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Thursday, September 7, 2017

2017 Agricultural Tax Issues Course
Locations and dates for
Agricultural Tax Issues Course

University of Minnesota Extension is offering an agricultural tax school in late September and early October.  This course targets income tax professionals that work with farmers.  Additionally, this course will benefit agricultural professionals such as agricultural lenders and farm management instructors. The agricultural tax school will be offered in five locations and the course has been approved for eight hours of continuing professional education.

Locations and dates for Agricultural Tax Issues Course:

St. Cloud, Minnesota
Tuesday, September 26, 2017
The Tuscan Center
3333 West Division St., Suite 116
St. Cloud, MN 56301

Rochester, Minnesota
Wednesday, September 27, 2017
Kahler Apache Hotel and Water Park
1517 16th St. SW
Rochester, MN 55902

Marshall, Minnesota
Thursday, September 28, 2017
Ramada Inn Conference Center
1500 East College Dr.
Marshall, MN 56258

Crookston, Minnesota
Tuesday, October 3, 2017
Crookston Inn
2200 University Ave.
Crookston, MN 56716

Fergus Falls, Minnesota
Wednesday, October 4, 2017
Bigwood Event Center
925 Western Ave.
Fergus Falls, MN 56537


This course targets income tax professionals that work with farmers.  Additionally, this course will benefit agricultural professionals such as agricultural lenders and farm management instructors.

Course Topics:
1.      Legislative Update
a.       Information reporting
b.      Income tax basis
c.       Due dates of tax returns
d.      Table of expiration dates
2.      Miscellaneous Agricultural Tax Issues
a.       Livestock transactions
b.      Form 1099-MISC
c.       Net investment income tax
d.      Inherited property
e.       Oil and gas payments and deductions
f.        Repairs
g.      Revoking a CCC loan election
h.      Marketing gain on CCC loans
i.        Going out of business
j.        Farm casualty gains and losses
k.      Casualty repair costs
l.        Children of farmers and the “Kiddie” tax
m.    4-H and FFA members
n.      Safe harbors for farmers
3.      Income Issues
a.       Commodity futures and options contracts
b.      Deferred payment contract losses
4.      Farm Employees
a.       Employee vs. independent contractor
b.      Payment of wages with commodities
c.       Employer-provided meals and lodging
d.      H-2A agricultural workers
5.      Self-employed tax and social security benefits
a.       Interaction of self-employment tax and social security benefits
b.      Farm optional method for computing self-employment earnings
c.       Self-employment tax on land rented to an entity
6.      Depreciation and I.R.C. Section 179
a.       Depreciation and section 179 expensing
b.      Related parties and depreciation
c.       Irrigation systems and water wells
d.      I.R.C. section 179 recapture
7.      Deduction Issues
a.       Prepaid farm expenses and deposits
b.      Prepaid expenses: change of plans
c.       Promissory note to supplier
d.      Deducting interest on loans secured by the residence
e.       Lease vs. purchase of equipment
f.        Improvements installed by lessee
g.      Demolition of a farmstead
h.      Deducting cost of growing crops purchased with land
8.      Farm-related Income Reported on Form 4797
a.       Depreciation recapture
b.      Depreciation recapture from assets received as a gift
c.       Net I.R.C. Section 1231 loss
9.      Like-kind exchanges
a.       Like-kind exchange of equipment
b.      Like-kind exchange of livestock
c.       Depreciation of cars, vans and trucks
d.      Like-kind exchange tenancy-in-common
e.       Like-kind exchange of Conservation Easements
10.  Rulings and Cases


TIME SCHEDULE:
Registration: 7:30 a.m. – 8:00 a.m.
Class:  8:00 a.m. – 5:00 p.m. (with a one-hour break for lunch**)
** Lunch will be provided as part of the course (This is a change from previous years).

FEE:
The fee for this 8-hour course is $180.00 and includes refreshments and course materials.

MATERIALS:
Participants will receive the 2017 Agricultural Tax Issues book authored by Philip E. Harris, Professor Emeritus from the University of Wisconsin-Madison/Extension.

