Finance-Accounting

Inside The Tax Return of Your Farm's Future

Thu, 09 Apr 2026 14:31:52 GMT

The traditional process of preparing agricultural tax returns has long been defined by manual data entry and the complex reconciliation of income. However, the integration of artificial intelligence into financial systems is ushering in a more sophisticated era of tax management. For the modern farm, the future of filing lies in a seamless pipeline where software handles the heavy lifting of data organization, leaving the high-level strategy to human experts.

Comprehensive Data Integration

The foundation of a modern tax return is the accounting system. Platforms like QuickBooks, Xero or specialized farm management software are becoming increasingly autonomous. In the near future, these AI agents will do more than simply record expenses; they will analyze them in real-time.

With direct links to bank feeds and digital invoices, AI can categorize expenditures with precision. It can distinguish between capital investments, such as machinery or land improvements, and standard operating costs like seed and fuel. This continuous synchronization means by the end of the fiscal year, the financial records are already in a format that mirrors the requirements of a tax return.

Automated Document Reconciliation

A significant portion of tax preparation involves matching — ensuring the farm’s internal records align with the documents issued by third parties. A preparer of a farm tax return may spend more time making sure all of the income is in the right box then planning to optimize the income tax level.

AI is uniquely suited to handle this high-volume verification. The system can automatically ingest Form 1099-PATR (cooperative distributions), 1099-G (government subsidies) and other Form 1099s and W-2s and verify them against recorded deposits.

If a document is missing or a figure does not match the ledger, AI identifies the specific discrepancy immediately, allowing for a targeted correction rather than a manual search through months of records.

The Role of Human Oversight

While AI provides the technical framework for the return, the final stage remains firmly in human hands. Once the software has mapped the data to the appropriate tax schedules, it produces a comprehensive draft for professional review.

This allows the farmer or a tax consultant to transition from a data entry role to a strategic advisory role. Instead of spending hours verifying line items, the human reviewer can focus on critical tax planning decisions including accelerated depreciation choices or income averaging that require professional judgment and an understanding of the farm’s long-term goals.

The result is a more accurate, defensible and efficient tax filing process. By automating the clerical aspects of the return, AI allows agricultural producers to maintain focus on their operations while ensuring full compliance with the evolving tax laws.

AppHarvest ousts CEO as creditors continue to knock

Thu, 13 Jul 2023 19:23:05 GMT

AppHarvest is shuffling leadership in hopes of changing the tide and recovering from a quick succession of compounding financial issues, the most recent of which includes a lease dispute at its Berea, Ky., farm with creditor and landlord Mastronardi Produce.

In a public filing released July 11, Mastronardi Produce disclosed that it planned to terminate AppHarvest’s lease on the property. In December 2022, AppHarvest sold its salad green greenhouse facility in Berea to distribution partner Mastronardi in a lease-back agreement. As a part of this deal, Mastronardi agreed to distribute AppHarvest’s greenhouse-grown produce to retailers.

The Mastronardi’s termination filing on July 5 alleges that “minimum production volumes” had been violated and cites this reason as cause for AppHarvest to vacate the facility.

Related news: Mastronardi funds AppHarvest to grow greens, expand farms in Appalachia

In a statement, AppHarvest Chief Communications Officer Travis Parman maintained that operations will continue as usual and rebutted Mastronardi’s lease termination claim.

“AppHarvest believes it has met the terms of its lease agreement for the Berea farm and recognizes that such notices from creditors are not uncommon as a strategy for firms attempting to push their way to the front of the line in case of an actual default,” Parman said in the statement.

The Berea farm is one of four farms in the Kentucky-based AppHarvest’s farm network in Appalachia. In recent months, AppHarvest also has faced creditor and foreclosure issues at its Richmond, Ky., farm.

Due to loan terms, closure of any one of AppHarvest’s four farms could trigger a domino effect at its other farm locations. Terms that funded the construction of AppHarvest’s Morehead, Ky., tomato farm — the company’s oldest farm facility — included a loan agreement with Rabo AgriFinance with a cross-default provision.

Related news: AppHarvest faces foreclosure of its Richmond tomato farm

Shuffling the deck

As the concerns mount regarding the stability of AppHarvest’s leases and its ability to repay its debt, the company has ousted founder Jonathan Webb as CEO, replacing him with controlled environmental agriculture industry veteran Tony Martin.

Webb is to transition from chairman and CEO to chief strategy officer and will remain on the board as a director, according to a news release.

“While I will continue to support the company, I am confident that Tony’s leadership, extensive background in CEA and track record for optimizing revenue growth will provide the guidance the company needs at this inflection point,” Webb said in the release.

Martin has served on AppHarvest’s board since October 2022 and has acted as as chief operating officer since January this year. He brings a wealth of experience in CEA-grown fresh produce, which includes 12 years at Windset Farms, where he supported both significant infrastructure and revenue growth, according to the release.

Additionally, Martin served as a consultant in the CEA sector and is a board member of the Fruit and Vegetable Dispute Resolution Corporation. He also serves on the board of Natureripe Farms and is a partner in GA Partners, which consults on agricultural operations and assisting businesses in transition, according to the release.

Kevin Willis, who has served on the AppHarvest board since February 2022, will assume the position of board chair.

Turning over a new leaf

Martin takes the helm with a strategy for refocusing the company that he calls Project New Leaf, according to the release.

“AppHarvest is at an exciting inflection point transitioning from a construction and development mode to an organization focused on core operational excellence,” Martin said in the release. “I believe AppHarvest has a tremendous opportunity to leverage its world-class CEA network at a time when both changing climate and major grocery retailers are demanding it. We’re working to ramp up production and revenue by ensuring efficient, cost-effective delivery of high-quality produce to major grocers and restaurants.”

