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Associated Press
Rural Economies Boosted by Agriculture
Monday October 25, 2:33 am ET
By Roxana Hegeman, Associated Press Writer
Farm Scene: Agriculture's Improving Fortunes Bode Well for Rural Economies

WICHITA, Kan. (AP) -- Farmer Ken McCauley maneuvers his new combine over fields so abundant with corn he is having a hard time finding enough storage for it all.
His crops were so good during his last harvest that he was able to spend more than $100,000 a year ago buying that combine and other harvest equipment, plus another $20,000 last month on a new planter.

Bountiful crops and lofty cattle prices are spurring rural economies, and more farmers take advantage of "bonus depreciation" tax breaks to offset this year's big farm incomes. Many are finally able to replace aging farm equipment they nursed along during hard years of drought and low prices.

"We would have done it either way, but this deal really helped," McCauley said of bonus depreciation.

While the tax incentives have been around since 2002 -- when Congress approved them in a move to spur business investment during a recession -- they remained mostly out of reach for farmers struggling just to survive after losing crop after crop to a lingering drought.

The tax breaks, renewed in the last tax bill, allows businessmen to immediately write off more of the cost of their equipment purchases rather than depreciate it over several years.

This summer -- when it became apparent the harvest would be very good -- farmers nearly cleaned out all of the used harvesting equipment at Hiawatha Implement Co., owner Larry Roeder said. He usually carries about 20 used combines, he is now down to six between his two stores as harvest winds down.

His sales so far this year are up 45 percent over a year ago, he said.

"We sell combines now for next year. ... We have been pricing three to four combines a day and so people are thinking about them," he said. "I think we will have a great year next year."

It used to take two months from the time a farmer ordered new farm machinery to when it was delivered from the factory. Now "all of a sudden" the waiting period is six months or more because of the nationwide demand, Roeder said.

Illinois-based Deere & Co., for example, reported in August a 62 percent increase in third quarter earnings. The company -- which manufactures the John Deere line of farm equipment as well as construction and other machinery -- also reported its sales of agriculture equipment grew 34 percent for the quarter and 30 percent for the nine months.

Farm machinery is not the only sector expected to benefit from the good times down on the farm, either.

"If I was a car dealer, I'd want to make sure I had some pickups in hand this fall," said Jere White, executive director of the Kansas Corn Growers Association.

While not all parts of Kansas had good fall crops -- most notably the northwest corner of the state remains in drought conditions -- other farmers are reaping the benefits of a bountiful harvest coupled with high beef and hog prices.

Communities will likely see more of that farm money ringing in their cash registers come December, once farmers have a chance to take stock of their income and tax situation after the end of harvest, White said.

"There certainly are some happy faces -- even though there are long lines at elevators trying to get this crop brought in. It has been a wonderful fall to try to get a huge harvest in," said Duane Hund, a farm analyst at Kansas State University who works with struggling farm families.

In Kansas, the turnaround in the farm economy began the summer of 2003 with the near-record wheat harvest, Hund said. The 2004 wheat harvest -- except for drought-plagued northwest Kansas -- was generally average throughout most of the state. But fall-harvested crops such as corn, soybeans and sorghum were bountiful almost everywhere this fall, except again for northwest Kansas.

All sectors of the state's huge beef industry -- from cow-calf producers to feedlots and meat processors -- also made money this year, notwithstanding the mad cow scare. Pork prices rose as the United States substituted more pork to replace banned beef for exports. Milk prices remained surprisingly strong for much of the year.

"We can thank the timely moisture, the excellent temperatures this summer, just a whole host of things had to work right to produce these crops. We needed it. If ever there was a year Kansas farm families needed an income boost, this was it," Hund said.
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