It’s the end of the year and we are in the midst of the holidays. Everyone’s mind is filled with thoughts of family, friends, food, gifts and parties. For the farmers and ranchers among us, those are joined by thoughts of harvest, winter planting, year-end stockyard sale days and new equipment discounts. We are making decisions on whether to sell the harvest now or later, to buy that new tractor or not, to cull that cow, to keep that heifer. Any and every decision we make, regardless of the time of year, has a lasting effect on our operations and the well-being of our families.
The majority of the decisions made this time of year are tax related, as several of the examples above indicate. But let’s take taxes out of the equation. How different would our thought process be then? Would it affect our management style? How would it change our expansion, or consolidation, plans? Would we look at the goals for our farms and lives differently?
Even with the recent decline in cattle prices, margins are still decent for the cow/calf operator. Some of the options that could be considered at this time are: when do I sell the calves, do I keep back heifers, do I cull cows, do I purchase that new cab tractor? All options that can affect the amount of taxes paid next year, as well as affect the future growth of the operation.
But, if we are removing taxes from the equation, how would those decisions look? The weather is changing now – as I write this, the temperature is dropping and the rain is coming down. How will that affect my calves’ sale weight? Will I need to use additional feed and hay to just hold them at their current weight until sale day? And what about their health with the changes in the weather? Does the possible gain of income outweigh the possible loss if I wait to sell until first sale day of 2016?
Or what about the breeding side of the situation? We’ve always been encouraged to keep a young herd. Can we make our goals if we hold back, grow and breed our own heifers while culling older cows already in production? Should we sell our heifers and buy new blood to enhance our current bloodlines? Does it pencil out to keep the older cow who calves every year right on schedule, or is it time to retire her from the herd?
And that new cab tractor – if taxes were not in play, would we still make the purchase? Does it make sense to put that payment on the farm at this time – does it cash flow? Is the depreciation expense enough to balance out the payment? We all would like to see that new equipment in our fields, but does what we have now still operate and work efficiently for us?
My intent here is not to discourage or change any decisions we make for our operations at year end currently. Taxes are one of the few things we can be certain of in this life. I would, however, like to just encourage us to take a step back and evaluate our farms, our goals and make the decisions that would help us reach those goals faster while allowing use to keep our farms in the family for generations to come. After all, we do live and work in the best and highest industry of all – agriculture.