Related news: Financial woes surface in investor report, but AppHarvest says it’s ramping up

According to the release, Project New Leaf is focusing on the following key pillars over the next five years:

Improving labor efficiency.
Better leveraging industry relationships and expertise.
Implementing disciplined cost control.
Improving the feedback loop across the organization.
Aligning the workforce to the plan.

AppHarvest’s Q1 earnings beat consensus

Fri, 12 May 2023 15:43:03 GMT

Indoor grower AppHarvest recently shared steady gains and higher sales in its operating and financial results for the first quarter of 2023.

This comes as the company works to increase production across its three new farms and implement a new strategic plan with new Chief Operating Officer Tony Martin, according to a news release.

“Under Tony’s leadership, we’re already seeing improved performance in the first quarter with net sales of $13 million,” AppHarvest founder and CEO Jonathan Webb said in the release. “Tony is focusing on a data-driven approach for optimizing production and driving more efficiency across the four-farm network. I believe Tony’s strong CEA experience will help accelerate our path to profitability.”

AppHarvest’s first-quarter net sales totaled $13 million versus net sales of $5.2 million in the first quarter of 2022 — a more than 250% increase that is nearly 90% of the company’s net sales for full-year 2022, according to the release.

This $7.8 million increase in net sales during the quarter was largely driven by tomato sales from the third harvest season at AppHarvest’s facility in Morehead, Ky., along with the start of operations at other Kentucky locations in Berea, Richmond and Somerset, the company said.

Related news: Financial woes surface in investor report, but AppHarvest says it’s ramping up

January 2023 marked the first time that all facilities in the AppHarvest’s four-farm network were commercially shipping products from an increasingly diversified crop portfolio that included strawberries, salad greens, cucumbers and additional tomatoes, the company said.

According to the release, net sales by crop type included:

Almost $11 million in tomatoes.
More than $1 million in strawberries.
Over $800,000 in salad greens.
Nearly $200,000 in cucumbers.

In line with expectations, the company said it recorded a net loss of $33.6 million in the first quarter of 2023, compared to a prior year net loss of $30.6 million.

Making steady process on strategic plan

Martin, an AppHarvest board member and controlled environment agriculture industry veteran, was appointed COO in January 2023 to optimize production, sales and costs throughout the AppHarvest network.

This year the company has focused on profitability, implementing a strategic plan dubbed “Project New Leaf.”

Martin is working to implement the five-point strategy to focus efforts across all operations with objectives that, according to the release, include:

Further leveraging synergies with its marketing and distribution partner, Mastronardi Produce.
Enabling labor efficiency.
Improving enterprisewide feedback through clear key performance indicators and cross-organization information sharing.
Initiating comprehensive spending reviews.
Aligning team members to milestones outlined in the five-year strategic vision.

Expanding production

In its third season, AppHarvest’s Morehead facility is achieving significant production records in terms of key performance indicators, according to the release. The company said it is applying lessons learned at Morehead to accelerate its operational excellence at each of its new farms, especially at Richmond, where the team has made meaningful progress in labor efficiency, plant health and production.

The Morehead, Somerset and Richmond facilities have successfully completed their food safety audits and have increased the number of direct shipments from each farm, reducing transportation costs and the number of food miles travelled so AppHarvest fruits and vegetables arrive on store shelves fresher and with less waste, according to the release. The Berea farm is currently pursuing its food safety certification.

Operations continue to ramp up with both Berea and Richmond opening on a planned phased approach, and Richmond is expected to be fully planted in the third quarter and start harvesting later in the fourth quarter, the company said.

Financial Outlook

AppHarvest reiterated its full-year 2023 guidance of net sales to be in the range of $40 million to $50 million. The company believes in its ability to be self-sufficient and generate positive operating cash flow over the longer term with the four-farm network, according to the release.

Related news: Mastronardi funds AppHarvest to grow greens, expand farms in Appalachia

With all four farms in the AppHarvest network shipping under a variety of brands for Mastronardi Produce, the company expects to see significant year-over-year net sales increases throughout 2023, and it expects that trend to continue in 2024 as the company leverages more of the farm acreage and works to optimize production.

Mastronardi purchases AppHarvest farm in $127M sale-leaseback deal

Wed, 28 Dec 2022 15:06:30 GMT

Kentucky-based controlled environment agriculture company AppHarvest has finalized a sale-leaseback of its Berea, Ky., indoor leafy greens farm to its marketing and distributing partner, Mastronardi Produce, for just over $127 million, according to a news release.

The sale includes an initial lease rate of 7.5% over 10 years. A portion of the proceeds from the sale-leaseback will repay a $30 million bridge loan from Mastronardi Produce to AppHarvest, along with the first two years of prepaid rent at the Berea farm, according to the release.

Mastronardi Produce markets and distributes AppHarvest’s entire line of produce, which includes leafy greens, along with tomatoes, cucumbers and strawberries.

Related news: Financial woes surface in investor report, but AppHarvest says it’s ramping up

At the same time as the sale-leaseback of its Berea farm, AppHarvest has opened a fourth location, a 60-acre high-tech indoor farm in Richmond, Ky., growing Campari brand tomatoes. The first harvest is anticipated in early January.

Half of the Richmond tomato farm currently is planted, with the other half slated to be planted in 2023. The January Campari tomato harvest marks the first time AppHarvest is expected to have commercial shipments delivered from each of its four indoor farms.

“The AppHarvest team has worked relentlessly this year to get the four-farm network operational, and those efforts have paid off with the quadrupling of farms in our network and diversifying our crop set,” AppHarvest founder and CEO Jonathan Webb said in a news release. “The team is now focused on operations to ramp up production and revenue from the four high-tech farms.”

