Agriculture Posts

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 

Farmland Lease Checklist: 10 Essential Elements Every Agreement Should Include 

A farmland lease is more than a document. It sets the tone for the working relationship between a landowner and a farmer. When expectations are clear from the start, it becomes much easier to avoid misunderstandings later on.  Some leases are built on long-standing relationships and trust. That foundation matters, but even the strongest relationships benefit from …

A farmland lease is more than a document. It sets the tone for the working relationship between a landowner and a farmer. When expectations are clear from the start, it becomes much easier to avoid misunderstandings later on. 

Some leases are built on long-standing relationships and trust. That foundation matters, but even the strongest relationships benefit from clarity. A well-structured lease helps both parties understand their responsibilities and protects the future of the land. 

Whether you are creating a lease for the first time or revisiting one that has been in place for years, there are several core elements worth reviewing.

1. Put the Agreement in Writing

Verbal agreements still exist in agriculture, but they often lead to problems. Many disputes can be traced back to details that were never clearly documented. 

Putting the agreement in writing is not about mistrust. It is about preserving the relationship by making sure everyone is aligned from the beginning.

2. Use the Correct Legal Names and Property Description

A lease should clearly identify who is involved. That means using full legal names for both the landowner and the tenant, especially when entities such as LLCs or corporations are involved. 

It is just as important to describe the land accurately. Including parcel numbers, acreage, and location ensures there is no confusion about what is being leased.

3. Clearly Define the Lease Term

Every lease should outline when it begins and when it ends. It should also explain whether the agreement renews automatically and what notice is required if either party decides not to continue. 

State laws may influence these timelines, so it is important to make sure the lease aligns with those requirements.

4. Be Specific About Rent and Payment Terms

Rent should be clearly defined. Whether the agreement is based on cash rent, crop share, or a hybrid approach, both parties should understand how payments are calculated and when they are due. 

It is also helpful to clarify how government payments are handled and what happens if the land is enrolled in a conservation program.

5. Outline Operator Responsibilities

The lease should explain what is expected from the tenant. This typically includes maintaining the land, following appropriate farming practices, and complying with state and federal regulations. 

It may also address how soil conditions and inputs are managed throughout the lease term.

6. Define Landowner Responsibilities

A strong lease works both ways. Landowners may have responsibilities such as disclosing known issues on the property or supporting improvements like drainage or conservation practices. 

Clear expectations on both sides help prevent future disagreements.

7. Address Fertilizer and Input Costs

Input costs can create confusion if they are not clearly outlined. The lease should explain who is responsible for different types of fertilizer and how those costs are shared. 

Agreeing on this structure in advance helps avoid issues during the growing season.

8. Include Insurance Requirements

Risk is part of farming, and a lease should address how that risk is managed. Both the landowner and the tenant should maintain appropriate liability coverage. 

Clear insurance requirements help protect everyone involved if an accident occurs on the property.

9. Include Hold-Harmless and Indemnity Provisions

Leases often include provisions that limit liability and define how responsibility is handled if something goes wrong. Hold-harmless and indemnity clauses help protect both parties when used appropriately. 

These sections may feel technical, but they play an important role in managing risk.

10. Plan for the End of the Lease

It is just as important to define how a lease ends as it is to define how it begins. The agreement should explain what happens when the lease term expires, including access to the property, harvest rights, and transition to a new tenant if needed. 

It may also address subleasing and how ownership changes could affect the agreement. 

Building a Stronger Foundation 

A well-crafted lease creates clarity, reduces uncertainty, and supports a stronger working relationship. It allows both parties to focus on the operation rather than worrying about what was or was not agreed upon. 

At DBC, we work with agricultural businesses and landowners to bring clarity to these types of agreements. With the right structure in place, you can move forward with greater confidence and fewer surprises. 

