Agriculture Posts

Rising Land Values Are Creating New Challenges for Farm Estate Planning

Strong farmland values have been a positive development for many agricultural operations, but they are also creating new challenges for farm families planning for the future.As land values continue to reach record levels in many areas, producers face a difficult question: How can assets be distributed fairly among heirs without creating an unsustainable financial …

Strong farmland values have been a positive development for many agricultural operations, but they are also creating new challenges for farm families planning for the future.

As land values continue to reach record levels in many areas, producers face a difficult question: How can assets be distributed fairly among heirs without creating an unsustainable financial burden for the next generation of farmers?

While every family’s situation is different, focusing solely on current market value may not always lead to the best outcome for the long-term success of the farm.

Below are several important considerations when evaluating farmland as part of an estate and transition plan.

Fair Does Not Always Mean Equal

Many farm families want to treat all heirs fairly. However, fairness and equality are not always the same thing.

When farmland represents the majority of a family’s wealth, dividing assets equally can create significant challenges for the heir who intends to continue farming.

If a farming heir is required to purchase land from siblings at full market value, the resulting debt load can dramatically affect profitability, cash flow, and the future viability of the operation.

Estate planning discussions should consider not only today’s asset values, but also whether future generations can realistically support the financial obligations created by those decisions.

Consider the Long-Term Future of the Farm

One of the most important questions in any transition discussion is whether the family wants to keep the farm together.

If preserving the operation is a priority, then the focus should extend beyond simply determining what the land is worth today. Families should also consider what ownership structure will allow the operation to remain successful after the transition occurs.

In some situations, shared ownership among siblings may work well. In others, it may create operational challenges or differing expectations that become difficult to manage over time.

Evaluating these possibilities early can help families avoid future conflicts and create a smoother transition process.

Affordability Matters

Current land values may not reflect what a farming operation can realistically support.

When estate plans require a farming heir to buy out siblings at full market value, annual debt payments can quickly become substantial. Even highly successful operations may struggle to absorb large buyout obligations while continuing to invest in equipment, inputs, labor, and growth opportunities.

A transition plan should consider the operation’s projected cash flow, profitability, and long-term sustainability. The goal is not simply transferring ownership. The goal is ensuring the farm remains financially healthy after the transfer occurs.

Other Assets May Help Balance the Plan

Many farm families use a combination of assets to create a more balanced estate plan.

Life insurance, retirement accounts, investment assets, and other nonfarm property can sometimes help offset differences in farmland distribution. This approach may reduce the financial burden placed on the farming heir while still providing meaningful value to nonfarming heirs.

Every family situation is unique, but exploring multiple options often creates greater flexibility and better outcomes for all parties involved.

Communication Is Critical

Conversations about estate planning are not always easy, but delaying them often creates more challenges later.

Open discussions about family goals, financial realities, and expectations can help reduce misunderstandings and create a stronger foundation for future decision-making. When family members understand both the emotional and financial considerations involved, they are often better positioned to work toward solutions that support both family relationships and business continuity.

Planning Beyond Today’s Land Values

Record land prices can make estate planning decisions more complicated, but they should not dictate the entire conversation.

The most successful transition plans balance current asset values with long-term business sustainability, family objectives, and the future needs of the next generation. By focusing on affordability and operational success rather than simply maximizing asset values, families can often create plans that better support both the farm and the people involved.

At DBC, we work closely with agricultural families to navigate farm succession planning, ownership transitions, estate considerations, and long-term financial strategies. Thoughtful planning today can help preserve both family relationships and the future success of the operation for generations to come.

To read the original article by Myron Friesen, please visit https://www.agriculture.com/don-t-let-record-land-prices-derail-your-farm-estate-plan-11940991

This article provides general tax and accounting insights and is not intended as advice specific to your organization or a substitute for personal consultation. We do not provide legal advice. Because every organization’s circumstances are unique, we encourage you to consult with your legal, tax, or accounting advisor regarding your specific situation.

Federal Energy Grant Uncertainty Creates Challenges for Michigan Agricultural Businesses

Federal grant and incentive programs often play an important role in helping agricultural operations invest in efficiency improvements, renewable energy projects, and long-term sustainability initiatives. When producers commit to these projects, they typically do so based on the expectation that approved funding will be available as promised.Recent discussions surrounding the Rural Energy for America …

Federal grant and incentive programs often play an important role in helping agricultural operations invest in efficiency improvements, renewable energy projects, and long-term sustainability initiatives. When producers commit to these projects, they typically do so based on the expectation that approved funding will be available as promised.

Recent discussions surrounding the Rural Energy for America Program (REAP) highlight how changes to federal funding programs can create financial uncertainty for farms and rural businesses that have already made significant investments.

