Presents go hand-in-hand with the month of December, and our gift to you this month will help you finish this year and start the next one strong. We asked nine of our experts to recommend two things for you—an action they believe can help your farm operation and a good book you can read sometime this winter. They gave us some great ideas to share. Enjoy. —Farm Journal Editors
Ken Ferrie & Missy Bauer
More than 30 years of dirty-boots agronomy experience underpin Ken’s full-circle knowledge of crop production and technology. Nearly two decades of experience fuel Missy’s passion for agronomy and helping farmers improve yields and profitability.
In light of the tight economics we continue to face, we’d like to encourage farmers to manage their acres with proven agronomic practices—those practices they know will support their return-on-investment (ROI) goals. Here are our top five recommendations:
1. Use variable-rate practices, whether it’s with lime, fertilizer or seeding populations. They have a proven ROI and can save inputs while increasing yields.
2. Planting dates don’t cost anything, so take advantage of them. With soybeans, consider pushing your planting dates a little bit while respecting soil conditions. Early planting dates in soybeans typically increase pods per plant. With corn, however, be more patient about planting timing with respect to soil temperatures, upcoming weather conditions and seed quality. We advise farmers to plant when daily soil temperatures have reached an average of at least 50°F. Also, consider weather conditions for the first 24 to 36 hours after planting. You want the first drink of water that starts corn germination to be warm and not an ice bath.
3. Don’t let nitrogen be a limiting factor with corn. You’ll cut yields if you cut back too much, so apply the amount of nitrogen your crop needs. Proper nitrogen timing and placement can help improve nitrogen efficiency.
4. Consider using fungicides. If your area has a track record that shows a proven ROI from fungicides, we encourage you to use them depending on your level of disease pressure.
5. Know what’s going on below-ground with your crops and what factors can limit yields. For instance, if you’re farming on density layers, that’s going to hurt yield results. Uniform soil density allows for proper root growth—which sets the foundation for strong plants.
“Our Daily Bread: The Essential Norman Borlaug” by Noel Vietmeyer and “40 Chances: Finding Hope in a Hungry World” by Howard G. Buffett.
As a precision ag consultant, Steve Cubbage works with farmers to implement and manage hardware and data and bridge the gap between the two.
Simple answer: Pay more attention to the little things. It might sound cliché, but it is one mindset that can make a big difference. Given that 2019 looks to be no more forgiving than 2018 when it comes to the overall farm economy, mistakes matter. That means being proactive rather than reactive when it comes to the business of growing a crop.
There’s no magic bullet. No magic beans. Somebody already won the billion-dollar lottery ticket, and there’s not one piece of equipment that’s instantly going to make your farm more profitable. But a laser focus on doing things such as calibrating your planter’s row meters to improve seed singulation can gain you several valuable bushels per acre. Using your yield maps to better allocate fertilizer dollars to the higher producing acres is a smart move. Keeping better tabs on your crop after harvest also pays. For example, when a 1,000-acre corn farmer overdries the crop in the bin by even just one percentage point, that is equivalent to evaporating two to three semi-trucks’ worth of corn.
Pardon the baseball analogy, but you have to play small ball—no walks, no wild pitches, no unforced errors and no swinging for the fences. It means executing the fundamentals at the highest level. Good agronomy still applies. Your crop is just like your best bird dog. Keep it well-fed, healthy and happy, and it will reward you in the end.
Technology should be helping us do a better job of preventing such production faux pas. In many cases, it’s already integrated into day-to-day operations, but it’s not being leveraged effectively.
“The Zero Dollar Car” by John Ellis. I saw John Ellis speak at Farm Journal AgTech Expo in 2017. He put a great spin on how data, including the data from our modern cars, has become a valuable commodity in this digital age.
Ellis also said farmers need to think of themselves as agricultural technologists and not just producers. Creating a digital strategy for your farm will be paramount to an individual farm’s ultimate viability in the next five to 10 years and, realistically, most farms have less time than that.
Agriculture is not immune from the digital tsunami that has hit our society, and understanding and retaining the value from such data will be something everyone must begin to consider—including agricultural technologists.
As a finance and growth consultant with K•Coe Isom, Peter Martin helps businesses identify opportunities, source capital and manage expansion challenges.
Leverage your labor force. All employees, not just your top people, must understand how tough times are right now. They need to recognize your operation might not break even this year. Pull them together for a meeting that not only underscores the seriousness of this year’s challenges but stresses how each of them can make a difference. Engage them with a message of inspiration and motivation, not fear. You don’t want to scare people into quitting because they think the ship is sinking. Let them know this is an opportunity to become the best-run ag business around, and you’re all in it together. Their efforts to do everything leaner and better can help sustain the business—and their jobs—for the future.
“Growth IQ” by Tiffani Bova. This book is about creating efficiencies in tough times and provides ideas on how to get smarter about the choices that will make or break your business. It discusses smart paths to growth and is applicable for large and small businesses.
Resident tax expert Paul Neiffer is a CPA and principal at CliftonLarsonAllen. He also authors The Farm CPA blog on AgWeb.
Many farmers have done well deferring income taxes through prepaid farm expenses, deferred payment contracts and bonus depreciation and Section 179. However, this can lead to tax liability in the future, especially the year of retirement.
The new tax law allows farmers to reduce the buildup of deferred income taxes by using the new Section 199A deduction. This 20% deduction is allowed against net farm income, and along with the lower tax rates, farmers can now report more “income” than they have in the past and either owe no tax on it or at a very low rate.
