Allowing too much of an income swing can push a farm into higher income tax brackets that will require a farm to pay more income taxes which can result in an intense downward income swing for the farm the following year.

This potential for low or negative income in 2013 may create a situation that would not allow the farm to take advantage of some basic tax deductions.

In the past few years, crop farms in the Thumb and Saginaw Valley regions of Michigan have had strong commodity prices and good crop yields.

Many farms have managed income by marketing much of the year’s crop production in the winter of the following year. In this situation farms would have carried the bulk of the 2011 crop production into 2012, which allowed the farm to take advantage of some very good commodity prices and fixed the 2012 crop sales income early in the year.

In this case these farms would then carry the bulk of the 2012 crop into 2013 for marketing. This is where the drought’s impact on 2012 crop production will impact 2013 farms with reduced bushels to market during the winter months.

Farms that expect to have less 2013 income may want to evaluate options to decrease the projected 2013 expenses.