R. Brent Young, Ph.D. Agriculture and Business Management Specialist

Agriculture & Business Management  Production  Marketing  Financial  Human  Legal

Agriculture & Business Management  Whole Farm Revenue Protection  Alternative enterprises  Conservation crops

Agriculture & Business Management  Whole Farm Revenue Protection  Relearn old skills – marketing & negotiation

Agriculture & Business Management  Cash reserves in savings or liquidation of assets without changing the operation  Increase working capital by marketing stored crops or livestock  Tap into credit reserves  Use equity in long term assets to refinance current excess liabilities  Lengthen repayment period on machinery or breeding livestock

Agriculture & Business Management  Take advantage of FSA guaranteed loans to reduce credit risk and lower payments  Increase off farm earnings. Use your shop facilities to preform tasks for others during your down time  Decrease nonfarm/ranch expenses  Always think capital preservation

Agriculture & Business Management  Talk to you family  Talk to your banker and landlords  Don’t ignore the future. Make time, set a schedule and report to someone  Estate planning and transfer

Agriculture & Business Management  Cancel or renegotiate leases  Estate planning and transfer

Agriculture & Business Management  A risk management safety net for all commodities on the farm under one insurance policy. ◦ For any farm up to $8.5 million in insured revenue ◦ Diversified farms producing two or more commodities  Both crops and livestock  Organic and conventional  Revenue for livestock coverage is limited to $1 million

Agriculture & Business Management  Submit 5 yrs. Schedule F ◦ Determine average farm revenue  Submit Farm Operations Report (intended) ◦ Crops grown, expected yields, expected prices  Revenue to be covered lessor of 5 yr. Schedule F average or intended Farm Operations Report  Select Coverage level 50 to 85%  Losses are determined after you file your Schedule F for the production year

Agriculture & Business Management

 5years Schedule F Tax Forms ◦ 3ys if Beginning Farmer or Rancher  Farm Operations Report ◦ Crops grown, expected yields, expected prices  Intended, Revised, Final  Summaries of other crop insurance policies  Marketing records if you use direct marketing  Inventory records of crops and livestock  Accounts payable/receivable

Agriculture & Business Management

 Low input, low value crops ◦ Produced to reduce per acre losses ◦ Produced to maintain soil fertility ◦ Produced to control weeds  May help meet diversity requirement for WFRP ◦ Example: Corn belt – corn – soybeans – oats ◦ Colorado – grain sorghum - millet

Agriculture & Business Management  1. Reluctance to pre-harvest price crops  2. Failure to understand and track local basis  3. Failure to have an exit strategy  4. Don’t hold un-priced grain past July 1 st  5. Trying to avoid storage cost by cash marketing grain and buying a call option

Agriculture & Business Management ($ Billions) Total Farm Expenditures$289$319$360$367$398 (8.6% increase 2013 to 2014) (38% increase 2010 to 2014) 4 Largest Expenditures ($188.3 billion) Feed Farm Services Livestock, Poultry, Related Labor 16.0% 11.4% 11.3% 8.6%

Agriculture & Business Management  $191,500  $175,270  60% of expenditures occur within top two categories of farm sales ◦ $5,000,000+26% of total expenditures ◦ $1,000,000 - $5,000,00034% of total expenditures Increase of 9.3%

Agriculture & Business Management Category Change < $10,000$15,370$15, % $10,000 - $50,000$36,977$38, % $50,000 - $100,000$91,254$88, % $100,000 - $249,000$183,416$175, % $250,000 - $500,000$358,756$369, % $500,000 - $1,000,000$688,043$691, % $1,000,000 - $5,000,000$1,602,379$1,644, % > $5,000,000$8,238,790$10,936, %

Agriculture & Business Management A.Increased more than 50% B.Increased 21% to 50% C.Increased 1% to 20% D.Did not change E.Decreased 1% to 20% F.Decreased 21% to 50% G.Decreased more than 50%

Agriculture & Business Management Ratios F Asset Turn Over Operating Expense Rate of Return of Farm Assets Net Farm Income $74.4$111.9$91.4$123.8$91.1$58.3 (53% decline 2013 – 2015F) (Billion Dollars) Colorado Cash Receipts$5.9$6.9$7.6$7.0$7.5n/a

Agriculture & Business Management

 Investment in nonproductive assets.  High family living costs or withdrawals from the business.  Spending your way out of income taxes.  Poor financial record systems.  Co-mingling business and personal expenses.

Agriculture & Business Management  Bigness on the brain!  Mismanagement of family members return.  Skipping the details.  Attempting to hit a home run each time at bat!  Refusal to learn.

Agriculture & Business Management

 NO!!!! ◦ Radically different interest rate and lending environment ◦ The level of indebtedness has been reduced ◦ Ag Sector Income has remained above historic averages ◦ The dramatic changes in the crop insurance program ◦ The current capitalization rate of farmland is consistent with other investments

Agriculture & Business Management

 ABM Website  Website URL ◦

Agriculture & Business Management

R. Brent Young, Ph.D. Agriculture & Business Management Specialist Ph