Posted February 4, 2016 by Administrator
ARC-County was created as part of the 2014 Agriculture Act to help protect agribusinesses who had below average crop yields. Many farmers and others in the agriculture industry believe that with this safety net in place, crop insurance isn’t necessary. That isn’t the case. ARC-County offers limited protection and figures are based on lower levels as part of the county average. Because farm yields are variable, the coverage received from ARC-County wouldn’t be enough to offset losses for most agribusinesses.
In a recent study comparing ARC-County with different types of policies and coverage levels, agribusinesses would need ARC-County and crop insurance to help offset loses. And since 2016 is expected to be a tough year for crop yields, you may want to consider keeping your existing crop insurance coverage. A quick refresher from the USDA/FSA is below:
County ARC: Payments are issued when the actual county crop revenue of a covered commodity is less than the ARC county guarantee for the covered commodity and are based on county data, not farm data. The ARC county guarantee equals 86 percent of the previous 5-year average national farm price, excluding the years with the highest and lowest price (the ARC guarantee price), times the 5-year average county yield, excluding the years with the highest and lowest yield (the ARC county guarantee yield). Both the guarantee and actual revenue are computed using base acres, not planted acres. The payment is equal to 85 percent of the base acres of the covered commodity times the difference between the county guarantee and the actual county crop revenue for the covered commodity. Payments may not exceed 10 percent of the benchmark county revenue (the ARC guarantee price times the ARC county guarantee yield).
Individual ARC: Payments are issued when the actual individual crop revenues, summed across all covered commodities on the farm, are less than ARC individual guarantees summed across those covered commodities on the farm. The farm for individual ARC purposes is the sum of the producer’s interest in all ARC farms in the State. The farm’s ARC individual guarantee equals 86 percent of the farm’s individual benchmark guarantee, which is defined as the ARC guarantee price times the 5-year average individual yield, excluding the years with the highest and lowest yields, and summing across all crops on the farm. The actual revenue is computed in a similar fashion, with both the guarantee and actual revenue computed using planted acreage on the farm. The individual ARC payment equals: (a) 65 percent of the sum of the base acres of all covered commodities on the farm, times (b) the difference between the individual guarantee revenue and the actual individual crop revenue across all covered commodities planted on the farm. Payments may not exceed 10 percent of the individual benchmark revenue.
Posted November 3, 2015 by Administrator
The recent drought conditions have forced some ranchers to sell livestock they would have normally kept for breeding. This can lead to a significant loss for some ranchers who are in extreme or severe drought conditions and can’t replace livestock in the four years that is allowed under current tax laws.
Under 1033 (e)(2)(B), livestock that is sold or exchanged during a drought are considered an involuntary exchange. The IRS has decided that some areas are suffering from such severe drought conditions that exemptions to the standard tax laws should be made. In all 50 states and Puerto Rico, the IRS has designated specific counties to be exceptional, extreme, or severe drought areas. Under the extension, changes have been made to how the government defines the first drought-free year base on three different criteria.
The extension may be able to help you recover financially if you are in a county that has suffered from severe drought. To help you understand how the extension works or if your agribusiness is in a designated county, you will want to visit the IRS website to read the recently released notice. To learn more about agribusiness risk management and best practices, contact us.
Posted September 22, 2015 by Administrator
When you own a commercial agricultural business, you often have to store hazardous material on your property. You may need to keep petroleum, fertilizer or chemicals in large tanks, running the risk of environmental damage from leakage. However, if you follow some basic maintenance tips, you can prevent tank leakage, save your business time and money, and preserve your reputation.
Inspecting the Seams
Tanks often develop leaks along the seams. They may be small and difficult to see at first but then the seam will rupture and the resulting leak can cause severe damage to soil and ground water. Routine inspection of tank seams will help you see when it is time to reinforce or replace a tank.
Inspect the Valves
Another common area where leaks occur is at the valves. Valves are turned frequently, the wear and tear of the consistent use can cause threads to strip, and leaks may occur. Frequent inspection and lubrication of the valves will extend their usefulness and prevent the possibility of leaks.
Lubricating the valves can help prevent them from seizing, another common cause of leaks. If a valve freezes and an employee has to break it free, then the damage to the valve may cause it to leak or burst.
