In August 2012, I posted a discussion “Family farm successions and transitions” which highlights what I learned from the Farm Link and Transition Pilot Workshop held in Virginia. Last week, I had the opportunity to hear another excellent presentation on farm succession planning at the Farm Action Workshop held by the Maryland Farm Bureau and Nationwide Insurance and organized by local agent Carrie Polk. Therefore, I am revisiting the topic.
According to Don Schrieber, Director of Nationwide’s Advanced Consulting Group, only 30% of family businesses pass onto the second generation, 12% pass onto the third generation, and 3% pass the family business onto the fourth generation. And in its report Family and Small Farms, USDA predicts that 70 percent of U.S. farmland will change hands in the next 20 years, and that “many family operations do not have a next generation skilled in or willing to continue farming.” Two examples of the trend–from 2002 to 2007, the number of farm operators 75 years old and older was the fastest growing age group while the number of operators under 25 years of age decreased by 30%.
How do we encourage families to plan for the future of their farm? As mentioned in the first post, it is hard to start the family discussion on farm succession. In the fall of 2012, SMADC sent out a survey to approximately 350 farmers in the region and 158 surveys were returned. Of those returned, only 51 (32%) have a succession plan to eventually transition the ownership to a family member. While most of the Southern Maryland farmers did not have succession plans, 80% wanted to continue to farm the land and keep the farm in agriculture.
As he proceeded in the discussion, Don made a provocative suggestion: When thinking of farm succession, “let the farm speak loudest.” In other words, ask yourself “What is best for the farm?” This is a question you need to pose to your heirs as well. Without family discussions, it is impossible to know for sure whether or not a child is even interested in farming or whether their spouses would ever consider living on the farm. In addition, you need to ask yourself if the heirs would be up to the task and if they would view farm ownership as an opportunity or a burden. Don noted that not everyone is a good steward of resources. While some children might be hard workers, they may not be good at managing finances.
Most farmers want their land to continue in farming, no matter who owns it. There are many new farmers who are seeking farmland, and access to land is one of their greatest challenges. Of course, there are only two ways that new farmers can have access to land. One is to have permission to work or lease another person’s farmland. The other is to buy it. Unfortunately, Maryland farmland is worth three times the national average, so it can be difficult for new farmers to purchase.
In the survey, only 4% of the farmers in the Southern Maryland survey were interested in leasing part or all of their farm to a new farmer while making decisions about the future of their land. We need to learn why farmers are reluctant to lease their land to new farmers and figure out ways to address their concerns. In addition, we may need help from land trusts and government agencies which own farmland, to start up new farmer lease programs so that new farmers can build their farming knowledge, their resume, and their farm business plans for eventual land purchase. Fortunately, with Maryland’s land preservation options, farm purchasers can often pay as much for land and those who wish to develop the land.
Meanwhile, families who wish to keep land in farming should start the discussion. There are some great resources such as those presented at the Farm Action Workshop. In addition, there are online resources to get you thinking about succession planning, such as Planning the Future of Your Farm. It is time to seek out the resources needed to plan for your farm’s future.