By attending this course, you will earn:
·         8 Federal Tax update credit hours*

INSTRUCTORS:
Rob Holcomb, EA, Extension Educator in Agricultural Business Management, University of Minnesota Extension

Nathan Hulinsky, Extension Educator in Agricultural Business Management, University of Minnesota Extension.

REGISTRATION:     
Registration for the agricultural tax course will be conducted through the University of Minnesota College of Continuing Education.  Below is a link that may be used to register for each of the respective locations.  The deadline for registration is Friday, September 8, 2017.  For more information or questions, please contact Rob Holcomb at holcombr@umn.edu or by calling 507-337-2807.


Or you may copy and paste the following web link into your email browser.


*This course has been approved by the IRS Registered Preparer Office. The University of Minnesota College of Continuing Education is an Approved Continuing Education Provider.



Wednesday, August 30, 2017

Your Ability to have a Critical Conversation is Important to Your Long Term Farm Business Success

By Don Nitchie, Extension Educator

Successful farm management today, often depends on your ability to discuss important items “beyond and between the numbers”, in a constructive way.  Often these discussions are about pivotal points in history for your farm business or careers.  Sometimes you may be struggling with or even attempting to have a badly needed “critical conversation” about a significant decision that has to be made or implemented.  This maybe with a business partner, spouse, other family members, a landlord, son or daughter.

While many Minnesota farms are on average holding up well financially in these tight profit margin times—there are some stress points on some farms. Some critical conversations are necessary on the best of farms  for example if;  liquidity is weakening more than average the last few years and profitability has been weak across enterprises and the whole farm for the last few years. This probably has resulted in a weakening of Net Worth and maybe over-expenditure on family living in some cases.  If this situation is not being acknowledged-a discussion of the impact of continued current trends plus ways to improve the situation needs to occur-soon. The farm manager should ideally seek out discussion and consultation before they are forced to by someone else such as their lender.

For pivotal business decision-making that is dependent on or involves others, you need to assess what you need to do to make the impending “critical discussion” productive and hopefully successful.  You may have been avoiding discussion because it will not be a comfortable situation-or you may have to deliver bad news in the process.  Whatever the case, you probably realize procrastinating will only make it worse.  Examples of critical conversations can be; informing others (partners, family or banker) of farm financial conditions; rental discussions with landlords; farm transition needs/realities with family members—as well as many others.

There are several books and self-help guides probably written on this topic.  Many guidelines and tips are very good but, often easier said than done.  I will offer some here that I have found to be helpful to me personally and professionally.  This is after attending numerous trainings myself as well as working with many students, producers and employees over the years.  I hope you find some of these helpful.  I am not an expert in this area but, have some practical experience.

  1. Try to minimize the emotion in the conversation. Talk to a neutral 3rd party in confidence first if you feel a lot of stored up anger, regret, disappointment or you feel taken advantage of. Work out some of your emotions first.  When you meet, it certainly would be accurate to let the other party know how you have felt but, doing it under control will likely lead to better outcomes for you and all concerned.  If someone does get emotional—let it happen as those feelings are probably very real, acknowledge their feeling for what they are—then attempt to bring it back to the real decision at hand.  Set the tone by using a calm and quiet voice.
  2. Try to pick the right time for the conversation—maybe let them know ahead of time or even schedule it in advance.  It is maybe OK to let them know a general topic but, save the real content for the actual conversation.  Don’t procrastinate though, just because you anticipate the conversation will be uncomfortable—or someone will get emotional.
  3. Make a very brief list of your expectations of necessary items to discuss before you meet. When you meet ask the other conversation participant to state their expectations for the discussion—then list yours.  Ask if you both agree these are the correct topics.  Set a tone for mutual respect.
  4. Prepare yourself to be satisfied with shorter term or interim discussion points—where you can maybe more easily find common ground or understanding. “Don’t try to solve world peace in one meeting”.
  5. At the end of discussions, affirm what you have heard, as a way to conclude. So, what I heard is “we both agree on……. But, we disagree on……….”.  Be careful to not put words in someone else’s mouth.  It is OK to ask the other party to clarify a point you may not agree with by asking; “Could you help me understand…or could you clarify….”? You may find out you may not have understood their reasoning; there may be information you were not aware of or, their information maybe primarily a feeling versus fact.


