Agristability

[parsley]

I want to add this, bucket. Our soil, in Western Canada has been the best, although much of it will prob be degraded by chemical and genetic contamination in the future. Our water is so much better than anywhere else in the world. Polluition, compared to thousand year old societies, is non existent.We have it all!

We have such a unique selling tool. We can be ABSOLUTE #1 in the world, and yet, farmers cannot agree, nor work together in regions, nor promote for themselves, instead wanting governments to do it for them (CWB branding), when everyone in the world distrusts governments the most.

What is the matter with our culture?

We have allowed government to essentially take over our statistics, our marketing, our promotion, our research, etc, our industry.

Are we a stupidIQ lot?

Or perhaps simply a political lot who WANTS the government performing what we should be able to do for ourselves. Pars

[poorboy]

Is cash basis accounting for farms part of the problem for farm programs?


With cash basis accounting and getting expenses from year end purchases and reductions for selling crop and livestock in the next tax year it is very confusing for most farms to know when a good or poor year has came or gone because of the averaging that occurs with cash based accounting.

The agristability program uses accrual based accounting, so it actually reflects if the farm made or lost money in the year of production. If all the farms had to do their books on the same system, the agri stability would be easier for most farmers to understand.

Certain tax rules would have to be changed as well, so unincorporated farms would not have to give all their income away at the highest tax bracket in one year and not pay tax the next year, but that could be done, and would help every farm with a better picture of how their farm is doing financially. As a recently incorporated farm and having to covert my books to accrual accounting for my year end report, it very much different than my cash basis accounting books.

[checking]

Bucket.

You ask the good question - "how to compete?"

Parsley has her good answer for her farm. I'd wager that she had a plan B, maybe more, if organics hadn't worked out. In fact, this may be her plan B, as I believe she may have said she started conventional.

At the risk of being called a garden sized predator, and having no morals by a tar mouthed sot, I'll suggest how I compete. I think everyone else on here should have at least thought up, or tried a strategy that doesn't have as its central plank government programs.

Storage is my center piece, and I'm not talking bags. They are too easily counted by satellite, just like the shades of crop growth in our fields. I've yet to be convinced that anyone has the technology to determine the content, or fullness of bins without the physical examination that involves trespass.

Many will suggest that the carry costs will eat me up. Much better to unload at market price, like yesterday. Get rid of it, take the pennies, produce more the following year.

The CWB, whose system on durum that forces carry, will say that it has me in inventory. Don't count on it. My patience extends years out, and sooner, more than later, it will forget about my inventory in their next year carry over calculations.

Now comes the part that the vader thinkers don't like. I await disasters, anywhere in the world. Those disasters provide my income for multiple years.

In the event that the vaders are listening, I don't want your farms.

[bucket]

checking

Right, I agree hold on for the disaster but it takes time to do that and a 1 in 500 year rain event really screws things up.

Parsley

The ford thing, i think if you do your research, you will find a handout by the american government to the tune of billions. They got help as well not in the same program as GM.

[bucket]

Poor Boy, as a new incorporated farm I hope you incorporated a family farm partnership and not a straight in incorporation.

If you didn't, unfortunately you left thousands and potentially hundreds of thousands of permanent tax savings on the table by not using your capital gains exemption for inventory and equipment instead of land.

[poorboy]

Saskfarmer99,

No I did not start with a partnership and roll into a corp. I was not up enough on my books and got caught with a potential tax liability in 2009, from the 2008 crop year and had to start the corp part way through 2009.

There is a way to use your lifetime capital gains exemption by rolling the shares of the corp if set up right. This is what I had to do and the only difference is there will be another $4-5000 in accountant and lawyer fees. A partnership would have had to be in operation for a minimum time to get the capital gains exemptions, and I did not have that kind of time.

The agri stability program is certainly baised to farms that have steady margins and only experience a small hicup once in a while. It also offers some risk management. For example, does it pay to take any more than 50 or 60% crop ins level. Anything below 85% and the program kicks in anyway, so is there an advantage to taking the highest crop insurance coverage? Or extra hail insurance? If you have your basic needs covered, should your money be left in your pocket and the agristability program be your backup?

Obviously for those who have farms that have seen declining margins for several years the program is not the best for you. For others, though the program has great potential as a risk management tool, it is just too bad that it has to be so complicated and expensive (ie accountants).

I still think that if non corporation farms could be taxed differently, then all farms could switch to accrual accounting and filing for income tax and this would reduce the costs for support programs.

I still consider us lucky as farmers that we have some basic Gov't support. Look at any little business in a small town when Walmart or any other big store moves in. They can't compete and just go broke. There is no gov't support for those businesses that fail. Farming is a low margin business, but there are insurance and aid programs in place that most other businesses would love to have.

[wmoebis]

Checking you are right. Hold on to stocks when the prices are low. Sell high/store low. However most will sell at what ever they can get. What is high what is low?

Green lentils went down to like 9 cents a few years ago and guys still sold and increased acres the next year. New contract prices have been comming up a bit but some locked in when they were 2/3/4 even up to 10cents lower so why would the world offer more? Producers have said we will sell at this price. Why aren't we signaling to the market place, that we have lentils for sale the cost is 40cents per lbs. (a price they were a decade ago)

Peas are $5.50 but truck load after truck load moved out a month ago at around 4.50 if that hadn't happened maybe we would be at $8.

