Knowing per-unit costs can help producers make end-of-year financial decisions
With about six weeks left to go in this calendar year, experts say this is an ideal time for producers to sit down and get their financial house in order. Getting their books completed and making analyses down to a per-head or per-acre level can help aid in good end-of-year decision-making.
“Now is a big time for producers to get to the tax preparer,” said David Koupal, instructor with The South Dakota Center for Farm/Ranch Management, based out of Mitchell Technical Institute. “There’s still money being made, and there are still going to be tax issues. It’s nice to know those early on and get in there and make decisions.”
Koupal, who is based in Hot Springs, S.D., works with about 30 producers in the western part of the state. Statewide, Mitchell Tech has five instructors working with more than 150 farm and ranch families who have signed up for the program.
Koupal says the year looks to be profitable for livestock producers, although down from the profit levels seen in the last few years.
“Over the last two weeks, we’re really trying to see where the financials are going to be. We’re looking at the detail-level stuff, looking at futures contracts and talking about when it’s going to be a good time to market if they’ve still got livestock on hand,” he said, noting that the instructors don’t make those decisions for clients, but rather provide reports, reviews of sale barn prices and other resources needed for making informed decisions.
Now is also the time to take inventory of hay and see what’s on hand and what’s available for carryover.
“This year there’s plenty of hay, so you can really shop around and buy good-quality hay if you need to,” Koupal said. “Out west, you’re always one year from a drought, so you always plan and manage that way.”
Whether on the livestock side or the crop side, Koupal urges all producers to get to a level of detail where they know and understand their exact cost per-head or per-acre. Expenses for things like new equipment, vaccines and land taxes can add more to your per-unit costs than people realize.
“Taxes per animal -- that’s a huge one that’s going on right now,” Koupal said, pointing to how the current system for property taxes assigns value based on soil classification rather than actual use of the land.
“We can have a situation where even though it’s range, it can be considered Class 3 soil and is taxed as a crop. Some guys are up to $90 per animal just for taxes. Some years that’s your whole profit,” he said.
While producers can control financial decision-making by investing time in some good analysis, other issues in agriculture—such as land valuations, the regulatory environment or trade policy—are more difficult to control. Wanda Blair, a long-time Farm Bureau member, credits her involvement in an agriculture association with giving her a voice in some of these broader issues.
“We can do much more together than we can individually, and that’s important today because the list of issues coming at agriculture seems longer than ever before,” said Blair, who serves as vice president of the South Dakota Farm Bureau. “If you’re concerned about land valuations or regulations coming out of Washington, for example, joining together and speaking with one voice is the way to really be heard.”
Koupal urges producers to be proactive for agriculture by getting involved in advocacy for their industry and their way of life.
“Being involved in nothing isn’t an option anymore,” Koupal said. “You have to become involved in something. You can’t just watch on the sidelines and hope it all goes your way.”