Getting Started in Ag: Financial Planning for the Coming Year

Visit Farmanswers.org/library for information on a variety of financial planning topics, many geared toward new and beginning producers. The library contains more than 300 articles on financial topics alone.

Visit RightRisk.org for additional financial planning resources and tools, as well as online courses, such as the “Getting on Track” series, which specifically addresses record-keeping, financial statements, financial analysis, and more. RightRisk.org also offers the RD Financial Tool, developed to help producers evaluate their financial statements, and many other resources for new and beginning producers.

IT’S A NEW YEAR: WHERE DO I START?

This time of year is often when those involved in production agriculture begin making plans for the coming production season. Financial planning is a critical component of these plans, regardless of the size of your business. While you likely have plenty of chores and other daily activities that require your attention, it is important to set aside time for detailed financial planning.

In today’s environment of supply chain challenges, inflation, rising interest rates and price volatility, it is imperative to plan accordingly. It is important, from a risk management standpoint, to develop a complete review of your financial health. This information can help you plan for uncertainty and allow you to take advantage of potential opportunities. Understanding your current financial position and budgeting for the coming year allows you to better measure your business’s financial position and overall performance, address potential issues and make changes to succeed.

Gather Your Records

Before you can accurately plan for next year, you need to understand how last year went. It is important to keep good records— both production records and records of all receipts and disbursements. Save all receipts including, but not limited to, sales tickets, paid invoices, checking records and credit statements. These records should be sorted by enterprise or type, depending on the nature of your business.

In addition to keeping good records, maintain a journal of all income and expenses. Journals can be paper or digital; many different apps and software programs, both free and paid, are available to help track transactions.

Once the data is collected, a profit and loss statement can be put together, either on a monthly or yearly basis. If your business includes more than one enterprise, it is important to divide or allocate the income and expense items by each enterprise as appropriate. Individual enterprise analysis can help you identify where both profit centers and areas of improvement exist within your business.

Build Your Financial Statements

There are four main financial statements crucial to analyzing your business and planning the way forward: cash flow, income statement, balance sheet and owner equity. The cash-flow statement describes the farm business’s sources and uses of cash, as well as a monthly summary of those cash inflows and outflows. The first cash-flow statement should be a historical document, using actual data from your most recent financial records. From there you can construct a cash flow projection or budget for the coming year.

Formulating a projected cashflow is especially important if you are borrowing money needed to operate. This projection allows you to anticipate when cash deficits might occur and how they will be addressed. The first step is to list all potential cash inflows and outflows in total, then assign them to appropriate months. It is important to be as comprehensive as possible when listing expenses, as it will cut down on surprises in the form of cost overruns later on.

Construction of the balance sheet is the next step. This statement outlines the owner’s assets and liabilities and the subsequent net worth (asset values minus liabilities). The balance sheet is a useful tool for lenders as well as business owners, providing estimated values at a certain point in time as well as a measure of business performance over time. For instance, a series of balance sheets can show whether net worth has improved over a three-year period. Assets and liabilities are designated as current (due or sellable in the coming year) or non-current/long term (due beyond one year).

Using the information from the cash flow and balance sheet, it possible to formulate an income statement. An accrual-based income statement is the only true measure of profitability for a business. This statement accounts for all cash and non-cash (accrual) income and expenses.

Cash accounting measures income and expenses that are based on cash transactions, ignoring inventory and other non-cash changes. Accrual-basis accounting matches revenue from the production period to actual expenses associated with producing that revenue. This provides an accurate picture of business performance over the period, not just a description of changes in cash. Production agriculture often involves inconsistent revenue streams and expenses, so even if you choose to use cash accounting for tax purposes, it is important to develop an accrual-based income statement for management decision-making.

Finally, a statement of owner equity (net worth) shows how a business’s overall financial position may have changed over a year. This statement can help identify the financial events that led to a change in equity position as well as what steps can be taken to address any negative impacts.

Budgeting

You can begin to develop budgets for the coming year once you have a handle on your business’s financial information. As discussed above, if you have more than one enterprise involved in your operation, such as crops and livestock, it is important to use enterprise budgets to evaluate financial performance. You can better understand the contribution of each enterprise to the profitability of the entire business by estimating net revenue for each. When building these budgets, make sure the financial information used is as accurate and up to date as possible.

Partial budgeting is another tool that can be used to consider the potential benefits and costs from a proposed change to an enterprise or the business as a whole. These changes might include expansion, machinery/equipment purchase, a new marketing strategy, or choosing to custom hire instead of owning equipment. For more information, see the Risk Scenario Planning tool available at RightRisk.org/Analytics.

