Farm & Ranch
ONLINE EXCLUSIVE- In the Cattle or Horse Business? Is it Business or Hobby? How well would your farm or ranch meet the test?
By June Henderson, CPA
The IRS “Hobby Loss” provision applies to individuals, partnerships, LLCs filing as a partnership and
S-corporations. If you are a farmer or rancher, you should learn more about how this provision may affect you. The tax code provides that Hobby entities are not allowed to deduct expenses in excess of income from an activity which is not engaged in for profit.
Whether an activity is a business or a hobby depends upon whether or not the taxpayer entered into the activity with the objective of “making a profit”. For farmers and ranchers who have other income sources not related to your farming activity, building a case that you are in the cattle or horse business with the intent of making a profit is very important.
Should your farm or ranch fall into the category of being profitable for two out of seven years, your business would be presumed to be a business and not a hobby. But, keep in mind that the “two profit years out of seven” rule is a presumption and not a safe harbor. Without proper planning and recordkeeping, the IRS could still reach the conclusion that your activity is a hobby rather than a business.
For example, the horse industry has suffered declines over the past 6 to 8 years. If you invested in putting together a good band of brood mares and selected prime breedings for those mares, there has been little opportunity to recover those costs or to “profit” from these activities. There are no rules related to how many horses an entity should own in order to qualify as a business. But, in order to preserve the objective of making a profit, you should be wary about investing so much that you have little hope of recovering your investment through winnings, services revenues or sale of horses. Fuel prices, costs of feed and hay have risen over the past few years while the average sale price of the horse has fallen. Due to these conditions, many horse-related businesses are experiencing losses spanning several years. How do you best insure that your losses will not be looked upon as “Hobby Losses” by our taxing authorities?
There are nine important factors to consider in determining whether the owner of an activity intends to make a profit.
1. The manner in which you carry on the activity
2. Your expertise or that of your advisors
3. The time and effort you spend in carrying on the activity
4. Your expectation that the assets used in the activity will appreciate in value
5. Your success in other similar or dissimilar activities
6. Your history of income or losses with respect to the activity
7. The amount of occasional profits, if any, which you have earned
8. Your financial status
9. Any personal pleasure or recreation you may have experienced
What are the best practices to establishing proof that your farming/ranching undertaking is “for profit”?
Planning for profit years is important. You might shift revenue and expenses from one year to another, such as paying two years of property taxes within one reporting year, or holding onto livestock for sale and grouping the sales within one reporting year which may make the “sale” year more profitable.
Selling horses, cattle or breeding rights, leasing broodmares or purchasing cattle embryos are tactics to shift revenue and expenses in order to plan for a “profit year”.
Consistently using straight line depreciation is also a good practice that can be used when planning for profit years. This does not affect the overall profitability of your business activity, but could help you qualify for the two out of seven year profit conditions.
Farmers and ranchers should always try to operate in a manner which indicates there is a profit motive. The creation of a business plan is one of the top recommendations along with the development of an annual budget. Also recommended is that owners keeps a daily, weekly log or “diary” in which issues that affect profitability can be recorded. Documenting issues such as livestock related accidents, failed breedings, illness, disease or changes in the way you do business can prove to be important should there be an audit. It is also difficult to remember these issues years later if not documented.
Record keeping is key.
Keeping a good set of books and operating with businesslike methods is one of the most important steps that you can take. In the past IRS evaluations have had positive outcomes if the farmer had prepared budgets and operating procedures which forecasted that the operation would be profitable even if the profits did not come to pass.
For farming/ranching operations, a lack of a business plan, a budget or projections for future profits can be damaging. It is a good practice to have a written plan. It is also easier to follow your plan if it is written and it is also much easier to explain your plan should the IRS evaluate your business.
Your business plan should provide details such as anticipated profits from future sales of animals, crops or leases as well as plans, for the purchase of future income producing assets such as replacement heifers or herd bulls.
Another thing to keep in mind is the concept that farming and ranching assets may be expected to appreciate. The term “profit” includes appreciation in the value of assets, including your land.
If little profit is realized from your ranching operation, perhaps an overall profit might occur from the increase in value of the land, livestock or other assets used in the business.