To read the full article by Cassidy Walter and Shawn Williamson visit https://www.agriculture.com/farmland-lease-checklist-10-essential-elements-every-lease-agreement-should-include-11746678 

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Building Your Farm’s Professional Advisory Team

Running a successful farm requires more than strong production skills. It also depends on having the right people around you to support decision making, protect the business, and help you plan for the future. A well-built advisory team allows you to focus on farming while trusted professionals handle the areas that demand specialized expertise. …

Running a successful farm requires more than strong production skills. It also depends on having the right people around you to support decision making, protect the business, and help you plan for the future. A well-built advisory team allows you to focus on farming while trusted professionals handle the areas that demand specialized expertise.

No two farms need the exact same team, but the most effective operations intentionally surround themselves with advisors who understand agriculture and work toward shared goals.

Understanding the Roles on Your Team

Every farm relies on a mix of contributors who move the business forward and protect what has been built. Some advisors focus directly on profitability and production, while others play a critical role in managing risk and long-term stability.

Operational advisors often include lenders, agronomists, nutritionists, marketing professionals, seed and chemical representatives, veterinarians, and production employees. Their work directly affects yields, efficiency, and cash flow.

Protective advisors help safeguard the business and family. These typically include accountants, attorneys, insurance providers, succession planners, and trusted service professionals. While their impact may be less visible day to day, their role is essential to preserving assets and preventing costly mistakes.

In addition to formal advisors, many farms rely on a broader support network that includes family members, Extension specialists, mentors, neighbors, and peer producers. These relationships often provide perspective and practical insight when it matters most.

Finding the Right Fit Matters

The value of an advisory team depends on how well its members align with your operation and goals. Credentials alone are not enough. Advisors must understand agriculture and be willing to engage with your specific challenges.

Many producers discover that an advisor who served a previous generation well may not be the best fit for the next phase of growth. As operations expand, take on more risk, or change structure, their advisory needs naturally evolve. Reassessing your team is not a sign of disloyalty; it is a necessary step in managing a sophisticated, growing business.

Strong advisors communicate clearly, return calls, ask thoughtful questions, and show confidence in your vision. They should challenge assumptions when needed and support informed decision making rather than simply reacting to problems.

The Time Saving Value of a Strong Team

One of the most overlooked benefits of a well-built advisory team is time. When responsibilities are clearly delegated and supported by capable professionals, owners gain both mental space and hours in the day.

Clear systems, shared platforms, and proactive communication reduce last minute stress. Tax planning becomes less disruptive. Legal and financial issues are addressed before they become urgent. Equipment breakdowns, labor challenges, and operational risks are managed more efficiently because the right people are already in place.

This support is especially important for multi-generational operations where responsibilities are shared among family members and employees. A strong team helps prevent burnout and allows the business to function smoothly even during peak seasons.

Making Sure Advisors Are Aligned

A common challenge in farm operations is working with advisors who operate independently without coordination. Financial plans, legal documents, lending structures, and succession strategies may each make sense on their own but fail to work together.

Alignment across advisors is critical. When your accountant, attorney, and lender are not communicating, gaps and conflicts can emerge. Coordinated planning helps ensure decisions support both short-term operations and long-term goals.

Having a central point of coordination, whether that is an internal leader or a trusted advisor, helps keep everyone focused on the same objectives and reduces the risk of conflicting strategies.

Knowing When to Make a Change

If a professional relationship is not working, it is important to recognize that you are the client. Advisors are there to serve the goals of the farm. If communication is poor, understanding is lacking, or progress feels stalled, it may be time to seek a second opinion or make a change.

Moving on from an advisor does not require conflict. Often, it simply reflects a shift in needs or direction. Giving yourself permission to adjust your team helps ensure the business remains supported as it grows and changes.

Building And Maintaining Your Roster

Recommendations from trusted peers, lenders, and current advisors are often the best way to find new team members. Asking who has helped others navigate similar situations can lead to better matches than asking general questions about who is “good” at their job.