As agricultural businesses continue evaluating capital improvement opportunities, this situation serves as a reminder of the importance of planning for both opportunity and risk when government programs are involved.

Understanding the Rural Energy for America Program

The Rural Energy for America Program, commonly known as REAP, provides grants and loan funding to farmers and rural businesses pursuing energy efficiency improvements and renewable energy projects.

The program has helped support investments such as:

  • Solar energy systems
  • Energy-efficient equipment upgrades
  • Building improvements
  • Renewable energy infrastructure
  • Other projects designed to reduce long-term operating costs

In many cases, approved grants can cover a significant portion of project costs, making major investments more financially feasible for producers.

Because of this support, many agricultural businesses move forward with projects after receiving confirmation that funding has been obligated by the federal government.

When Funding Expectations Change

Recent testimony before the Michigan Senate Energy and Environment Committee highlighted concerns from businesses and producers who moved forward with renewable energy projects based on previously approved REAP funding.

Several project participants reported completing projects, securing financing, and paying contractors with the expectation that grant reimbursements would follow. However, changes to federal funding administration have left some businesses uncertain about whether they will ultimately receive the funds they anticipated.

For producers, situations like this can create difficult financial challenges. Projects are often completed using borrowed funds or internal capital while reimbursement is pending. If expected funding is delayed or unavailable, cash flow projections and debt repayment plans can quickly change.

The Importance of Financial Flexibility

Agricultural operations regularly navigate changing commodity prices, weather conditions, input costs, and interest rates. Funding uncertainty adds another layer of complexity.

When evaluating major capital investments, producers may benefit from considering:

  • Alternative financing scenarios
  • Cash reserve requirements
  • Debt service capacity
  • Project payback timelines
  • Contingency planning if incentives change

Government grants and incentives can create valuable opportunities, but long-term project viability should ideally be evaluated under multiple financial scenarios.

Operations that build flexibility into their planning process are often better positioned to adapt when circumstances change.

Renewable Energy Investments Continue to Grow

Despite uncertainty surrounding individual programs, interest in renewable energy projects remains strong across agriculture.

Many producers continue to explore solar energy systems and energy-efficiency upgrades as a way to reduce operating expenses, improve sustainability, and strengthen long-term profitability.

For some operations, energy projects can provide predictable cost savings over time and reduce exposure to rising utility expenses. Others view these investments as part of broader succession, sustainability, or operational efficiency goals.

As technology continues to improve and energy costs evolve, renewable energy projects will likely remain an area of interest for many agricultural businesses.

Evaluating Risk Alongside Opportunity

Every major investment carries some degree of uncertainty. The recent REAP funding concerns illustrate why it is important to evaluate both the potential benefits and risks associated with any project.

Before moving forward with significant capital expenditures, producers should consider:

  • How dependent the project is on outside funding
  • The impact of delayed reimbursement
  • Financing alternatives
  • Long-term return on investment
  • Effects on working capital and cash flow

Careful planning can help operations make informed decisions while reducing the financial impact of unexpected changes.

Looking Ahead

The situation surrounding REAP funding continues to develop, and many producers and rural businesses are waiting for additional guidance regarding approved projects.

While the outcome remains uncertain, the broader lesson is clear. Agricultural businesses should continue evaluating opportunities for efficiency and growth while maintaining a disciplined approach to risk management and financial planning.

Strong decision-making often requires balancing optimism about future opportunities with preparation for changing circumstances.

At DBC, we help agricultural producers evaluate capital investments, assess financing strategies, and understand the long-term financial implications of major business decisions. Thoughtful planning can help position your operation for success regardless of changes in the economic or regulatory environment.

To read the original article by Kyle Davidson, please visit https://www.agriculture.com/partners-michigan-senate-panel-mulls-financial-catch-22-for-farms-pledged-federal-clean-energy-funding-11992855

This article provides general tax and accounting insights and is not intended as advice specific to your organization or a substitute for personal consultation. We do not provide legal advice. Because every organization’s circumstances are unique, we encourage you to consult with your legal, tax, or accounting advisor regarding your specific situation.

Proposed Changes to Animal Welfare Laws Could Affect Livestock Producers Nationwide

Animal welfare regulations are once again at the center of discussions in Washington as Congress considers changes to the federal farm bill. One proposal receiving significant attention is the Save Our Bacon Act, which would limit the ability of individual states to establish certain livestock production standards. The proposal is aimed largely at California’s …

Animal welfare regulations are once again at the center of discussions in Washington as Congress considers changes to the federal farm bill. One proposal receiving significant attention is the Save Our Bacon Act, which would limit the ability of individual states to establish certain livestock production standards.

The proposal is aimed largely at California’s Proposition 12, a law that established minimum confinement standards for breeding pigs and other livestock products sold within the state. While the legislation remains under debate, its potential impact extends far beyond California and could affect producers across the country.