Related news: Mastronardi funds AppHarvest to grow greens, expand farms in Appalachia

In 2022 alone, AppHarvest has opened two other CEA farms: a 30-acre strawberry and cucumber farm in Somerset, Ky., and a 15-acre leafy green facility in Berea, Ky., according to the release.

AppHarvest is shipping strawberries under the WOW Berries brand and washed-and-ready-to-eat leafy greens under the Queen of Greens brand. In its third growing season, the AppHarvest Morehead farm has further diversified its crop, adding snacking tomatoes sold under the Sunset brand as Flavor Bombs and Sugar Bombs.

Financial woes surface in investor report, but AppHarvest says it's ramping up

Wed, 07 Dec 2022 22:30:11 GMT

Kentucky-based indoor farm operator AppHarvest is heading into its third season of tomato harvest with questions about its financial stability.

SEC filing statements released Nov. 7, along with several key leadership changes, raised concerns with a local Kentucky newspaper. According to the Lexington Herald Leader, AppHarvest is pausing its plan to build a dozen indoor farms to shift focus on turning a profit quickly over the next few years at its three existing farms in Morehead, Berea and Somerset, along with a soon-to-be-operating fourth farm in Richmond. The farms grow tomatoes, leafy greens for salads, and berries.

The SEC investor statement detailed net losses of $83 million in the first nine months of 2022. Coupled with net sales of $10 million and accumulated deficit of $270 million, altogether AppHarvest has spent at least $641 million since 2018, according to public filings.

Related news: Mastronardi funds AppHarvest to grow greens, expand farms in Appalachia

Additionally, recent leadership changes at AppHarvest bolstered concerns. Two executives stepped down from the company in November; former president David Lee “mutually agreed” that he would leave the company but stay on as a member of AppHarvest’s board of directors, and former chief operating officer Julie Nelson left earlier in the month.

AppHarvest Director of Corporate Communications Darla Turner told The Packer that the Herald Leader story caused a lot of misunderstanding.

“The article was based on an SEC filing statement that we released on Nov. 7 along with our quarterly earnings report. That filing regarding the financial status of the company is based on a formula that doesn’t take into account any of the upcoming revenue streams that we anticipate or the potential financing options that we’re actively working on—such as the sale-leaseback of our Berea, Ky., salad greens farm that could provide significant cash for ongoing operations,” Turner said.

Turner said that the company had solid plans to deliver long-term value for Appalachia and all its stakeholders.

“During a pandemic, we’ve been able to undertake what we believe is the largest-ever build-out of controlled environment agriculture in U.S. history,” she said.

“Also—because we went public while still in hypergrowth mode making significant capital investments in the four farms we have—the article portrayed those investments purely as losses instead of explaining that the cash has gone into assets that hold long-term value (our high-tech farms and equipment) that are just now ramping up to deliver millions of pounds of fruits and vegetables and revenue,” Turner added.

Looking toward 2023 tomato harvest

While the fourth farm in Richmond, a 60-acre facility, is still under construction, half of the farm has been planted with Campari and Maranice varieties of tomatoes on the vine, with an expected harvest in January 2023, according to a news release.

AppHarvest’s Moreland farm is heading into its third harvest season with a more diversified range of tomatoes, adding snacking tomatoes sold under the Sunset brand to the mix. The crop set is 50% beefsteak tomatoes, 25% tomatoes on the vine and 25% snacking tomatoes, according to the release.

“With the experience of two seasons of harvests, the Morehead farm is seeing significantly improved quality and yield, which largely can be attributed to task completion rates of crop care specialists meeting and sometimes exceeding 100% of goal,” AppHarvest founder and CEO Jonathan Webb said in the release. “We’re developing a tenured workforce and seeing benefits of promoting from within to help drive efficiency and quality from folks who have grown the business with us from the ground up.”

Mastronardi funds AppHarvest to grow greens, expand farms in Appalachia

Thu, 03 Nov 2022 17:39:51 GMT

Indoor farm developer and operator AppHarvest is opening a 15-acre autonomous, indoor salad greens farm in Berea, Ky., featuring a touchless growing system with robotic harvesting. This new farm will supply marketing partner Mastronardi’s Produce’s “Queen of Greens” washed-and-ready-to-eat packaged salad brand.

To construct the farm, AppHarvest Berea secured a $30 million loan from Mastronardi Produce, according to a news release. AppHarvest expects to operate a fully developed, four-farm network in Appalachia by end of year, with a 30-acre Somerset berry farm expected to begin commercial shipments soon. Once completed, AppHarvest’s four-farm network will include 165 acres of controlled environment agriculture. AppHarvest currently operates a 60-acre tomato farm in Morehead, Ky., the release said.

“Our top customers increasingly request CEA-grown produce for its reliable quantity and consistent quality — especially in terms of flavor, texture, color and shelf life — and its more sustainable growing methods,” Mastronadi Produce CEO Paul Mastronardi said in the release. “This deeper relationship with AppHarvest positions us to grow together efficiently to meet increasing demand by expanding our local footprint and delivering on our long-standing ‘fresh from the farm’ commitment to customers.”

The AppHarvest Berea CEA facility officially opened on Oct. 26, 2022, as Kentucky Gov. Andy Beshear, U.S. Rep. Andy Barr and AppHarvest founder and CEO Jonathan Webb used handheld harvesters to cut down a strip of crispy and juicy greens grown in the farm’s touchless system. The farm is opening in a phased approach, beginning with 5 acres and bringing on additional productive acreage over time. AppHarvest began first commercial shipments of salad greens in early October.

Related news: Mastronardi Produce leaps ahead with expansion

At 15-acres — or nearly 654,000 square feet — the AppHarvest Berea farm is expected to be a leading high-tech indoor farm for autonomously harvested salad greens with a touchless growing system, according to the release. The hands-off production system is automated from pre-seeding to packaging and includes on-site washing to support food safety and post-harvest efficiency for washed-and-ready-to-eat salad packs.

