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May 17, 2019
Grain Market Outlook
y Ag
Economist Daniel O’Brien based on an analysis of seasonal price patterns estimates that average
monthly impact from January through – mid May 2019 averaged $0.20 per bushel per month.
Underlying CFTC positi … lying CFTC position of traders data confirms the record “be …
September 1, 2015
KFMA Newsletters
Terry Griffin
Status of Precision Agriculture
The commercialization of GPS along with sensor technology in the 1990s gave rise to what we refer to as ‘precision
agriculture’. During the last twenty years, many farmers have adopted the technology and even utilized it in ways that
the industry had not anticipated; however, not all farms use the technology today due to a variety of reasons. One
reason often stated is the uncertainty regarding the return on investment. Today, the agricultural industry has a
renewed interest in precision agriculture due to advances that seemingly improve production and profitability.
Academic studies that evaluate the profitability of precision agriculture technologies have indicated inconsistent results.
Most of these studies focused on a single field rather as a whole‐farm system. Several studies have reported survey‐
based perceptions …
May 31, 2024
Livestock Insurance
is recognized as the 2025 commodity year. Producers who buy coverage … Producers must select what months to use AFI. The “growing … season” extends
for seven months beginning in the …
January 13, 2017
Grain Marketing Presentations
not declined as quickly as commodity prices, adding to the squeeze … landlords/tenants. • Need good data/records for making these … fertility, etc. • Keep a monthly accrual balance sheet: track …
June 1, 2009
KFMA Newsletters
2009
EFFECTS OF HIGH COMMODITY PRICES ON WESTERN KANSAS … the
Ogallala aquifer as reported by the Kansas
Geological … the impact of the
rising commodity prices on groundwater
consumption …
April 1, 2009
KFMA Newsletters
election/enrollment
process for the 2009 commodity program crops
will start … state revenue guarantee for
commodity program crops based on state … producers of
the covered commodity or peanuts for the most
recent …
December 20, 2017
KFMA Newsletters
make. Examining a decade of data by quartile in
northwest … list goes on. Using KFMA data from Northwest
(NW) Kansas … Over the past 67 years of data, the average net farm income …
August 25, 2015
University
www.agmanager.info
Overarching Beef Industry
Economic Outlook
• Supplies
– Historically … Weekly
Avg. 2009-13 2014 2015
Data Source: USDA-AMS, Compiled … Weekly
Avg. 2009-13 2014 2015
Data Source: USDA-NASS, Compiled …
October 15, 2018
KFMA Newsletters
The TCJA implements several significant—even structural—changes to the tax code. Included among these are the
elimination of personal exemptions, the substantial increase (near‐doubling) of standard deductions, an expansion of
the child tax credit (in amount, refundable portion, and income limits), creation of a new 20% “Qualified Business
Income” (QBI) deduction, and extensive changes in depreciation rules for farmers. Add in tax rate changes and many
more modifications not mentioned here and you can see why TCJA is being described as the most sweeping tax bill
passed by Congress in the last 30 years. (For a detailed dissection of TCJA, see “Tax Cuts and Jobs Act” by Mark Dikeman
in the March 2018 KFMA Newsletter.)
Before discussing the usage of some of the tools TCJA gives us to manage tax, a brief review of the concept of tax
management would be helpful. Put concisely, tax management should attempt to remove the upper income from very
good years, raise the troughs of very poor years, and align taxable income levels from year to year. Recall that not only
income tax should be managed, but also self‐employment tax (Social Security and Medicare taxes for self‐employed
individuals). Also remember that Social Security benefits are based upon the level of income on which self‐employment
taxes are paid over the working life of the individual. The 35 highest earning years (after accounting for inflation) are
used to determine the Social Security retirement‐related benefit. Intuitively, managing taxes in such a manner as to
simply reduce the net income reported on the tax return each year—and therefore the taxes paid—to as low a value as
possible is not an efficient tax management method. Net return after taxes is a much more important measure than
taxes paid. Also, as returns to agriculture are by nature volatile over time, it is vital to implement tax management with
a multi‐year mindset. That is, recognize that decisions made regarding the current income tax year directly affect future
years as well (and not just the following year, either). Tax management should be implemented with an eye toward
using the tax attributes you have available in the most efficient manner possible over multiple years. Manage your tax
tools and attributes (deductions, deferrals, flexible depreciation rules, prepays, etc.) like you would your farm assets.