Failure to meet the “for profit” requirements are often related to investigations or audits in which case the taxpayer did not have counsel. As with any business undertaking, you should seek legal and financial advice about the economics of your activity. Even though you may be quite experienced with the aspects and undertakings of your ranching operation, seeking and following the advice of a professional is valid documentation that your intent is to improve the financial outcome of your business.
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Farm & Ranch
Tumble Windmillgrass
By Tony Dean
Tumble windmillgrass is a short, compact perennial bunch grass that is adapted to almost every corner of Texas. It can grow on almost any soil, but prefers coarse textured soils.
The most obvious characteristic about Tumble windmill is its large seed head sporting 10 to 16 laterally spreading branches, each approximately two to six inches long, arranged in one to three whorls.
When mature, the seed head will break off and be caught up in the wind, making Tumble windmill one of the great wanderers of the plains. It can tumble great distances, spreading itself in the process. This wanderer seems to like parking in your garage on windy days, as well as dancing around windy corners of buildings and any other place the wind decides to carry it.
Tumble windmill can also spread by short stolons. The upper leaves are very short, while the lower leaves are often much longer. The leaves are light green with a purplish seed head that fades to pale reddish at maturity.
Tumble windmillgrass provides poor forage for livestock and wildlife, although most grazers will use the forage in early spring when tender.
Since Tumble windmill can grow in poor soil conditions, it is useful as a component for a prairie grass mix used on disturbed areas. This grass does not usually dominate a pasture but can often be found in smaller amounts. Proper grazing use along with rotational grazing can cause the plant to be replaced with higher successional plants.
Farm & Ranch
Looking for Low-Maintenance Poultry? Geese are Your Answer!
Unless you are a fan of Dickens and Doyle, geese probably aren’t the first thing that comes to mind when you think of poultry. But maybe they should be. And the aim of this article is to get you acquainted with the aristocrat of poultry.
Let’s start with the basics. Geese are domesticated waterfowl. Twelve breeds are recognized by the American Poultry Association, but dozens more are available. Much like ducks, all domestic geese breeds descend from two species. The overwhelming majority of breeds originate from Greylag geese (Anser anser). This species is native to Europe and Central Asia. These are the stockier, heavy geese that feature prominently in German fairy tales as a symbol of wealth and which Victorians loved to consume at Christmas. These geese come in various sizes, colors and dispositions. Here are a few examples: Cotton Patch geese are a small, variably-colored, extremely heat tolerant landrace native to the South. These were raised to consume weeds in cotton fields in the days before commercial herbicides. They are quite rare today and lay a variable number of eggs. American Buff geese are medium-sized, tan colored, very docile geese of uncertain origin. They are excellent meat birds. They are decent layers and wonderful mothers. Toulouse geese are the largest breed at up to thirty pounds. This ancient French breed is dark grey in color. They are bred to become very fat and so must be managed carefully to maintain fertility. They are very gentle, but require somewhat more shelter than other breeds.
A native of parts of China, Mongolia and Russia, the Swan Goose (Anser cygnoides) gave us both the Chinese goose and the African goose. Both have large bulbs on their heads and are similarly colored, but are otherwise very different. African geese are quite large, maturing at around twenty pounds and prized for their meat. These gentle giants are often recommended for beginners. Chinese geese are the egg champions of the goose family. They produce multiple clutches in a year, equaling up to a hundred eggs annually. They are small geese with males weighing about twelve pounds and females ten. They are nervous and the loudest breed, but this makes them suburb as “watch geese” and perhaps the best all-purpose breed.
Now that we are a bit acquainted with various breeds, we can find out just why someone may want to keep geese. Before we go over their benefits, you may be surprised to learn something surprising about geese. Geese are so rarely seen in the United States today that they can seem unusual, even exotic. As such, you may reasonably expect that geese are hard to manage, require expensive feeds and must be waited on hand and foot. The surprise is that geese are actually significantly easier to take care of than chickens. In fact, I would venture to day that geese are the lowest maintenance poultry there are.