Windbreaks offer critical protection from Western winters

Over the past few weeks, frigid temperatures and howling winds have proved only the toughest can survive a nasty Wyoming winter. Since livestock performance and survival is heavily affected by temperature and wind, one can only imagine how hard of a toll recent conditions have had on cattle across the West.

In a University of Lincoln-Nebraska (UNL) BeefWatch newsletter titled “Windbreaks for Protection and Snow Diversion,” published on Jan. 1, UNL Extension Educator Brad Schick notes windbreaks are an important tool for keeping cattle out of the wind.

“Shelter for livestock during winter months can influence the success of calving on a livestock operation. In fact, calving success can increase by two percent behind a windbreak,” states Schick. “Additionally, in Montana feedlots during severe winters, cattle behind windbreaks gained 10.6 pounds more than cattle without windbreaks.”

Constructing a windbreak

Since protection from the wind and snow isn’t always readily available from natural topography or living windbreaks such as trees or shrubs, Schick notes it is important to construct windbreaks to increase livestock protection.

He believes it is critical to keep the end goal in mind when installing a windbreak.

“A windbreak will only be as good as it is designed, and using the wrong design can cause more harm than good,” he explains. “Knowing the purpose of the wind- break is vital to its success.”

According to Schick, there are several different options available to producers when constructing a windbreak, including permanent, porous and nonporous structures.

Schick points out research by the U.S. Forest Service, conducted at the Rocky Mountain Research Station, examined nonporous, solid windbreaks, while research by the University of Saskatchewan, Saskatchewan Department of Agriculture and Food and Manitoba Agriculture looked at the benefits of porous windbreaks.

“Ultimately, the turbulence of the wind behind the windbreak determines the size of the protected area and the degree and placement of snow accumulation,” he says.

Solid windbreaks

According to Schick, a solid windbreak constructed in the shape of a “V” will create adequate protection from the wind, while minimizing snow accumulation.

“The sides of the ‘V’ should form a 90-degree angle, and the point should be built facing into the prevailing winter winds. This will cause snow to be diverted around the ends of the barrier and form drifts away from the sheltered area,” he explains.

With this design, Schick says shelter will be downwind about five times the height of the windbreak, and will reduce wind speed by 60 percent with minimal snow accumulation.

“The shelter width, measured as the distance between the open ends of the windbreak’s sides, should not exceed 15 times the height of the barrier. For example, an eight-feet tall barrier can have sides no longer than 85 feet because the distance between the ends of the sides with that configuration is 120-feet wide,” he says. “If the sides are longer, snow will begin to drift over the barrier and into the sheltered area.”

To read University of Nebraska-Lincoln BeefWatch newsletters, visit beef.unl. edu/beefwatch.

For producers who may not have the materials or funds to build a permanent “V”-shaped structure, Schick notes the same design can be accomplished by stacking round bales or placing tarps over two eightfeet long panels.

Porous windbreaks

When building a porous windbreak – permanent or temporary – Schick encourages producers to construct them in a line. He notes the effectiveness of a porous windbreak is determined by the open area as a percentage of the total area, which affects the amount of wind reduction.

“Porosity at 25 to 33 percent will optimize protection from wind and snowdrifts. Years of research have determined the protected area to be eight to 10 times the height of the windbreak. Therefore, a 10-foot tall fence – with 25 to 33 percent porosity – will provide 80 to 100 feet of protection behind it,” he says.

When using vertical

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Clint Snook • 307-290-4000 boards to build a windbreak, Schick advises producers to use six-inch boards with two-inch spacings to create 25 percent porosity and to ensure the base of the windbreak is as wide as it is tall when constructing a temporary structure, to keep it from falling over.

Producers looking for portable, sturdy and lowcost options may consider using axles and hitches or a steel frame and vertical boards when constructing their windbreak.

Temporary windbreaks

Like permanent structures, Schick explains there are several advantages and disadvantages to using temporary or portable windbreaks.

Advantages include the ability to move structures to calving pastures, reducing hay loss fed in bunks or on the ground, offering shelter for cattle grazing crop residue fields, concentrating manure in a nutrient poor portion of the field and avoiding feed residue buildup.

On the other hand, Schick says disadvantages may include the act of moving windbreaks, toppling in extreme winds, a higher associated cost and the potential for the base to freeze to the ground.

Hannah Bugas is the managing editor of the Wyoming Livestock Roundup. Send comments on this article to roundup@wylr.net.