Friday, August 18, 2017

Finding Common Ground with Consumers

by Betty Berning
Extension Educator

Local, non-GMO, organic, gluten-free.  These are some of the words you might see if you look at a package of food at the grocery store.  Some of it might make you chuckle.  What exactly is non-GMO soda, anyway?  And wasn’t oatmeal always gluten-free?!  Why are food companies using these words?

The answer is simple.  Consumers are asking for it.  According to the Center for Food Integrity (CFI), a non-profit organization whose members and partners range from farmers to food companies, today’s consumer is different from the consumer of the past.  Their research indicates that the consumer of the past valued price, taste, and convenience, while today’s consumer is looking for more.  Health and wellness, safety, social impact, experience, and the overarching theme of “transparency” are values of younger consumers.
This explains why there are more organic and natural offerings at the grocery store.  It also explains the to be a boom in agri-tourism (berry-picking, pumpkin patches, wine tasting, etc.).  Consumers want to feel connected to their food and feel like they are buying from a trusted friend.

For traditional/conventional farmers, these trends can be maddening.  Farmers work hard to provide a high-quality product.  They are very proud of their product (and rightly so!)  Farmers consume their product and are happy to serve it to friends and family.  One can understand why farmers might feel frustrated when consumers do not seem to trust the product they have worked so hard to create.

Like it or not, consumers buy your products.  They need you and you need them.  Before I worked in Extension, I worked for a food company.  The consumer’s voice is greatly valued at food companies.  Our goal was to sell a product that consumers wanted to buy.  We did not just make a product and expect consumers to buy it. 

Our products were created based on consumer research.  We listened to our consumer, asked questions, and then we responded.  Our response was to launch a product and market it.   Marketing did not mean telling consumers all the facts about why a product was good for them.  Marketing meant highlighting how the product met the needs and values that the consumer had previously expressed to us.  We related to our consumers through our advertisements, social media engagement, and customer service.  We wanted consumers to feel like they were buying a product from a trusted friend. 

I spoke with Natasha Mortenson, Public Relations Director at Riverview Farms, about the topic of consumer engagement.  She and I have engaged with consumers, but in very different ways!  As we talked, we quickly discovered that regardless of how you are engaging with consumers (as a farmer, processor, food company, etc.), the strategy is similar.    Natasha’s process was simple:  1. Listen, 2. Ask questions, 3. Relate and express where you have common ground, and 4. If you can, come up with an analogy to explain why you do what you do. 

Think about common values that you have with most people.  You are most likely a member of a local community and farm with your family.    Like most Americans, you are probably trying to provide for your family.  Your farm could be considered a “small business”, as opposed to a corporation.  You care about your cows’ health and well-being.  Consumers value these principles, just like you do! Sharing these common values help consumers feel connected to you and provide a sense of transparency.  

I would encourage each of you to connect with consumers, which is as easy as talking to your non-farming family and neighbors.  Understand their needs and preferences by LISTENING, even if you don’t agree.  Ask for clarification or more information if you don’t understand or disagree. Talk to them about your needs and share your farm’s story (not just facts).  Finally, try to identify common values. 


Facts are important, but people are more inclined to trust facts once they trust you.  Remember that quite often we have more in common with others than we might realize.  We often want the same things, whether it is safe food, clean water, or healthy animals.  Listen, ask questions, and then highlight your common values.  Be patient and good luck!