Geese are unique among poultry in that the vast majority of their diet is made up of grass. Some meat birds are raised entirely on grass. It may be a good idea to supplement their grass with some chicken feed and scratch grains, but you will find that, when grass is plentiful, they will generally not bother with anything else. Geese are excellent pasture birds. A simple wire pen that can be moved every other day is enough to keep them happy. Unlike chickens, geese do not scratch up a yard and are not nearly as messy as ducks. If moved promptly, the area they occupied will swiftly grow back greener, thanks to all the free fertilizer, which they produce in abundance. Few geese can fly with any proficiency and even then, only when they are young. One wing’s feathers can be easily clipped, if their escape is a concern.
Geese are also almost absurdly hardy. They not only love rain, they seldom if ever go inside. Shade and perhaps a windbreak are their only real needs for shelter. In sub-freezing temperatures, they will scorn a shed and simply sit in the snow. There is a reason that goose down is so valued for comforters. It is extremely good at keeping them warm. The clever little birds know exactly when they need to bend down over their feet to keep them warm and hide their heads under their wings for the same purpose. In the summer, geese require shade and access to water at all times, but are otherwise unbothered. Geese keep their bodies very clean and are, owing to a small oil gland and their meticulous grooming, waterproof. They will soil water almost instantly, so do not worry about keeping it clean, just be sure they have enough. Without water, they may die in the heat and regardless (like ducks) cannot keep their bills and eyes clean, which could cause disease. Provide multiple water tubs to reduce fighting. Geese will dig up the mud around their waterers, so they should be moved each time they are filled. They will appear to be eating the mud, but are actually filtering it in the water through the serration in their bills. This is to find food, as well as small rocks for their gizzards. With a bit of caution, geese will weed a garden for you and clean it up at the end of the season.
Geese need little more from you than water, basic protection from predators and grass. In return, they offer a number of benefits.
In the first place, Geese offer a dark, rich, beef-like meat. Geese are often butchered between twelve and twenty weeks old. At this time, their weight will vary by breed, but as an example, the commonly raised meat breed Pilgrim geese will weigh around thirteen pounds. The carcass weight will be about sixty to seventy percent of the live weight. If one cares to process it, goose fat is highly valued in the culinary world and contains almost no saturated fat. It is comparable to olive oil and may be used in the same applications.
Especially if you have selected the Chinese goose, eggs are another offering of your new favorite poultry. These eggs are roughly the equivalent of three chicken eggs. A fried goose egg, sausage or bacon and a pancake makes a very nice dinner or hearty breakfast. Alternatively, you can incubate and hatch goose eggs quite easily. The goslings are so valuable that it’s a wiser financial move to only consume the first couple of eggs laid in the spring, which are usually infertile. Goose eggs are easily candled without any special equipment. Infertile eggs or those that die early on can be blown out and made into painted or dyed eggs.
If you hate waste, and wish to use all but the “honk,” so to speak, the feet are rich in collagen and highly prized in the rest of the world. The liver of a goose is extremely healthy and famous as foie gras. A more familiar byproduct of butchering is down, which can be made into extremely valuable bedding. Be sure to clean and dry feathers carefully first. If raised by hand and handled very often, geese will be quite friendly to their owners and make loyal pets. Some people will actually hold their geese in their laps and gently pluck the down from their flock.
Lastly, geese are often kept as watch animals. Geese are extremely observant night and day and will loudly complain when they see something unfamiliar anywhere in the vicinity. It takes a very short time to learn the difference between the normal sounds of geese and the sound of their panic. Please know that while they may scare away small predators and they are nearly always too big for hawks, a goose is largely defenseless against most predators. Keeping geese near a livestock guardian dog is a great idea. The extremely intelligent birds will rapidly learn the dogs are a source of safety and will alert the dogs to anything they see as a threat. Geese can usually be kept with other poultry without problems. They will not directly protect their avian brethren, but the others will learn to hide when the more observant geese voice a concern. In mixed flocks, the noble geese stride around the yard, aristocracy among poultry.
Geese are immensely versatile, the most low-maintenance poultry there is and should have a place on any property.
Farm & Ranch
Changing the Way We Handle Hay
Few machines have reshaped livestock operations as much as the round baler. Before its arrival, haymaking was slow, labor-intensive, and limited by the storage and handling of small square bales. The round baler mechanized the process, producing large rolls that could be handled with tractors instead of back-breaking labor. Today, those big bales are a familiar sight across Oklahoma, Texas, and much of the world, stacked along fence lines or dotting pastures.