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Market Report • February 8, 2023

by Lee Pitts

How To Stay Married

The other day I saw one of those bikes that makes the rider look like they are laying down while they peddle. Only this bike was a little different. The husband was facing forward with his legs peddling out in front of him while his wife was behind him facing backwards and peddling in the opposite direction.

Yet, the bike was moving forward. If that isn’t a fitting metaphor for marriage, I don’t know what is.

Next year my wife and I will celebrate 50 years of wedded bliss. My marriage is the thing I am most proud of in my life, and I knew after our first date, Diane was the one I wanted to spend the rest of my life with. Still, I was reluctant to ask, “Will you marry me?”

I was afraid she’d reply, “Will I what?” or, “I’d rather drink a gallon of paint thinner!”

Statistics reveal marriage, or what is now referred to as “the sociocultural interface” or “two or more people sharing a living space,” is an alternative lifestyle and a dying institution.

I have a friend who’s been married so many times the preacher gives him a volume discount, and he could live for a month on the rice collected in the pockets of his suit. Another monogamously challenged acquaintance jokingly refers to his “five-mile wedding license” and “his current wife.”

Having a great marriage is not easy, and there are sacrifices one has to make. For example, I was raised on Miracle Whip and was shocked to find out from my bride, “Only poor people eat Miracle Whip.”

She ate real mayonnaise and wouldn’t have Miracle Whip in the house. I figured this was a battle not worth fighting.

Then there’s her choice in football teams. She’s been a fan of the Pittsburg Steelers ever since Terry Bradshaw played for them – she’s got this thing for Bradshaw I don’t understand. Whereas, I’ve liked the 49’ers ever since I became friends with their offensive line coach who invited us once a year to sit in the owner’s box to watch a game.

One can imagine how humiliated I was when she rooted for the Steelers while eating cheese puffs in the owner’s box of the Niners. Rather than argue, I just gave up watching football.

My wife says I only have two faults, I don’t listen and I forget the other one. Oh yeah, it’s my driving. Although you really couldn’t call it that as all I did was hold the steering wheel. She used to constantly tell me, “Slow down! Speed up! Don’t pass! Don’t let that jerk cut you off!”

I finally made the ultimate sacrifice and gave up driving after having a debilitating stroke – seizures and driving don’t mix. This meant she had to do all of the driving, and we haven’t had a fight ever since.

My neighbors have the same problem and have to drive two vehicles even when going to the same place.

I did have a minor victory in the toilet paper and paper towel department though. People might not believe this, but my wife was taught the paper was to come off the back of the roll, while I was normal and knew the proper way was for it to cascade down the front.

I also realized right away if our marriage was going to last I’d have to give up control of three things – the remote control, the cookbook and checkbook.

The best advice I ever got on how to stay married came from my grandpa who I never heard get in a fight with grandma.

When he gave me the family heirloom diamond ring that was to be Diane’s engagement ring he said, “If the husband or wife starts to get a little hot under the collar, the wife should go to the kitchen and the man should go to the garage.” as well run the hay through a few cows,” he says. “Our cow herd started with a couple of show heifers we purchased from a close family friend, Nate Lupher, and eight or so cows we got from my grandpa.”

“The man will get a little quality time in the shop and maybe even some hot chocolate chip cookies. As for the wife, there’s always the possibility the car will fall off the jack stands, and she’ll get to collect on the life insurance policy,” he added.

Oh, and I almost forgot this tip, generally speaking – the couple who laughs together stays together.

“They weren’t the shiniest set of cattle, but it was a start,” Colten adds.

Things have changed drastically for the Wakelys since their humble beginnings.

“Today, we run quite a few momma cows,” Colten explains. “We have been fortunate enough to get in to some great leases that fit into the scheme of our operation. We also manage some Bureau of Land Management and U.S. Forest Service leases during the summer.”

“These opportunities have allowed us to grow over the past few years. We do most of our work horseback, which is just the way I think it ought to be,” he adds.

Colten also notes he artificially inseminates the majority of his herd to maintain quality and markets show calves, bulls and heifers.

Overcoming challenges

Like any cattleman in the business, Colten shares he has had to overcome some challenges to get where he is today.

“Name it, and we’ve probably dealt with a little of it in the past 25 years, which I’m sure is the case for most everybody involved in the industry,” he states. “One that really sticks out in my mind would have been in 2010 when the drought was so bad we were out of grass by midsummer and ended up liquidating the herd.”

He notes during this time, he was actually away at college and wasn’t around to help as much as he wishes he could have been.

