How To Get Through
The Dairy Farm Crisis
It can be mentally draining to “stick it out.” As it is
harder and harder for small dairy operations to be
profitable, it’s not surprising that there has been an
increase in mental health issues among farmers. Be
prepared to get the help and support you need.
Consider Every Option
Years of slumping milk prices, rising input
costs, and a surplus of cows (thus a surplus of
milk) have triggered today’s dairy farm crisis.
As a result, many family farms have had to
make some very tough decisions. Here in
Ohio, more than 170 dairy farms – about 7.5
percent – have already disappeared in recent
years.
LOOK BEYOND THE FARM
In some cases, a family member will take an
off-farm job to make extra money or to obtain
health insurance, which can otherwise be a
costly expense for the farm to absorb. We’ve
also seen clients complement their businesses
with extra services such as equipment repairs,
hauling
While it’s always hard to close a business, it
can be tougher for farmers because theirs is
more than a business; it’s a way of life that’s
likely endured for generations.
If you’re a dairy farmer who has had to
manure
or
custom
harvesting.
Trucking is also a viable option if you have
a CDL as the industry has a hard time finding
dependable drivers. Most farmers have a lot
of great skills that they can put to work; don’t
sell yourself short.
confront the many challenges of the industry, WHEN SELLING MAKES SENSE
you likely have a lot of questions. This article While making the decision to sell the farm
will help you identify your options. is an extremely difficult decision to make, it
FIRST THINGS FIRST
shouldn’t be disregarded as a viable option.
In fact, depending on your financial situation,
The first thing to consider is whether you’re it may be the only option that will allow you
able to (and want to) hold on to your family’s to continue on without going further into
farm. If your plan is to stay the course, debt. But if you do make the decision to
you’ll need to begin by asking yourself the sell, be aware that there are significant tax
following questions: consequences you’ll want to be aware of.
• HAVE A PLAN (OR SEVERAL)
•
Are there ways to reduce your costs or
overhead?
Do you need to sell cows that aren’t
producing what they need to be
•
•
•
producing in order to break even?
Do you need to consider taking on an
additional job outside the farm?
Do you need to sell assets to generate
When times are tough, it’s even more
important to plan to help propel you in the
right direction. Having a tax, business, estate
and succession plan are good ways to obtain
some peace of mind as you continue to look
toward the future.
additional cash to keep the farm Some farmers might have a basic estate plan,
functioning? but it might be decades old. It’s important to
If you have a lot of equity in your farm, have an updated plan that factors in what’s
do you want to take out a loan against going to happen when you retire or are
it? If so, how far do you want to go? unable to continue farming. The majority of
This could be hard-earned generational farmers make plans to pass their land to the
equity that has built up over decades. next generation, which can be great if it is
Although it may seem counterintuitive to
invest in your farm when you aren’t making
done correctly. If executed poorly, it can tear
families apart.
any money, it may be necessary to help reduce Many farmers think, with the estate tax
your overall costs. exemption now at $22 million for married
2
Rise & Shine • Spring 2019
couples, they don’t need an estate plan
because the land will simply pass on to their
kids when they die. But, what if you have
several kids and only one wants to keep the
land, and the others want to sell? Factors
such as divorce, death or buyouts can have
unforeseen consequences and do irreparable
damage to a family. Estate and succession
plans can spell out everything and eliminate
uncertainty and confusion.
Strong tax and business plans can ensure that
you’re doing all that you can to maximize
your dollars and minimize your risk. Tax
planning during down times can help save
taxes now, as well as save tax in the future.
When selling assets, it’s important to consider
the 0 percent long-term capital gain rate in
order to maximize the amount you can sell
with little to no income tax consequences.
Some families have been able to generate
up to $100,000 of income in a year and still
pay no federal or Ohio taxes through careful
planning.
TURN TO THE EXPERTS
FOR GUIDANCE
Regardless of your course of action, having
your accountant and your attorney by your
side to help make well thought out, rational
decisions is the best way to make it through
this crisis. Give me a call to learn more. I
would be happy to sit with you and discuss
your options for getting through today’s dairy
farm crisis.
by: Brian Kempf, CPA
Principal
212 North Washington St.
Millersburg, OH 44654
330.521.4549
[email protected]