The farm is designed to grow about 35 million lettuce plants at a time, which go from seed to maturity in about three to four weeks depending on variety, according to the release.

“AppHarvest is deepening its relationship with Mastronardi Produce under the ‘Queen of Greens’ packaged salad brand,” Webb said in the release. “Working closely with Mastronardi, the AppHarvest team has set new precedents in the CEA sector by quadrupling our number of farms in such a short time. With the Berea opening, we now have two farms shipping produce to national customers, and our 30-acre Somerset berry facility also is expected to ship in the next few weeks. We expect Morehead to start its third harvest and to start planting our 60-acre Richmond tomato farm in November.”

The AppHarvest Berea growing environment uses sunshine and rainwater and includes automated lighting, humidity and temperature controls. The farm employs a closed-loop irrigation system, which enables expected water savings of up to 90% compared to open-field farming, and allows for precision dosing of nutrients, resulting in less fertilizer compared to open-field farming while avoiding pollution from agricultural runoff, according to the release.

Related news: Driscoll’s heads to Virginia to grow strawberries in world’s largest indoor vertical farm

The closed-loop system also supports in integrated pest management — using beneficial insects and supporting early pest detection and prevention — to lessen dependence on chemical pesticides, the release said. The adaptive spacing design of the troughs in the touchless growing system is designed to minimize any potential pest exposure.

According to AppHarvest, the packaged salad market in North America was estimated to be about $5.9 billion in 2021 and growing. As traditional lettuce-producing areas in California and Arizona experience ongoing drought and other severe weather conditions wreak havoc on crop yields, AppHarvest thinks its CEA approach producing more predictable yields with less water and other resources will be critical in providing fresh fruits and vegetables that are affordable.

The Farm Economy Explained in 5 Charts

Thu, 24 Jun 2021 18:56:55 GMT

The tide has turned, and it turned rapidly. The latest round of agricultural credit condition surveys from the Federal Reserve banks shows improved strength in the agricultural economy.

This strength is exhibited in several key metrics , write Nathan Kauffman, Federal Reserve Bank of Kansas City vice president, economist and Omaha branch executive, and Ty Kreitman, Federal Reserve Bank of Kansas City assistant economist. Those metrics include farm income, farm loan repayment rates, overall farm loan demand, interest rates and farmland values.

“Strength in markets for most major agricultural commodities has led to higher prices and expanded profit opportunities across the sector in recent months,” write Kauffman and Kreitman. “Together with robust financial support from government aid programs related to the pandemic, conditions have led to a rapid improvement in farm finances.”

Let’s dig into each metric.

(Farm Journal)

Compared to recent years, farm loan repayment rates increased rapidly across the bulk of farm country in the first quarter. Repayment rates were higher across all areas in the same quarter for the first time since 2013.

(Farm Journal)

Overall demand for farm loans is reduced. In addition, renewal and extension activity dropped considerably in some areas. Demand for loans dropped at a slightly faster pace in the Chicago and Minneapolis Districts than others.

(Farm Journal)

Farm income has strengthened sharply. Around 70% of all participating bankers reported that farm income was higher than a year ago.

(Farm Journal)

Average interest rates on farm loans are at historic lows. The average fixed rate on all types of agricultural loans was at least 40 basis points less than a year ago and at least 170 basis points less than the 20-year average across all Districts in the first quarter.

(Farm Journal)

The combination of strength in the farm economy and low interest rates are supporting farm real estate values in all regions during the first quarter. The value of non-irrigated cropland increased by 7% on average across all Districts. Beyond the Mountain States, which are flat with last year, gains in farm real estate values range from 4% to 23%.

Read More
Rural Mainstreet Index: Farmland Price Increase Hits Longest Streak Since 2013

Kansas City Fed Shows Increase in Farm Loan Repayment Rates Makes Biggest Jump Since 2012

What to Know: New Farm Lease Rules

Tue, 26 Oct 2021 00:56:56 GMT

Prepare for new accounting methods for your farm

In December, new accounting standards for reporting leases are scheduled to go into effect. The intention: To more accurately portray leases’ implications for a company’s financial health.

Under the new ASC 842 standards, companies must report both operating leases and finance (formerly called capital) leases on their balance sheets. Also, quarterly or monthly reports adjust balances of liability and “right to use” value.

(Farm Journal)

“This will place a significant accounting burden on operations that use leases,” says Fallon Savage, senior vice president, agribusiness credit at Farm Credit Services of America. “Leases are not all entered into at the same time, nor do they end at the same time. Details of formerly ‘off balance sheet’ operating leases will need to be identified, pulled together and reported.”

On the cash flow statement, short-term operating leases are treated as a single expense, but finance leases are reported as operating principal plus interest payments over the term of the lease.

The related amortization calculations will mean more work for accountants but likely not as much for most farmers, notes Paul Neiffer, CPA with CLA. Plus, accounting companies have had time to develop programs to spit out the values.

NOT ALL WILL BE AFFECTED

The new standards apply to operations following Generally Accepted Accounting Principles (GAAP) or Farm Financial Standards Council recommendations.

“I estimate some 20% to 30% of those who make their living from their agricultural operation will be affected,” Neiffer says.

The new reporting system shows “right of use values” for the asset under lease — but those assets are not treated as equity.

“As a result, leverage measures such as the debt:equity ratio will be affected,” Savage says.

This could push a farm over lending thresholds. Bankers could simply back the lease out, Neiffer says, or adjust their ratio thresholds.

“We are having conversations with some of our customers,” Savage says. “So far, we are looking at qualifications on a case-by-case basis and, when appropriate, we consider total liability less the lease liability.”

