Black Friday is over but the mad dash shopping continues since Christmas is roughly three weeks away. There's no time to lose, or at least that's what retailers want you to believe.
Farming has its own version of the mad dash – decisions to make before Dec. 31 expires and a new tax year begins. Should you buy new equipment? Should you sell grain this year? Should you pay ahead on inputs to get discounts?
Here are a few insights about decisions a typical farm operation might face this time of year. The bottom line is to make it a calm walk, not a mad dash. A mad dash might result in errors that could prove costly later. Consult your experts – including your tax accountant, financial planner, input dealers, marketing advisor, agronomist and more before deciding which way to fall on decisions.
To trade or not to trade. Most agree this year wasn't as profitable as 2012, but it certainly was more fun harvesting a crop. Now comes the hard part. Was it profitable enough that you have money set aside to trade equipment? Will the tax breaks offset the up-charge you will pay for newer paint? Will it leave you in a position you can still work out of if things go south next year?
Company discounts. One year ago the week before New Year's, I visited a farm where the owners traded three combines the morning before I arrived. They got a huge discount from the dealer and/or machinery company. Volume discounts are out there – the question is do they make sense in your long-range plan?
Tell the wife. Bob Taylor, the retired Purdue University Extension ag economist and family relationships expert, says the worst thing you can do is trade and not tell your wife. You don't want her to find out about the new corn planter you bought through a letter from the machinery company offering to let you come see it being produced. That happened! Taylor insists that's not a wise move.
Pay for inputs. Get out your calculator and see if discounts you can get for ordering and perhaps paying early offset carrying charges in interest if you have to borrow the money. Some institutions, including Farm Credit Mid-America, are offering a program to loan low interest, fixed rate loans so you can take advantage of discounts without selling crops if you choose.
Sell the crop or hold it? Here's where a financial planner, tax accountant and grain marketer need to sit around the table with you and offer their opinions. Do you have lots of income from the 2012 crop that came in 2013, partly because of insurance payments? Then perhaps you need to hold 2013 crop and sell it in 2014. Do you need cash to pay the mortgage? Then either you sell crop now or take advantage of offers from financial institutions to borrow money, betting you can avoid a big tax hit and perhaps gain money back on storing the corp. The tax accountant can help pencil in the details of how much hit you would take selling early. The grain marketing adviser can help size up the odds of selling now vs. holding to sell later.
The rest of the year may not be a mad dash, but it's certainly not time to slip off out of town for vacation until key decisions are made. Good luck on buttoning up 2013.