Below are several key considerations livestock producers should be monitoring as the discussion continues.

The Debate Over State Versus Federal Authority

A major component of the debate centers on who should have the authority to regulate livestock production standards.

Supporters of the proposed legislation argue that individual state requirements create a patchwork of regulations that can be difficult and costly for producers to navigate. They believe production standards should be addressed through a consistent federal framework rather than varying state-by-state requirements.

Opponents argue that states should retain the ability to establish standards that reflect the priorities of their residents and consumers. They also point out that producers can choose whether to sell products into markets that require specific production practices.

The discussion mirrors broader national conversations about the balance between federal oversight and state autonomy in regulating industries and commerce.

Existing Investments Could Be Affected

Many producers have already made substantial investments to comply with animal welfare requirements such as Proposition 12.

Facility renovations, housing modifications, and operational changes often require significant capital expenditures. Producers who invested in these improvements did so with the expectation that the standards would remain in place and continue influencing market access.

If federal legislation changes the regulatory landscape, those investments could become more difficult to evaluate from a financial standpoint. For some operations, this creates additional uncertainty around future capital planning and long-term business decisions.

Consumer Demand Continues to Influence Production Practices

Regardless of regulatory outcomes, consumer preferences continue to shape livestock production.

Many retailers, restaurants, and food manufacturers have adopted sourcing standards that emphasize animal welfare. Demand for products marketed as cage-free, crate-free, or humanely raised has increased over time, creating new market opportunities for producers who choose to pursue those segments.

For some operations, investments in animal welfare standards are driven as much by customer expectations as regulatory requirements. Understanding consumer demand remains an important component of long-term planning.

Regulatory Uncertainty Creates Planning Challenges

Periods of regulatory change can make it difficult for producers to make confident business decisions.

Questions surrounding future requirements can influence facility investments, financing decisions, profitability projections, and market strategies. Producers may find it beneficial to revisit their assumptions and evaluate how potential policy changes could affect future operations.

Areas worth reviewing include:

  • Capital improvement plans
  • Cash flow projections
  • Financing arrangements
  • Market access opportunities
  • Risk management strategies
  • Long-term growth objectives

Proactive planning can help producers remain flexible while regulations and market conditions continue to evolve.

Looking Ahead

The outcome of the current farm bill negotiations remains uncertain, and it is unclear whether the proposed legislation will ultimately become law. However, the discussion highlights the growing intersection of regulation, consumer expectations, animal welfare standards, and agricultural business planning.

As the situation develops, livestock producers should continue monitoring legislative activity and evaluating how potential changes could affect both current operations and future investments.

At DBC, we work with agricultural producers to evaluate the financial implications of major business decisions, assess long-term profitability, and develop strategies that support sustainable growth. Understanding how regulatory changes may affect your operation can help position your business for continued success regardless of the outcome.

To read the original article by Kevin Hardy, please visit https://www.agriculture.com/partners-farm-animal-welfare-rules-might-be-rolled-back-by-congress-11990404

This article provides general tax and accounting insights and is not intended as advice specific to your organization or a substitute for personal consultation. We do not provide legal advice. Because every organization’s circumstances are unique, we encourage you to consult with your legal, tax, or accounting advisor regarding your specific situation.

How Monthly Financial Reviews Can Improve Year-End Tax Outcomes for Agriculture Businesses

For many agricultural businesses, tax planning becomes a year-end conversation.By then, most of the year’s decisions have already been made. Revenue has been received, expenses have been paid, equipment may have been purchased, and cash flow has already moved through the business.Year-end planning still matters, but the best tax outcomes are often shaped much …

For many agricultural businesses, tax planning becomes a year-end conversation.

By then, most of the year’s decisions have already been made. Revenue has been received, expenses have been paid, equipment may have been purchased, and cash flow has already moved through the business.

Year-end planning still matters, but the best tax outcomes are often shaped much earlier. Monthly financial reviews give farmers and agribusiness owners a better view of where the year is heading, making it easier to make informed decisions before December arrives.

Tax Planning Starts With Good Information

Strong tax planning depends on accurate, timely financial information.

When books are only reviewed once or twice a year, it becomes harder to understand true profitability, cash flow, and taxable income. That can lead to rushed decisions at year-end, especially when trying to reduce income or manage deductions.

Monthly reviews help answer important questions throughout the year:

  • Is income tracking higher or lower than expected?
  • Are expenses increasing in certain areas?
  • Is cash flow strong enough to support new purchases?
  • Are estimated tax payments still appropriate?
  • Are there upcoming decisions that could affect taxable income?

These questions are easier to address when there is time to plan.

Better Visibility Into Income and Expenses

Agricultural operations often face fluctuating income and expenses. Commodity prices, input costs, weather, equipment repairs, and timing of payments can all affect financial results.