Wednesday, August 16, 2017

Marketing Grain in Low Price Market

By David Bau, Extension Educator

Current marketing opportunities for the 2017 crop have been below the average farmer’s breakeven prices. Each year farmers in my marketing groups determine breakeven prices needed to cover their crop input costs and living expenses. The average cash breakeven price is $4.26 for corn and $10.78 for soybeans for southern Minnesota farmers. The average cash corn and soybeans prices for Worthington in 2017 has been $3.23 for corn and $9.07 for soybeans, well below the prices needed to cover costs.

Using 2016 farming results for corn and soybean producers from FINBIN database, the numbers are not good. The average of 1382 corn farmers in Minnesota lost $62.35 per acre for corn, while making $7.88 per acre on soybeans. This compares to a loss of $55.07 per acre for corn in 2015 and income of $8.34 for soybeans. A trend of larger losses was created from 2015 to 2016 even while input costs including rent rates declined and yields increased. The average price for corn sold in 2016 was $3.29 and for soybeans $9.35. This compares to $3.49 for corn and $8.55 for soybeans in 2015. These average prices are well below breakeven prices for the marketing groups.

Farmers should first start with determining their own breakeven price and use these prices to establish target prices. Target prices are sometimes set at levels below breakeven levels due the current market situation. Target prices are goals that when met will cause the sale of a predetermined portion of the crop in the marketing plan. A farmer can use the Acceptable Crop Price Worksheet to complete crop budgets for corn and soybeans. Available at: www.extension.umn.edu/agriculture/business/commodity-marketing-risk-management/ 

Decision dates should be a part of a marketing plan where a farmer is establishing a date for which to decide to establish a price for a portion of their crop. The real point here is to spread out the decisions in the March through May period which has now passed and now cash flow needs will take over. The marketing plan should incorporate a list of when cash needs to be generated.

Default dates need to be established to force action in a marketing plan so a farmer does not miss a historically good time to establish a price for their crop. Historic price information will help a farmer determine price objectives for marketing plan. Trying to determine where to start and end.

Crop Insurance can insure some revenue levels along with loan rates. In Minnesota the loan rates average $1.82 for corn and $4.84 for soybeans. These prices are well below breakeven prices.

If farmers sell crops below their breakeven price, they can reown the crop with call options, or hope that later sales will be at higher prices to bring their average above their breakeven before the last of the crop is sold.

For the last 5 years, high cash corn price $8.22 (2012) and $17.74 (2013) beans for Worthington and the lows were $2.65 (2016) for corn and $8.03 (2016) for soybeans. Today’s cash prices in Worthington were $3.16 and $9.16 for corn and soybeans.

The last USDA report was negative while the June USDA was positive, corn and soybean prices went up significantly after the June report and now after the August report have given all the increase and more in price back.

Farmers need a marketing plan with target prices and default dates to sell crop as needs and opportunities arise. Hopefully prices will rally before harvest, if not there will be losses.

Friday, July 28, 2017

Outlook for 2017 Corn and Soybeans

By David Bau, Extension Educator

I was asked to speak at FARMFEST on a panel discussing Strategies for Farming in Challenging Times.  I thought I would examine some of the reasons for the stress in farming.  If you look at 2016 farming result for corn and soybean producers, the numbers are better than they were in 2015 according to FINBIN figures, but on average 1382 corn farmers in Minnesota lost $62.35 per acre, while making $7.88 per acre on soybeans.  This compares to a loss of $55.07 per acre for corn in 2015 and income of $8.34 for soybeans.  A trend of larger losses was created from 2015 to 2016 even while input costs including rent rates declined and yields increased. Results in the marketing groups I work with, shows better income on 2016 crop sales than 2015 crop but did not cover their total costs in either year.

So what about 2017?  Each year farmers in my marketing groups determine breakeven prices needed to cover their crop input costs and living expenses.  The average breakeven price is $4.26 cash for corn and $10.78 for soybeans. These are based on historical average yields of 177 bushels per acre for corn and 50 bushels per acre for soybeans. The last two crop years experienced record yields. If I used 200 bushels of corn per acre and 55 bushels of soybeans per acre, the breakeven prices declined to $3.77 for corn and $9.80 for soybeans.

