What Are SOme Actions farmers Can Take Now as a Result of Imposed Tariffs?
Since 1895, the National Oceanic and Atmospheric Administration has tracked the weather and rain totals in the U.S. and they have reported that the 12 months from May-to-April have been the wettest on record. The state of Nebraska was one of the first to feel the effects of heavy snow and rain in early March this year with President Trump declaring it a federal disaster area. Now, months later, the Midwest has been flooded with continued rains and storms delaying planting and shortening the growing season.
In addition to the challenges of the weather, farmers continue to be affected by the imposed tariffs. The trade disputes have slowed exports and the prior six years of bumper crop yields created a grain supply that continues to keep prices down. The hog epidemic in China will have an impact as well.
Financial Planning for Farmers and Agribusiness
Financial planning and being attentive to the details about your farming or agribusiness operation are more important than ever before. The decisions you make about marketing, crop insurance, working capital and financing this year will most likely require input from your advisors (accountant, banker, crop insurance agent, lawyer, and consultants). Working with your advisory team by sharing information and coordinating communication among the group, will help maximize your operation. This message is not only for producers, but all of us who work in the industry.
What Are some Actions Farmers Should Take Now?
If you haven’t already done this, contact your crop insurance agent. If you have or are considering taking prevented planting payments, you need to have a meeting with your agent. There are eligibility and reporting requirements and you need to understand these in detail from your agent. These payments will be significant sources of income and getting the details wrong will be impactful. There are numerous calculations to make and getting help may likely be necessary. Additionally, the impact of the second round of Market Facilitation Payments will be based on 2019 crops. Although the formula has changed to a per acre payment based on the county where the farm is located, it appears that the farmer would need to plant the crop to receive the MFP.
Important to note is that the disaster package that President Trump is expected to sign contains a significant change for farmers. The previous program was limited to those farmers that had an average AGI (adjusted gross income) less than $900,000. The package limit keeps the $900,000 AGI threshold but waives it if at least 75% of that AGI is from farming. This would mean that if at least 75% of your income as individual or entity is from farming, then an expected MFP of up to $125,000 would be allowed. Keep in mind, selling your equipment or farm ground does not qualify as gross income from farming.
What are some actions agribusinesses should take now?
What are Some Actions Agribusinesses Should Take Now?
In conclusion, as an a trusted advisor in the agriculture industry accountant, I must stress the importance of accurate accounting and financial reporting. Looking back over the last 10 years, I believe this year will be one of the most important for keeping your records up to date and accurate. This is not the year to procrastinate and wait to plan. This is also not the year to learn at the last minute that your records were not accurate. Get some help from us, collaborate with your team, share information and stay connected.
