Cattle, land and money.

[herofan]

I Guess its my fault for reporting more income than expenses . I guess i could be like a lot of other folks and hide it or just forget to report it. I really blame my Mama for raising me to do whats right . Its all her fault now that i think about it,

Not an expert here, but I've always been a little confused by the "loss" thing myself. A couple of years ago when my daughter started college, we filled out all the forms to see if she qualified for any financial assistance. Everybody told me that because I have a farm, we would get a lot of help. We were at orientation day with other parents and they passed out the financial forms that showed results, and having a farm didn't make a splash on ours, but there was a lady I knew well who is a farmer, and it seemed to work for her. We kinda scratched our heads a few minutes, and she said, "Of course, we always show a loss each year."

I don't know how or why to show a loss if I don't actually have one. My operation isn't big enough that I'm making a living from it, but I'm certainly making a little profit; if I weren't, how could I go on year after year?

Every few years, you make a small profit, not large enough to be taxable at any rate, to keep yourself considered by the tax man as a 'legitimate farm'. The other years you spend 'er all and make sure you stay away from things you can't claim. Groceries are one necessary evil you can't claim. Nobody hates paying income tax more than farmers. Always shocked to meet those that do, because they are few and far between. A good accountant is worth his weight in gold, and some really know how to push the boundaries. I do drop the ball at times as I don't claim all of my vehicle fuel, because I would need to carry a log book to prove every trip is a business trip.

By spending it all, I assume you mean spending it in farm related things that you can count off. I guess it's just a different view on the subject. I'm also a very small operation; what I make is just some extra money, but not a living. I guess the enjoyment of income for me is to be able to do what I want with it instead of using it all to buy more farm supplies. Of course, some of the money has to be put back in the farm, but if all I ever do with profit is buy more farm supplies to make more money go buy more farm supplies, that just seems like a monotonous circle to me. I can understand liking something and not being too worried about profit; that's an idea one might apply to stamp collecting, but I don't like cows that much; not enough to fool with them for free or at a loss. I guess if one enjoys farming that much, then getting to buy a new piece of equipment or something every year is a treat, but I'd like to spend for things outside the farm with my extra whether I get to count it off or not.

 

[boondocks]

I don't get the losing money thing either. I typically have 40-50 mama cows and spend around 8-11K every year.

Welp, ya must not feed hay a solid 6 months a year. I honestly don't know how anyone in northern climates (or drought areas) doesn't lose $ if they are scrupulous about their true costs. I suppose a few folks get by if they are lucky enough to get their neighbors' pastures free for the haying. Even if we "charge" none of the land costs (purchase price or taxes) to the cows, and assume nothing for our own labor (we hire a very little help from time to time), and have not bought outside stock in 4 years now (AI only), it is still tough to justify on a financial basis. We started with zero equipment and no fences, which has been a big bite.
We are cutting out own hay this year, which will probably convince us this whole thing is bat-shite crazy.

 

[TexasBred]

Every few years, you make a small profit

Guess I never figured that part out. I had a small loss one year.

We know by now that you're better than all of us at about anything but you need a new CPA. He/she is missing a lot. Or are you doing it yourself??

 

[Aaron]

Not an expert here, but I've always been a little confused by the "loss" thing myself. A couple of years ago when my daughter started college, we filled out all the forms to see if she qualified for any financial assistance. Everybody told me that because I have a farm, we would get a lot of help. We were at orientation day with other parents and they passed out the financial forms that showed results, and having a farm didn't make a splash on ours, but there was a lady I knew well who is a farmer, and it seemed to work for her. We kinda scratched our heads a few minutes, and she said, "Of course, we always show a loss each year."

I don't know how or why to show a loss if I don't actually have one. My operation isn't big enough that I'm making a living from it, but I'm certainly making a little profit; if I weren't, how could I go on year after year?

Every few years, you make a small profit, not large enough to be taxable at any rate, to keep yourself considered by the tax man as a 'legitimate farm'. The other years you spend 'er all and make sure you stay away from things you can't claim. Groceries are one necessary evil you can't claim. Nobody hates paying income tax more than farmers. Always shocked to meet those that do, because they are few and far between. A good accountant is worth his weight in gold, and some really know how to push the boundaries. I do drop the ball at times as I don't claim all of my vehicle fuel, because I would need to carry a log book to prove every trip is a business trip.