Yields could be good again this year, but probably not record levels and closer to historical yields.  So farmers will need $4.00 cash per bushel for corn and $10.50 for soybeans.  So what have the 2017 December corn and November soybean contract prices been?  The high in December 2017 corn futures since 2016 has been $4.23 and assuming a 50 cent basis would be $3.63 cash high, but basis has been wider than normal due to large crops the past couple of years, so using a 60 cent basis would make the high cash corn price $3.53.  For soybeans, the high in November soybeans since 2016 has been $10.47 and with a normal 60 cent basis the cash price would be $9.87 and with wider basis of 70 cents which is more common the cash price would be $9.77.

The average cash corn and soybeans prices for Worthington in 2017 has been $3.23 for corn and $9.07 for soybeans. Well below the prices needed to cover costs.  Looking at 2016 figures from FINBIN 70 percent of Minnesota farmers had a breakeven higher than $3.23 and 30 percent of soybean farmers had costs higher than $9.07. Today’s cash prices in Worthington were $3.16 and $9.16 for corn and soybeans.

So the outlook is this:  If the average farmer could get the record yield experienced in 2016 and sell all of their crop at the contract high prices they would cover their costs. If they sold their crop at the average 2017 prices they would have a loss and if they get normal yields closer to their historic averages the losses will be larger.

So what are some strategies farmers are engaging in?  Farmers are examining all costs and looking for ways to lower cost of production without affecting yield, the largest input cost is land rent, followed by fertilizer, seed and chemicals. Farmers have given up some rented land that does not cover costs at current rental rates. Farmers are looking very carefully at every new purchase to determine if it will add or hurt the bottom line.  Farmers are looking for ways to adjust and finance a cash flow that will keep them farming in 2018.

Tuesday, July 25, 2017

Farm Transition and Estate Planning Workshop on August 3

by Betty Berning
Extension Educator

“Farm Business Transition: Where Do I Begin?"  is scheduled for August 3rd at Ridgewater Campus in Willmar,.  The workshop is $40 per family, $15 for Ag Professionals.  To pre-register for the workshop by July 31st contact Kami Schoenfeld at 320.212.5255.

In “Farm Business Transition: Where Do I Begin?,” participants get a greater understanding of establishing intergenerational communications, the process of transferring labor-income-management-assets, determining the financial viability of the farm business, retirement issues for the senior generation and establishing goals as the foundation for beginning the farm business transition process. As part of the workshop, participants will be given time to discuss issues and complete worksheets related to the application of the different sections of the workshop. The result is a process for farm families to begin transferring the farm business to the next generation.

 The workshop is jointly sponsored by Minnesota Dairy Initiative and the Ridgewater College Farm Business Management. The program will be presented by University of Minnesota Agricultural Business Management educators, Gary Hachfeld, Betty Berning, and Nathan Hulinsky. 

For more information, please click here.  

Monday, July 24, 2017

Summer fun with Women in Ag Network!

by Betty Berning
Extension Educator

Women in Agriculture Network (WAGN) is excited to announce a summer tour to Redhead Creamery in Brooten, MN.

The tour will take place on August 16, 2017 from approximately 10:30AM-5PM.  The afternoon features lunch at the creamery, tour of the farm, and a discussion on managing a family business.  Coach bus transportation will be provided and pick-ups will be late morning at University of Minnesota Mid-Central Research and Outreach Center in Willmar, MN; St. Cloud Regional Extension Office; and Sauk Centre Wal-Mart.    Registrants will receive more details about pick-up and drop-off details closer to the event date.

Betty Berning, Extension Educator, shares, “We asked women for feedback on a summer networking event and have created the tour to Redhead based on their responses.  Women were clear that they wanted time to network and relax, while learning about a farm to market business.  Participants will have the opportunity to socialize and learn more about what it takes to make a successful business!”

Registration deadline is August 9, 2017.  The fee is $30 and needs to be paid in advance.  For more information, please click here.    To register, follow this link.  