Discuss the new rules with your financial team to allow for the paperwork and time to go over the numbers with your lender.

Farm Debt-to-Income Ratio Points to Continued Farmland Price Strength

Fri, 15 Oct 2021 14:17:03 GMT

$13,400 per acre in Cedar County, Neb. $17,000 per acre in Douglas County, Ill. $26,000 per acre in Johnson County, Iowa.

This has delivered numerous mind-blowing farmland sales. But will this runup in values continue?

The odds are likely, according to a key ratio that compares farm debt to farm incomes, says Mike Walsten, contributing editor to LandOwner .

“The farm debt-to-income ratio suggests the land market is not so heavily leveraged that a downturn in profits will bring a rush of forced land sales that would crush land values in the short term,” he says. “I expect the land market will continue to see strong demand well into next year.”

The ratio reflects how much total net farm income, as forecast by USDA, is available to service total farm debt. A high ratio, such as $6 of debt to $1 of net income, means debt is too high and income too low. If a high ratio exists for three years or longer, it signals farmland foreclosures and lower land prices are on the horizon.

For 2021, the ratio eased back under 4. That’s based on USDA’s recent forecast of $113 billion in net farm income.

“The ratio hovered under 6 the past five years, which reflects the improved financial health of the farm sector compared to the highly leverage farm economy that existed in the late 1970s, just ahead of the commodity prices collapse and resulting ag recession of the 1980s,” Walsten says.

For now, the metric shows farmers have lower leverage and are positioned to cope with several years of low commodity prices and paper-thin profit margins.

“This gives us confidence the farmland market is much more buffered from a washout collapse, such as in the 1980s,” Walsten says. “It does not mean the market is not vulnerable to 10% to 20% corrections. Such corrections are normal and healthy for a market. That next correction could occur as early as 2022, depending on when commodity prices ease and interest rates rise.”

Does Your Farm’s Financial Reporting Pass the Grade?

Mon, 24 Jul 2023 20:46:50 GMT

Think about how your farm has grown in size and scope over the past decade. Has your financial reporting followed suit?

“Farmers really struggle with anticipating the needs for better financial reporting,” says Curt Covington, senior director of institution credit at AgAmerica Lending . “One of the biggest risks farmers make as they grow is information risk.”

Covington defines information risk as the quality of the financial data and information farmers are collecting, analyzing and acting on. To have the best information today, he says farmers must adopt accrual accounting.

Most farmers use cash basis accounting, says Paul Neiffer, a CPA who works with farmers.

The main difference between accrual basis and cash basis accounting is the time at which income and expenses are recognized and recorded. The cash basis method generally recognizes income when cash is received and expenses when cash is paid. The accrual method recognizes income when it is earned and expenses when they are incurred.

“It’s important for farmers to understand that cash accounting — cash in, cash out — does not do a very good job of explaining what your farm really made,” he says. “It doesn’t help you plan forward. By using farm accrual accounting on an on-going basis (not simply making some adjustments at year-end), you can accurately determine how much income you generated off of this year’s crops and know what you really made for the year, not what you show to the tax man.”

Listen to Covington on The Farm CPA Podcast with Paul Neiffer:

For today’s complex farm operations, accrual accounting can remove some of the guesswork and provide better information for multiyear projections, Covington says. It can also make your loan renewal process easier.

“You want to get your loans approved quicker? You want to get it done with less questions? Provide us accrual based financial reporting,” he says.

The switch to more comprehensive financial reporting, Covington admits, can be a bit tedious. “Plus, farmers often say they don’t see the benefit to the cost,” he says.

Yet he encourages farmers to look at adding someone to the team who can provide strong bookkeeping and/or analytical skills.

“Once you employ managerial accounting principles to understand the enterprises in your business, you’ll see the benefits,” he says. “It is one of the most valuable tools you can implement.”

Assess Your Farm Financial Reporting
Successful and profitable farmers display certain financial habits that separate them from others. These habits, consistently applied through the years, add up, and the results are evident. Neiffer encourages farmers to ask themselves these questions:

Are you using a computerized accounting system?
Do you record your income and expenses on some type of accrual system?
Do you print out your balance sheet, income statement and statement of cash flows on a monthly basis and use it in your farm operation?
Do you know more about your farm finances than your banker does?
Do you book crop inventories on your balance sheet?
Do you calculate your deferred tax liability and know what that means?
Do you calculate depreciation based on some type of economic depreciation or book depreciation?
Do you prepare both historical and fair market value balance sheets?

If you do at least six out of eight, give yourself an A. If you do four to five, give yourself a B-. Less than four is likely a failing grade on your farm financial reporting.

“For those farmers with a failing grade, I would suggest looking at the guidelines at the Farm Financial Standards Council website,” Neiffer says. “They can help you get a passing grade.”

Read More:
Farming for ROI: It May Be Time to Give Your Accounting Method a Makeover

Top 10 Reasons You Might Need Accrual Accounting

Webinar to offer financial guidance for produce businesses

Mon, 15 May 2023 18:10:58 GMT

Capital and technology provider Silo will host a webinar to help produce businesses navigate challenges of the current economic climate.

“Rising Above the Capital Crunch: A CFO’s Guide to Financing and Skilled Cash Flow Management” will be delivered by Mason Brady, founder of Brady CFO and a renowned strategic CFO adviser, according to a news release. The partnership webinar will be the first of a webinar series beginning at 10 a.m. PST on May 25.

With over 12 years of experience in financial management, supply chain and operations within the food and agriculture industries, Brady brings expertise to help businesses optimize cash flow and financing strategies, the release said. As the former CFO and director of supply chain at Homegrown Organic Farms, Brady understands the unique financial demands faced by produce businesses and the importance of navigating economic uncertainties effectively, according to the release.

