Pastured poultry--what are you charging this year?

[ChickFarmer]

Leaving the much debated question of how many calories chickens get from grass, pasture isn't free. Land is expensive and good farm land is being lost at an alarming rate. It costs far less per bird to cram thousands into a broiler house.

 

[Mrs. Mucket]

I agree it would be nice if everyone could buy pastured poultry if they wanted to. Many consumers are eating less meat and poultry these days but still want high quality when they do. We are tweaking our production to provide that quality product at a price people can pay.

Some of us suspect that due to increasing transportation and grain costs, grocery store prices of many foods may rise to exceed the price of higher quality farm-grown products.

 

[donrae]

Quote:
So I can tell the bank my pasture is free, then?

And just quit paying on it? You have a serious flaw in your thinking there.

 

[Bossroo]

Quote:
So I can tell the bank my pasture is free, then?

And just quit paying on it? You have a serious flaw in your thinking there.

Not my thinking that the pasturing grasses, seeds and bugs are free. They all have inderect costs. However, Many argue that they are free, so I included that thinking to ask a question of why the pastured poultry is more expensive. If someone told their banker that they will quit paying for that portion of the mortgage for pasture because the grass, seeds, and bugs are free, I am quite positive that their entire property will end up on the auction block quite soon. Many people only think that by pasturing poultry they somehow get a free ride...the purchase price of chicks + cost of commercial feed = their production costs. Not so ! That is the serious flaw in that thinking. Many don't include their cost of labor, prorated mortgage, prorated taxes, prorated insurance, transportation of the birds and feed, power, water, amortize specialized chicken housing and equipment, holding time ( process at 6 weeks vs.12 weeks vs. 20 weeks), feed conversion rate of stock ( pounds of feed needed per pound of meat produced ), holding time of breeder stock, mortality loss to predators/ desease, etc. as costs. Now, if one was in the business of selling chickens for profit, one can take a deduction of these costs on their schedule F on their Income Taxes as cost of goods sold, then pay taxes on the income derived from the sale of chickens/ eggs. Don't forget that when you eat a portion your own chicken/egg crop, you sold it to yourself at the fair market value price and must include it in your farm profit statement.

 

[DenverBird]

Quote:
Boss,

When I read it and compared with other posts you've contributed, it looked like you were having an off day when you put up your "free" post that you're getting hammered for. You're right on in the post above where you detail what goes into raising poultry and must be considered when calculating whether one's making a profit or putting a lot of effort into a hobby.

One thing that I think folks can't forget is that those who are selling pastured poultry and eggs shouldn't compare our prices with the conventionally produced factory farm products out there. We need to educate the market about the differences as well.

Conventionally produced factory farm products have a staggering economy of scale and receive huge defacto "subsidies" in being able to externalize the costs of the environmental degradation they cause due to the scale of their operations. I haven't read the latest farm bill but would imagine Mr. Tyson and company get major government subsidies as well.

-DB

 

[Mac in Wisco]

Quote:
That's not beyond me... It's all included in our Schedule F each year for the layer operation; depreciation of buildings, farm portion of mortgage interest, farm portion of property taxes, farm insurance, etc.

Although we are still in the trial stage to see if there is any market interest, if we did do this on a larger scale, the alfalfa/grass fields that we cut and and bale for bedding/fodder for the layer barn or trade to the neighbors for use of their equipment, will be converted to pasture for broiler pens. We'd still have enough for for the layers and there would still be enough to compensate the neighbors. So while there may be a small reduction in the number of hay bales harvested, it generally doesn't change anything for us, except that we are better utilizing our assets.

Yes, technically all expenses and costs for the farm itself (mortgage interest, insurance, etc.) are spread amongst all of our products equally, but since we are already making a profit here, better utilization of what we have only increases our profits, the rest is already covered...

Don't forget that when you eat a portion your own chicken/egg crop, you sold it to yourself at the fair market value price and must include it in your farm profit statement.

Oh, heck no... Unless your business is a separate entity (most backyard operations would probably be sole proprietorships), why would you claim a profit and pay taxes on that profit for something that you produced for yourself? The expenses incurred for the portion that you produce for yourself are not tax deductible, just as if you weren't in business and were only doing for yourself. You get the product for its share of the expenses (plus your effort).​

 

[Bossroo]

Quote:
That's not beyond me... It's all included in our Schedule F each year for the layer operation; depreciation of buildings, farm portion of mortgage interest, farm portion of property taxes, farm insurance, etc.

