The chilly rain at the 2012 World Ag Expo (WAE) in Tulare, CA, last Wednesday didn’t keep fair-goers from checking out all the big show had to offer. Each year, BEEF hosts a seminar for area beef producers, and this year featured speakers including myself, Robert Gunther, a tax specialist with Frost, PLLC; and Wes Ishmael, contributing editor for BEEF. Here’s a roundup of some of the key points made in each presentation.
Robert Gunther on estate planning and tax tips:
According to the USDA, if an existing farm or ranch family has not adequately planned for succession, “it is more likely to go out of business, be absorbed into ever-larger farming neighbors, or be converted to non-farm uses.” In such situations, the impact on rural communities, the environment, our food supply and the national economy can be significant.
Gunther said producers have two options when estate planning: gifting now or passing through the estate later. “The benefits of gifting now give you future growth of assets that will be excluded from your estate. Additionally, producers should take full advantage of the $5-million exemption while it’s still in place. The benefits of using estate tax exemption mean beneficiaries get stepped-up basis in assets received from the estate.”
As producers make tax preparations, Gunther stressed the importance of having documentation for every business decision made. Here are a few other points to consider: “Producers need to think about electing out of bonus depreciation. If you operate under an S-Corps, you must pay yourself a reasonable compensation. The payroll tax cut is set to end Feb. 29, 2012, and there is a Medicare surtax coming in 2013. Our tax code will certainly change in this election year, and I wish I knew where things were headed with the $5-million exemption. Time will tell.”
Check out this video interview with Gunther here.
Wes Ishmael on the shifting cow market:
Taking a look at the numbers here in the U.S., Ishmael explained, “In 1975, we had 46.9 million; in 1990, 37.2 million; and today, 31.4 million beef cows. Our U.S. cowherd is the smallest since 1952. Yet, 36% more people in the country today want to eat about the same amount of beef in total that they did in 1980.”
Ishmael quoted James Minert, agricultural economist at Iowa State University, “Since 1975, the number of cattle has declined from 132 million head to 90 million in 2000. That’s the picture of an industry shrinking because of the lack of profitability. Beef producers are recouping production costs by putting less meat on consumer plates.”
In a nutshell, even though beef prices have increased, and U.S. beef exports are skyrocketing, so have the costs and risks of being in the cattle business.
“Time and again, tightening supplies have rescued prices. Time and again, tightening supplies have masked declining domestic consumer interest in beef,” said Ishmael. “According to CattleFax, per-capita net beef supplies were 57.4 lbs. last year—a 50-year low. Meanwhile, our input costs continue to rise. Operating a cow-calf operation in 2009 required 60% more capital than in 2000. Assuming 20% equity to feed a calf, the required investment has grown from $170/head in 2000 to more than $300/head today.”
As Ishmael further expanded on the growth of export markets, corn market volatility, improving our efficiencies and taking advantage of hidden opportunities, there were four points he stressed:
Pray for exports,
Evaluate technology both old and new,
Look for ways to play bigger,
And, exploit added-value programs.
A busy week in California for me:
Following my presentation on agriculture advocacy using social media at WAE, I had a full agenda. I spoke at Elbow Creek Elementary to 400 students, grades K-6. I read my children’s book, “Levi’s Lost Calf,” and had the opportunity to answer questions from the students. They wanted to know everything from what it was like to write a book to what it felt like to lose calves on the ranch. The questions were fantastic, and it was a great opportunity to share the beef production story with kids. The visit even made the local newspaper!
My next stop was Reedley College, where I spoke to more than 80 junior college students about beef production. While there was a scattering of aggies in the crowd, the audience consisted of kids studying other pursuits, and I was thrilled to have the opportunity to educate them about how beef gets from my pasture to their dinner plates. Additionally, I was able to explain to them the motives behind the Humane Society of the U.S. Many were shocked to learn that with its $130-million annual budget, HSUS actually devotes less than one-half of 1% to fund animal shelters. Questions varied and included everything from what I fed my cattle, to if I approved of using coolers for show steers, and even if oxtail came from cattle or from oxen!
My final destination while in California was speaking at the Tulare County CattleWomen’s Membership Drive. A small group of women, I presented them ideas for beef promotions they could implement in the future including things we do back home: Team ZIP, Beef Bucks giveaways, beef nights at the races and baseball games, and debunking the beef and cancer myth in hospitals. It was a great evening of fellowship, and I’m always impressed with what a small group of motivated cattle women can do to promote beef!
It was a whirlwind week, and I’m back in South Dakota, where we are getting in the swing of calving season and our private treaty bull sales. I’m still tallying up votes from our “Winter Wonderland On The Ranch” photo contest, and I will announce our winners tomorrow! I will be giving away five $100 VISA Beef Bucks, courtesy of the South Dakota Cattlemen’s Auxiliary; stay tuned!