Monthly financial reviews help identify changes early.

For example, if income is trending higher than expected, there may be time to evaluate options before year-end. That could include reviewing prepaid expenses, retirement plan contributions, capital purchases, or income deferral opportunities.

If income is lower than expected, the focus may shift toward preserving cash, adjusting estimated tax payments, or delaying certain expenses.

Either way, the business is making decisions based on current financial information rather than a year-end estimate.

Avoiding Rushed Year-End Decisions

When tax planning waits until the end of the year, decisions can become reactive.

This is especially common with capital purchases. A farm may consider buying equipment to reduce taxable income, but the purchase still needs to make sense operationally and financially.

Monthly reviews create more room to evaluate whether a purchase fits the business. Owners can consider cash flow, financing, equipment needs, and long-term value before making a decision.

The tax benefit may be helpful, but it should support a sound business decision rather than drive it.

Managing Cash Flow Alongside Tax Strategy

Tax planning and cash flow planning should work together.

A strategy that reduces taxable income may not be the right choice if it creates unnecessary pressure on cash flow. Similarly, delaying income or accelerating expenses may help in one year but create challenges in the next.

Monthly reviews help business owners see the full picture. They can evaluate how tax decisions may affect loan payments, operating expenses, payroll, input purchases, and future liquidity.

This is especially important in agriculture, where timing and seasonality can make cash flow uneven throughout the year.

Improving Estimated Tax Planning

Monthly reviews can also help improve estimated tax planning.

When income changes significantly during the year, estimated tax payments may need to be adjusted. Waiting until year-end can result in underpayment, overpayment, or missed planning opportunities.

Regular financial review allows owners and advisors to monitor taxable income throughout the year and make more informed adjustments as needed.

Building a Stronger Year-End Planning Process

Monthly financial reviews do not replace year-end tax planning. They make it more effective.

By the time year-end arrives, the business should already have a reasonable understanding of income, expenses, cash flow, and potential tax exposure. That makes the final planning conversation more focused and practical.

Instead of trying to solve everything in December, the business can confirm the plan, review remaining opportunities, and make final adjustments with more confidence.

A Better Rhythm for Decision-Making

Agricultural businesses operate in a changing environment. Monthly financial reviews provide a regular rhythm for evaluating performance and making decisions with better information.

This process can help owners:

  • Track profitability throughout the year
  • Identify tax-planning opportunities earlier
  • Make stronger capital-purchase decisions
  • Manage cash flow more effectively
  • Reduce surprises at year-end

The goal is not to create more administrative work. The goal is to make financial information more useful.

A Final Thought

Year-end tax outcomes are rarely shaped by one decision. They are usually the result of many decisions made throughout the year.

Monthly financial reviews help agricultural businesses stay ahead of those decisions. With timely information and regular conversations, owners can better align tax planning, cash flow, and long-term business goals.

At DBC, we work with agricultural businesses to review financial performance, evaluate tax-planning opportunities, and prepare for year-end with a more complete understanding of the business. If you want to strengthen your planning process, monthly financial reviews are a practical place to start.

This article provides general tax and accounting insights and is not intended as advice specific to your organization or a substitute for personal consultation. We do not provide legal advice. Because every organization’s circumstances are unique, we encourage you to consult with your legal, tax, or accounting advisor regarding your specific situation.

Common Tax Planning Mistakes We See in Agricultural Operations

Agricultural operations face a unique set of challenges when it comes to tax planning.Income can vary significantly from year to year. Expenses often fluctuate with weather, market conditions, and timing of production cycles. These factors make proactive planning especially important.At the same time, certain patterns tend to show up consistently. Small missteps, repeated over …

Agricultural operations face a unique set of challenges when it comes to tax planning.

Income can vary significantly from year to year. Expenses often fluctuate with weather, market conditions, and timing of production cycles. These factors make proactive planning especially important.

At the same time, certain patterns tend to show up consistently. Small missteps, repeated over time, can lead to missed opportunities or unnecessary tax exposure.

Treating Tax Planning as a Year-End Exercise

One of the most common issues is waiting until year-end to think about taxes.

By that point, many decisions have already been made. Income has been earned, expenses have been incurred, and options may be limited.

Agricultural operations benefit from ongoing planning throughout the year. This allows for more flexibility in managing income, timing expenses, and making informed decisions as conditions change.

Not Aligning Tax Strategy with Cash Flow

It is possible to reduce taxable income while creating cash flow strain.

For example, accelerating expenses into the current year may lower taxes, but it can also reduce available cash needed for operations, equipment, or debt payments.

Balancing tax strategy with cash flow is essential. Decisions should support both objectives, not just one.