Technology has also expanded access to specialized expertise. Geographic location is no longer a barrier to working with professionals who understand agriculture and your specific challenges.

Once your team is in place, regular check-ins help keep everyone aligned. Reviewing goals, updating plans, and evaluating progress ensures advisors remain focused on supporting the direction of the farm rather than reacting to isolated issues.

How De Boer, Baumann & Company Can Help

Strong advisory teams do not form by accident. They are built intentionally around the goals and structure of the operation. De Boer, Baumann & Company works with agricultural producers to coordinate financial planning, tax strategy, succession planning, and long-term decision making. Our team helps connect the dots between advisors so farm owners can move forward with clarity and confidence.

To read the full article by Lisa Foust Prater, please visit https://www.agriculture.com/draft-your-farms-professional-dream-team-8708459.

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Factoring Living Expenses Into Farm Compensation Planning

As farm families review year-end financials and prepare for another season, compensation conversations often rise to the surface. Wages, salaries, and major capital investments tend to get the most attention. One area that is frequently overlooked, however, is family living expenses. While these costs may seem modest compared to land, equipment, or operating inputs, …

As farm families review year-end financials and prepare for another season, compensation conversations often rise to the surface. Wages, salaries, and major capital investments tend to get the most attention. One area that is frequently overlooked, however, is family living expenses.

While these costs may seem modest compared to land, equipment, or operating inputs, they can significantly affect cash flow and profitability, especially when multiple families rely on the business for support. When living expenses are not clearly understood or documented, they can also become a source of tension within family operations.

 

Why Living Expenses Matter More Than You Think

Family living expenses often flow through the farm business in ways that are not always obvious. Housing, utilities, vehicles, insurance, and other benefits may be paid by the operation and deducted for tax purposes. While these arrangements can be tax efficient, they can also blur the line between compensation and business expenses.

When these costs are not clearly identified, it becomes difficult to answer a basic question: what is each person actually living on? Without that clarity, compensation discussions are incomplete and comparisons between roles can feel unfair, even when no one intends them to be.

Understanding the full cost of supporting family members through the business is an important step toward more transparent financial planning.

 

Separating Compensation From What the Business Can Afford

In many family operations, compensation discussions get tangled with concerns about cash flow. Rather than setting compensation based on the value of the work being performed, families often ask what the business can afford in a given year.

In a nonfamily business, compensation decisions are typically made based on market value for a role. If the business cannot afford that cost, staffing changes are considered. Family businesses rarely operate this way. Instead, they often reduce pay, defer compensation, or rely on operating loans to cover gaps. Over time, this can lead to resentment and confusion, especially if expectations are not clearly communicated.

Developing a formal compensation plan helps shift the focus from short-term affordability to long-term sustainability and fairness.

 

Accounting for Hidden Compensation

Many farms provide benefits that function as compensation but are not always recognized as such. Housing, vehicles, insurance coverage, meals, or even animal boarding can represent a significant portion of an individual’s total compensation package.

When these benefits are not quantified, individuals may underestimate what they are receiving from the business. A role that appears to pay a modest salary may actually provide a much higher level of total compensation once these benefits are considered.

Quantifying both wages and benefits allows families to see the full picture. It also provides a foundation for addressing perceived inequities and making informed adjustments.

 

Building a Market-Based Compensation Plan

A strong compensation plan often starts with a market-based assessment. Consider what a similar role would command if the farm had to hire a nonfamily employee. This approach helps establish a fair baseline for labor and management compensation.

Once total compensation is defined, benefits can be allocated based on individual circumstances. One family member may need health insurance through the farm, while another may receive coverage elsewhere. Flexibility within the compensation structure allows benefits to be adjusted while maintaining overall fairness.

Clear documentation ensures everyone understands how compensation is determined and what it includes.