If the farmer normally prepays $250,000 at year-end and reports a net farm income of $100,000, but uses Section 199A and lower rates, he might only have to prepay $200,000 at year-end (or less) and pay lower income taxes than in prior years. This is only available from 2018 to 2025, so farmers should meet with their tax advisers now.
One last thing. If your kids work on the farm, make sure to pay them appropriately. This reduces the farm income, no payroll taxes will be owed and the child can earn up to $12,000 tax-free.
“The Millionaire Next Door” by Thomas J. Stanley is an excellent book and an old standby for me. Although it was written more than 20 years ago, this book provides some great details on how farmers can create and retain wealth. It’s also well written and will stand the test of time.
It all comes down to the numbers, which is where Moe Russell comes in to help farmers analyze feasibility and manage risks.
Determine the gross dollars per acre you need to make all your term debt payments and pay operating expenses, operator draw, depreciation and a profit. I’d suggest $50 to $100 per acre profit.
Depreciation, although it’s a non-cash cost, is important because it’s “the allocation of funds to replace equipment worn out in the production process.” If you can’t get the gross dollars needed to make your desired profit, you can take out some of the depreciation, if for a short period.
Then be prepared to forward sell, buy put options or sell futures on at least half your crop when the market reaches that gross dollars per acre, based on average yields. The market has given us that opportunity each of the past five years. It has been a small window, however, it would have assured a profit, especially the way yields turned out.
Being proactive when most others are reactive can really pay off. The best defense is a good offense. Yes, there’s uncertainty in making forward sales, but it’s a big benefit when the market doesn’t know what yield will be or the weather for the rest of the year.
In addition, seek advice from someone who can help you do this. Having a steady hand to advise you can make all the difference.
“The Dichotomy of Leadership” by Jocko Willink and Leif Babin.
Tap into the latest from Machinery Pete, the most trusted name in farm equipment.
Where is the value? This is a great question to ask when beginning your search for used farm equipment. This approach dictates we’re proactive rather than reactive. Reactive equals paying more, as in, “I need to buy that equipment before year-end.”
So where is the value in the current used equipment market? It’s in the 4- to 6-year-old age range, whether you’re buying from your local dealer, at auction or a private purchase.
The past year, auction prices for 1- to 3-year-old combines and other equipment were pretty strong. In the 8- to 10-year-old range we also saw strong to increasing premiums for equipment in good condition.
Once a piece of equipment hits 10 years old, everyone wants it if it’s in good condition. Why not jump on the chance to buy a 5-year-old machine in good shape? After all, in five years it will be 10 years old and highly sought after.
“The Range Bucket List” by James Dodson. No farming advice, just solid life perspective.
Dick manages a diversified crop, cattle and timber family farm in Idaho and provides consulting services to farmers and agribusinesses.
When you’re under tight profit environments, one of the first things you can do is tune up your management processes. Building better planning processes, weekly agendas and professionalizing communication and human resource processes are good places to start.
Farms and ranches are increasingly challenged with finding good employees. How can we better understand the characteristics of the labor force and adapt our hiring and onboarding practices to address this challenge?
Farmers often over-generalize that younger generations don’t want to work. That’s not necessarily true; they just have different values and expectations. Instead of pushing back and telling younger employees they have no clue, we might need to change our own thought processes and perceptions.
As employers, we tend to focus on what’s important in our own value systems and expect new hires to conform to what’s important to us. It’s OK to have a clearly defined culture on the farm, but we might have to rethink work schedules, job descriptions and hiring practices so they’re more attractive to prospective hires.
For example, Gen Z (people born from 1995 to 2014) are driven, “do-it-yourselfers,” realistic, digitally focused and want flexibility to write their own job descriptions. Let them. It’s OK if they want to work different hours, as long as all the work gets done. We in the boomer generation have the reputation of being highly structured workaholics. Gen Xers, millennials and now Gen Z bring different characteristics and work attitudes to the job. As a longtime employer, I find it helps to have a more diversified generational mix on our team, where generational differences challenge some of our extremes and bring out the good in all of us.
“Gen Z @ Work: How the Next Generation Is Transforming the Workplace” by David Stillman and Jonah Stillman and “Give and Take: Why Helping Others Drives Our Success” by Adam Grant. Both are well-done books and are good reads to help with team building in a family business. Each book identifies different personality types and operating styles, so you can better understand yourself and work with others.
As Farm Journal Economist and host of “AgriTalk” and “AgriTalk After the Bell” radio programs, Chip Flory helps farmers seize market opportunities.
Buy a foot massager. You know, one of those plug-in things you stick your feet into. Just let those magic rollers and inflatable pillows drain the tension from your body. It really works; I love mine.
I say this because if you felt stress in 2015, 2016, 2017 and 2018—2019 is asking you to step right up and get ready for some more. I just don’t see much change in 2019 compared with the past four (or six) years. That, of course, is assuming the corn and bean crops will once again challenge the record national average yields. If corn yields are knocked back to anywhere near 170 bu. per acre, excitement and profitability will return to the corn market. The bean market, however, has built a thick-enough supply-side cushion that a few bushels south of 50 could be just temporary relief from burdensome supplies.
I’m calling the grain markets “patient.” They’re waiting for trade agreements to be ratified, for trade barriers to be removed and for U.S. product to flow more freely around the world. You’ve got to be patient, too.
But seriously, invest in real-time, profit-management software that sounds alarms when profits can be made. Oh, and seriously, get the foot massager, as well.
While you’re using the foot massager, read anything by Lee Child. His Jack Reacher is a badass. There’s always “Making the Family Farm the Family Business.” And this one is going to sound cliché, but if you haven’t read “Merchants of Grain” by Dan Morgan, you really should.