Source: Farm Futures
Farm Futures reported June 3 what a House Ag Committee subcommittee had to say about the economic health of the farm sector. One member commented that, “when the farm economy is healthy, the ‘main street’ economy is healthy.”
With lower commodity prices and decreasing net income, committee members discussed the farm bill and how it was meant to ensure that there are risk management tools in place to help producers in this type of situation.
To get through this setback, Nathan Kauffman, Federal Reserve Bank of Kansas City branch executive, said producers will need to review balance sheets and think carefully abut keeping costs low and efficiency high.
Declining land values are also putting farmers in a pinch, as they continue to own the land while their net worth shrinks, said Paul Combs, a Missouri farm equipment dealer who provided input to the meeting.
Looking ahead, Combs also addressed another financial frustration for the farm sector: Higher IRS Section 179 expensing levels, and the drawn-out path to its approval last year.
With higher Section 179 expensing levels, farmers were allowed to take full depreciation deduction of items in the current tax year, with a maximum deduction of $500,000 and a phase-out threshold of $2 million. This is much higher than the default level of $25,000 with a $200,000 phase-out, which was scheduled to take effect for the 2014 tax year prior to a last-minute tax extenders bill in December, 2014.
"The scale of farming has gotten so much bigger that customers tend to plan their purchases well in advance," Combs explained, noting that uncertainty surrounding Section 179 caused many farmers to delay those purchase plans last year.
"If we can get [Section 179 levels] stable or at least know where we are by the beginning of the fourth quarter, that would really help us," he said.