgets using the C IL low productivity soils budget.

 

Probably closer to $100 acre under their number on non-land cost but I'm about 10 bpa under their yield in corn, a couple on soys by my reckoning. 

 

Which I suppose the land cost is supposed (?) to account for in a rational market.

 

Perhaps I'm supposed to conclude that I need to throw everyhting but the kitchen sink at it, cost wise, to try to get those yields. But I'm fairly confident of what these soils will do and if I "bought" another 15 bpa of corn and 5 of soys I'm losing money at a $100/acre cost difference.

 

Interesting that they come up with about a $300/acre return to land and operatoron the corn/soy rotation which means that with $300 rent you get to work for zippo.

 

At least back in the $2 corn days you weren't making anything but didn't have $800/acre on the table.

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Senior Contributor

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

I've been planning on prices coming down for a while.   I'm probably looking at it differently than most here, as I am not at all a big grain farmer.

However, I have been slowly trying to get at least some of my inputs pre-paid in the good years.   I think by the end of this year, I should have all my seed, and half my fertilizer for '14 paid for.   If '14 brings lower prices, I will use this pre-pay to average out the high-low income years.

The thing that I am not sure about, is the cattle end.   We sold a bunch of cows due to the drought, and we can defer the income from selling breeding stock for 3 to 5 years, and take it against breeding stock we may buy to replace the cows we sold.   What I am not sure, is exactly how that will work, if we keep back our own heifers, rather than purchase some.   That is one of the big questions for the accountant.

I took the higher income the last couple years, as an opportunity to fix up a lot of things, but I haven't really bought any big ticket items.   Instead, I faced the tax man a bit, so to speak, to get debts paid down as much as practical.   This is where a good accountant comes in.   They help you find that right balance of how much debt to pay down, vs. how much to pay (or not pay) in taxes.

He gave me some good advice a few years ago.   He said that there are only two ways to not pay taxes:  Cheat (and not get caught) or not make any money.

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Senior Advisor

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

Husker I agree with your last comment about only being a couple ways to avoid paying taxes. However, I was handed an operation that needed a few improvements, a few pieces of equipment and a few facility updates, but overall I'm not sitting that bad. If I've got the cash to improve a couple of them each year and avoid paying taxes, I'm going to do it. I'm breaking no laws and lowering my tax obligation at the same time. Until capitol improvements become a tax liability, I will continue to update/improve my operation. In my opinion, this is a third way to reduce taxes.
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Honored Advisor

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

Husker a great entry.

 

There is one other way to limit taxes.   During the high income years a steady growth of size will also work.  Eventually when growth stops the tax man becomes more of an issue.

But,  I caution, it takes a very good seat of the pants feel for the very decisions you describe.  Too much growth is risky and it is often hard to predict what investment will return best in the future.  Inputs like seed and fertilizer can be just as risky if one is locking into a high cost.   But some steady growth is promoted by and desired by tax law.

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Honored Advisor

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

The heading here assumes there is still something to do.

 

That ship already sailed.

 

Leaner times are already here. Higher expenses and 1/3 or more LESS income has already arrived.

 

 

This is akin to deciding you need firewood for the winter after the first foot of snow is already on the ground.  

 

 

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Honored Advisor

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

Excellent points of discussion.
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Frequent Contributor

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

Try to secure inputs at a cheaper price without sacrificing quality. No new machinery this year, everything we have is older used but well maintained, preventative maintenance does not cost it pays. Refigure COP and break evens of alternative crops and try to keep farms in a 1/3 W, 1/3 S and 1/3 in C . Try to use minimal tillage passes and use rotation as a method of lowering weed control costs. Avoid high priced race horse hybrids and go with cheaper tried but true hybrids for our area. In a nutshell stop swinging for home runs and concentrate on base hits only.
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Senior Advisor

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

A well planned cover crop worked into the crop rotation can pay big dividends as well. They key to making them work is management.
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Senior Advisor

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

II'm looking hard at cover crops.  Go over with me how you make money on them every year?  It's got to be a sure enough thing that I can count on the benefit.  In other words, if someone says I can use less fertilizr or less herbicide, it needs to pay.  I know I'll need more insecticide as rye invites cut worms.

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