NW
Timing the market and always buying farm ground or cattle at the lowest price point is nearly impossible. There are thousands of factors daily that have an impact on the markets. Dollar-cost averaging is an approach where you make smaller investments at regular intervals instead of making large, lump sum investments on an irregular basis. History shows that if you dollar-cost average, you will be a better investor than trying to time the market once per year.
I work with individuals who take this approach when buying farmground. Instead of purchasing a farm once every 5 years, they buy a small share of a farm every year. By finding a partner and purchasing 17% of a $1.5mm property every year, the investment is smaller and they are able to dollar-cost average into another farm again the next year. These gradual increases to their investing keeps debt levels in check while constantly growing.
SW & SE
When calculating for a breakeven or updating your cash flow, you typically would not include depreciation as an expense. Breakevens most often are going to mirror your checkbook, showing cash coming in (grain sales) and going out (operating expenses) of the operation. Finding an accurate breakeven should be beneficial when deciding when to market or sell your grain. If kept up-to-date, you know when you have secured a profit on that portion of the crop and can make the sale.
Individuals that include depreciation are not using the depreciable tax number they give their CPA. That figure is not the best measure to use for a cash flow. Instead, they are putting estimates into their breakeven for replacement costs of the equipment, or future repairs on buildings. This helps them level out expenses on a yearly basis and plan for the future.
There are several ways you can find this figure, such as:
1. Change in equipment/building market value.
2. University custom rates on equipment used.
3. Hours put on equipment in past year.
4. Historical replacement cost of that asset.