John Knipp
Vice-President
& Trust Officer
Office 620-669-9809
Cell 620-727-3628
[email protected]
Dale Ladd
Assistant Vice-President
Office 620-241-2100
Cell 620-245-4015
[email protected]
Many times, owners of farm and ranchland property have
objectives that are difficult for them to formulate and manage,
especially if they live a distance from their land or have limited
agricultural backgrounds. That is where professional farm and
ranch management services provided by the Peoples Bank and
Trust’s Farm Management Group can make land ownership both
a more profitable investment and satisfying experience.
Our Farm Management Team works closely with clients to help
them determine their personalized goals of land ownership. We
discuss objectives such as return on investment, income timing,
retained ownership into the future, conservation and
improvement of the resources, communication preferences, and
much more.
One of the more unique features of our Farm Management
Service is that, based upon our client’s goals, the farm manager
works toward a personal relationship with the land owner.
Colleen Ward
Trust Officer
Office 620-669-9809
[email protected]
PBT Farm and Ranch Management
Should you know someone who might be interested in learning
more about our Farm and Ranch Management Services,
please encourage them to give us a call, or let us know so we
can send them information about PBT Farm and Ranch
Management Services.
Grain Price in a Steady Down Trend
Where will it end? That is what most producers and land owners are asking as commodity prices have
dropped off gradually, but steadily, since late spring when thought of continued drought still loomed in
the forecast. Prices for corn, soybeans, and wheat currently are approaching the pre-drought lows of
2010 as predictions of good fall crop yields keep coming into the mix.
For many corn enterprises, prices are below break-even levels in spite of respectable yield prospects.
For irrigated corn in Western Kansas, K-State economists estimate the total cost of production
(includes depreciation, interest, land charges, & labor) to reach as much as $1,000 per acre. Using a
200 bushel crop as an example, the necessary price approaches $5.00 per bushel. Prices as of this
writing are in the $3.10-$3.30 range.
On some non-irrigated acres, timely summer rains have bumped bushel per acre yields enough to
October 2014
Year End Planning Can Minimize Taxes
Agricultural land owners should consider doing income
tax planning before the end of 2014. As a general rule,
a basic tax management strategy is to avoid wide
fluctuations in taxable income. Relatively uniform
income from year to year results in the lowest income
tax over time. Keep in mind that even in a low income
tax year, you should try to have enough income to
utilize your personal exemptions and the standard
deduction. The reason is that if you don’t use them,
you lose them.
“It all starts with good records of income and expenses
and sharing those records with your tax preparer or
accountant before the end of the year,” according to
Sue Regier, tax accountant with Swindoll, Janzen,
Hawk and Loyd. Some of the common options for tax
management that she refers to includes:
-prepaying/ delay paying expenses
-deferring income
-making capital purchases or improvements
However, Regier points out that it is frustrating
trying to make intelligent tax management decisions
when the current year’s tax code is not finalized
often until late in the year.
Tax planning now can make tax paying easier later
on.
As your farm managers, we have helped you
achieve your tax planning goals by timing expenses
and income from your farm. We can also develop a
plan for needed capital improvement expenses such
as irrigation well repairs, terrace construction, fence
building, or field leveling. Just let us know if we can
help in any way.
Excerpts from “End of Year Tax Planning”; Warren Schauer,
Michigan State University Extension Economist
2014 Farm Bill Includes New Risk Management Options
Once again, the USDA has been handed another Farm Bill that appears to be more complicated
offset the eroded price per bushel in calculating a break-even. On other not so fortunate farms, yields
than even the last one. Making decisions on just how to enroll a farm in this program not only
have suffered right along with prices.
requires a lot of case by case analysis, but a significant amount of “guessing” about (1) commodity
Soybean prices have fallen off from $15 per bushel down to the $9 area as the multi-year drought
continues to unwind especially in the corn belt region. Total cost of production in Kansas is estimated
to be around $300 per acre for non-irrigated soybeans and $600 for irrigated crops. Depending on how
prices and (2) yields into the future.
There are two major features of this bill that are fairly straight forward- the Direct Payments that
farms have received for years have been eliminated as a governmental cost cutting measure, and
Crop Insurance remains intact with some minor tweaks.
yields come in this fall, soybeans may pay their way better than corn when including all costs- both
New to farmers and land owners will be the option to participate in either the
fixed and variable.
“Price Loss Coverage” (PLC) option or the “Area Risk Coverage” (ARC)
option. Whichever option is selected, it is binding for five years. To
www.peoplesbankonline.com/farm
further complicate the decision making process,
continued to page 2
Page 2
October 2014
Page 3
Farm and Ranch Management Newsletter
WHEAT RESEARCH GIVES BETTER VARIETIES
Unfortunately, modern wheat varieties seem to have a limited shelf life. Once a new and improved high
yielding variety is discovered by researchers and wheat breeders, its lifespan time-clock begins a countdown
until it is no longer providing the top yields it did several years earlier. The reason largely lies in the fact that
these new high performing varieties initially have superior resistance to a host of diseases that commonly
attack wheat. As a specific variety is planted on more and more acres across a region (from Texas to North
Dakota) because it indeed gives better yields, diseases have a way of adapting to that variety, and its resistance
starts to break down.
Most varieties retain their yield superiority for only 3-4 years. Then newer, improved, more disease resistant
varieties are needed to take their place. And the cycle starts all over again.
Wheat breeders and researchers have literally hundreds of new varieties in their trials every year trying to find
that one variety that stands up to the rigors of being productive in an often hostile environment. Varieties
must have many qualities in addition to disease resistance. Breeders
must incorporate desirable characteristics such as straw strength,
tolerance to acid soils, hessian fly resistance, milling and baking
traits, test weight, shattering resistance, emergence ability, and winter
hardiness.