 

Separating Returns to Labor From Returns to Ownership

Another common challenge in family farms is distinguishing between compensation for work performed and returns generated by ownership. Without clear policies, profits may be distributed unevenly or used to supplement wages in strong years, only to be reduced when conditions change.

Establishing a policy that prioritizes fair, competitive compensation first helps create consistency. Profits earned beyond compensation can then be distributed based on ownership interests. This separation supports more stable planning and reduces emotional decision making tied to short-term performance.

Clear distinctions are especially important as farms bring in the next generation or involve multiple family branches.

 

Establishing Expense And Reimbursement Policies

Expense management is another area where clarity matters. Personal expenses can easily be buried in operating categories, whether intentionally or unintentionally. Over time, this practice distorts financial reporting and complicates compensation discussions.

Clear policies should define which expenses may be charged to the business and how reimbursements are handled. Regular review of expenses encourages accountability and promotes more disciplined spending.

Some farms benefit from structured discussions around expenses, while others rely on documented policies and periodic reviews. The right approach varies, but consistency is key.

 

Having The Right Conversations At The Right Time

Discussions about compensation and expenses are not easy, but avoiding them creates greater risk over time. These conversations are best handled intentionally, separate from holidays or emotionally charged family gatherings.

Trusted advisors can play an important role in these discussions. Accountants and lenders bring objectivity and financial insight that can help families evaluate options and make informed decisions grounded in data rather than assumptions.

 

How De Boer, Baumann & Company Can Help

Compensation planning in family farm operations requires more than setting wages. It involves understanding living expenses, valuing benefits, separating ownership returns, and aligning policies with long-term goals. De Boer, Baumann & Company works with agricultural producers to develop clear, practical compensation and expense structures that support fairness, transparency, and financial sustainability.

To read the original article by Katie Micik Dehlinger, please visit https://www.dtnpf.com/agriculture/web/ag/news/article/2025/12/01/hidden-benefits.

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A Conversation Is Not a Contract: Why Farm Succession Plans Must Be Put in Writing

Many farm families talk openly about the future. They discuss who will run the operation, how responsibilities will shift, and what retirement might look like for the senior generation. These conversations are important, but they are not enough. Without written agreements and legal documentation, even the best intentions remain uncertain. A farm succession plan …

Many farm families talk openly about the future. They discuss who will run the operation, how responsibilities will shift, and what retirement might look like for the senior generation. These conversations are important, but they are not enough.

Without written agreements and legal documentation, even the best intentions remain uncertain. A farm succession plan that exists only in conversation leaves too much room for misunderstanding, delay, and conflict. For the next generation, that uncertainty can become a significant source of stress.

 

When Responsibility Grows but Certainty Does Not

In many family farm operations, the next generation gradually takes on more responsibility. They manage day-to-day operations, oversee production decisions, and help stabilize the business so the senior generation can step back. Over time, this shift often allows parents to travel more, reduce stress, and enjoy life beyond the farm.

The challenge arises when increased responsibility is not matched with clarity about the future. Assumptions replace assurances. Verbal comments like “you’re doing great,” “we will take care of it,” or “that sounds fair” feel encouraging, but they do not define ownership, authority, or timelines.

As years pass, uncertainty grows. The next generation may wonder what their long-term role will be, how assets will transition, and whether their commitment is truly recognized. Strong working relationships can mask these concerns until frustration quietly builds.

 

Why Verbal Agreements Fall Short

Families often avoid formal planning because conversations feel easier than documentation. Topics like ownership transfer, compensation, and estate planning can feel uncomfortable, especially when relationships are positive.

The problem is that verbal alignment does not guarantee shared understanding. People may interpret the same conversation very differently. What sounds like agreement to one person may feel like a loose idea to another.

Without written documentation, expectations remain untested. Decisions are delayed. When a triggering event occurs, such as illness, death, or burnout, the lack of clarity can quickly turn into conflict. In many cases, this is when farms are divided, sold, or lost entirely.