During this 60-minute interactive webinar, Brady, along with Silo Capital General Manager Jeff Butler, will explore key insights and actionable strategies that produce businesses can implement to enhance their cash flow management and leverage financing to balance risk and reward. Participants will gain a comprehensive understanding of the current economic landscape and learn how to better prepare their businesses for survival and growth.

Key topics to be covered in the webinar include:

Navigating the swings of customer demand, seasonality, and cash flow preparation.
Insight into risk metrics and leading indicators of cash flow challenges.
Building strategic partnerships with capital providers to strengthen financial stability.
The impact of changes in interest rates on the produce industry and strategies to mitigate associated risks.
Tools and strategies for forecasting cash flow, managing working capital and achieving a balance between liquidity, growth and investment.
Recommended financial lenders for the produce industry in the current economic climate.

This webinar offers a unique opportunity for produce business owners, finance professionals and industry enthusiasts to gain knowledge and expertise, according to the release.

Attendance is free, but space is limited. Registration is available online.

Upside debuts new dashboard

Fri, 12 Jan 2024 14:12:07 GMT

Upside , a digital marketplace dedicated to empowering individuals and businesses financially, has unveiled the new Upside Dashboard . Developed based on extensive feedback from grocery, fuel and restaurant retailers, the product sets new standards for measurement and transparency from third-party platforms, providing retailers with greater access and detailed insights into top-to-bottom performance metrics, according to a news release.

“In an era of heightened competition, evolving consumer behavior and rising costs, retailers not only deserve but need to understand the tangible impact third-party solutions are having on their bottom line. It’s the only way for brick-and-mortar commerce to thrive,” Wayne Lin, co-founder and chief product officer for Upside, said in the release.

Upside says it provides retailers with complete visibility into the expected and incremental, net-new activity across all locations and across all customer segments without imposing charges for extended reach and can exactly isolate the program’s impact within the dashboard.

“The Upside Dashboard really helps me keep a pulse on what Upside is doing for our business and what incremental sales the program is driving — week in and week out. Our business moves very quickly, and we need to respond very quickly,” Sean Weiss, vice president of marketing for Price Chopper and Market 32, said in the release.

Since its founding in 2016, Upside has generated $1.3 billion in profit for its retailer partners, returned $575 million in cash to its users and allocated 1% of its revenue to support sustainability initiatives, according to the release. Upside says it gives 30 million consumers access to its offers via its app and partner apps at over 100 thousand grocery stores, restaurants, gas stations, convenience stores and home improvement stores nationwide.

Banker Confidence in the Rural Economy Drops to Two-Year Low

Mon, 24 Jul 2023 15:40:22 GMT

For the sixth time in the past seven months, the rural economy has posted signs of weakness. That’s according to the Rural Mainstreet Index (RMI) from Creighton University.

For October 2022, the RMI sits at 44.2. That is down from September’s 46.3. This was the fifth consecutive month the overall reading has fallen below growth neutral.

“The Rural Mainstreet economy is now experiencing a downturn in economic activity,” says Ernie Goss, who chairs Creighton’s Heider College of Business and leads the RMI. “Almost one in four bankers reported the economy was already in a recession. Approximately, three of four bankers expect a recession to begin in 2023.”

The slowing economy, strong energy prices, higher borrowing costs and elevated agriculture input costs pushed the business confidence index down to 30.8 from 40.7 in September.

“This is the lowest reading for the confidence index since May 2020,” Goss says.

This month, bankers were asked to estimate the increase in farm equity for 2022. On average, bankers forecast a 3.4% boost in farm equity from 2021 levels. This compares to a 4% projection from the USDA for the nation’s farmers.

“Higher farm input costs and drought conditions in portions of the region supported stronger borrowing from farmers,” Goss says.

Farmland Still Shows Strength
The region’s farmland price index for October declined to 58 from September’s 61.1. However, the index has remained above growth neutral for the 25th straight month.

Jim Rothermich of the Land Talker reported on farmland sales auctions in Iowa between Oct. 8-14: “Plymouth County takes top honors this week with a sale at $26,250 per acre (55.6 acres), breaking the last state record of $26,000 per acre set in Sioux County on Aug. 31, 2022.”

For the second time in the past three months, the farm equipment-sales index slumped below growth neutral to 47.8 from September’s 58. The index has risen above growth neutral for 21 of the last 23 months.

4 Highly Effective Financial Habits for Farmers

Mon, 24 Jul 2023 15:38:31 GMT

Use your accounting processes to evaluate, forecast and plan

Think about how your farm has grown in size and scope in the past decade. Has your financial reporting followed suit? Would you define your financial management and bookkeeping processes as a competitive advantage or an area to improve?

“Your financial management system should help you make better and data-based decisions,” says John McNutt, management consultant with Latta Harris . “A good system will help you respond quickly to unknown challenges or opportunities, such as renewing leases, pricing grain or pursuing new ventures.”

Profitable farmers create financial habits that separate them from others. These habits, consistently applied through the years, add up, and the results are evident. Here are a few tips to consider:

1. CREATE A PAPER TRAIL.

Always keep supporting source documents for what you are paying, receiving for income, sales, money transfers, loan advances/payments and so on, advises Kristy Snyder, Compeer Financial manager of tax and accounting. “Having this paperwork will help in making sure all items are accounted for and be a resource to look at later,” she says.

2. RECONCILE AND EXAMINE FINANCIAL DATA ON A REGULAR BASIS.

McNutt suggests reconciling the bulk of your records each month; if you wait three or six months you can easily lose track of balances and inventories. For grain farmers, he recommends producing and reviewing farm financial statements twice a year — midyear and year-end. This will help you with tax planning and forward-looking decisions, such as renewing leases, booking inputs and setting budgets.

