The Top 2 Percent

These days, we hear more and more about “The Top Two Percent”, those Americans, according to the President, who need to be paying more in taxes to help balance our budget. American farmers, who happen to also be two percent of the population, are caught in the crossfire of this claim. Now, I could go on and on about how Obama’s second term is going to hurt small business; but I’m going to focus on the main point: taxes. You see, family farms like mine are also small businesses, and, due to our wonderful tax system, are taxed as such. Let me explain...

Most family farms, like mine, are incorporated into what’s called a LLC (Limited Liability Corporation). Now, an LLC is a great way to operate; it gives you some liability protection from lawsuits, and if your business does fail, it can help keep you from loosing everything you’ve ever made. But there is a bad part of LLC’s: the taxes.

Now, LLC owners, like most Americans, file a 1040 with income and expenses. So let’s just use some simple examples. Right now, President Obama wants to raise the tax rates on the “top 2 percent”--those who earn over 250,000 a year--substantially. That will cost family farms millions, and hurt folks like me who are trying to earn an honest living, and provide jobs to others. See, when I file taxes, I have to attach what’s called a “schedule F” to my 1040; it shows how much farm income is passed on to me. Let’s say my farm “makes” 200,000 dollars in profit. Now, anyone who owns a business can tell you, you never, NEVER, actually “make” that. That’s what you show on paper; in reality, you may not have paid yourself anything, or maybe only a few thousand dollars; you’re constantly reinvesting in your business. But that doesn’t matter; according to the IRS, you made 200,000 dollars. Now, if your spouse works in town, as mine does, and has a good job, you can eclipse 250,000 pretty fast. 

This rhetoric about “top earners paying their fair share” is a killer. I can tell you right now, we are sitting on capital, as many small business owners are, because we are unsure about what the future holds in terms of taxes, regulations, ect. Regulations like Dodd-Frank have made it harder and harder for the small town banks to lend us money to operate, forcing us to keep more cash on hand. Instead of spending hundreds of thousands of dollars with local contractors build more grain and fruit storage, we’ll sit on our hands and see what the future holds. 

This isn’t just in farming, folks. This is happening everywhere.

Elections have consequences, and we have to live with the will of the majority. Unfortunately, I believe far, far too many in that majority have never signed the front of a paycheck, balanced the books, and paid the taxes. But, if you understand what I’m saying, and if you agree that we need to keep small businesses hiring and growing, please, take the time to talk with your congressperson about this issue. 

Jeff VanderWerff is a 4th generation farmer from Sparta, Michigan. When not ranting about politics, he raises corn, wheat, soybeans, apples, and peaches. You can find him on YouTube at www.youtube.com/agsalesman

Free (corn) Markets

Just incase you’ve been living under a rock for the last 3 months or so, the Midwest, hell, the whole country, has been gripped by a massive drought, which has crippled yields, especially for corn and soybeans. In fact, the crop failures are so massive, that corn and soybean “futures” (prices) have reached record levels; and those costs, unfortunately, will in some way be passed on to the consumer. 

It’s not that we want to charge you more, but our hands are tied. The corn cattle and chickens eat is more expensive; same goes for the soybeans that pigs and dairy cows consume. And then, there’s the pink elephant in the room: 

Ethanol.

Many, many grain famers, like myself, sell some of their corn for ethanol production. Now, there is a by-product, called DDG, that is fed to cattle in place of “whole” corn, so it’s not a total net-loss for feed. However, that hasn’t stopped several livestock groups and some producers from calling for a “waiver” for the amount of ethanol the government says we need to put into our gasoline.

Now understand, I’m writing this from the perspective of a grain farmer; but I’m also writing as a consumer of meat and dairy products. What I have the biggest problem with, in this whole “waiver” debate, is that the government is picking winners and losers, and when that happens, we all loose.

If we allow the government to shut down ethanol production to satisfy the demands of livestock producers, then what about the inverse? When corn prices crash, can we demand an increase in ethanol to prop up my industry? How about then dairy prices drop; should we control supply with a national quota system? The same quotas could apply to pigs, turkeys, ect. 

