An economically sound farm or ranch likely has a strong team of professionals behind it. Members of the Kansas Farm Management Association have the added benefit of a relationship with a team of ag economists.
KFMA is a team of 25 economists spread across the state who are part of the department of agricultural economics at Kansas State University. They work cooperatively with farm families to provide members with production and financial management information for use in decision-making.
KFMA Executive Director Kevin Herbel said the foundation of KFMA is good record keeping—their other efforts build from that. KFMA works to provide each member with any necessary information related to the management of the farm or ranch. And the data collected from the 1,900 member farms in turn helps researchers at K-State.
“Our goal is to get each farm very high-quality information for their decision-making,” he said. “If we’ve accomplished that purpose, then we have a very good data bank to use for research purposes, and that then will be used in a number of different fashions.”
Members have the following available to them as part of their membership, according to the KFMA website, www.agmanager.info/kfma:
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Sound farm accounting systems;
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On-farm visits;
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Accrual basis whole-farm and enterprise analysis;
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Financial benchmarks for comparing performance with similar farms;
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Year-end tax planning and management;
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Integrated tax planning, marketing and asset investment strategies;
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Assistance with estate planning and farm succession planning;
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Guidance for business entity and structure planning; and
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Improved decision-making.
Herbel stressed the importance of building the relationship between the farm families and their economist. Meeting several times during the year helps build the relationship and allows the focus to be pointed toward efforts in meeting the farm operation or farm family’s goals.
“Certainly, something a lot of farm management association members find very valuable, are the farm visits that occur several times during the year requiring them to keep their records up to date,” Herbel said. “Having up to date records allows utilizing those records for decision-making in a lot better fashion.”
“A statement I often make is the encouragement for a manager of a farm to ‘know your numbers and use your numbers’” he said.
For a KFMA member to have their own farm numbers is crucial.
“For them to know their own individual financial position and to know their individual cost structure is very important,” he said. “As we work with these individual farms, we help them to have their records in an order, in a fashion, that allows them to know and understand their own financial position—to have their own information as they make decisions.”
Sharing financial information is something that is very personal for an individual or farm family, and opening up and sharing that information with someone isn’t something many are comfortable doing.
“So to have someone we have a strong relationship with certainly can be of great value,” Herbel said. “Having an individual that gets to know you, that knows your goals and objectives, that knows how you respond in different situations—having that relationship that allows that type of information to enter into the discussions and the interactions that take place.”
Longtime relationship
For Cheyenne County, Kansas farmer David Hendricks, it’s been a lifelong relationship with KFMA. His family has been members since he was a little boy.
“I have been a member for 18 years,” Hendricks said. “My family has been a member for over 30 years.”
David, along with his father, John, and brother, Chad, farm 14,000 acres around Bird City, Kansas. About 1/4 of their acres are irrigated, growing corn and soybeans. On the remaining dryland acres they have corn, milo, wheat, and field peas.
Hendricks sees a number of benefits from being a member. One is its tie to K-State, while another is the ease of number crunching.
“(They give us) the ability to have both our analysis and taxes done by just submitting our books once to a economist that we know and trust,” Hendricks said.
The benchmarking analysis that’s done annually is equally important.
“This gives us a chance to compare our operation’s costs and returns to operations across the state, in our county, operations our size, and how we compare with the top and bottom performing operations in the area broken down by crop enterprises and using a standard set of accounts,” Hendricks said.
Herbel agrees. Merging together the ability to assess the financial situation and to complete tax management from an economic perspective is a tricky job at times, but Herbel is confident in the KFMA economists to sort things out for the best of the farm or ranch. Farm visits and fall tax planning allow the farmers and economists to gain perspective through out the year when there are decisions that need to be made can have a substantial impact on the way something turns out either from a financial perspective or in a tax management perspective.
“The ability to bring that all together in an integrated decision making framework is I think, very important,” Herbel said. “Along with the accounting, the tax management, the opportunities to have multiple farm operations based within a region as well as around the state, with those farm records being put together in a similar fashion; allowing the ability to compare with other farms.”
By having their records in order, managers can compare the farm to itself over time, looking for trends and directions within that individual farm, and to compare to others and benchmark against standards.
“And just be able to do the overall assessment of where things are at from that standpoint,” Herbel said.
When it comes to farm tax management, many individuals lean towards, “what can we do to pay the least taxes at that point in time.”
“We work very hard to take an economic tax management perspective and moving away from a goal of just the least taxes this year and more toward a direction of the most after tax income that can be generated for a farm over time,” Herbel said. “With a goal of building after tax wealth and doing so in a fashion that can meet the goals and objectives that the farm manager or farm family has in what they’re trying to achieve.”
Individual farm managers and farm families have a lot of different goals and objectives they’re trying to achieve, and KFMA realizes that.
“Our focus is to work with that family in a way that we can learn those goals and objectives and help them meet what they’re wanting to accomplish,” Herbel said.
This is especially important for those farmers and ranchers weathering the storm of low commodity prices and high input costs.
“If we look at the value of KFMA with the economic reset, or economic downturn, that we’re in, it can be a very good time for someone to become focused on using their records to manage well,” Herbel said. “This is an excellent time to gain that focus and work at using records to achieve improved value as they make decisions on the farm.”
For more information about KFMA visit www.agmanager.info.
Kylene Scott can be reached at 620-227-1804 or [email protected].