3. ANALYZE PROFITABILITY FROM SEVERAL ANGLES.

Farm profitability is the ultimate concern and focus for everyone in your organization, so tracking it, which can be complicated, is essential, says Norman Brown, president of FBS Systems . He suggests tracking profitability in multiple ways:

Revenue per profit area: This metric measures profit per unit of farmland, such as dollars per acre. While a great metric, it shouldn’t be a standalone measurement as it typically does not include costs associated with land use or maintenance.
Economic farm surplus (EFS): This measure calculates both the cash and physical profit performance of your farm assets, including livestock and land. Brown says EFS is a great way of forecasting future performance and growth and can help you see overall performance across profit centers.
Month-to-month profits: This measurement allows you to gauge current profits but might not provide the long-term view you need for strategic planning.

4. KEEP YOUR ACCOUNTS SEPARATE.

A common mistake farmers make, McNutt says, is commingling personal and business accounts.

“When it’s all blended together, you can’t keep track of each, and you don’t know which enterprises are profitable or not,” he says.
Aim for consistent coding. Everyone on your team needs to use the same coding strategy, Brown says. This includes accounts, centers, fields and inventory items.

Orange Juice Stuck in Worst Rout in Five Decades as Demand Sinks

Fri, 13 Nov 2020 06:04:42 GMT

Orange-juice futures in New York are heading for a 15th straight day of losses, the worst rout in records back to 1967.

U.S. demand for the juice has been weakening for years. Add that to a declining citrus crop in Florida, the top domestic grower, and you’ve got a recipe for shrinking investor interest as fewer people want to use futures to hedge. Prices have slumped about 17 percent this month.

The liquidity drain has also sapped market swings: 60-day historical volatility for most-active futures is at the lowest since November 2014. Even though Florida’s harvest is forecast by the government to drop to the smallest in 73 years, surging imports of frozen concentrate juice from suppliers like Brazil and Mexico are making up for the losses.

The future farm office

Wed, 04 Jan 2023 14:17:50 GMT

As a 21st century farm manager, you’ve invested in high-tech options. But what about your farm office?

It’s the hub of your operation. Yet the office often gets overlooked when it comes to a farm’s investment.

Modernizing your farm office is increasingly crucial to managing and expanding your farming operation. Greater reliance on technology, data and record-keeping has upgraded the role of your office. Moreover, HR experts say long-time employees – those who stay with one company for 15 or 20 years – are becoming a rare breed. Having to depend on “short-timers” makes it difficult keep the wheels spinning on everything from job applications to payroll to regulatory compliance.

So, take time to reimagine your farm office for the not-so-distant future. Is your office management system up to date? Is it integrated with other systems your ag business uses? Is it cloud-based?

Here are ways to prepare your farm office for tomorrow’s demands:
• Decide if you believe in the importance of transforming your office. Are you ready to invest in its role or do you want the next generation to do it? It will take effort and time, but the results will be worth it.

Make sure your farm’s basic IT needs are addressed. These include hardware, software, cybersecurity and system back-ups.
Evaluate the skill sets of your office staff. Make sure your employees have the skills to handle a modern office management system. Many office staffers already wear multiple hats and may be overwhelmed by new technology. One solution: outsourcing your HR needs. There are service providers who specialize in things like employee handbooks, regulatory and legal changes, H-2A labor and employee contracts. Working with professionals ensures your farm stays up to date and is protected from lawsuits. Outsourcing also frees up you and your staff to manage the rest of your farm or livestock operation.
Standardize your office processes and procedures. In this digitized world, it’s no longer enough to keep your operating methods in your head. Creating, documenting and following how you handle the many tasks of your farm office leads to efficiency. It also removes emotion from important tasks. Easily repeatable processes and procedures not only aid your regular staff but help with onboarding new employees. And setting down how you and your farm do things is especially important as you transition your operation to the next generation.
Think about scalable processes across the farm. Integrating or tying together your farm’s across-the-board programs allows you to gather granular, timely data to make quick, educated decisions.

In this ever-changing world, your farm office will benefit immeasurably from modern, accurate and cohesive office processes and procedures. Bottom line: If your farm office is set up for success, imagine what new growth you can achieve going forward.

Kala Jenkins will present on the farm office of the future and more at the 2023 Top Producer Summit. Register now!

Kala’s insights have helped position agribusinesses for both survival and success – from agricultural lending, cash flow strategies and debt optimization to grain marketing, risk management and legacy building. A manager with Pinion (formerly KCoe), she is a proactive catalyst for agribusiness success – enabling their growth, optimization and expansion.

Evaluate Your Farm's Capital Stack

Thu, 27 Jul 2023 16:01:33 GMT

Is your operation poised for financial stability?

The cheapest option isn’t always the least expensive. That’s especially true when it comes to your farm’s capital costs.

With higher profit potential versus recent years, now is a smart time to analyze your capital structure and options, says Peter Martin, finance and growth consultant with K·Coe Isom .

“Capital can come from many sources: debt, equity, supplier financing, even friends and family,” he says. “If you’re happy with where your operation is, cheap capital may be good. But if you’re looking to grow, diversify or try something new, paying a little more for capital may bring worthwhile advantages.”

Rate Sensitivity Analysis

Evaluate your capital structure from both tangible and intangible perspectives, Martin says. How can you make yours more flexible, cheaper and more tailored to your operation’s goals?

From a hard-cost perspective, take a deep dive into your loan portfolio, suggests Ashley Arrington, founder of ag consulting firm Agri Authority . Consider your loan portfolio, she says, and ask these questions:

How would my debt load be affected by an increase in rates?
Is something being aggressively amortized that could be toned down for year or so?
Could some debts be combined and re-amortized?
How are my payments timed? Are they timed to coincide with cash flow?

