Farm Loan Program Changes

Changes to FSA regulations have resulted in changes to both the Direct and Guaranteed Loans available through FSA.  The new regulations have removed Guaranteed Operating term limits.  Previous and current guaranteed loan borrowers who were not eligible for further guaranteed loans due to the previous 15 year eligibility term limit may now be eligible for further guaranteed loans through their commercial lender.

Also, the interest rate was reduced on Direct Loans where FSA provides 50 percent or less on jointly financed purchases of real estate also called Direct Farm Ownership Participation Loans.  The interest rate is currently 2.5%, but is subject to change.

Disaster Assistance

The 2014 Farm Bill, formerly known as the Agricultural Bill of 2014, makes the Livestock Forage Program (LFP) and Livestock Indemnity Program (LIP) permanent programs and provides retroactive authority to cover eligible losses back to Oct. 1, 2011.

LFP provides compensation to eligible producers who suffered grazing losses due to drought and fire.  LIP provides compensation to livestock producers who suffered livestock death losses in excess of normal mortality due to adverse weather and attacks by animals reintroduced into the wild by the Federal Government or protected by Federal law, including wolves and avian predators.

USDA is determined to make implementing the livestock disaster programs a top priority and plans to open program enrollment by April 15th, 2014.

As USDA begins implementing the livestock disaster assistance programs, producers should record all pertinent information of natural disaster consequences, including:

• Documentation of the number and kind of livestock that have died, supplemented if possible by photographs or video records of ownership and loss.
• Dates of death supported by birth recordings or purchase receipts.
• Cost of transporting livestock to safer grounds or to move animals to new pastures.
• Feed purchases if supplies or grazing pastures are destroyed.
• Crop records, including seed and fertilizer purchases, planting and production records.
• Pictures of on-farm storage facilities that were destroyed by wind or flood waters.
• Evidence of damaged farmland.

Many producers still have questions.  USDA is in the process of interpreting the Farm Bill program regulations.  Additional information will be provided once enrollment period is announced.  In the meantime, producers can review the LIP and LFP fact sheet.  The USDA is working dilligently to put the Farm Bill programs into action to benefit the Farmers and Ranchers of rural America.

Treat Your Soybean Seeds

Don't think of seed treatment as an input cost.  Think of it as an investment.  It's really only a small investment you have to make to ensure your beans are taken care of.  For example, it takes less than a bushel of soybeans to pay for the treatment.

Wet soils that are poorly drained promotes the development of fungal and cause seedling diseases, which slows germination and plant growth.  You will waste less seeds, see more stands, resulting in a better yield and eventually a increase on your return of investment.

While there are many different seed treatment products out there, I highly suggest using Latham Hi-Tech Seeds signature Soy Shield Plus, which has fungicide and insecticide.  It protects seeds from disease and insect damage for around 30 days.  This time frame is longer than most other seed treatments and usually covers the window needed for seedlings to grow.

Soy Shield Plus has a fungicide combination that protects against soil born diseases.  Diseases such as Pythium, Phytophthora, Fusarium and Rhizoctonia.  It also provides health benefits that for increased germination.

Some seed treatments that could protect nematodes, which are becoming more prevalent.  Many fully loaded treatments contain innoculants, micronutrients or plant foods.  For more info go to Latham Hi-Tech Seeds website.

Closing Grain Futures

Just real quick I thought you would be interested in the closing grain futures from March 17th, 2014.

• May corn closed at $4.79, down 7 cents
• May soybeans closed at $13.91 and 3/4, up 3 and 1/4 cents.
• May soybean meal closed at $446.60, up $2.60.
• May soybean oil closed at $41.89, down 40 points.
• May wheat closed at $6.74 and 1/2, down 12 and 3/4 cents.
• April crude oil closed at $98.08, down 81 cents.
• May cotton closed at $92.03, down 16 points.
• April gold closed at $1,372.90, down $6.10.
• Dow Jones Industrial Average: 16,247.22, up 181.55 points.

