The Ohio State’s Farm Science Review was in London, Ohio, Sept. 19-21, almost 114,000 people attended.
In fact, I got to see quite a few northeast Ohio farmers there. It was nice to visit with so many locals. At the review, I had the opportunity to serve as one of the moderators for the Ask the Expert panel.
Each day, 15 experts were each questioned over a 20 minute period on some of the hottest farm management issues that we are currently facing.
These sessions were eye-opening especially given the financial downturn that we are facing in agriculture.
Today, I would like to share some of the notes I jotted down during these sessions.
2018 budgets
Barry Ward, assistant professor in OSU Extension’s Department of Agricultural and Natural Resources, was a panelist and was able to share his budget forecasts for 2018.
Sadly, these numbers do not look too much different from 2017. While most of the input costs for corn, soybeans, and wheat are projected to remain the same, net profit is looking slim at best because of stagnant crop prices.
One good note is that nitrogen prices appear to be more favorable for next year.
Ward reports, that on average, after paying all the variable and fixed costs per acre, there will be only $31 per acre for corn; $106 per acre for soybeans, and $8 per acre for wheat to cover land rent/expense.
This means 2018 will be another tight year. So it is imperative that producers examine their budgets to see where they can trim costs.
Any producer who would like the 2018 budget estimates for corn, soybeans and wheat can access them at OSU Extension’s Farm Office website.
Rental rates
Given the low-profit margins, the past few years and similar projections for 2018, both Ward and Michael Langenmeier, Ph.D., from Purdue University indicated that rental rates should continue to drop over the next few years.
I know this is a hard pill for many landowners to swallow given the run-up of our CAUV property tax rates. Something will have to give, as it will be hard for many producers to continue to operate with such low margins.
Food waste
Brian Roe, Ph.D., gave a nice session on the food Americans waste. I was shocked to learn that food waste accounts for almost 22 percent of what is in every landfill.
In fact, Roe shared during his session that we waste about 40 percent of the food we produce or more than 34 million tons of food.
He shared while food waste does occur at restaurants and supermarkets, the largest area for food waste is right in our homes.
Each year, Americans throw out about one-quarter of the food they buy, costing an average family anywhere from $1,365 to $2,275 a year.
Roe and his team are working on an APP which will allow users to determine how much food they are wasting. So, how much food are you wasting? A great question for all of us to ask.
Tax reform
I presented on the tax reform discussions which have permeated in Washington D.C. since the election of President Trump. Turns out this was very timely as President Trump’s tax reform plan was released the following week on September 27.
After reviewing the plan which was released, I still have many of the same questions for farmers to consider.
For farmers, the tax plan would allow them to immediately expense the cost of depreciable assets during the next five years. My question, though, is what happens after five years?
There has also been chatter of the elimination or curtailment of Section 1031 tax-deferred exchanges. These like-kind exchanges have been beneficial to many farmers through the years.
Currently, farmers are allowed to exchange their equipment for new farm equipment and usually owe no tax on the exchange.
Also, farmers can sell less productive farmland and roll that gain over into new farmland and defer the tax. There is also concern on whether or not farmers would be able to continue to deduct business income and state and local property taxes.
These are all targets in the planned elimination of many deductions. Congress also wants to repeal the estate tax. I would be careful what you wish for as an elimination of the estate that could mean the end to the “step up in basis.”
Or it could lead to a creation of a capital gains tax at death similar to the Canadian tax system.
For many operations, this could mean paying more, not less, when the farm passes from one generation to the next. So be careful of jumping on the “get rid of the federal estate tax bandwagon” as it could cost more money in the long run.
This could jeopardize your ability to pass the farm on to the next generation.
Final thoughts
There was not a lot of good news from the “experts” with regards to profitability in 2018 for agriculture producers. I cannot stress the need for producers to develop sound budgets for next year and to improve their record keeping systems.
A dollar an acre saved here and a dollar saved there will make a huge difference in 2018.
To close today’s column, I would like to share a quote from James H. Douglas Jr. who stated, “Our deep respect for the land and its harvest is the legacy of generations of farmers who put food on our tables, preserved our landscape, and inspired us with a powerful work ethic.”