The modern round baler traces back to the mid-20th century. While early versions of hay-rolling machines appeared in Europe in the 1940s and 1950s, it was a man from Iowa who brought the design into practical use in America. In 1971, Vermeer Corporation, led by Gary Vermeer, introduced the first large round baler that could be mass-produced and widely adopted. His design gathered hay into a chamber, rolled it into a tight cylindrical package, and then wrapped it with twine before ejecting it onto the ground.
This solved a long-standing bottleneck. Small square bales required enormous labor — lifting, stacking, hauling, and feeding by hand. One person with a tractor and round baler could do in hours what once took a crew all day. The new bales were weather-resistant, stored easily outdoors, and reduced spoilage. They also fit well with the larger scale of modern cattle operations.
By the 1980s, other manufacturers such as John Deere, New Holland, and Case IH offered their own models. Improvements included variable chamber sizes, better pickup systems, and stronger tying methods. Round balers quickly became the standard for beef and dairy producers in Oklahoma, Texas, and beyond.
Though models vary, the principle remains the same. The baler picks up cut hay from the windrow and feeds it into a chamber with belts, rollers, or chains. As the hay circulates, it rolls into a tight cylinder. Once the bale reaches the set size — often 4×5 or 5×6 feet, weighing between 800 and 1,200 pounds — the machine stops feeding, and the bale is wrapped for storage.
The result is a dense, weather-resistant package that can be moved with a tractor spear or loader. Unlike small square bales that require dry storage, round bales can be stacked outdoors, especially when wrapped correctly.
The biggest evolution in round baling since its invention has been the way bales are bound. Early machines used only twine, usually sisal or synthetic. Twine is inexpensive and reliable, but it has drawbacks. Wrapping a bale with twine can take up to two minutes, slowing production. Twine also leaves more exposed surface area, allowing moisture to penetrate and spoil hay.
Net wrap was introduced in the 1990s as a solution. Made of high-strength polyethylene, it wraps the bale quickly — usually in 10 to 20 seconds — and covers more surface area. This tighter, more uniform wrap sheds water better and reduces spoilage, especially for bales stored outside. Net-wrapped bales also hold their shape better, making them easier to stack and transport.
Producers must weigh cost against efficiency. Net wrap is more expensive than twine, both in material and in required equipment, but many ranchers find the savings in time and hay quality worth the investment. Twine remains common for operations feeding hay quickly or storing it under cover, while net wrap dominates in large-scale or commercial setups.
In recent years, bale film wrap has also entered the market. Similar to plastic used in silage, film wrap can seal bales almost completely, reducing spoilage even further. While more expensive, it is gaining ground in wet climates and dairies where feed quality is critical.
The round baler is more than a machine — it changed the rhythm of haymaking. Producers can now harvest, bale, and store hundreds of tons of hay with a fraction of the labor once required. In regions like Oklahoma and North Texas, where cattle herds are large and hay is often stored outdoors, round balers became indispensable.
The machine also influenced land use. With the ability to bale quickly and efficiently, ranchers could harvest larger fields and manage forage with precision. It also reduced dependence on hired labor during peak hay season, a major benefit as rural populations declined.
While square balers still have their place — especially for horse hay and small-scale operations — round bales remain the workhorse of modern cattle ranching.
From its introduction in the 1970s to its widespread adoption today, the round baler has proven to be one of the most influential farm inventions of the last century. It solved the labor bottleneck of haymaking, improved storage and feed efficiency, and fit seamlessly into the mechanization of modern agriculture.
Whether wrapped in twine, net, or film, those big round bales are more than just scenery on a country road. They are symbols of an innovation that continues to save time, labor, and feed across ranch country. Like the steel plow, barbed wire, and windmill, the round baler is an invention that permanently changed the way we work the land.
References
Vermeer Corporation. History of the Round Baler. https://www.vermeer.com
John Deere Equipment. Hay and Forage History. https://www.deere.com
Oklahoma State University Extension. Hay Storage and Preservation.
Texas A&M AgriLife Extension. Net Wrap vs. Twine for Round Bales.
Farm Progress. “Round Balers: The Machine That Changed Haymaking.”
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