To learn more about Women in Ag Network, please visit:  http://www.extension.umn.edu/agriculture/business/women-in-ag/


Tuesday, June 13, 2017

The Importance of Agriculture to Minnesota's Economy

By David Bau, Extension Educator

According to 2016 Summary from the Minnesota Agriculture Statistic Service there was 8.39 million acres or corn harvested in 2016 with a yield of 193 bushels per acre average for total revenue of $5,343,591,000 at $3.30 per bushel. There were 7.5 million harvested soybean acres at 52.5 bushels at $9.25 which totals $3,642,188,000. Combining for over 9 billion dollars in revenue generated.

Other crop sales generated over 1.5 billion in revenue on 73,300 farms on 25.9 million acres. Dairy farmers produced 9.67 billion pounds of milk valued at $1.624 billion. There is also a large swine, cattle turkey, chicken, and sheep industries in Minnesota with a total revenue generated in 2016 of $7.4 billion.

All this added together totals $17.9 billion in farm sales which trickles throughout the Minnesota economy. With an estimated population at end of 2016, of 5.4 million, this translates to $3,315 of ag sales for every citizen in Minnesota. This does not include the many industries in Minnesota that also rely on the agricultural industry.

Grain farmers just experienced record high corn and soybean prices followed the last couple of years by much lower prices. If you added $3.00 to the corn price and $6.00 to the soybean price this would have added $4.858 billion in more agricultural sales for corn and $2.363 billion more soybean revenue. Added together for a total of $7.22 billion in more revenue, divide this by the total number of farms and the average loss of income by each farm of $98,499. This change in revenue is what the Minnesota corn and soybean farmer has been experiencing for the last few years. Table 1 below shows the average cash corn and soybean prices for Worthington from 2007 through 2016.


The impact from changing hay and livestock prices has a similar effect on the Minnesota economy. Corn and soybean farmers have a significant impact on the Minnesota economy and as their revenue goes up and down this trickles down and is felt across rural Minnesota and the whole state with many industries in Minnesota dependent on the prosperity of Minnesota farmers. The change in revenue in just 10 years translates into $1.337 average in lost revenue for every Minnesotan.

Wednesday, May 31, 2017

Managing Farm Profit Margins - Join "The 5% Club"

By Don Nitchie, Extension Educator

A single 5% improvement may be easy to overlook, but you should not take this small improvement for granted. Increasing revenue 5% while also decreasing costs 5% can have a big impact on your bottom line.

The table below compares actual outcomes for the average Southwest Minnesota Farm Business Management Association farm in 2016, to the projected 2017 results for the average association farm if it joins “The 5% Club”. Our analysis of “The 5% Club” compares farm performance if the average association farm improves gross revenues by 5% and lowers operating costs by 5% over 2016 for 2017.

It is impressive how just these small changes result in Net Farm Income of an average farm more than doubling to $170,000 and Term Debt Repayment Capacity improves from 1.4 in 2016 to 2.4 in 2017. In 2016, the same 5% changes would have almost tripled Net Farm Income for the average farm. Therefore, small changes have a BIG impact on your bottom line. Attention to the correct details can make a real difference.

Projected Impact of Improved Margin Management; 5% Increase in Revenue & 5% decrease in Costs on the average SWMFBMA Farm

Is it possible to achieve a 5% improvement in gross revenue? Probably. Do a little better than average on selling prices, yields or a little of both. Be willing to sell portions of your production when profitable pricing opportunities are available. Do not hold out for the highest price and avoid selling all your production in a few large portions. Make the basic math work in your favor. Try to sell increasing quantities if a market is moving higher and a greater quantity first as a market moves lower. Any price should always be evaluated relative to YOUR projected cost of production instead of on the latest price forecast.

Is it possible to lower costs by 5%? Probably. Being more effective with expenditures on inputs is one of the real keys. Getting the most revenue possible for each dollar spent on herbicides, pesticides, seed, fertilizer, and feed is very important. You do not necessarily want to try to cut expenses 5% across the board. Be strategic and critically examine which of those expenditures may not be adding to production efficiency at current expenditure levels.