 

What Successful Transitions Have in Common

Farms that transition successfully do not rely on assumptions. They take the time to document how the business operates today and how it is expected to operate in the future. With family, more clarity is required, not less.

Written plans help protect relationships by removing ambiguity. They provide a shared reference point and create accountability for follow through. Most importantly, they give the next generation confidence that their future is being taken seriously.

 

Key Items That Should Be Documented

A comprehensive succession plan typically includes clear documentation across multiple areas of the business:

  • Ownership documents such as titles, deeds, and asset records

  • Business structure documentation for corporations, LLCs, or partnerships, including operating and organizational agreements

  • Exit strategies, including buy-sell agreements and transfer provisions

  • Leases and contracts tied to land, equipment, or facilities

  • Compliance and regulatory documentation

  • Defined signature authority and decision-making responsibilities

  • Accurate meeting minutes and formal records

  • Core business documents such as mission statements, goals, standards, and financial reports

  • Conflict resolution processes

  • Employee documentation including job descriptions, compensation, and benefits

  • A written succession plan outlining leadership and ownership transition

  • Estate planning documents when individually-owned assets affect business continuity

Each of these elements helps ensure the farm can continue operating smoothly while ownership and leadership evolve.

 

Starting the Conversation the Right Way

When relationships are strong, the next generation has earned the right to ask meaningful questions about the future. Asking for clarity is not a sign of impatience or entitlement. It is a necessary step in protecting both the business and the family.

Setting aside dedicated time to discuss concerns and expectations can help move conversations into action. Written plans do not need to answer every question immediately, but they should establish direction, structure, and next steps.

 

How De Boer, Baumann & Company Can Help

Farm succession planning involves more than estate documents. It requires alignment between ownership, management, tax planning, and long-term business goals. De Boer, Baumann & Company works with farm families to bring structure and clarity to succession planning conversations. Our team helps clients document expectations, evaluate financial impacts, and build practical plans that support continuity while preserving family relationships.

To read the original article by Jolene Brown, please visit https://www.agriculture.com/a-conversation-isn-t-a-contract-put-your-farm-succession-plan-in-writing-11825340

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Getting Farm 1031 Exchanges Right

Section 1031 exchanges continue to be a common planning tool for agricultural producers, particularly as land sales tied to solar projects, data centers, and inherited property increase. While many 1031 exchanges follow a familiar structure, farmland introduces unique considerations that can complicate the process if not addressed early. A 1031 exchange can offer meaningful …

Section 1031 exchanges continue to be a common planning tool for agricultural producers, particularly as land sales tied to solar projects, data centers, and inherited property increase. While many 1031 exchanges follow a familiar structure, farmland introduces unique considerations that can complicate the process if not addressed early.

A 1031 exchange can offer meaningful tax deferral opportunities, but it is highly rule driven. Understanding the nuances specific to agricultural land is essential to avoiding costly missteps.

What Is a Section 1031 Exchange?

Section 1031 of the Internal Revenue Code allows taxpayers to defer capital gains taxes by exchanging qualifying property used in a trade or business or held for investment for another like-kind property. The IRS defines like-kind as property of the same nature or character, even if it differs in grade or quality.

For real estate, this definition is broad. Improved and unimproved real property generally qualifies as like-kind, making farmland eligible for exchange into other real property used for business or investment purposes.

Why Farm 1031 Exchanges Are More Complex

Agricultural land is rarely just land. A typical farm property may include buildings, irrigation or tiling systems, a personal residence, and associated water or mineral rights. Each of these components can carry different tax classifications, which affects how they must be treated within a 1031 exchange.

Another common complication in agriculture is related party transactions. Family-owned operations often involve exchanges between relatives or commonly owned entities, which triggers additional IRS scrutiny and stricter compliance requirements.

Understanding Asset Class Treatment

Farm properties often consist of multiple asset classes, each with its own exchange rules.

