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Extension > Agricultural Business Management News > December 2016

Tuesday, December 27, 2016

Southwestern Minnesota Farmland Values Decline 2.6 percent in 2016

By David Bau, Extension Educator

At the end of each year for the last twenty-two years, a survey has been conducted of farm land sales in fourteen southwestern Minnesota counties. Land values had been on a steadily increasing until 2014. The survey reports bare farm land sales to non-related parties for the first six months of each year. After reaching record high prices in 2013, the upward trend was broken as prices declined in 2014. The trend continued in 2015 and 2016.  Data collected in this survey is available at the county extension offices in Chippewa, Cottonwood, Jackson, Lac qui Parle, Lincoln, Lyon, Martin, Murray, Nobles, Pipestone, Redwood, Rock, Watonwan and Yellow Medicine Counties. This year the decline across the fourteen counties averaged 2.6%. Average land values had not declined since 1996 when the average SW Minnesota land prices were $1,175 per acre in 1995 to a high in 2013 to $8,466 then declined in 2014, 2015 and again to $6,751 in 2016.

Data from these counties indicate prices decreased from an average of $6,929 in 2015 to $6,751 in 2016 or a decrease of 2.63%.  This is only the third decrease as far back as this data has been collect since 1995. In 2013 was the largest year to year increase of 35.6%.  Farmland prices decreased in eight counties and while increased in seven counties including Cottonwood, Lyon, Martin, Murray, Nobles and Watonwan from 2015 to 2016.  There was a lot of variability in the numbers from 2015 to 2016. The largest increase was in Pipestone County with an increase of 21.2% while Lincoln experienced the largest decrease of 30.3% for the sales that met the bare farmland to non-related party transaction.

Thursday, December 22, 2016

What Are the Keys to Successful Farm Business Management?

By:  Pauline Van Nurden, Extension Educator

The new year is right around the corner and with that comes a blank page to create your financial plan for the coming year. As a farmer, do you ever struggle with what needs to be included in your financial management plan? Are you looking to boost your farm financial management skills? As you look to start the new year off on the right foot, make sure you have a handle on your business;s finances. 

  • Balance Sheet – Do you sit down at the beginning of the year to create a balance sheet? This gives a snapshot of what you own and what’s owed against it. You’ll then determine your net worth. Creating a balance sheet at least annually is important to assess your profitability and business gains. 
  • Income Statement – Do you look at the profitability of your farm over the last year by creating an income statement? The income statement measures profitability by determining the net income of your farm. This is calculated by subtracting the farm expenses from the farm revenue for the year. The best approach is to calculate the accrual adjusted income because this factors in changes in inventory and depreciation during the year. By doing this, you learn the true profitability of the operation. 
  • Cash Flow Projection – Do you create a plan each year for your money? A cash flow projection can help you do just that. The statement of cash flows looks at where cash is utilized in the operation – either for operating, investing, or financing activities. Remaining funds build your cash balance. Planning how every dollar will be best used is important and will get your business off to the right start in the new year. 
These financial statements are created using your farm records and aid you in making important financial decisions for your operation. The MN Soybean Research and Promotion Council knows the importance of sound farm financial management as well. They are generously sponsoring two workshop sessions aimed directly at these skills. “Taking Charge of YOUR Finances: How to Survive & Thrive” workshop will help farmers put these tools into action to gain financial management skills. To learn more go to z.umn.edu/thriveworkshop. To register go to z.umn.edu/thrive2017. For more information, contact Pauline Van Nurden at: pvannurd@umn.edu or 320-235-0726, ext 2008.

Monday, December 12, 2016

Look Back to Look Ahead

by Betty Berning
Extension Educator

The end of the year is rapidly approaching.  It is a special time of family, friends, and reflection.  As 2016 comes to an end, look at the year past and the year ahead.  I’d like to suggest that you ask yourself four questions:
  1. What went well?
  2.  What didn’t go well?
  3.  What do I want to do differently?
  4. Where do I want to go from here?
Being positive is important.    Start off by identifying areas where things went as planned.  It was a tough year.  You survived.  What did you do well?  What are you grateful for?  Maybe your family worked well together.  Perhaps the cows had great production.  In spite of the slow harvest, did you have record yields?  Look at your victories.  Spend some time analyzing them and asking “why did this happen?  What was my role in it?”  This will help you understand what behaviors or actions made a difference and what to continue in the future.  It is really important to focus on the positive during challenging times.