Overlooking Depreciation and Capital Planning

Equipment purchases are a regular part of agricultural operations, and the related tax treatment can be complex.

Some businesses take full advantage of accelerated depreciation without considering long-term implications. Others underutilize available deductions.

A more thoughtful approach considers how depreciation fits into multi-year planning, rather than focusing only on the current year.

Inconsistent Recordkeeping

Accurate records are the foundation of effective tax planning.

Inconsistent tracking of expenses, inventory, or production costs can lead to errors in reporting and missed opportunities for deductions or credits.

Strong recordkeeping also supports better decision-making beyond tax compliance.

Missing Available Credits and Programs

Agricultural operations may qualify for various credits, incentives, or special provisions, depending on their activities and location.

These can include credits related to conservation efforts, energy usage, or specific types of production.

Without regular review, these opportunities are often overlooked.

Not Revisiting Entity Structure

As operations grow or change, the original business structure may no longer be the most effective.

Entity choice affects taxation, liability, and long-term planning. Periodically reviewing whether the current structure still aligns with the operation’s goals is an important step.

Bringing It All Together

Tax planning in agriculture is not about a single strategy.

It involves coordinating income, expenses, capital investments, and long-term goals in a way that supports both the operation and the individuals behind it.

Regular review, accurate reporting, and forward-looking decisions all play a role.

A Final Thought

Agricultural businesses operate in an environment where conditions can change quickly.

Having a consistent approach to tax planning helps create stability and reduces uncertainty.

At DBC, we work with agricultural clients to identify planning opportunities, improve reporting, and align tax strategies with overall business goals. If you would like to take a closer look at your current approach, we are here to help.

Evaluating Capital Purchases: Is New Farm Equipment Worth the Tax Deduction?

Purchasing new equipment is often framed as a tax decision.Section 179. Bonus depreciation. Year-end write-offs.It can feel like a smart move to reduce taxable income. But the tax benefit is only part of the equation, and often not the most important part.Before making a capital purchase, it is worth stepping back and asking whether …

Purchasing new equipment is often framed as a tax decision.

Section 179. Bonus depreciation. Year-end write-offs.

It can feel like a smart move to reduce taxable income. But the tax benefit is only part of the equation, and often not the most important part.

Before making a capital purchase, it is worth stepping back and asking whether the investment makes sense for the business as a whole.

The Tax Benefit Is Not the Return

A tax deduction reduces taxable income. It does not create profit.

For example, spending $100,000 on farm equipment to save a portion of that in taxes still means you have spent $100,000 in cash. The deduction helps, but it does not replace the outflow.

The question should not be “How much can we write off?”
It should be “Does this purchase improve the business financially?”

When a Capital Purchase Makes Sense

There are situations where new equipment is a strong investment.

If it increases efficiency, reduces labor costs, improves output, or supports additional revenue, the long-term value may justify the cost.

Equipment that replaces outdated or unreliable assets can also reduce downtime and unexpected repairs, which can have a meaningful impact on operations.

In these cases, the tax benefit becomes an added advantage, not the primary reason for the purchase.

When the Decision Is Driven by Taxes

Problems tend to arise when the purchase is made primarily to reduce taxes.

This often shows up near year-end, when businesses look for ways to lower taxable income without fully considering cash flow or return on investment.

Common issues include:

  • Purchasing equipment that is not immediately needed
  • Taking on financing without a clear repayment plan
  • Reducing liquidity at a time when cash may be needed for operations

These decisions can create pressure in the following year, especially if revenue does not increase as expected.

Cash Flow Still Matters

Even if equipment is financed, it affects cash flow.

Loan payments, maintenance costs, insurance, and operating expenses all need to be considered. These ongoing costs can impact flexibility, especially during slower periods.

Understanding how the purchase fits into overall cash flow helps ensure it supports the business rather than strains it.

Looking Beyond the First Year

Tax deductions often accelerate benefits into the current year, but the business impact extends beyond that.

Will the equipment still provide value in two or three years?
Will it support growth or improve margins over time?
Will it need to be replaced or upgraded sooner than expected?

Thinking beyond the initial tax savings helps frame the decision more accurately.

A More Balanced Approach

The most effective approach is to evaluate both the financial and operational impact.

Consider:

  • Expected return on investment
  • Impact on efficiency and capacity
  • Effect on cash flow and liquidity
  • Long-term usefulness

When those factors align, the tax deduction becomes part of a well-rounded decision.

A Final Thought

Tax planning should support business decisions, not drive them.

When capital purchases are made with a clear understanding of their impact, they can strengthen operations and improve long-term performance.

At DBC, we work with businesses to evaluate farm equipment purchases in the context of cash flow, tax planning, and overall strategy. If you are considering a capital investment, we can help you take a closer look before moving forward.