Use them efficiently, do not waste them, and definitely do not allow the process of tax management to alter the
enterprises on your farm or ranch, or how you get things done.
In a lower income year, techniques employed to manage taxes are used very differently than they are in high income
years. Be prepared for a different mindset concerning tax management this year if you are working through a low
income 2018. Instead of advancing expenses into the current year, deferring income into the following year, or
aggressively electing to deduct additional depreciation from machinery purchases via Section 179, you may be
http://www.agmanager.info/kfma/ September 2018 E‐newsletter 3
employing the opposite techniques in order to prop up this year’s taxable income to a level similar to your recent past
levels. In low income years, avoiding an overall loss of the tax return (a net operating loss, or NOL) is nearly always
advisable, if possible. It is true that NOL’s can be carried forward and utilized in future years, but in doing so some
deductions are often lost and the NOL does not reduce any self‐employment tax in the years to which it is carried. Also,
attempting to fill the lower income tax brackets that you have traditionally filled is often beneficial. Remember, you will
not receive a wider bottom tax bracket next year just because you didn’t fill the current year’s bottom bracket.
One of the areas of significant change brought on by TCJA is that of depreciation. These changes result in most farm
machinery being depreciated in more of a frontloaded manner and sometimes even over a shorter depreciable life. (See
“New Depreciation Rules” by Amy Boline and Chelsea Fullerton in this issue of the KFMA newsletter for a complete
breakdown of these depreciation changes.) In a low‐income year, it is helpful to review significant repairs made and
supplies purchased to determine if any of these expenses should be capitalized instead of immediately deducted as
repairs or supplies. Doing so gives you options. You can accelerate all or a portion of the purchase via Section 179 if the
expense is necessary in the end to manage your tax situation, but you can instead leave the item on your depreciation
schedule, effectively pushing deductions (the depreciation expense not deducted in the current year) forward, when the
hope is they will be able to be better utilized. Importantly, the depreciation rule changes in TCJA make this a bit of an
easier decision. This is so because the depreciation—if not accelerated via Section 179 in the year of purchase—will be
deducted more rapidly now and possibly over fewer future tax years.
The TCJA also made drastic changes affecting machinery trades. (Again, see “New Depreciation Rules” by Boline and
Fullerton in this issue for more detail on this.) Due to these changes, one may be inclined to utilize Section 179 to the
extent that Schedule F is driven negative in order to offset the taxable gain now resulting from the machinery trade (a
result of the changes brought by TCJA). However, the act of driving Schedule F negative should be investigated
thoroughly before actually doing so. It is often beneficial to avoid a negative Schedule F, even if it means landing in a
higher tax bracket than you historically have. This is so for several potential reasons. First, if Schedule F is negative, the
last depreciation dollars expensed via Section 179 that made F negative did not reduce self‐employment tax at all. In
other words, once Schedule F drops to zero, you are already at the point where no self‐employment tax is paid (other
than a possible minimal elected amount). Those depreciation dollars that made Schedule F negative only reduced
income tax, not self‐employment tax. If, instead, less depreciation was deducted via Section 179 and Schedule F was not
reduced below zero, the ability to utilize those saved depreciation dollars in future years to (hopefully) reduce income
tax AND self‐employment tax could very well more than offset the added income tax burden from a higher tax bracket.
This is also where the new 20% “Qualified Business Income” (QBI) deduction comes into play. Without going into detail
on the mechanics of this deduction, by keeping Schedule F at least up to a net of zero (and not negative), the QBI
deduction would nearly always be greater than if F was negative. Additionally, the possible usage of Farm Income
Averaging if you end up in a higher tax bracket than you have recently adds potential value to this technique. Finally,
possible deductions for health insurance and certain retirement account contributions are tied to having a positive
Schedule F. All these tax attributes make it extremely important to scrutinize the decision to use Section 179 to drive
Schedule F negative, even if it is to offset now‐taxed gains arising from machinery trades that were not present under
previous tax law.
Managing income and self‐employment taxes requires the knowledge of all tax tools and attributes available to you and
seems to grow ever more complex. Also, the techniques employed in low income years are very different than those
utilized in high income years. The Tax Cuts and Jobs Act adds some tools that will help us in the area of tax
management, but also adds complexity to the process at the same time.
http://www.agmanager.info/kfma/ September 2018 E‐newsletter 4
Managing …
process
oMy history says 6-9 months for any refund• There is … file suit if not done in 6 months
p. A108
Form 1045
• … oMust be done within six months of the due date of the original …