“We all thought it was the most practical call,” he adds. “I’m not going to lie, it was kind of nice being able to do some of the other things I enjoyed. But, it didn’t take long for the itch to resurface, and before long we were back at it, more invested than we were before.”

Although agriculture comes with a multitude of difficulties, Colten believes the good exponentially out weighs the bad.

“God paints some pretty amazing pictures, from the early morning sunrises or the clear starry nights when we’re out checking heavies at two in the morning,” he says. “It’s the small victories keep ing me going when things get tough, like when I finally get a baby calf to latch a teat and suckle or a grand champion slap at a county fair.”

“My favorite part of the whole deal is to see the cycle come full circle,” he contin ues. “From calving, to breed ing decisions, to seeing calves climb on the truck in the fall, just to start it all over in a few short months. These are agri culture’s best kept secrets –we are truly the lucky ones.”

Colten also shares how grateful he is for everything the industry has taught him.

“I am very passionate about the industry and feel it plays a very integral part in how the world functions,” he shares “Ag isn’t the problem, as some portray it, it is the solution. I think it’s important to let people know that.”

When it comes to an accomplishment he is most proud of, Colten says, “I take a lot of pride when looking at where we started to where we are today. It wasn’t without its challenges and luck, to be honest. I’m not sure if I’m on the right track or not, but I’m thankful for the opportunity to live this life, and hope we can continue to do so for years to come.”

Grateful for support

In addition to overcoming challenges and sticking it out when things get tough, Colten also attributes his success to a few of the role models in his life.

“The industry is full of people to look up to. Around every corner there is someone who we can visit with and learn a thing or two from,” he says.

“Nate Lupher, in particular, is the one who lit the fire in me. He taught me a lot about how to properly handle cattle and horses and what they are supposed to look like. He was a genius. Unfortunately, we lost him to cancer nine years ago,” he adds.

“I’m very thankful for the time I got to spend with him growing up and the things he taught me,” he continues. “He holds a special place in my heart, and I operate every day with him in the back of my mind.”

Colten also recognizes his parents as a contributing factor to his success and notes he wouldn’t be where he is today without their help and sacrifice.

“Family is a big part of our operation. I think it is a very important part of what we do,” he shares. “It’s important to have someone to lean on when things get tough, and they have been the best in the world for that.”

Offering advice

Like his parents and Nate were for him, Colten has grown into a role model for the newest generation on the ranch.

“I enjoy watching the

“I am very passionate about the industry and feel it plays a very integral part in how the world functions. Ag isn’t the problem, as some portray it – it is the solution. I think it’s important to let people know that.” – Colten Wakely

Childhood dream – Colten Wakely knew he wanted to get into the cattle business from a very young age and fondly remembers spending countless hours on the living room floor building a ranch out of Lincoln Logs. With a lot of hard work and a close-knit support system, he has made his childhood dream a reality. Ashlee Wakely kids,” he shares. “My sister Bryell and a few of my friends have young ones who come help us out on the ranch from time to time. I enjoy watching them learn and grow.”

When it comes to offering advice for other young producers, Colten says, “Make goals and work toward them every day. Don’t get discouraged if you fail. Learn from mistakes and try again. Patience is key. These things take a lot of time and energy to build. Start small and work toward the end goal.”

He continues, “I think our generation has a lot on our plate. More and more people are going by the wayside and getting out of agriculture. I think it presents a pretty unique opportunity for the younger generation of agriculture. Go talk to those old timers and devise a plan. I’m sure there are a few who would be more than willing to help young producers get a start.”

Hannah Bugas is the managing editor for the Wyo-

Role model – Colten Wakely has spent most of his life looking up to his role model and late family friend Nate Lupher. Today, Colten has grown into a role model for the newest generation on the ranch, including his nephews Hunter (pictured), Gauge, Ruger and Bo. Ashlee Wakely photo

Although the ranching business comes with its fair share of difficulties, Colten Wakely believes the good outweighs the bad. When things get tough, he looks for small victories and beauty in the little things, such as early morning sunrises and clear starry nights. Ashlee some 7000 acres of mountain forage. ere is no creep feeding or hot rations. Our goal is to provide you with some of the freshest and most proven genetics that the industry has to o er; with bred in performance and an unconditional soundness guarantee. Come see for yourselves how Rees Bros can help your program. be happy you did. nears, we have three options for the upcoming farm bill –let it expire, pass an exten sion or craft a bill which works for farmers, ranch ers, producers and foresters nationwide,” said Thomp

On Dec. 6, The December Farm Foundation Forum, “What to Expect from the 2023 Farm Bill,” provided further insights into the next farm bill.