“Your banker should be able to help answer these questions,” Arrington says. “Just don’t want to wait until the last minute to run the numbers to see how different interest rate levels will impact your operation.”

Beyond the hard costs, consider capital-cost intangibles, Martin says.

“For example, there may be a strong advantage with capital flexibility,” he says. “Is your lender willing to work with you to help you get where you’re trying to go? Will they give you the freedom to buy what, when and where you want? Is working with that lender a yearly grind or more aligned as a partner for the future? All that’s worth something, even if your cost may be a little higher.”

Be Poised for Good Times

Many farmers applied and were given funds through the Paycheck Protection Program (PPP). That combined with higher commodity prices mean farmers are securing fewer loans through traditional lending, says Joe Caffee, president and CEO of the First State Bank of Middlebury, Ind.

“Banks and financial institutions are getting more and more competitive for the very best credits because we’re all sitting on a pile of cash,” he says.

As a result, lending institutions may be willing to provide larger portions of your operating needs or adjust their credit requirements. Now may be the time to replenish or increase your working capital.

For example, maybe you need $1 million to run your farm. You borrow 50%, or $500,000. You still need the other $500,000, so you use money you’ve set aside from profits. But what if you had instead borrowed 80% of the $1 million?

“You still would have your own untouched money that could be used for another opportunity,” Martin says. “Some farmers operate with very high levels of debt, others with none. There is no perfect capital structure for all farms, only what works best for your business.”

Calculate Your Cost of Capital

Consider the following factors to understand the true cost of your business capital, says Peter Martin, finance and growth consultant with K·Coe Isom.

Interest rate. It’s not only important to know the main cost of borrowing but the fees that go with it. These can include origination fees or a fee for an audited financial statement. Have you factored in those costs?

Supplier finance. When you borrow from a supplier, the true cost can often reach into double-digit percentages. Why? Because the terms often mean you can’t take advantage of cash discounts on the supplier’s product or service. Borrowing from a supplier may also preclude you from buying that same product or service for a lower price from another business.

Equity opportunity. People often fixate on the visible cost of debt. But remember the equity that’s factored into the cost of your capital. You might get a lower interest rate based on the higher equity you bring to the table. But could you make better use of your equity without committing it to your lender?

A Simple Checklist to Evaluate ROI on Your Farm

Thu, 27 Jul 2023 16:04:27 GMT

The concept and calculation of return on investment (ROI) is pretty simple. It is most commonly measured as net income divided by the original capital cost of the investment. The higher the ratio, the greater the benefit earned.

Yet, ROI is often poorly defined and poorly understood, says Brent Gloy, economist at Agriculture Economic Insights .

“Return on investment is a popular phrase and it can be insightful,” he says. “But it also has its limitations.”

Gloy says understanding your ROI is helpful when you are:

Considering uncertainty.
Comparing or benchmarking alternatives.
Evaluating performance over time.

To truly analyze your ROI, create an internal operating procedure for how you will calculate and use it, suggests David Widmar, economist at Agriculture Economic Insights .

“You can’t invest in every operation that comes your way, so ROI can help you prioritize,” he says.

Widmar and Gloy suggest this ROI checklist:

Identify all costs and potential revenue. Start with a clean sheet of paper.
Evaluate alternatives. Challenge your thinking.
Review key assumptions and possible outcomes.
Consider constraints: capital, labor, etc.

Factors, Calculations and Reality

With higher commodity prices, you may be in the market to make an upgrade or new investment on your farm. While you need to read the promotional information and research done by the companies providing the service or product you’re considering, do so with a realistic frame of mind, encourages Shay Foulk, farm business consultant with Ag View Solutions and an Illinois farmer.

Your goal is to pinpoint the minimum benefit your farm needs to see to cover the costs and your time for the investment. You want to avoid phrases such as, “I know this is going to add 5 bu. to our bottom line,” or “I think this product is going to give us an agronomic advantage.”

Foulk suggests evaluating these factors:

Grain Price: Projected price for the commodity you will be using to evaluate your margin enhancement.
Investment Cost Per Acre: How much will it cost to make this enhancement or upgrade?
Yield Improvement Per Acre: This is your best educated guess for yield improvement.
Acres: Across how many acres will you use this margin enhancement on?
Years of Use: How many years do you plan to use this margin enhancement?

Watch a Farm Credit Services of America webinar of Gloy and Widmar discussing ROI .

Read More
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Should You Buy That Farm? A Tool to Help You Do the Math

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Arable Capital Partners invests in Organicgirl

Tue, 30 May 2023 14:05:15 GMT

Washington-based sustainable food and agribusiness investor Arable Capital Partners LLC has confirmed a strategic investment in Organicgirl LLC, according to a news release.

This would bring Arable’s current platform investments to five companies, including Blazer Wilkinson Gee, Laurel AG & Water, Pacific Trellis Fruit and Royal Ridge Fruits.

A branded organic packaged salad company, Organicgirl is headquartered in Salinas, Calif., and ships to retailers nationwide.

“This is exactly the sort of company we want to partner with. Organicgirl has already delivered on a big vision for packaged organic salads and we look forward to supporting expansion with its consumer, customer, and product base,” Derek Yurosek, managing director of Arable Capital Partners, said in the release.

Related news: Experts discuss what’s ahead for the shifting CEA marketplace

The current management team will continue to lead Organicgirl’s business, and Arable is aligned with Organicgirl’s long-term vision, Yurosek added.

“This is a fantastic opportunity for Arable to expand its footprint in organics and to enter the leafy greens category,” Greg Richards, founder and managing director of Arable, said in the release. “We look forward to working with the entire Organicgirl team to deliver premium organic products to consumers and customers.”