By spending it all, I assume you mean spending it in farm related things that you can count off. I guess it's just a different view on the subject. I'm also a very small operation; what I make is just some extra money, but not a living. I guess the enjoyment of income for me is to be able to do what I want with it instead of using it all to buy more farm supplies. Of course, some of the money has to be put back in the farm, but if all I ever do with profit is buy more farm supplies to make more money go buy more farm supplies, that just seems like a monotonous circle to me. I can understand liking something and not being too worried about profit; that's an idea one might apply to stamp collecting, but I don't like cows that much; not enough to fool with them for free or at a loss. I guess if one enjoys farming that much, then getting to buy a new piece of equipment or something every year is a treat, but I'd like to spend for things outside the farm with my extra whether I get to count it off or not.

Yes, if you don't love the cows and have a deep connection with the land, your likely to just view it as a hobby or investment. Everything I make goes back into the farm as I don't have any other interests. I get tremendous satisfaction at seeing the farm being well maintained and boosting productivity at every turn. I only had one elderly cousin across the river from Detroit in Southern Ontario that had the same passion for farming. He was still putting in crops in his early 90's. The rest of family/extended family just views it as a hobby or money pit. But they have other interests like vacations, cruises and various hobbies. I've been spending a lot of time the last number of weeks along a back forty fence line widening out the right of way and skidding out wood. Many would just shake their heads at the amount of work, but it is very therapeutic for me. So quiet and isolated, there isn't a single sound to be heard other than the odd whisper of the wind. Nobody is on my back about timelines or protocol - every day is productive and enjoyable.

 

[herofan]

I don't get the losing money thing either. I typically have 40-50 mama cows and spend around 8-11K every year.

Right. I'm sure you make a lot more than 8-10k on 40-50 calves, so I certainly don't understand how that would calculate into a loss. I have 20-22 mamas and usually spend around 5-7k a year in expenses. If I was making less than that on 20 calves, I would hang it up.

 

[Lucky]

I wouldn't say the cows don't need to make money for me but, I don't need the money they do make to live on. I enjoy seeing progress so if I can buy feed bins or troughs to lower feed cost that's more I can spend on cross fencing. Cross fencing and rotating allows you to run more cows which equals more $$. I really enjoy making progress and running more efficiently.

 

[Brute 23]

I wouldn't say the cows don't need to make money for me but, I don't need the money they do make to live on. I enjoy seeing progress so if I can buy feed bins or troughs to lower feed cost that's more I can spend on cross fencing. Cross fencing and rotating allows you to run more cows which equals more $$. I really enjoy making progress and running more efficiently.

Same here. That is pretty much our game plan. If the cattle produce cash that year we re-invest it to reduce risk, become more efficient, and grow the asset.

 

[shaz]

I don't get the losing money thing either. I typically have 40-50 mama cows and spend around 8-11K every year.

Welp, ya must not feed hay a solid 6 months a year. I honestly don't know how anyone in northern climates (or drought areas) doesn't lose $ if they are scrupulous about their true costs. I suppose a few folks get by if they are lucky enough to get their neighbors' pastures free for the haying. Even if we "charge" none of the land costs (purchase price or taxes) to the cows, and assume nothing for our own labor (we hire a very little help from time to time), and have not bought outside stock in 4 years now (AI only), it is still tough to justify on a financial basis. We started with zero equipment and no fences, which has been a big bite.
We are cutting out own hay this year, which will probably convince us this whole thing is bat-shite crazy.

I feed hay about 80 days a year. Used to do my own hay but my job got in the way. My hay cost is $60/ton.

 

[herofan]

Every few years, you make a small profit, not large enough to be taxable at any rate, to keep yourself considered by the tax man as a 'legitimate farm'. The other years you spend 'er all and make sure you stay away from things you can't claim. Groceries are one necessary evil you can't claim. Nobody hates paying income tax more than farmers. Always shocked to meet those that do, because they are few and far between. A good accountant is worth his weight in gold, and some really know how to push the boundaries. I do drop the ball at times as I don't claim all of my vehicle fuel, because I would need to carry a log book to prove every trip is a business trip.