Moving on, think about what didn’t go well.  Was it milk price?  Completing harvest?  There were a lot of challenges this year.  Be honest with yourself about what didn’t go well and stick to the facts.  There is no need to throw a pity party.  Pick a few key issues.  Determine what you had control over and what you didn’t have control over. 

There are many things that fall in a gray area; we can’t completely control them, but we have some control.   For example, we don’t control milk price, but we can take advantage of opportunities to forward contract milk.  Another example is weather.  We don’t control the weather.  However, you can think about how to prioritize field work on good weather days and who might be able to pitch in so that you can get more done on those days. 

Look ahead, what do you want to do differently?  It might be as simple as avoiding some of the issues identifies in question #2.  It could also be that you are looking to make some changes to your farm in the form of expansion, adding a child as a business partner, hiring additional labor, etc.  These are opportunities for you to improve.

Last question:  Where do I want to go from here?  If you answer this questions after you’ve answered the previous three, this should be the easiest to answer.  This is where you can start to think about your farm’s vision and strategic plans.  Think about what your goals are for 2017 and even beyond (5 year goals?  10 year goals?)  What is it that you want to accomplish?   What changes need to occur?  If you’re thinking about expansion, do you have a plan in place?  Are you following that plan?  Where might your plan need to changed?  If you haven’t written these things out, write them out now.  Then you can revisit them on a regular basis.      

Not everyone likes to write out goals.  Some people like to stay in the present moment.  Generally speaking, that’s a good way to live on a daily basis; however, on occasion a business (any business, including a farm) must look at its past and learn.  It must also look forward to identify where it might like to go.  Without an idea of where you may be headed, it is difficult to know what steps are needed next.  In other words, without a roadmap, it’s hard to find your destination.    

2016 is almost over.  2017 will be a new year that is completely different.  There will be new challenges and opportunities.  Take time to reflect.  Think of it as strategic business planning.  Talk to your business partners and families about your answers to the above questions.  Discuss their answers to the questions.  Together you can create a great plan and vision for your business moving forward. 

Although 2016 hasn’t been easy, be sure to be positive and focus on what you can control.  Keep after your goals and adjust them where you need to.  Finally, be patient.  Lots of small steps add up over time.  Life if journey made up of many steps.  We don’t arrive at our destination immediately.  Keep stepping forward toward your destination.  With time and hard work, your many small steps will bring you to your goal.  Best wishes to you!

Friday, December 2, 2016

Ag Tax Publication Available for Farm Families

By Gary Hachfeld, Extension Educator

With farm profit margins very slim in agriculture today, financial planning is crucial to the survival of a farm operation. That planning includes tax planning for the end of the year. A tax planning publication is now available for farm families which includes many of the new ag tax rules and related information. This information will aid farm families as they prepare for the tax season.

With the passage of the Protecting Americans from Tax Hikes (PATH) Act of 2015, there were substantial changes in depreciation rules. Section 179 depreciation has been permanently established at $500,000 with a $2 million dollar overall investment limit before phase out takes place. Qualified Section 179 property includes breeding livestock, machinery, single-purpose agricultural structures and drainage tile. The qualified property can be new or used. The legislation makes permanent the rule allowing a taxpayer the ability to revoke I.R.C. Section 179 elections and any specification of property to be expensed without IRS consent. The PATH Act also reinstated bonus depreciation under a phase down schedule through 2020.

Federal and state estate exclusion rules are also outlined. The federal estate tax exclusion, indexed for inflation, will be $5,490,000 per person for 2017. The Minnesota estate tax exclusion increases by $200,000 to $1,800,000 for 2017 and the qualified farm property exclusion will be $3,200,000 for 2017. The annual federal and state gift exclusion for 2017 remains at $14,000 to any number of donees.

The publication also includes information on alternative minimum tax, disaster payments and insurance indemnity payments, repair regulations, business sale or liquidation, earned income credit plus a number of tables with applicable tax rates and related thresholds. “This information is not intended to be legal and financial advice but can give the farm family some valuable background information from which to begin” says Gary Hachfeld, University of Minnesota Extension educator. Always seek advice from a qualified professional on details specific to your situation.


The publication is available at no cost through Extension. For those who have Internet access, go to the "Farm Tax & Legal Issues” page. Click on the document titled “Ag Income Tax Update for Farm Families”. For those without Internet access, contact your local county Extension office or the Farm Information Line at 1-800-232-9077 for a copy.

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