Land is generally the most straightforward. It can be exchanged for other qualifying real property on a tax deferred basis, provided all net proceeds and cash are reinvested in the replacement property.

Section 1250 property includes buildings other than certain livestock or storage facilities. These assets must be exchanged for equal or greater Section 1250 property to maintain tax deferral.

Section 1245 property includes certain depreciable assets tied to the operation. To qualify for tax free treatment, these assets must be exchanged for equal or greater Section 1245 property. It is important to note that personal property such as tractors or vehicles no longer qualifies as like-kind property for 1031 purposes.

Properly allocating value among these asset classes is critical, as an error can result in unexpected taxable gain.

The Role of Debt in a 1031 Exchange

Debt is another key factor that can affect the success of a 1031 exchange. If the relinquished property carries debt, the replacement property must generally have equal or greater debt to avoid triggering taxable boot.

This requirement often necessitates early conversations with lenders. In some cases, debt may need to be restructured or refinanced to align with the exchange rules. Addressing financing before the sale closes helps prevent delays or disqualification later in the process.

Timing Rules You Cannot Miss

Timing is one of the most rigid aspects of a 1031 exchange. Once the relinquished property is sold, the taxpayer has 45 days to identify potential replacement properties. The exchange must be fully completed within 180 days of the original sale.

During this period, sale proceeds must be held by a qualified intermediary. The taxpayer cannot access or control the funds at any point during the exchange. Missing a deadline or improperly handling funds can cause the entire transaction to become taxable.

Replacement Property Identification Rules

When identifying replacement property within the 45 day window, taxpayers must follow specific identification rules.

Under the three property rule, up to three potential replacement properties may be identified regardless of their value.

Under the 200 percent rule, any number of properties may be identified as long as their combined fair market value does not exceed 200 percent of the relinquished property.

Selecting the appropriate identification strategy depends on market conditions, availability of land, and the overall exchange plan.

Special Considerations for Related Party Exchanges

Related party 1031 exchanges are subject to additional restrictions. Related parties include family members, commonly owned entities, and certain trusts. These transactions are closely reviewed by the IRS due to the potential for abuse.

When a 1031 exchange involves a related party, neither party may dispose of the acquired property within two years. If this rule is violated, the deferred gain becomes taxable. Proper documentation is also critical. Transactions should be conducted at fair market value and structured as arm’s length arrangements to reduce audit risk.

Planning Ahead Matters

While 1031 exchanges are often described as straightforward, agricultural exchanges rarely are. The combination of multiple asset classes, financing considerations, timing rules, and family involvement increases the margin for error.

Producers considering a 1031 exchange should involve their advisory team early. Careful planning helps ensure the exchange achieves its intended tax deferral and supports broader operational and succession goals.

How De Boer, Baumann & Company Can Help

Section 1031 exchanges require careful coordination between tax planning, transaction structure, and long term business strategy. De Boer, Baumann & Company works with agricultural producers to evaluate exchange opportunities, identify risks, and navigate the technical requirements specific to farmland transactions. Our team helps ensure exchanges are structured properly and aligned with your broader financial and succession plans.

To read the original article by Rod Mauszycki, please visit https://www.dtnpf.com/agriculture/web/ag/news/business-inputs/article/2025/12/03/get-farm-1031-exchange-right.

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Supporting Generational Transitions in Farm and Ranch Operations

Generational transitions are some of the most consequential moments in the life of a farm or ranch. These changes go far beyond ownership paperwork or management titles. They influence daily decision making, long-term strategy, family relationships, and the financial stability of the operation for years to come. While every transition is different, many challenges …

Generational transitions are some of the most consequential moments in the life of a farm or ranch. These changes go far beyond ownership paperwork or management titles. They influence daily decision making, long-term strategy, family relationships, and the financial stability of the operation for years to come.

While every transition is different, many challenges stem from the same source. Multiple generations bring valuable but different strengths to the business. When those strengths are not intentionally aligned, frustration and uncertainty can follow. When they are, the operation is often better positioned for continuity, growth, and resilience.