Understanding Debt Structure: Matching Farm Loans to Cash Cycles

Debt is a normal part of most farming operations. Land, equipment, livestock, and infrastructure require significant capital. The question is not whether to use debt, but how to structure it wisely.One of the most common financial pressures we see in agriculture is not excessive borrowing, but mismatched borrowing. When loan terms do not align …

Debt is a normal part of most farming operations. Land, equipment, livestock, and infrastructure require significant capital. The question is not whether to use debt, but how to structure it wisely.

One of the most common financial pressures we see in agriculture is not excessive borrowing, but mismatched borrowing. When loan terms do not align with the farm’s cash cycle, even a profitable operation can feel unnecessary strain.

The solution begins with a clear understanding of when cash comes in and when it goes out during the year. Once that timing is defined, debt payments can be structured around the realities of your operation rather than working against them.

Know Your Cash Cycle

Unlike many businesses, farms often experience uneven income patterns. Expenses occur steadily or even upfront, while revenue may arrive once or twice a year.

Seed, feed, fertilizer, labor, fuel, and repairs are paid long before crops are harvested or livestock is sold. That timing gap must be financed thoughtfully.

A clear cash flow projection, updated annually, helps identify when cash is tight and when it is available. Without this visibility, loan payments may come due at the worst possible time.

Match Short-Term Needs with Short-Term Debt

Operating expenses tied to a single production cycle are best financed with short-term operating lines or seasonal notes.

These loans are designed to expand during planting or feeding periods and contract once revenue is received. The goal is to avoid using long-term debt for short-term needs, or vice versa.

When structured properly, operating lines provide flexibility without creating unnecessary long-term obligations.

Finance Long-Term Assets with Long-Term Debt

Land purchases, major equipment, building construction, and facility upgrades should generally be financed over a period that reflects their useful life.

Stretching short-term loans to cover long-lived assets creates cash pressure. Conversely, paying for long-term assets too quickly can strain working capital.

A well-structured term loan spreads repayment in a way that aligns with the asset’s productivity and preserves liquidity.

Protect Working Capital

Working capital acts as a buffer against volatility in commodity prices, weather events, and input cost increases.

If debt payments consistently erode working capital, it may signal a structural issue rather than a temporary challenge. Refinancing or restructuring debt can sometimes restore balance and provide breathing room.

Regularly reviewing current ratios and liquidity trends helps identify concerns before they become urgent.

Plan for Growth Carefully

Expansion often requires additional borrowing. Before taking on new debt, it is important to model how repayment fits within existing cash flow.

Will projected revenue comfortably cover principal and interest, even in a lower-yield year? How will new debt affect leverage ratios and lender covenants?

Growth should strengthen the operation, not expose it to unnecessary risk.

Ongoing Review Is Essential

Debt structure should not be set once and forgotten. An annual review of loan terms, repayment schedules, and overall leverage ensures that your financing continues to match your operation’s reality.

At DBC, we work with agricultural clients to evaluate debt structure in the context of cash flow, profitability, and long-term goals. Clear reporting and thoughtful planning can reduce financial stress and support steady growth.

If you would like to review whether your current loan structure aligns with your farm’s cash cycle, DBC is here to help.

Using Benchmarking to Measure Farm Performance Year Over Year

Farming has always required good instincts. Today, it also requires good data.Commodity prices shift, input costs rise and fall, and weather often remains unpredictable. In that environment, it can be difficult to tell whether a farm’s performance is truly improving or simply reflecting external conditions. That is where benchmarking becomes valuable.Benchmarking allows you to …

Farming has always required good instincts. Today, it also requires good data.

Commodity prices shift, input costs rise and fall, and weather often remains unpredictable. In that environment, it can be difficult to tell whether a farm’s performance is truly improving or simply reflecting external conditions. That is where benchmarking becomes valuable.

Benchmarking allows you to measure your farm’s financial and operational results against prior years and against comparable operations. When used consistently, it provides a clearer picture of progress and areas that need attention.

What Benchmarking Really Means

At its core, benchmarking is the process of comparing key performance indicators over time. For farms, those indicators often include:

· Gross revenue per acre or per head

· Cost of production by crop or livestock category

· Operating expense ratios

· Labor efficiency

· Debt-to-asset and working capital ratios

· Net farm income trends

Looking at these metrics consistently helps separate normal seasonal swings from meaningful change. It also reduces the risk of making decisions based on one unusually strong or weak year.

Why Year-Over-Year Comparisons Matter

A single year rarely tells the full story. Strong yields may mask rising input costs. Higher revenue may hide tightening margins.

By reviewing multiple years side by side, patterns begin to emerge. You may see that machinery costs are steadily climbing faster than revenue. Or that feed efficiency has improved after a change in process. Those insights lead to better decisions.