By spending it all, I assume you mean spending it in farm related things that you can count off. I guess it's just a different view on the subject. I'm also a very small operation; what I make is just some extra money, but not a living. I guess the enjoyment of income for me is to be able to do what I want with it instead of using it all to buy more farm supplies. Of course, some of the money has to be put back in the farm, but if all I ever do with profit is buy more farm supplies to make more money go buy more farm supplies, that just seems like a monotonous circle to me. I can understand liking something and not being too worried about profit; that's an idea one might apply to stamp collecting, but I don't like cows that much; not enough to fool with them for free or at a loss. I guess if one enjoys farming that much, then getting to buy a new piece of equipment or something every year is a treat, but I'd like to spend for things outside the farm with my extra whether I get to count it off or not.

Yes, if you don't love the cows and have a deep connection with the land, your likely to just view it as a hobby or investment. Everything I make goes back into the farm as I don't have any other interests. I get tremendous satisfaction at seeing the farm being well maintained and boosting productivity at every turn. I only had one elderly cousin across the river from Detroit in Southern Ontario that had the same passion for farming. He was still putting in crops in his early 90's. The rest of family/extended family just views it as a hobby or money pit. But they have other interests like vacations, cruises and various hobbies. I've been spending a lot of time the last number of weeks along a back forty fence line widening out the right of way and skidding out wood. Many would just shake their heads at the amount of work, but it is very therapeutic for me. So quiet and isolated, there isn't a single sound to be heard other than the odd whisper of the wind. Nobody is on my back about timelines or protocol - every day is productive and enjoyable.

I can appreciate your thoughts and passion for what you do. I'm with you on a few things. I also like isolation and working on the backside of the farm where it's quiet and away from everything. I also do not care for vacations, cruises and the like. When I read about your deep connection to the land and your "love" of the cows, it almost makes me feel like a singer trying to pretend he's country to get on the charts when he's really rock n roll at heart. I'm the type of personality, however, who has never had such a passion for "one" thing to the point that I want to devote my being to it; I have to have some balance and divide up my time.

I have to teach school a while, do cows a while, do some everyday living a while, do a singing gig on occasion, and then just hit the recliner and watch tv a while. If I did any one of those "all the time," I'd get sick of it; that's just how I'm wired. I think doing things in moderation keeps them fresh and enjoyable to me.

As for putting money into things, I suppose I'm more of a "purpose" guy more than anything. For example, a lot of my fence probably wouldn't make the cover of a farming magazine. It's the result of years of patching what tears up, but it serves the purpose of keeping my cattle in just the same as if I'd spent thousands having it looking good. Actually, I think the rustic look isn't that bad. So, I don't really see the point in spending a lot on it; I'd rather spend that money on something else.

 

[shaz]

I think any farm is a business. If it doesn't make a profit then how can it survive after I'm gone? I'd love to see my grandson take over one day but ......do I really have to say it?

 

[Lucky]

I notice that allot of people don't like putting money back into the farm. I understand everyone likes to do other things and some folks just make due with what they have. The one thing to remember though is that if you keep thinking maybe next year I'll replace that stretch of fence or fertilize that pasture eventually it will all be bad and won't be able to sustain any cattle. You pretty much can't starve a profit out of anything. For the most part the land I have all came up for sale because previous owners used it up until it wasn't worth running cattle on. A few years and some hard work and it's back on track.

 

[backhoeboogie]

I notice that allot of people don't like putting money back into the farm. I understand everyone likes to do other things and some folks just make due with what they have. The one thing to remember though is that if you keep thinking maybe next year I'll replace that stretch of fence or fertilize that pasture eventually it will all be bad and won't be able to sustain any cattle. You pretty much can't starve a profit out of anything. For the most part the land I have all came up for sale because previous owners used it up until it wasn't worth running cattle on. A few years and some hard work and it's back on track.

That's the problem with leased land. If you take on something that's marginal and put it in good production, the owners want to up the lease.

 

[backhoeboogie]

Every few years, you make a small profit

Guess I never figured that part out. I had a small loss one year.

We know by now that you're better than all of us at about anything but you need a new CPA. He/she is missing a lot. Or are you doing it yourself??

I wish you success TB. I haven't done my own taxes in decades.

