A good investment
pays a dividend either by generating more
profi t for the operation or generating more
time or freedom for the producer.
consulting services (fi nancial planning, risk manage- ment, etc.). “Again, no single investment is good or bad for
everyone,” Childs says. “On one ranch, a new pickup might be the investment that provides the highest return. On another operation, that same pickup may be an extravagant luxury. Only the producers can determine whether something is a need or want in the context of their operations. The distinction trips some people up.” In addition to identifying appropriate investments, producers who fi nd themselves with available capital
must determine where to spend the money so it has the most positive impact on their operations.
Debt management The presence of additional capital creates an op-
portunity to pay down debt. For most producers, debt service may take priority over other types of invest- ments, including improved infrastructure. Childs says, “Although paying down a debt does not
create a tax benefi t per se, a low debt load may deter- mine how well an operation can weather downturns in commodity prices, extended droughts or other situ- ations that affect income.”
Taxes No one enjoys paying taxes. In years with surplus
net income, it is tempting for producers to “shelter” a portion of their income to reduce their tax bills. Swigert says, “Making an investment for the sole
purpose of reducing taxes is generally not a good busi- ness decision. Instead of avoiding a tax payment, the producer is delaying a tax payment.” This can create its own set of problems. First, it is diffi cult to know what the next year’s income is going
• Insure only acres important to your grazing and hay operation. • Rainfall totals are calculated in two month intervals. • USDA subsidized. • Sales closing date- NOVEMBER 15, 2015 for 2016 policy year. Billing date- September 1, 2016.
DROUGHT INSURANCE
tscra.org
Capital Farm Credit offers drought insurance on hayland and rangeland while providing experience and service you can trust. Call an agent near you for a quote.
830.426.4175 or 800.467.3274
MyAgri-Insurance.com
November 2015 The Cattleman 71
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