Year-over-year benchmarking also strengthens conversations with lenders. Clear trends and documented performance improvements build credibility and support financing discussions.

Internal Benchmarks vs. Industry Benchmarks

There are two valuable ways to benchmark.

Internal benchmarking compares your farm to its own historical performance. This is often the most meaningful starting point because it reflects your land, your management style, and your cost structure.

Industry benchmarking compares your results to regional or national averages. This can highlight areas where you are outperforming peers or where there may be room for improvement.

Used together, these comparisons provide context. If margins are tightening across the industry, that signals one type of challenge. If your margins are tightening while others remain stable, that signals another.

Turning Data into Decisions

Benchmarking is not about producing more reports. It is about making better operational and financial decisions.

For example:

· If cost of production per bushel is rising, it may be time to renegotiate input contracts or evaluate equipment efficiency.

· If labor costs are increasing faster than revenue, staffing models may need review.

· If working capital is trending downward, cash flow planning may require adjustment before it becomes a constraint.

These are strategic decisions, not just accounting exercises.

The Importance of Clean, Consistent Records

Benchmarking only works when the underlying data is accurate and consistent. Changes in accounting methods, inconsistent expense categorization, or incomplete records can distort comparisons.

Maintaining disciplined year-end reporting and consistent classifications ensures that you are comparing like with like. Even small inconsistencies can lead to misleading conclusions.

This is where thoughtful financial oversight adds real value.

How DBC Supports Agricultural Clients

At DBC, we work with agricultural producers who want more than year-end financial statements. We help clients identify the right metrics, structure reports consistently, and interpret trends in a practical way.

Our goal is to provide clarity. Clear data leads to informed decisions. Informed decisions support long-term stability.

If you would like to explore how benchmarking can strengthen your farm’s financial performance, the team at DBC is here to help.

When a Trust Complicates Farm Succession Planning

Keeping a farm in the family is rarely simple. It is not just about land or assets, but about legacy, relationships, and the responsibility of passing something meaningful to the next generation. Even with thoughtful planning, older estate documents can create challenges that were never anticipated, especially as circumstances change over time.  One situation that …

Keeping a farm in the family is rarely simple. It is not just about land or assets, but about legacy, relationships, and the responsibility of passing something meaningful to the next generation. Even with thoughtful planning, older estate documents can create challenges that were never anticipated, especially as circumstances change over time. 

One situation that comes up more often than many families expect involves testamentary trusts. These trusts are often created to protect assets and provide structure, but years later they can limit flexibility when plans need to evolve. 

When the Plan No Longer Fits the Reality 

Consider a situation we often see in farm succession planning. A farmer lost his wife more than a decade ago, and as part of her estate plan, her share of the farmland was placed into a trust. The trust specifies that, after his passing, her portion of the property will be divided equally among their four children. 

Since then, one of those children has stepped fully into the operation and built his future around farming. The father made a promise that he would find a way to keep the farm intact so his son could continue. The challenge is that the trust no longer reflects that goal, and it cannot be changed. 

This is where many families find themselves. The plan made sense at the time, but life moved forward in ways no one fully anticipated. 

Working With What You Can Control 

Even when part of the plan is fixed, there is often still room to adjust other pieces. In this situation, the father still controls his share of the property, which gives him the ability to influence how things unfold. 

He could choose to leave his portion of the home farm directly to the farming son. While that does not solve everything, it reduces the amount the son would need to purchase from his siblings. Another option is to balance things by allocating additional land from another parcel, helping create a more workable outcome for everyone involved. 

These adjustments may not be perfect, but they can move the family closer to the original intention. 

Looking at the Numbers Differently 

In some cases, the solution is not about changing the structure, but about adjusting how value is shared. 

If the trust requires full market value for its portion, the father may be able to offset that by offering more favorable terms on the assets he controls. A deeper discount on his share can help create a similar overall outcome to what the family originally envisioned. 

This approach requires careful planning, but it can help balance fairness across the family while still supporting the goal of keeping the farm intact. 

Having the Conversation Now, Not Later 

In many situations, the most important step is simply having an open conversation. 

If the goal is to keep the farm operating, it helps to bring the family together and talk through what that means in practical terms. Would the other children be open to allowing their sibling to purchase the land over time? Do they share the same long-term vision for the farm? 

These discussions are not always easy, but they are far easier to have now than during a time of loss. When expectations are clear, families are better positioned to move forward together. 

Setting Expectations With Care 

One of the more difficult moments for any family is when a will is read and something feels unexpected. Without context, decisions can feel unfair, even when they were made with good intentions. 

Taking the time to explain the reasoning behind the plan can make a meaningful difference. When family members understand the limitations created by the trust and the goal of preserving the farm, they are more likely to see the full picture. 