In past years, most new varieties for Kansas came through K-State
efforts to find better varieties. Today, private company breeders have
also been able to develop and distribute new wheat varieties due to
the enactment of the Plant Variety Protection Act which enables these
companies to protect their genetics from unauthorized distribution.
As these are “for profit” companies and because development of a superior variety is very expensive, the cost
of good wheat seed has increased as companies recover their investment through seed sales.
Going back 20 years, seed wheat could be purchased for $2.00 per bushel over elevator market price. Today,
it is common to see wheat seed prices at over double what the elevator price would be. And that is OK. It is
very expensive to not only develop new varieties, but seed dealers must pass rigorous field and seed inspection
requirements to be able to sell weed free, high test weight, high germination, and genetically pure seed.
Without this economic incentive to develop new, improved varieties of wheat, Kansas would no doubt lose its
long standing claim to fame as “The Wheat State”.
2014 Farm Bill Includes New Risk Management Options
- continued from page 1
if PLC is selected, then we have another choice- do we want to sign up for “Supplemental
Coverage Option” (SCO) which can add extra crop insurance coverage to offset the “deductible”
portion of crop insurance. SCO is not available for ARC farms.
Crop Insurance, which is carried on all our crop share farms to protect land owners’ annual revenue,
thankfully will not change much. It continues to be the foundation of yield and price loss protection
with the premiums being paid by participants. ARC and PLC options are selected at the FSA office
with no cost to participants. SCO will be sold through crop insurance agents.
There will be computer tools developed by agricultural universities to help us, as your farm manager,
and our tenants analyze each farm’s unique variables including base acres, established yields, crop
selection, and forecasts of future yields and prices. We will also be attending several educational
updates on this new 2014 Farm Bill to get up to speed on its features. Even though the new bill
is quite complex, it does indeed provide additional risk management tools for grain producing farms.
Soil Erosion Management: A TOP PRIORITY
Land owners expect us as their farm manager to protect
their agricultural property from a variety of damaging
influences. Consistently at the top of the list of these
“asset devaluators” and environmental threats is soil
erosion.
Soil erosion by water, wind, and even tillage affects both
agriculture and the natural environment. Soil loss, and its
associated impacts, is one of the most important, yet
probably the least well-known by the general public, of
today's environmental problems.
Yet, it isn't easy to find comprehensive information on
erosion. To a large extent this is because soil erosion does
not fit neatly under any one heading: it is studied by
agricultural engineers, soil scientists, agronomists,
hydrologists and others; and is of keen interest to not only
farmers, but also to policy-makers, environmentalists,
municipalities, and many other individuals and groups.
Soil erosion as a result of rain events occurs because of
two mechanical forces.
First- splash erosion. This occurs when a raindrop impacts
bare soil and its energy is able to detach and move soil
particles a short distance. Although considerable quantities
of soil may be moved by rainsplash, it is all merely
redistributed back over the surface of the soil only a few
inches away.
Two management practices that farmers use to minimize
splash erosion are: no-till/minimum tillage farming (where
residue is left on the soil surface to absorb the impact of
raindrops before they reach the soil surface) and cover
crops or growing crops, which also minimize falling
velocity impact energy of a raindrop.
Second- Rainfall may also move soil indirectly, by means
of water runoff in rills (small channels) or gullies (larger
channels). Once splash erosion has dislodged a soil
particle, it is easy for flowing water to carry it downstream. On the farms which we manage, the dominant
form of potential water erosion that we watch for is rill
and gully erosion. Once enough rainfall has occurred
where water starts to flow downhill rapidly, it picks up
soil particles, which stay in suspension, and carries them
to wherever the water speed slows down enough for them
to settle out. An example of this would be reservoirs
which are filling up with sediment, especially at the upper
ends where water speed first slows down.
Several management practices are recommended for
prevention of this type of soil loss. If fields are sloping in
topography, we utilize terraces, waterways, contour
farming, no-till farming, minimum tillage farming, and
cover crop as our main line of defense. Not all soil loss
can be prevented when rain events occur, but it certainly
can be held to a level whereby the negative impacts are
within tolerances established by the Natural Resource
Conservation Service.
Wind erosion is another important stress on soil with little
or no crop residue or no growing crops. Kansas winds,
especially in the spring, can be very destructive as they
pick up soil particles and deposit them wherever the wind
starts to slow down. We have all seen pictures of terrible
dust storms that occurred years ago. However, even today,
serious wind erosion and dust storms occur where soil lays
vulnerable to the massive energy of a windy day.
Farmers, especially in drier climates, are very sensitive to
wind erosion which can easily remove 5 to 10 tons of soil
per acre in one storm. With this soil loss goes nutrient loss
and loss of vital organic matter. Management practices
which are utilized by our tenants include many of the same
they use to prevent water erosion, those being residue
management, reduced tillage, and cover crops. Also used
to prevent or minimize wind erosion is strip farming,
windbreaks, emergency strip tillage (brings clods to the
surface which restricts soil movement), applying manure,
and in some cases, establishing permanent vegetative
cover such as native grass. Many CRP acres were planted
to native grass solely due to their vulnerability to wind
erosion.
In summary, a sound understanding of the processes that
cause water and wind erosion is key to developing
effective control strategies. Some of these practices, such
as terraces, may require significant capital. Although
conservation practices can be successful in controlling
erosion, farmers and managers alike must be vigilant in
understanding and implementing practices that are
required when soil loss threats occur.