If we head down this road today, we are asking the government to take away our rights to free markets tomorrow. 

I’m not going to propose a solution to this issue; I know folks at all corners of this table who are struggling, and who have strong opinions. The larger question I simply want to ask, is, are we as farmers and ranchers ready to give the government this much control over the principals of free market economics that we all thrive under??

Jeff VanderWerff is a 4th generation fruit and grain farmer from Sparta, Michigan. To learn more about his family farm, and the drought, visit www.youtube.com/agsalesman

Bailouts, Handouts, and Crop Insurance

So there seems to be a lot of confusion out there by many people, including people who I believed understood how this system works for farmers. In the spirit of full disclosure, the numbers I’m sharing are generalized, and this blog is going to be long...so bail now if you’re not into understanding economics, farm finance, and insurance.

People often see or hear about a crop loss, in this case fruit, and wonder about the “bailout” the farmers will receive. Well, first off, there is no bailout. My farm isn’t GM, and I don’t have union clout to demand help. The government does provide disaster payments, so I’ll address those first.

When you hear about a farmer receiving a disaster payment, some would have you believe that a USDA or FSA (Farm Service Agency) person shows up at the farm, says “well Jeff, how bad was it?” and whips out a check for a couple of hundred grand. Let me impart some reality on you; we last had a major freeze event in 2010. Joe and I lost about 1/2 of our crop that year, and the government declared a disaster for our area. That started a going-on-two-year bureaucratic nightmare that still hasn’t resulted in my seeing a single damn dime of money. Is the government going to just “mail me a check”? Probably, but who knows when; if it was really that dire, I’d be bankrupt looonnnngggg before those ultra efficient government employees decided to act. Oh, and the amount? Probably about 20 or 30 thousand dollars which yes, sound like a lot, but when your farm has gross revenue north of 300 thousand a year, it’s peanuts.

So that brings us to crop insurance, which most of us have, and all of us support. So here’s the basic rundown of how it works; every year in October, I have to decide if I want to have insurance for the next year; keep in mind, I’m still picking my current crop and now I need to start making decisions about my NEXT crop. And if I do want insurance, you pay now. Upfront. Like, 20 grand. And no, they don’t except monthly payments, food stamps, or American Express. It’s cash on the dash if you want to play. So let’s say we do have that catastrophic loss that we saw this year; first, it’s not like car insurance. They don’t run out, look at the damage, and pay. They wait; we MIGHT see an adjuster by July or August. And the check? Probably October 1, best case. So every year, you write this check, hoping you don’t freeze, or have hail, but if you do you have your crop insurance. Payday, right? Well, check out the math....

So here’s where the rubber meets the road. How much insurance money comes in, versus how much it costs to keep the lights on. So here it is:

Crop insurance revenue: roughly 1100 dollars per acre; I farm about 120 acres.

Cost of sprays, trimming, mowing, and maintenance: around 1300 dollars an acre.

Cost of payments for such minor things as: land, bank loans, machine payments, insurance, utilities, ect: around another 75 thousand dollars a year.

So do the math: at the end of the day, even this this “huge payout” I’m loosing my ass. Plain and simple. Crop insurance isn’t about a “giant payday”, it’s about keeping the wolves away and hopefully living to fight another day. 

And here’s where the shit really hits the fan; we have NO apples. NONE. ZERO. ZILCH. Ok, well, I did find enough for a pie the other day, but that’s about it. See, normally, a loss of 1/2 the crop would trigger an insurance payment; or a hail event would trigger it. In either case, you still have some apples to sell, for something. Even we lost 1/2 the crop, we’d have enough to sell, with the insurance proceeds, to break even. Not the case this year; the crop insurance check I’ll receive this fall is the only revenue my farm will have until about October....of 2013.

So let me put it in real terms for most people: you make 100,000 dollars per year. Due to a disaster, you aren’t going to receive your pay, but you have insurance. In the analogy, you would be receiving about 40,000 dollars. Could your family live on that? Think you’d have to cut back on anything? 