Inspect the Pipe Lines
Pipelines and hoses are another possible trouble spot for leaks. They can become brittle in severe cold or they may become damaged when they are run over or struck. Sometimes lines and hoses develop pinhole leaks, which will leech into the soil for a long period before the damage is noticed. Frequent inspection of all pipelines and hoses will allow you to change out the damaged lines and reduce the chance of a leak developing.
When a tank ruptures, it can cause financial and environmental damage. However, not all leaks occur because of a rupture in the tank. Inspecting the seams, valves, lines and hoses will help you prevent some leaks before they occur and reduce the risk of contaminating the soil or local water supply. If you are interested in learning more about agribusiness risk management, read more or call us at 888-451-3900.
Posted July 14, 2015 by Administrator
There have been significant drought conditions in certain parts of the country in the last few years, producing the need for clarification on crop insurance and tax regulations. In general, crop insurance proceeds are taxed in the year of receipt. A crop insurance beneficiary can elect to defer the tax liability until the following year. So in most cases the beneficiary will pay the taxes on the insurance payout in the year the payout is received, but a one-time election could be taken allowing the payment to be deferred until the following tax year.
There are, however, conditions that must be met in order for the beneficiary to be eligible for the one-time deferment.
- The insurance proceeds must have been received in the year the crop was produced.
- The majority of the taxpayer’s crop sold in the year following the year of production.
- The taxpayer must be using the cash method of accounting.
The tax deferment is an “all or nothing” type of election. For example, if the taxpayer received $50,000 in crop insurance related to production issues and $10,000 related to price issues, the $10,000 related to price issues must be paid in the year of receipt. The taxpayer could elect to defer the $50,000 if the above conditions are met, but must defer the entire amount.
May crop insurance products provide coverage for multiple types of qualifying conditions, such as poor production and low prices. If the beneficiary receives a payout for multiple coverage conditions they will need a breakdown of the benefit payout that specifies the amount for each condition. The taxpayer should retain the information in case the IRS requests it.
Please consult your tax advisor for more information about tax rules as they apply to agriculture insurance. Cline Wood Agency is a leading provider of agribusiness products. We would love to speak with you if you have any questions about agriculture-related insurance. Contact us through our website or call us at 888-451-3900.
Posted March 13, 2015 by Administrator
Livestock auctions present a crucial opportunity for agribusiness transactions to take place. Yet the unique risks involved make traditional business coverages woefully inadequate. Cline Wood understands these challenges, and offers a range of products specifically tailored to this purpose. This includes:
- Convenient Pay Plans
- 48 Hour Turnaround on Livestock Claims
- Property & Casualty Programs
- Specifically Tailored Livestock Coverage
- Payment Insurance Available
To learn more, discuss your livestock auction exposures with us today.
Posted February 19, 2015 by Administrator
Grain and feed dealers comprise a crucial segment of the agribusiness industry. Protecting business operations and assets presents a significant challenge due to the unique needs of companies in this area. As a dealer, do you know your risk exposures? Do you know your coverages? Insufficient coverage can crush a business when accidents or natural disasters occur. Yet excessive coverage can prove equally detrimental to your bottom line. Areas of potential risk exposure include:
- Tank Leakage
- Environmental Impairment
- Keytrol Cards
- Chemical Drift
- Trucks and Automobiles
In addition to protective coverages for goods and facilities, liability coverages are numerous and imperative. From D&O to EPLI, it’s crucial to understand your coverage needs and outlay. To learn more, contact us.
Posted January 29, 2015 by Administrator
Agribusiness represents this country’s largest industry, and protecting your assets, production, and liability in an effective and cost-effective manner can prove challenging. But failing to obtain coverage can spell ruin for your business and have a significant impact on the customers you serve. Understanding which risk exposures you face and how to best protect your agribusiness is our business. We represent top agribusiness insurance carriers across the country with access to all types of insurance programs including but not limited to:
- Livestock Auction Markets
- Feedlots-Commercial Operations
- Hog Confinement Operations-Commercial Operations
- Feed Milling & Blending
- Fertilizer Mixing & Blending
- Country Elevators
- Seed Dealers
- Feed, Grain & Hay Dealers
- Fertilizer Dealers & Storage – with or without application
- Growers & Shippers
- Dairy Operations
- Milk Haulers