Sharpen your production management and marketing skills. Be a student of current production technology research and methods. Discard products and methods that seem to only have great advertising and cost money with little proof of effectiveness. Know where your costs are relative to competitors using your benchmarking reports. Zero in on costs that seem out of line, and seriously examine the products or practices behind those costs. Also, celebrate the things you have done well.

Successful managers do more little things just a little better rather than doing one thing really well. It pays off when profits are scarce! Strive to join “The 5% Club” in 2017.

Wednesday, May 17, 2017

Farm Machinery Cost Estimates Publication Updated

by William F. Lazarus, Extension Economist

An updated version of this publication is available online at www.extension.umn.edu/agriculture/business/farm-financial-management/. The tables in this publication contain estimates of farm machinery operation costs calculated via an economic engineering approach. The data are intended to show a representative farming industry cost for specified machines and operations. The list of machines, the fuel price, and the labor rates are the same as last year.  Machinery prices continue to creep upward.

Have you tried the Microsoft Excel spreadsheet (MACHDATA.XLSM) that goes with this publication?  It is available for downloading at z.umn.edu/machdata. The “Calculate” and “Self-propelled” sheets in this spreadsheet can be used to calculate costs for your own situation.

The spreadsheet can also be used to answer a variety of specific questions, such as:
Should I keep the machine I have for another year, or should I replace it now?
Which is the best size machine for my operation?
How does inflation affect machinery ownership and operating costs over time?
How will the latest precision-ag features affect cost and performance? 

The “Sensitivity” sheet contains tables that show how annual use and years of ownership will affect costs per hour and per acre.

Tuesday, May 9, 2017

Outlook 2017 for Corn and Soybean Crops

by David Bau, Extension Educator

Farmers are just getting started planting their 2017 crops with hopes of good yields and good prices. There has been plenty of spring moisture and now the cropping season will take off in full swing when the soil dries out. Farmers have been blessed with two years in a row of record crops, will 2017 bring a third? The good yields have helped many farmers survive the low prices and small profits the past couple of years. In Southern Minnesota corn farmers in the Adult Farm Management programs have averaged losses on corn production since 2014, while they were able to generate small profits on soybean during this time.

Crop prices for 2017 corn are at $3.40 and soybean prices are $8.90 depending on your local basis. Farmers in my marketing groups have worked on their 2017 budgets and determined breakeven prices at $3.80 or above for corn and $10.10 or above for soybeans. The high futures price in December 2017 corn occurred on June 8, 2016 at $4.22 and for November 2017 soybean high was $10.42 on November 28, 2016. Using a 60 cent corn basis and a 70 cent soybean basis, which are wider than normal due to the large crop inventory, the high prices would have been $3.62 for corn and $9.72 for soybeans. With both current and the high prices offered for 2017 corn and soybeans below 2017 breakeven prices farmer will again be facing a small or no profit year.

Farmers will be examining their farm expenses to determine ways to lower costs. Rents are the largest expense accounting for 40% of soybean crop expenses and 33% of corn expenses. The next largest is fertilizer, followed by seed, chemicals and repairs and hired labor. The challenge is to lower input costs without sacrificing yield.

Farmers need to be alert for opportunities if the markets rally close to the prices necessary to lock in profits. Farmer need to develop a marketing plan with target prices beginning close to their individual breakeven prices and stair step their way up to higher price targets. Decision dates should be added to determine if prices are high enough to lock in prices available at the time. The high in corn prices usually occur in May, with historically higher than average prices for both corn and soybeans from April through June.  This time period would be a good time to set decision dates.

If the target prices are not met and on decision dates have passed with too low of price to market any grain, farmers need to add default dates to force sales, especially for those bushels that the farmer will not have on farm storage space for at harvest time. Hopefully 2017 will be another year with good yields which also help lower the breakeven prices. Without better yields or prices or both, 2017 will be another with little to no profits for Minnesota corn and soybean farmers.