Right now, the farm bill is being re-written; the main debate focuses on direct payments and crop insurance. This farmer supports eliminating direct payments, and improving crop insurance. I hope you’ll do the same.

Recall This.

So last week a California company recalled 16,000 pounds of lunch meat due to concerns about listeria contamination. Hearing this on the news, I think the first reaction of most people is to thing, wow, that’s a lot of lunch meat, but when you really think about it, it’s not, and it proves why our food is the safest in the world.

Think about it; we live in a country, where for the first time in the recored history of the planet, we can enjoy food just about any way we want it. We can eat eggs over easy for breakfast without fear, have sushi for lunch, and then enjoy a rare steak and a caesar salad for dinner, all without the worry of a food borne illness. Imagine living in a country where you go to the market, and you have to live in fear of what might be lurking in your food.

Food recalls like this are actually a good thing; they prove and reinforce to us that our food is not only produced safely, but handled and processed safely; I mean, would you rather NOT know that there was an issue, and risk getting sick? No, you wouldn’t. That’s why the USDA inspects food and facilities; so we can find problems, correct them, and improve safety.

Finally, let’s put this recall in perspective. Sure, 16,000 lbs sounds like a HUGE number, and yea, that’s a lot of meat. But think of it this way; according to the last census, the Grand Rapids, Michigan metro area has around 1 million residents. Let’s assume that one in 10 of them eat a cold-cut of some kind for lunch everyday-that’s brown baggers, Subway, Jimmy John’s, ect, and that each consumes around a quarter pound of lunch meat-that’s about average. So that’s 100,000 people eating 25,000 pounds of lunch meats EVERY DAY. This recall is a drop in the bucket!! There literally isn’t enough meat in this recall to supply a mid-sized American city for a single day.

Food safety is top of mind these days for many Americans, especially farmers and ranchers. When I ship a product, whether it’s fresh apples or wheat to the flower mill, I want to make sure you’re receiving a safe, nutritious product. I know I’m doing my part, and you can rest assured the USDA and processors are doing their’s as well.

Jeff Vander Werff is a fourth generation farmer from Sparta, Michigan. Learn more about food safety and your food at www.youtube.com/user/agsalesman

It all starts with a little trimming...

One of the jobs we have on the farm this time of year is tree-trimming, a laborious task involving a three-wheeled machine called a Brownie with what is basically a 25 pound hydraulic powered chain saw attached to it. You see, you ride up in the air in a little bucket, kinda like the power guys, and swing this saw around like a powered machete, removing errant limbs (hopefully only on the tree). It is a boring, cold, tiresome job; I can honestly say I can think of well over 100 things I’d rather do then trim trees; however, it’s one of the most important jobs on the farm. A well-trimmed tree produces better fruit, with better size, and less pressure from insects and fungus. It’s truly an investment you make for future years; the better job you do trimming, the better quality fruit you’ll likely produce.

Right now, we’re watching a lot of “fiscal tree-trimming” happen all over the United States, and Michigan is no exception. Governor Rick Snyder has climbed aboard his metaphorical “brownie”, and as we say when we need to do some hard trimming in a neglected orchard, he’s doing some major lumber-jacking. No tree is safe from Snyder’s saw, nor should any be; you see, for far too long our state legislature has worked off borrowed time; they’ve been growing some pretty lousy fruit, and the markets have changed. Consumers (and voters) are demanding fresh, high quality fruit, and they’ve hired a new farm manager to make that happen. Eventually, just like at home, the governor will replant the orchard with new trees that won’t need trimming for quite some time. But, for the meantime, stand back, cause the limbs are flying!!

Everything in the world has a day of reckoning; and just like my back and shoulders after a long day trimming in the orchard, the governor is sure to go home with a few wounds and some soar muscles. But as an old farmer once told me, when you trim trees the hardest, that’s when you get the most new growth.

Jeff Vander Werff is a 4th generation farmer and blogger from Sparta, Michigan. Learn more about his family's farm at www.youtube.com/agsalesman