For 2008, record high net incomes were earned for many farmers across the state. Those producers hoping to ease the 2008 income tax burden are hoping to pre-pay 2009 input costs before December 31.

Under normal circumstances, farmers would buy a majority of their crop input expenses such as seed, fuel, herbicides and fertilizer prior to the end of the year. However, fertilizer prices have soared to historic highs, forcing farmers to make a decision: pay these exorbitant fertilizer prices this year to reduce 2008 income taxes, or wait until the 2009 calendar year, when fertilizer prices have fallen to more normal levels.

Kevin Dhuyvetter, Extension agricultural economist at Kansas State University, said buying decisions in the past have routinely been made from a tax management standpoint.

“Don’t automatically think this is the best idea for this year,” Dhuyvetter said.

Farmers should study alternative methods to reduce 2008 income for the upcoming tax season. Dhuyvetter suggests farmers can buy seed and fuel, but postpone fertilizer buys until prices have stabilized.

According to Dhuyvetter, prior to 2000, anhydrous ammonia prices routinely ranged from $200-$250 per ton, but doubled by 2002. Worldwide demand for natural gas—the feedstock for anhydrous ammonia, cause prices to peaking at more than $1,000 per ton by late 2007 and early 2008. Anhydrous ammonia prices have since dropped due to weakening demand, caused by lower crop prices and a sluggish worldwide economy.

Now that fertilizer prices are dropping, many suppliers are being left with full inventories of high-priced fertilizer. This puts farmers and suppliers in an uncertain position.

“The businesses have to decide whether to sit on this high priced fertilizer or take a loss and get back to the price of the current market,” Dhuyvetter said.

Jerin Wurtz, financial service officer at Frontier Farm Credit in Hiawatha, suggests decreasing fertilizer prices should force farmers to postpone the 2009 fertilizer purchases until late 2008, perhaps even in 2009.

Regardless of whether farmers decide to buy early or wait until prices drop, they should be in constant contact with their supplier and prepare to buy needed products as soon they know what those needs are, said Dale Leikam, president of the Fluid Fertilizer Foundation. In addition, farmers should continue using best-management practices to improve production efficiency. A routine soil-testing program should be used, if it hasn’t already.

•For more information about 2008 farm tax planning, attend the 2008 Kansas Commodity Classic, December 9 in Salina. More information is available at or call 866-75-WHEAT.

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