moderation there along with a likely decrease in farmland values . On the commodity price side , the world is still over-supplied with grain , including substantial stocks held by China , and Gloy believes it will take three to five crops to get out of that situation
Paul Neiffer
— barring repeated drought years or a major increase in demand .
“ That doesn ’ t mean there isn ’ t opportunity for profit , though ,” he said . In addition to reductions in variable costs , there will have to be a decrease in fixed costs , Gloy added , pointing out that land and equipment costs will have to come down .
“ Machinery investment is hard to manage ,” he said . “ You need to figure out what it costs you to run your equipment and how to change it . Can you share equipment ? It ’ s a hard problem but it is important because the cost structure is still too high .”
With the Federal Reserve zeroing in on low unemployment and stable inflation , it will probably reduce stimulating the economy through low interest rates . “ Don ’ t try to out-guess interest rates ,” Gloy said . “ Ask yourself if you need to protect yourself or not . If you do , consider fixed rates .”
With China and Mexico being two of U . S . agriculture ’ s biggest customers , Gloy also expressed concern about the Trump Administration ’ s reticence to expand trade .
The economist shared his view on how to succeed in today ’ s environment with the following strategies :
• Establish clear profit and cash flow targets .
• Determine what has to go well .
• Seize marketing opportunities .
• Revisit time management .
• Free up capital .
• Beware and navigate the ARC- CO payment cliff .
• Evaluate opportunities carefully .
• Consider upside and downside .
• Focus on cash flow generation .
Acknowledging that his crystal ball is still a bit cloudy regarding tax reform , farm tax expert Paul Neiffer of CliftonLarsonAllen said farmers can likely expect the current six tax rates to be cut back to three with the top rate lowered from its current 44 percent . The only negative , he said is the top rate will probably kick in a little sooner . Individual provisions will be streamlined with an increase in the standard deductible .
Neiffer expects estate taxes to be eliminated — probably for a 10-year period — but there still may be a gift tax in the form of a capital gains tax upon gift or at death .
“ We have to be careful what we wish for ,” Neiffer said . “ This may result in a lot more taxable income .”
The tax expert outlined various business entity options farmers have as a means of limiting liability . Sole proprietorships and partnerships are subject to unlimited liability exposure , he noted . A corporation or one of the limited liability entities ( LLC , LLP or LLLP ) is best to limit the liability exposure of the farm owner but Neiffer stressed that the operation must be run like a business with proper records and documentation and annual meetings .
Neiffer emphasized that all changes in business and tax strategy are subject to the ultimate details of tax reform and advised farmers to keep a close eye on the final regulations put forth by Congress .
Melissa O ’ Rourke , an attorney and farm agribusiness management specialist at Iowa State University , presented her suggestions for employee hiring and retention .
Melissa O ’ Rourke
Turnover can be a significant cost for farming operations , she said , adding that the starting point is to analyze farm labor needs and how those jobs fit together .
That should be followed by a written job description
20 HEARTBEAT | SUMMER 2017