Understanding how each generation contributes is a critical starting point for a successful transition.

Recognizing the Strengths of Each Generation

Senior generations bring decades of experience shaped by market cycles, weather volatility, equipment challenges, labor issues, and lender relationships. They understand which decisions carry lasting consequences and where risks tend to surface over time. This depth of knowledge provides valuable perspective when evaluating opportunities and navigating uncertainty.

Younger generations often contribute energy, adaptability, and comfort with technology and data-driven decision making. They are typically more open to new tools, evolving production methods, and operational efficiencies. Their ability to learn quickly and challenge long-standing assumptions can reveal opportunities for improvement and long-term sustainability.

Both perspectives are essential. Challenges often arise when expectations around decision making, authority, and communication are unclear.

Creating Space for the Next Generation to Lead

One of the most common transition challenges occurs when senior generations remain deeply involved in every operational decision. While this involvement is often rooted in responsibility and care for the business, it can unintentionally limit the confidence and development of the next generation.

Allowing younger family members space to solve problems is essential. That may involve stepping away from daily operations periodically or intentionally allowing others to manage issues as they arise. This space creates opportunities for learning, accountability, and leadership growth.

It is also important to resist the urge to correct every mistake. Not every issue requires immediate intervention. In many cases, lessons learned through experience are far more valuable than guidance given too early. A practical approach is to step in only when a decision presents a significant financial or operational risk.

Financial structure can also influence how easily senior generations step back. When personal income depends entirely on operating profits, releasing control becomes more difficult. Separating income through land rent, equipment rent, or retirement resources can provide greater flexibility during the transition.

Supporting the Senior Generation Through Change

Transitions affect both sides. For senior generations, stepping away from a business built over decades represents a major life shift. Supporting that change requires clarity, respect, and open communication.

Younger leaders should clearly define where they want input and involvement. This helps avoid confusion and reduces overlap in authority. Asking for guidance in specific areas, such as lender relationships, land negotiations, or production planning, allows experience to be shared productively without undermining leadership roles.

Encouraging senior generations to teach, document, and share institutional knowledge is also valuable. Many farms rely on unwritten processes and historical insight that can be difficult to replace. Capturing that knowledge supports continuity and reduces risk during and after the transition.

Equally important is encouraging meaningful activities outside of daily operations. Community involvement, mentoring, industry boards, family time, or personal projects can help maintain a sense of purpose while supporting a healthy transition away from day-to-day management.

Aligning Expectations Early

Many transition challenges arise from assumptions that are never discussed. Who makes final decisions? How are profits distributed? What does the long-term vision look like? Addressing these topics early creates clarity and reduces the risk of conflict.

Formal transition planning helps structure these conversations. Ownership arrangements, management responsibilities, compensation, and timelines should be clearly documented and reviewed regularly. Planning does not eliminate flexibility, but it does create shared understanding and alignment.

Professional advisors can play an important role in facilitating these discussions. A neutral perspective helps families evaluate financial implications, identify risks, and model outcomes before challenges arise. Thoughtful planning supports both the business and the relationships behind it.

Building a Stronger Future Together

A successful generational transition does not happen by chance. It requires trust, patience, and intentional collaboration from all involved. When senior and younger generations align their strengths and expectations, farms and ranches are better positioned to remain financially sound and operationally strong for generations to come.

How De Boer, Baumann & Company Can Help

Generational transitions involve complex financial, operational, and family considerations. De Boer, Baumann & Company works closely with agricultural producers to provide guidance through ownership transitions, management changes, and long-term planning. Our team helps bring structure and clarity to the process so families can make informed decisions that support continuity, financial stability, and lasting success.

To read the original article by Lance Woodbury, please visit https://www.dtnpf.com/agriculture/web/ag/news/article/2025/12/01/supporting-generational-transitions.

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.