As the United States inches closer toward the "fiscal cliff," Iowa farmer Brian Van Meetern is hurriedly selling his grain before year's end and buying a new $50,000 sprayer for his farm.
Van Meetern, who works at an accounting firm during the winter, might have to pay a higher income tax and get a lower deduction in depreciation for farm equipment in 2013 if there is no deal in the budget battle before the new year.
It's a strategy that is being mimicked across the nation's heartland where farmers and ranchers are plowing back profits into their operations in the face of less favorable tax policies that may take effect next year due to the stalemate over the budget talks in Washington.
Some farmers are buying new drainage tubes for their fields and digging new wells for irrigation systems. Others are moving up their plans to buy seed and other inputs like fertilizer.
Unless the U.S. Congress acts, an estimated $600 billion in tax hikes and federal spending cuts will begin to take effect in January, with a potentially devastating impact on the economy.
Problematic too is that the country's agricultural policies and economic safety nets have remained in limbo since the last U.S. Farm Bill expired in September.
Driven by such fears, Van Meetern, who works for accounting firm Cain Ellsworth to help other farmers with their taxes, has been advising growers to accelerate grain sales because of the economic uncertainty.
"We know the tax rates aren't going to get any less," Van Meetern said. "If we would go back to the old tax-rate brackets, we're all going to have to pay more tax next year."
UNCERTAIN FUTURE
Though the autumn grain harvest is now safely tucked into bins and barns, concerns are mounting that the government's price supports and other farm policy tools will automatically revert to antiquated rules dating back to 1949 if a new farm bill is not passed by the end of the year.
The uncertain future, coming at the end of what has been a difficult growing season after the worst drought in half a century, has left some farmers torn over how to minimize tax bills.
Soaring land prices, along with the prospect of higher taxes next year, have prompted some farmers to sell off their land and get out of the business altogether. The drought drove feed prices sky high, forcing pork producers and cattle ranchers to drain their savings or send record numbers of animals to slaughter.
U.S. soybean prices this week saw their biggest weekly drop in three months. Corn hit a near six-month low.
"It's got me trying to figure out what to do with my soybeans," said David Miller, a grain farmer in Iowa and director of research at the state's Farm Bureau. "Do I sell now, much earlier than I expected to? Or do I hang on to them and hope for the best?"
Other farmers are refusing to wait, particularly on equipment purchases. There are, they say, some favorable deductions available this year.
Farmers can deduct up to $139,000 for equipment purchases in 2012, but the limit is slated to drop to $25,000 next year unless Congress crafts new rules, said Paul Neiffer, a certified public accountant who does financial planning for farmers.
"People are OK with planning," he said. "They just want to know what the rules are, and right now we just have no idea what the rules are."
Neiffer said he has increasingly been advising his clients to sign flexible deals when they sell grain to elevators in case Congress does not reach an agreement.
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