The trouble is this is free market and my competitors are willing or able to sell at a lower price so the price will stay down until a crop failure and force everyone to stop selling at these low prices and this is why the CWB was set up in the first place.

I have choises if I don't like the price I don't offer it into the market place. I think the CWB is doing the same thing. Only they get ridiculed for not selling it at these low prices. Yes they took a chance when the prices were higher and maybe getting close to reasonable, instead of offering more and driving down the price. They pulled off the market in an effort to get the last few pennies the next year. WE filled every bin flooded the market and depressed the world price again. Then we ridicule them for not selling. In the mean time we are selling off our lentils, peas and cnl at cheap prices instead of demanding 40c lentil $8 peas and $12 CNL.

What is everyones bottom line for selling thier durum? $1/bus or $10bus. What is everyones bottom line for selling thier lentils? 9c/lbs 20c or 40c/lb. What is everyones bottom line for peas $4.50 or $7.00. it seems most are willing to sell for what they can get in every commodity to dump thier grain at any price (DePutter analogy) to make way for a new bigger crop. I would rather have my bins half full of profitable crop than full of money loser.

We ridicule the market place for no movement at a profit price. The USA and EU have to subsidize thier farmers at world prices. Would anyone be happy to sell into the world market at these prices without a subsidy? Is that your bottom line? I don't want a subsidy I want a market that is profitable but everyone keeps selling into a depressed market.

I still say it is NOT the price of grain that is the problem it is the cost of production. The fuel, Chem and equipment companies etc. are the ones that need to be subsidised not the farmers. If there would have been a moritorium on inputs put on years ago when inputs started getting crazy, we could give the world cheap food and still be making a profit.

[checking]

Wmoebis.

I won't turn this into a hate the CWB fest because you see its worth, and I do not. I will say that I do want them gone, and I will say that that issue is out of the control of all farmers. I know that the government is in control. You may think otherwise, and that our piddling little vote voices are what elects directors to keep a pro board majourity, but I'm not convinced that if all ten were voted in anti that anything would change. We are not in charge.

I am interested, however, in how you survive on your farm without demanding public assistance.

The thing about disasters is that everyone knows that they are coming, they just don't know when. Chemical companies, fertilizer companies, everyone that feeds off agriculture are no smarter at predicting those events than what we are. That allows us a small window of opportunity, for the guys just like us, (sorry, I couldn't resist!) that have supplies when everyone else has emptied out their bins to get ready for the virtual big crop by fall, or pre-sold for what was penny profit contracts on grains that now they can't produced. The result is, for the lucky unlucky, you have an act of god contract. For the rest, you're back to buying out contracts, and to begging for assistance.

Here's where I disagree with you. You think the suppliers are going to scoop up the gains of farmers who made it from a great year of grain shortage. That's the year I'd shut down production, live on deferrals, and wait for a return to normal, and produce again.

Would you not have liked to have had a bin full of rubber boots for sale the day that all this water started, a bin of 3M masks the day SARS broke in Toronto, a quonset full of snowblowers the day a heavy snowstorm hit your city? Well, that's the way I look at stored grain.

Many farmers will do this for canary seed. Produce a bit, bin it, and forget it until $0.40/lb comes around. I just take that theory to the extreme, until I'm filled up, and then I shut down production.

[checking]

Poor boy.

You are correct with the shares but I am guessing you had to transfer land to get the tax basis of a direct incorporation to work. Because land can be transferred to the next generation and has special tax treatment anyway if you have no capital gains exemption left (50% of the gain is taxable) you will want to use your remaining exemption in any other way if possible. It can be tough to sell shares of a farm corp as well.

You still could have done the partnership route by forming a partnership with your spouse and your company. This would have given you both benefits of immediate tax relief and the benefits of the partnership.

I also agree with your comments about CRA's cash basis accounting however it doesn't really effect agristability directly.

Because of the accrual calculations that happen with the application, no matter what you have done tax wise is adjusted to reflect the true profit/loss of the year.

The indirect impact of this on agristability are things like (as I see it):
a) If your farm is highly cash taxable,are you selling when you need to or holding off
b) Normally, farms that are trying to avoid the tax man get cash strapped because of increased debt, increased principle portions, capital purchases for tax reasons not business reasons. If this is the case, do they put everything into the crop that gives it the best productivity

As to the crop insurance and self insuring comments, remember, if you can make a buck somewhere else you are better off as the program only coverers about 60% of the actual loss.

In addition, their is a calculation that is done when you have a payment triggered that looks at your margin with the insurance proceeds and premiums included and if your reference margin is lower because of this, your payment is recalculated.

Quick cash, spot and single crop coverage would be other reasons to look at.

I believe in 70 or 80% crop coverage and have carried it on all crops for as long as I can remember. Hail is taken every year as well depending on the crops value and weather.

[checking]

As far as the cost of the program, does the accounting bill and participation fee amount to more than a $1 an acre for most operations?

On 10,000 acres,its not even close but I know our crop and hail insurance is over 10x that amount