Although we are still in the trial stage to see if there is any market interest, if we did do this on a larger scale, the alfalfa/grass fields that we cut and and bale for bedding/fodder for the layer barn or trade to the neighbors for use of their equipment, will be converted to pasture for broiler pens. We'd still have enough for for the layers and there would still be enough to compensate the neighbors. So while there may be a small reduction in the number of hay bales harvested, it generally doesn't change anything for us, except that we are better utilizing our assets.

Yes, technically all expenses and costs for the farm itself (mortgage interest, insurance, etc.) are spread amongst all of our products equally, but since we are already making a profit here, better utilization of what we have only increases our profits, the rest is already covered...

Don't forget that when you eat a portion your own chicken/egg crop, you sold it to yourself at the fair market value price and must include it in your farm profit statement.

Oh, heck no... Unless your business is a separate entity (most backyard operations would probably be sole proprietorships), why would you claim a profit and pay taxes on that profit for something that you produced for yourself? The expenses incurred for the portion that you produce for yourself are not tax deductible, just as if you weren't in business and were only doing for yourself. You get the product for its share of the expenses (plus your effort).​

I talked to a person who works for the IRS and audits businesses with their CPAs present. Also teaches new hires. I stated in my previous post that "if one was in business for profit ... ". So, if one is selling their produce to the public and taking a deduction for expenses, then what that person then consumes of the produce themselves has to be included as a sale and the profit is taxable. Example of recent audit... persons raise 3 feeder steers on their small farm. Then sells 2 1/2 carcasses of beef to friends and keeps 1/2 of one beef to eat themselves. They fill out Schedule F and deduct all expenses... portions or mortgage, insurance, taxes, feed, Vet, butcher, etc. Ruling... They sold that 1/2 of steer to themselves at the fair market value ( same as what they sold per pound the other 2 1/2 for) therefor made a profit and is taxable.

 

[Mac in Wisco]

Quote:
I have several thoughts on this...

If the business is a separate entity that may apply. There may also be implications from using an accrual accounting method and carrying over market value of inventory that you eventually used for personal consumption , but I doubt it. In that particular situation the IRS may have caught them taking deductions for personal expenses and decided that was the best way to sort it out in the end, although that would still be outside of their own regulations.

Barring any implications from the situations above, if any, it wouldn't make much sense to do so, nor is it required by the IRS. Let's say you have $5 in expenses for a $10 product that you've "sold" yourself and you claim these amounts on the schedule F. You will pay taxes on $5 profit. That means you take $5 out of your pocket, money which you've already earned and paid taxes on, stick it in your other pocket, and then pay taxes on it again.

From IRS Pub 225, Farmer's Tax Guide:

Personal, Living, and Family Expenses

You cannot deduct certain personal, living, and family expenses as business expenses. These include rent and insurance premiums paid on property used as your home, life insurance premiums on yourself or your family, the cost of maintaining cars, trucks, or horses for personal use, allowances to minor children, attorneys' fees and legal expenses incurred in personal matters, and household expenses. Likewise, the cost of purchasing or raising produce or livestock consumed by you or your family is not deductible.

The bottom line is that personal expenses are just that, and business expenses are just that. Farmers don't have to pay taxes on any perceived profits for producing something for themselves any more than non-farmers producing something for themselves would have to. Could you imagine the IRS taxing the backyard gardener for "income" on every tomato they eat or every backyard egg eaten just because they provided for themselves? It's no different for farmers.

 

[Mrs. Mucket]

Thanks all for your input on prices, and I'm glad to see the info on taxes too.

Can I ask another question I should have included in the OP: what breeds/hybrids are you selling this year? Does anyone see a market for Dual Purpose as meat birds?

We will be selling colored broilers, the first generation offspring of our Freedom Ranger parents. We are also crossing our FR rooster with our DP hens (RIR, BO and EE). After we test them ourselves, we may offer those crosses for sale as well. Last year we raised FR chicks from the hatchery.

 

[Bossroo]

Have you noticed the rise in the gas prices lately ? Here up $0.38 / gal in 3 weeks. Last week 50 lb. bag of 20 % feed up by $1.00. Other products will soon cost more due to much higher transportation costs. What you may charge today will be totally out of sinc in terms of profit in 8 or 12 weeks or even more so in 20 weeks. I would seriously reconsider what chicken and eggs that I produced as to the feed conversion rate as well as the length of time to market and number of eggs each hen laid per year. I would also calculate the true overhead cost of keeping my own breeding stock + hatching costs vs. buying chicks from the hatchery.