Farmers seek options as major land transfer looms

In rolling cattle pastures in Missouri, in fertile cornfields in Iowa and Illinois, on old homestead farms in Nebraska and Kansas, the Baby Boomer generation remains a major force in American agriculture. This generation — defined as people born between 1946 and 1964 — still farms and owns much of the farmland, or it might be owned by people from the previous generation.

The average age of the American farmer continues to climb, and USDA references a study suggesting 70% of U.S. farmland will change hands in the next 20 years.

At the same time, starting a farming operation comes with monolithic costs, and farm groups, state legislatures and politicians in Washington are asking how they can help support beginning farmers and ranchers.

For people who specialize in farm succession planning, this is a major question facing the farming industry. How can farm families make the transition to the next generation?

University of Missouri Extension ag business specialist Wesley Tucker says “communication, communication, communication” is the key to farm succession planning.

“I tell parents they have a responsibility to get this worked out before they die,” he says. “It will go so much smoother for the family if they have these conversations.”

Finding farm successors

Mike Downey is on the executive team for Next Generation Ag Advocates, a group that works to help connect older farmers and landowners with beginning farmers to operate their land. Downey says the group was started by two Iowa farmers, one of whom had kids who did not want to farm the land. He worked to find someone who wanted to continue his operation, and now Next Generation Ag helps do that for farm families across the Midwest.

Downey says this is a common challenge — farmers deciding what to do with their operations when they don’t have an heir who wants to farm.

“We’re seeing more and more transitions like that occur in the industry,” he says.

Downey says the group also helps with farm succession planning within families when kids do want to farm, but he says people without a farming heir might need more help.

Mike Downey and his family received recognition at last year’s Iowa State Fair for having a farm in their family over 150 years.

Photo courtesy Mike Downey

He says it is important to match the outgoing generation with young people who “fit their goals and philosophies for farming, personality and finances.”

These arrangements can look different depending on the situation and can be gradual transitions over years. They can involve leasing farmland to younger generations or in some cases eventually selling it to them. Downey says the gradual approach helps both sides, as the older landowning generation can spread out tax liability and the younger generation can gradually take on more and more without having to fund everything right away.

“It usually presents win-win advantages for both sides,” he says.

Downey says it is very helpful for young farmers to have an “in” to help them get started, and that the old days of starting a farming operation up from nothing are “hard to fathom” with today’s land and equipment costs.

“By far the No. 1 barrier (to getting started farming) is just the capital required,” he says.

Step by step

Tucker says for farm succession planning, a gradual approach can be good. He proposes a five-step roadmap where successors seek experience and education away from the farm, work for a trial period on the farm, begin taking management and ownership responsibilities, accept advanced management and ownership responsibilities, and then become the majority manager and owner.
“There’s so many benefits to that,” he says. “Train the younger generation with a little more responsibility and a little more responsibility along the way.”

Also, this gradual approach can be good for aging farmers. Tucker says other industries celebrate retirement, but for farmers who identify strongly with the profession, it can be a challenge. But gradually training a successor can help preserve that identity and give them hope and excitement for the future of their farm.

“A farmer fears retirement because if I’m not a farmer, what am I?” Tucker says. “That gradually stepping away is so much better for their mental health. They can say, I’m still a farmer, but I’m just helping my kids take on more responsibility on the farm.”

Weighing the options

Tucker says for farmers who don’t have kids who want to farm their land, the process still involves thinking about what they want for the future of their farm.

“They have to ask, am I OK with the business I’ve built being dismantled?” he says.

Tucker says many farmers don’t want that, and so if their kids don’t want to farm they might look for a young farmer in the area who wants to farm the land. They can set up rental arrangements or future sales agreements, generating income for their heirs while also ensuring the land will continue as a farming operation.

Tucker says he thinks there is going to be “more and more” of this type of arrangement. He says farmers should also think about whether they want to allow their heirs to sell a family farm immediately or stipulate they keep it and have an income stream from it.

“Are you doing your kids a favor or a disservice to leave them a couple of million dollars versus leaving them an asset they can get income off?” he says.

Helping older farmers find these partnerships and set up succession plans is a key issue, Downey says.

“It’s no secret the age of farmers and landowners are the oldest in history,” he says. “Sixty-eight percent of farmers have children but don’t have children who actually farm. Half of those have not identified a successor.”

Rewarding work

Downey says it is a fulfilling feeling to help farm families preserve their operations and make plans for their land to continue to be farmed in the way they want. He says it is important to him to preserve family farms, as his family was recognized at last year’s Iowa State Fair for having a farm in the family for over 150 years.

“The legacy part of it hits home for me,” he says.

Tucker says the coming years and decades will bring a lot of asset rollover, and it will be helpful to think of farmers as part of a bigger picture, likening a family farm to a team Olympic event rather than an individual competition.

“A family business is a team competition,” he says.

He says it is important for farmers and rural small businesses to manage this transition well to support healthy rural communities going forward.

“If we don’t do this well, it’s going to affect our rural communities,” Tucker says.

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