 

[herofan]

I notice that allot of people don't like putting money back into the farm. I understand everyone likes to do other things and some folks just make due with what they have. The one thing to remember though is that if you keep thinking maybe next year I'll replace that stretch of fence or fertilize that pasture eventually it will all be bad and won't be able to sustain any cattle. You pretty much can't starve a profit out of anything. For the most part the land I have all came up for sale because previous owners used it up until it wasn't worth running cattle on. A few years and some hard work and it's back on track.

Sure, some money always has to ge put back in the farm; that's part of my expenses. I fertilize every year, and I always have some fencing expenses. I just don't understand why someone would want to have such a large project if all they ever do is put profits back in it, and that goes for anything, not just farming. If I open a restaurant, sure, there may be a period of a few years where all the money had to be put back in to get it on its feet, but if I have the restaurant for 40 years, and all I ever do is put the profits back in the restaurant, then I don't understand the gain. I could have had the same outcome with a lemonade stand.

 

[littletom]

I notice that allot of people don't like putting money back into the farm. I understand everyone likes to do other things and some folks just make due with what they have. The one thing to remember though is that if you keep thinking maybe next year I'll replace that stretch of fence or fertilize that pasture eventually it will all be bad and won't be able to sustain any cattle. You pretty much can't starve a profit out of anything. For the most part the land I have all came up for sale because previous owners used it up until it wasn't worth running cattle on. A few years and some hard work and it's back on track.

Sure, some money always has to ge put back in the farm; that's part of my expenses. I fertilize every year, and I always have some fencing expenses. I just don't understand why someone would want to have such a large project if all they ever do is put profits back in it, and that goes for anything, not just farming. If I open a restaurant, sure, there may be a period of a few years where all the money had to be put back in to get it on its feet, but if I have the restaurant for 40 years, and all I ever do is put the profits back in the restaurant, then I don't understand the gain. I could have had the same outcome with a lemonade stand.

I put a lot of money back into the farm. Either by improving or expanding i love it and it is my living i farm full time. I do have to pay taxes on my farm money. But most years something is bought to help the farm and taxes. When my kids decide to follow in farming or sell it they will start way better off than i did. Alot of farmers are asset rich cash poor.

 

[Aaron]

I notice that allot of people don't like putting money back into the farm. I understand everyone likes to do other things and some folks just make due with what they have. The one thing to remember though is that if you keep thinking maybe next year I'll replace that stretch of fence or fertilize that pasture eventually it will all be bad and won't be able to sustain any cattle. You pretty much can't starve a profit out of anything. For the most part the land I have all came up for sale because previous owners used it up until it wasn't worth running cattle on. A few years and some hard work and it's back on track.

Sure, some money always has to ge put back in the farm; that's part of my expenses. I fertilize every year, and I always have some fencing expenses. I just don't understand why someone would want to have such a large project if all they ever do is put profits back in it, and that goes for anything, not just farming. If I open a restaurant, sure, there may be a period of a few years where all the money had to be put back in to get it on its feet, but if I have the restaurant for 40 years, and all I ever do is put the profits back in the restaurant, then I don't understand the gain. I could have had the same outcome with a lemonade stand.

Yeah, I can't explain it. Must be a mental disorder of some sort. I get more joy out of buying something for the farm than for myself I guess. Just trying to remember the major purchases last year off top of my head. Fertilizer was 8k, tractor was 25k, bull was 6k, heifers were 18k, fence supplies were 3k, fuel was around 3k and I think the rest was hired repairs and small purchases/parts along with household expenses and insurances, etc. I know for the first time in a number of years, I never had a trackhoe or dozer on the place last year. But that will be back on the books this year. I carry enough capital cost allowances over from previous years to fill any gaps the tax man might find.

 

[Lucky]

I don't put all the money the farm makes back in but do try to invest wisely. Several years ago I bought a feed bin, truck feeder, and troughs. I caught allot of flack from the neighbors about it but can't understand feeding from sacks everyday and then setting them on fire once a week. Our feed mill charges $.75 for the sack add that up over a few years. Not to mention you have to lift all those sacks everday. I have a friend that has about the same amount of land I have and doesn't do anything he doesn't absolutely have to and he is down to running half the cows I am. To me doing nothing is a downward spiral that's hard to get out of.