Panelists included U.S. Congressman Glenn Thompson (R-PA), National Council of Farmer Cooperatives President and CEO Chuck Conner, Gardner Agriculture Policy Program Director and University of Illinois Urbana-Champaign Associate Professor Jonathan Coppess and Senate Committee on Agriculture Nutri tion and Forestry Former Staff Director Christopher Adamo.

Farm Foundation Forum discusses upcoming 2023 Farm Bill

son during the forum. “Of course, this is predicated on bipartisanship and the will of the House and Senate.”

He added, “I’m dedicated to working with my colleagues, agriculture advocates and farm families to get the job done.”

Thompson noted many producers across the U.S. are facing challenges, from rising input costs and diesel shortages to fracture supply chains and historic inflationary pressures.

“We must take action provide certainty to farmers, ranchers, agribusinesses and other entities across our food and ag supply chains,” said Thompson. “American agriculture, if given the right tools and regulatory confidence can expand this vital role in alleviating global food instability and reducing costs for consumers.”

Additionally, he noted the need for a reliable farm safety net is paramount. Nearly 80 percent of the federal funding to produc- and reduce the need for ad hoc assistance.” Another issue impacting producers is access to a legal reliable year-round workforce.

“No sector has been harmed more by our broken immigration system than agriculture,” he said.

Though far from perfect, Thompson shared he voted in support of the Farm Workforce Moderation Act, a bill aiming to address this very issue.

“I remain hopeful this bill will be refined through the legislative process to better support America’s farmers and ranchers,” he

“Farm bills are such an tion in terms of the future direction of farm and food policy in this country, and

To listen to the full webinar, visit youtube. com/watch?v=rA1EiRc1S20. For more information on the Farm Foundation, visit farmfoundation.org.

He added, “A farm bill is not just about farm programs or nutrition programs, it’s much more extensive and covers every function performed by the U.S. Department of Agriculture.”

The farm bill includes the following titles: Title I – Commodities; Title II – Conservation; Title III –Trade; Title IV – Nutrition; Title V – Credit; Title VI –Rural Development; Title VII – Research, Extension and Related Matters; Title VIII – Forestry; Title IX – Energy; Title X – Horticulture; Title XI – Crop Insurance and Title XII –Miscellaneous.

“We tend to focus on Title I and IV, Commodities and Nutrition, but there’s a lot more going on in this cost of production,” Conner mentioned.

A huge divide in the farm bill will come when discussing spending for these other categories in retrospect to nutrition, he noted.

Driving factors of 2023 Farm Bill Conner said there are four key areas driving the debate on the next farm bill. They include climate/ regenerative agriculture, urban versus rural, cost and nutrition.

“I feel optimistic because we’re using the most seasoned legislators than we have in a very long time to get this done,” said Conner. “I have tremendous confidence. There’s no one better than Boozman and Stabenow to put together influential in working on the farm bill to represent

Projected spending

Conner noted in the 2018 Farm Bill, nutrition spending accounted for 76 percent of the farm bill’s budget, with nine percent going to crop insurance, seven percent going to commodities and conservation and one percent going to an

The 2023 Farm Bill projection spending increases nutrition to 84 percent, six percent to crop insurance, five percent to commodities, four percent to conservation and one percent to other.

“I can see this being a big source of conflict, and it’s not a newsflash for those of us who work on farm and food policy, but there’s going to be a real attempt to increase conservation and some of the support levels for commodity programs because those levels are so low compared to current market prices and current provide an initial and brief look at the potential for climate change to drive revolutionary changes in the farm bill.

The report focuses on two initial concepts which could be built around farm support and the Supplemental Nutrition Assistance Program, but also notes multiple paths towards revolutionary status in 2023.

“While it is not easy to pinpoint which direction the next farm bill will take, we hope this issue report will spark thoughtful discussion and evaluation of some of the factors which may come into play to shape the 2023 Farm Bill into either an evolutionary or revolutionary farm bill,” said Farm Foundation President and CEO Shari Rogge-Fidler in a Morning AgClips article dated Oct. 4, 2022.

Brittany Gunn is the editor of the Wyoming Livestock Roundup. Send comments on this article to roundup@wylr.net.

“Farm bills are such an important piece of legislation in terms of the future direction of farm and food policy in this country, and this one will be no different.” – Chuck Conner, National Council of Farmer Cooperatives