Tuesday, May 2, 2017

Use Your Employee Handbook!

by Betty Berning
Extension Educator

Does your farm have an employee handbook?  I’ve talked to many dairy farmers about employee handbooks this winter.  Many farms have a handbook, which is great!  However, farmers tell me they are unsure of how to use the handbook once it’s written.  Too often, employees don’t look at the handbook or farms forget they have it and the handbook collects dust on a shelf. 

An employee handbook can be a very valuable communication and labor management tool.  I’d like to propose four reasons why your farm needs to not only have an employee handbook, but also needs to actively utilize it. 

An employee handbook communicates what your farm is about- In other words, what is the culture of your farm?  Business culture can be defined as values, beliefs, and behaviors that are typical of your farm. For example, if being on time is an important behavior on your farm, your handbook should reflect that.  You might have a very firm policy on tardiness and missed work that is included in the handbook.  Perhaps the farm’s culture is to keep things simple.  Your handbook might be succinct with only a few critical policies included. 

Every farm has a culture.  The way in which you write and the topics you choose to include in the handbook will send a strong message about your farm’s culture.  This will provide clarity to your employees because they will understand what is important to you and how they can be successful.  Clarity is critical in labor management because it helps employees understand your expectations and, in turn, meet them.

A handbook highlights the most important policies on your farm- Are there certain behaviors that would cause immediate termination?  These unacceptable behaviors and their consequences must be listed in your employee handbook.  This provides clarity to your employees so that they understand what is important to you.  If they engage in one of these behaviors, and they’ve read and signed off on the handbook, there won’t be any question as to why they were terminated.  This protects your farm and you.

An employee handbook can be a powerful tool for human risk management- Are you concerned about an employee mishandling an animal?  Maybe you worry about an employee having an accident with equipment?  You need to create policies on farm safety, animal welfare, and any other risks associated with employees.  These policies need to be in your employee handbook.  Furthermore, these policies need to be reviewed with employees.  Provide training to your employees on these policies, so that the expectations are completely clear.  This is managing your risk.  All employees should sign off that they’ve read the policy and received training on the policy. 

If an unfortunate event happens on your farm, you will have documentation to show that you did your due diligence.  There still may be ramifications, but providing a written policy and training (and re-training) can lessen the blow of an event.  More importantly, a policy that has been explained well can prevent an event from occurring.

As you write, update, and utilize your handbook, you build your leadership and business skills- Writing your employee handbook is a strategic activity, as opposed to being a day-to-day activity like milking and feeding cows.  Every time you look at the handbook and review your policies, you are spending time on your business and setting its direction.  You are thinking about the type of farm you want to have and what its future might look like.  I encourage every farm owner to take an time each week (30-60 minutes once/week is a good place to start) to spend time on strategic activities like the employee handbook, business plan, goal setting, transition planning, etc.  Anything that will have a big impact on your future, but doesn’t feel as urgent as milking cows, is something that you can work on during this time.  Put the time on your calendar and hold it; don’t let other activities creep in.  Take the time to shape your farm’s culture and future.

If you’ve gotten off track, i.e. you have a handbook, but haven’t looked at it in a while, it’s okay.  Just pick up where you left off.  If it needs to be updated, do that first.  Then begin to ask your current employees to read it.  Implement the best practice of requiring new employees to read the handbook within a certain time period of their hiring.  Have employees sign off after they’ve read it and provide time for your employees to read it!  If you have staff meetings, review sections of it during your meetings.  Provide training and re-trainings on the most important policies.  It might seem redundant, but this will ensure that even your more seasoned employees are reminded of your farm’s culture and policies. 

Employee management is challenging right now.  The entire workforce in Minnesota (not just the ag workforce!) is facing a shortage.  There is no silver bullet to solve this.  You have a choice, though, in how you want to manage your employees and business.  Choose to be proactive and do the right things.  Over time, doing the right things, like utilizing an employee handbook, will provide great results back to your farm. 
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