Currently, for people dying in 2009, you can have a taxable estate of up to $3.5 million and not pay any federal estate taxes.  For 2010, this amount is unlimited, but goes back to $1,000,000 in 2011 and beyond.

Congress is working on changing these amounts and my guess is that the current $3.5 million amount will be retained for 2010 and beyond.

Even though the federal estate has no taxes for values under $3.5 million, several states will tax your estate even if it is as low as $675,000 or in some cases even lower.  Here is a listing of the states with the minimum amount that is subject to state estate taxes:

$500,000 – Ohio

$675,000 – New Jersey and Rhode Island

$1,000,000 – Kansas, Maine, Massachusetts, Maryland, New York, Oregon, Minnesota, Tennessee, Vermont

$2,000,000 Connecticut, Illinois, Washington

Layered inheritance taxes, in many cases starting at $10,000 or less – Indiana, Kentucky, Nebraska, Pennsylvania

All other states currently do not have an estate or inheritance tax.  However, if the federal law changes, this could affect those states.

Remember that if you live in a non-tax state, but have real estate holdings in a state with an estate tax and the value is greater than the state minimum, you should look at doing planning to eliminate this tax.  You may be able to set up a trust or limited liability company or other forms of holding the property and this will eliminate the state tax.

This has been designed as a guide.  Make sure to discuss this with your tax advisor.

The Federal Reserve Bank of Kansas City issued their second quarter report on thier survey of agricultural credit condtions.  Some highlights of the report are:

• 1.  Farmland values seem to be stabilizing.  The value of farmland in the second quarter was basically unchanged from the second quarter of 2008.  Irrigated acreage was slightly higher due to lower energy prices.

2.  Farmers are continuing to dominate the demand for farmland, however, investors do seem to be coming back in to bid on quality land.  The supply of farm land for sale has declined substantially so this may be propping up the price.

3.  District farm income did edge up in the second quarter and capital spending increased slightly due to the expectations for higher farm income.

4.  Farm credit conditions continue to hold steady and may improve in future months.

5.  Demand for farm loans rose from a very weak first quarter.

 The major crops in this area are starting to be harvested and if there is no major freeze, we are probably looking at very good yields.

First off, an update on why there have not been any posts for a few days.  I went on a four day backpacking trip into the North Cascade Mountains of Washington state.  This is some of the best scenery in the whole United States.  I went with a friend that was in my wedding many years ago and we had not done this type of trip for several years.  I had a great time, lost a few pounds and did not get bitten by too many bugs.

After getting back, I found out my computer’s hard drive finally crashed on me.  I had another computer to replace it, but it took several days to get it up and running and will probably take another few days to get it exactly the way I want it.

For the current post, Successful Farming recent September 2009 issue has a very good article on the six sucessful steps needed to be a good marketer of your grain.  This article was written by Alan Kluis, who usually contributes a monthly article to the magazine.

The six steps are as follows:

1. Know Your Break-Evens – A good marketer will know exactly what is break-even point based upon price and yield.  They are willing to make sales when they get to a price level that works.
2. Be Consistent – A good marketer is consistent.  They sell about 40% – 60% of their crop in the key April-to-June period when seasonal trends are usually the best.
3. Make Sells on the way Up – They are willing to make incremental sales as the market is going up and keep making them.  I see too many farmers try for the exact top and by the time they determine what the exact top is, the market is 10 % – 20% lower and it is too late.
4. Be Disciplined – They are willing to sell when the market is bullish.  They have a sense of history and know when to sell and will pull the trigger to sell.
5. Use Seasonal Odds – These farmers tend to not sell in the low seasonal periods, but rather, wait until the normal seasonal high periods to sell.  They take advantage of new crop hedges, cash sales or put options to lock in these prices.
6. Use a combination of tools - They use a combination of risk management tools.  The majority of them take advantage of CRC or RA insurance.  They will tend to insure their “A” bushels which is the core crop yields and use put options to get price protection on their “B” bushels.

