The Farm CPA

We like to poke around in the Census of Agriculture report that is issued every five years.  You can always find something interesting in these reports.

For today, I wanted to review some of the information about dairy cows from the 2007 census.

For that year, there were a total of 69,890 farms that were considered to be a dairy farm and included a total of 9,266,574 dairy cows.

The top five dairy states for cow numbers were:

1. California 1.84 million
2. Wisconsin 1.25 million
3. New York 626 thousand
4. Pennsylvania 553 thousand
5. Idaho 536 thousand

Idaho has a population of a little more than 1.5 million people, therefore the people to dairy cow ratio is 3 to 1.  Continuing this analysis, Cassia county in Idaho has about 21,000 people and 54,000 dairy cows, so here the people to cow ratio is 1 to almost 3.  The biggest cow to people ratio in Idaho was Gooding County.  This county has about 140,000 cows and only about 14,000 people.  This results in 10 cows for every person in this county.  There may be other counties with more cows per person, but this one jumps out at me.

I will continue to look for little nuggets of information like this and am eagerly awaiting the 2012 farm census to update the numbers.

When we see in the headlines that farms in Iowa and other parts of the corn belt are going for $10,000, $15,000 and perhaps $20,000 an acre, I think we automatically assume that all farmland values across the US are increasing.

However, in reviewing the Federal Reserve Bank of Richmond, VA agricultural survey for the third quarter of 2011, it indicated that farmland values for their region (Maryland, Virginia, North and South Carolina and most of West Virginia) had actually declined in value.  The decline from the second quarter of 2011 was 1.5% and 4.5% from the same quarter in 2010.

The survey presented a chart of farmland values from 2002 until 2011 and most farmland values in this region peaked in early 2007 and have not recovered to that value since.  The average price of farmland during the third quarter was $3,263. 

In the fourth quarter survey done by the Dallas Federal Reserve, this region actually had an increase in irrigated land values and dry-land and ranch values held fairly steady.  Even with the drought conditions in the area, most of the bankers are expecting prices to rise over the next three months.

As the saying goes in real estate, "It is Location, Location, and Location"; it is certainly true about farmland prices.  The increase in price depends on where it is located.

At the Top Producer Seminar last week, I received several questions about my opinion on whether Congress will extend bonus depreciation or increase it from 50% to 100% for 2012. President Obama has already proposed increasing it to 100% for 2012; however, a more major issue is what happens if bonus depreciation stops.

In reviewing several of the farmer tax returns that I have been working on lately, I have noticed that most of them are running out of any depreciation except for what they get from placing equipment in service in the current year. Therefore, if Congress suddenly stops bonus depreciation in 2013, many farmers will be in the situation of having little or no depreciation deductions, large equipment loan payments and much higher income taxes. This is what I would call a triple whammy.

I think if the bonus depreciation is eliminated, it will be over a couple of years to give the farmer enough time to plan accordingly or the Section 179 deduction will be adjusted back to the $500,000 range. However, we are dealing with Congress and the President, so any prediction is not worth much at this point in time.

If you have never been to a Top Producer Seminar, you should go. It is both informative and entertaining and is well worth attending.

Wow, what an action-packed day! First, breakfast was at 6 a.m. to get the day started. At 7, we had the taping for the "U.S. Farm Report" to air this weekend.

At 8:15, my breakout sessions started. Each one lasted 55 minutes and they were back-to-back-to-back. I thought the last session would be the smallest, but it turned out to be the largest, and each session had many good questions (and I think I gave good answers).

Ann Duignan of JP Morgan gave a presentation on how the global economy is affecting the farm machinery business and then its effects on our farmers. The presentation was very informative.

Last night we had the Top Producer of the Year award dinner. There were three finalists and, based on the video presentations for all three, I could not tell who was going to win. Each farmer has been very successful and will continue that success. The one thing that was brought out to me by all three was their passion for the employees who work for them. The employees are like part of the family, and it showed.

I think this is the first time I have ever seen a farmer use a pink flamingo as part of his branding process.

I won't tell you the winner here, since it will be posted in the Top Producer section of www.agweb.com.

The Top Producer Seminar started out today with a bang. Peter Zeihan of Stratfor Group gave an interesting presentation on the economic outlook for ag and in general. It was very interesting to see a map with an outline of the world's river systems and learn how they have affected the world's economy over the last couple hundred years or so.

America, with the Mississippi River system and intercoastal waterway, has by far the best series of cheap river and water systems in the world. That is why it is cheaper for an American farmer to ship his corn from Minnesota all the way to New Orleans than it is for a Brazilian farmer to ship his corn by truck for a hundred miles.

The only other water system that comes close to ours is Argentina's, with three rivers that flow eventually down to Buenos Aires. Because of this waterway system, Argentina's standard of living in 1900 was about 90% of ours.

There was a group panel on where the new farm bill is headed. Consensus was for a bill in 2013, but we may still get one this year. Direct payments will no longer be there, and some expanded form of crop insurance is most likely to happen.

The value of peer groups was discussed in the afternoon, and I believe that these have great potential value to all farmers. It is always good to get another opinion that you value, and it is much easier to be held accountable by a peer.

All in all, the first day of the Top Producer Seminar was very productive, and I had several readers of the blog come up and say hi. I hope to see more tomorrow, and, with three back-to-back presentations, I know I will be more tired tomorrow.