1031 Exchange Under Attack

Proposed Tax Reforms Includes Ending 1031 Exchange

The ninety two year old 1031 tax exchange is once again up for abolishment in current tax reform proposals.  Congressman Dave Camp, Chair of the US House or Representatives Committee on Ways and Means, has a bipartisan tax reform group tasked with identifying eleven subjects including real estate tax matters as potential revenue raisers.  Senator Max Baucus, Chair of the Senate Finance Committee has targeted the elimination of the 1031 exchange as one of many means of tax reform.

Section 1031 "like-kind" exchanges is estimated to cost of $42 billion over the five year period 2012-2016 by the Joint Committee on Taxation (JCT).  Estimated by the JCT in prior years estimated the tax deferral to be $16.2 billion over the five year period 2010-2014.  The two fold difference is attributed to a change in accounting methodology.

The Treasury Department 1031 Regulation is enforced by the Internal Revenue Service in Section 1.1031 stating that "no gain or loss shall be recognized on the exchange of property held for productive use in trade business or investment, if such property is exchange solely for property of like ind which is to be held for productive use in trade or business or for investment."  Individuals, married partnerships, trusts, corporations use 1031 exchanges when selling and replacing real and personal property to defer federal and state capital gain and recaptured depreciation taxes.  The taxes are deferred until the replacement property is sold and not replaced, effectively cashing out.  The economic position of the taxpayer does not change in a 1031 exchange; they have the same amount of cash and debt if not more.  If the taxpayer receives cash or reduction in debt, then a tax is due.

Sixty percent of 1031 exchanges involve properties for sales of less than one million dollars with a third for less than $300,000 owned by small investors and businesses.  The majority of investors are individuals and small businesses with exchange proceedings of less than $300,000.  Corporate entities do utilize 1031 exchanges to replace worn equipment and reposition low income producing properties with higher income producing properties.  In the Florida Panhandle, from Perdido Key West of Pensacola, Florida to Panama City Beach, Florida, investment properties saturate the real estate market with the local counties benefiting from the country bed taxes on properties held for short term rentals.  Titleholders are individuals, husbands and wives, trust and small limited liability companies generating business for Realtors, lenders, contractors, title companies, attorneys, CPAs, appraisal, pest and survey companies.

Positive Impact of 1031 Exchanges

• Encourages the rate by which money is move from one transaction to another; otherwise, known as the velocity of money.
• Property located in the US must be exchanged with property located in the US requiring reinvestment in the US rather than overseas.
• Stimulates taxpayers to acquire properties of equal or greater value often times greater including improvements in real estate.

What a 1031 is Not

• A tax loop hole for the rich.  Ninety percent of investors are individuals, families and trusts within a seven hour driving distance to their investments.
• A tax scheme robbing US taxpayers and government, rather a temporary tax deferral with the tax due when replacement property is cashed out or due upon decedent's taxable estate.

Negative Impact of 1031 Exchange Elimination

• Fewer real estate transactions, real and personal property will be held longer with many families electing to hold until death.
• Increase in depreciation deductions offsetting income tax revenue.
• Businesses will downsize due to no longer having access to or qualify for loans and paying tax on the gain or depreciation recapture of relinquished or old asset.

1031 exchange provide significant benefits to the taxpayer and local economies where the asset is located encouraging reinvestment versus the hoarding of cash and removing those dollars from the economy.  The 1031 exchange allows many others to benefit in the transaction before ultimately deposited with the US Treasury.

FSA Helps Beginning Farmers

If you're a new farmer or someone looking to get into the farming business the FSA has a loan program for beginning farmers to help get them started.  The FSA can provide financing to eligible applicants through either direct or guaranteed loans.  So what makes an applicant eligible?

FSA Beginning Farmer Loan Qualifications

• Has operated a farm not longer than ten years. 
• Will materially and substantially participate in the operation of the farm.
• Agrees to participate in a loan assessment, borrower training and financial management program sponsored by the FSA.
• Does not own a farm in excess of 30 percent of the county's median size.

To learn more just go to your local USDA office or go to FSA.gov to learn more.