All-in-all, this is a very summary of what all farmers should try to obtain in their marketing efforts.

I was reading  a good book by Mark Reiter called “What Got You Here Won’t Get You There” .  Mark is a consultant to many Fortune 500 companies on how to get their key employees to overcome thier worst personailty traits.

In the book, Mark pinpoints 20 traits that almost all people in business and in life may have problems with.  From being too competitive to withholding information to speaking when angry, these traits can prevent someone from reaching their fullest potential.

Another area that Mark covers is the power of saying “thank you” and “I’m sorry”.  I grew up with a father who was about 46 when he got married and came from a large German farm family.  I know that my father was proud of me and loved to have me ride the combine as a child with him.  However, I never remember him saying “I’m sorry” or “Thank you” much, if at all.

I am working on trying to do this in the future with out be phony about it.  I think that if, as a farmer, you are able to say these two simple statements in every day life, I think you will find that you feel better and everybody else around you will respond in a happeir manner.  They will give you the extra effort that you may not be getting right now.

I would be interested in the feedback from anybody that gives it a try.

As the global economy turned south a year ago, the Food and Agricultural Policy Research Institute at the University of Missouri decided to revise their projections of food prices and production over the next five years.  This was done early in the year and many commodity prices have changed direction in the last several months.  FAPRI has issued an updated report as of August, 2009 give new updated estimates.  Has the outlook gotten better or worse?

Although prices have fallen from the 2008 peak, many of the major commodity prices remain above pre-2007 levels.  FAPRI is predicting that petroleum prices will increase over the next five years, however, they will not get back to the high levels of 2008.  Also, this will lower the demand for ethanol and bio-diesel which will lower the pricing for corn and related products.  The offset is that the cost of petroleum and fertilizers will be lower than peak pricing.

Corn Update – Corn acreage will climb steadily from 87 million to about 90.4 million in 2014.  FAPRI is estimating a new crop record of about 165 bushels per acre, however, this extra production will be offset with additional use for Ethanol.  It appears that the average price of corn will remain under the $4 level between now and 2014, however, it will still exceed pre 2007 baseline levels.  Net per acre returns before cash rents are expected to average around $300 per acre.

Soybeans Update – Acreage will remain steady at around 78 million acres till 2014 with yields steadily climbing to around 43.2 bushels per acre.  FAPRI is predicting pricing to remain in the $9 to $10 range.  For each year, carryover is projected to average around 220-230 million bushels.  This means that if there is any weather scares or disease issues, the price could increase dramatically.  Net per acre returns before cash rents are expected to average around $240 per acre.

Wheat Update- Acreage will decline from the peak acreage of 55.7 million acres in 2008 to around 49 million in 2014.  The yield is expected to climb slightly and the pricing appears to average between $5 and $5.50 between now and 2014.  Net per acre returns before cash rents are expected to average around $90 per acre.

Cotton Update – Cotton acreage during these years peaked out in 2007 at 10.2 million acres.  It is expected to remain level at the high 7 million acres between now and 2014.  Pricing is expected to increase from the bottom of 49 cents per pound to about 61 cents per pound in 2014.  Net per acre returns before cash rents are expected to average around $140 per acre.

Livestock Update – The beef herd is expected to continue its liquidation trend until about 2012.  This will reduce the herd by about 2 million head to 30 million total.  Pricing is expected to expand from the current 85 cents per pound to over a dollar for an average 1,100 – 1,300 pound Nebraska steer.  Net returns are expected to become slight profitable next year and then top out in 2013 at about $70 per head.

Swine Update – Some liquidation will continue over the next couple of years, with production starting to increase in 2012.  Pricing should firm from the drastic lows of last year and this year to around the high 50 cents per pound for barrows and gilts starting 2011 and beyond.  Returns will remain negative this year at around $8 per head and trend up to a perhaps $8 per head in 2011 and 2012, however FAPRI expects returns to drop to zero in 2014.