Planning With the Future in Mind 

Situations like this are a reminder that estate plans should not remain static. Over time, land values change, tax rules shift, and family roles evolve. What worked years ago may not support the same outcome today. 

Revisiting these plans periodically gives families the opportunity to adjust while options are still available. It also creates space to think through both the financial and personal aspects of succession. 

At its core, farm succession is about more than transferring property. It is about creating a path forward for the next generation while maintaining fairness across the family. With thoughtful planning and clear communication, it is possible to move closer to both. 

At DBC, we work with agricultural businesses and families to bring structure and clarity to these conversations. By focusing on long-term goals and practical realities, we help guide decisions that support both the operation and the people behind it. 

To read the full article by Mark McLaughlin visit https://www.agriculture.com/how-to-keep-the-farm-in-the-family-when-a-trust-gets-in-the-way-11825875 

U.S. Farm Income Expected to Decline in 2026 Despite Increase in Government Payments 

The financial outlook for U.S. agriculture is showing signs of strain. According to the U.S. Department of Agriculture, net farm income is projected to decline in 2026, even as government support reaches levels not seen in several years.  At first glance, the change appears modest. Net farm income is expected to fall ~0.7% to $153 billion. After …

The financial outlook for U.S. agriculture is showing signs of strain. According to the U.S. Department of Agriculture, net farm income is projected to decline in 2026, even as government support reaches levels not seen in several years. 

At first glance, the change appears modest. Net farm income is expected to fall ~0.7% to $153 billion. After adjusting for inflation, the decline is more pronounced, dropping $4 billion, or ~2.6% from the prior year. What stands out is how much of that income is being supported by government programs. 

A Larger Share of Income Coming From Government Payments 

Government payments are expected to account for nearly 29% of total farm income in 2026. Without that support, the picture changes significantly. USDA data shows net farm income would fall nearly 12% to $109 billion. 

That shift highlights a growing reliance on federal programs to stabilize farm operations. As one agricultural advisor noted, government payments are doing much of the work in supporting crop producers right now. 

Support Levels Not Seen Since Recent Disruptions 

USDA projects direct government payments will reach $30.5 billion in 2025 and increase to $44.3 billion in 2026, not including crop insurance indemnities. These levels have not been seen since 2020 and 2021, when pandemic disruptions and trade challenges led to similar support. 

The increase is tied to Farm Bill programs responding to lower crop prices, along with continued supplemental and disaster assistance. 

At the same time, many producers are carrying higher levels of debt while depending more heavily on these payments to cover operating costs. 

What Is Driving the Pressure 

Several factors are contributing to the current environment: 

  • Lower crop prices influenced by global supply levels 
  • A surplus in grain markets 
  • Lost export demand tied to past trade policies 
  • Ongoing pressure from operating costs, even as some inputs begin to stabilize 

While fuel and pesticide costs are expected to decline, overall financial pressure remains. 

A Mixed Outlook Across Commodities 

Income expectations vary across the agricultural sector: 

  • Corn receipts are expected to increase 
  • Soybean receipts are projected to remain relatively steady 
  • Wheat receipts are expected to decline 
  • Livestock receipts may fall due to lower egg and milk prices 
  • Cattle receipts are expected to continue rising 

This uneven performance adds another layer of complexity for farm operators managing multiple revenue streams. 

A Broader Concern Across the Industry 

Lawmakers and industry leaders are raising concerns about the direction of the farm economy. Some have pointed to growing financial stress among producers, while others have warned of the potential for broader instability if conditions do not improve. 

The USDA’s February report, which incorporated delayed data due to a prior government shutdown, has made it more difficult for economists to fully assess the pace and depth of these challenges. 

What This Means for Farm Operations 

For many farm owners, the concern is not just this year’s numbers. It is what those numbers suggest about long-term stability. 

When a larger share of income comes from external support rather than core operations, it becomes harder to plan with confidence. Cash flow, debt management, and future investment decisions all become more sensitive to factors outside of day-to-day operations. 

This is where financial clarity becomes especially important. Understanding how your operation performs both with and without government support can provide a more complete view of risk. 

Moving Forward With a Clearer View 

Agriculture has always faced cycles, but the current environment is a reminder that strong production alone does not guarantee strong financial results. A record harvest can still lead to tighter margins when prices are under pressure. 

At DBC, we work with agricultural businesses to help bring clarity to these situations. By focusing on cash flow, cost structure, and long-term planning, we help you make informed decisions in an environment that continues to shift. 

To read the full article by P.J. Huffstutter visit US farm income set to fall in 2026 despite surge in government payments | Reuters 

About us

De Boer, Baumann & Company provides professional accounting, tax, and business advisory services to individuals and businesses in West Michigan and the surrounding areas. With expertise in a variety of industries, DBC specializes in comprehensive and innovative solutions to help clients achieve their financial goals.