Transferring power in multi-generational farming operations.
The banquet hall was filled with about 500 young farmers, most ranging in age from late 20s to mid 40s. The speaker asked how many were the third generation living on the family farm. The majority of the hands in the room went up. Fourth generation, he asked; and still the majority of the hands were in the air. Fifth generation, and still more than a few hands were raised. Sixth generation, and still a few hardy souls held their hands high. Seventh generation, and there were 2 hands in the air. Eighth generation, and one very proud couple still had their hands up. This is a testament to the enduring power and legacy of American agriculture. It is also a testament to how successful the transfer of those family farms has been from one generation to another. No other industry can make this claim, but it is a process that is getting harder and harder with each generation.
It is an economic reality that the only way to get into farming today is to inherit it. While there are a few notable exceptions, the vast majority of farmers today were either born or married into it. Yet, the changes that are impacting rural America are making that farm transfer process much more difficult. Dr. Ron Hanson, a professor at the University of Nebraska, has made it his specialty to help farm families navigate this process, “If it is the dream of parents to see that family farm pass on to the next generation, to have their children have the same opportunity they did, then they have to make it happen.” Dr. Hanson said the key to keeping the farm in the family is keeping the family together.
In a presentation to the Indiana Young Farmers Leadership Conference, Dr. Hanson told heartbreaking true stories of families that were destroyed and farms that were lost when the fighting began over what would happen to the farm. He stated that the families that make a smooth transition are those that communicate openly, set goals, and share visions. He said family issues are the most important issues, “Farms can be replaced, but families cannot.”
The pressures on farm families are greater today than perhaps they have ever been and they are certainly different than they have been in the past. The increasing rate of divorce means there is a great likelihood of stepchildren being part of the mix. Fewer and fewer children of farmers want to return to the farm and work in agriculture. Urban sprawl and rural housing developments are inflating land values and presenting families with the opportunity to reap considerable profits from the sale of the farm.
Dr. Hanson said it is the current generation of farmers who hold the key to passing the farm on to the next generation, “It is mom and dad’s farm, and they have to decide what will happen to it. They have to initiate the process, make sure the process is carried out; they have to make sure the process is accomplished.” Dr. Hanson does not believe in “sweat equity.” He suggests, from the first day a son or daughter comes into the business, they need to begin to acquire assets and build net worth, “No banker ever made a loan to a young farmer on sweat equity.”
Ultimately, it comes down to control. At some point in the transfer process, the control of the farm must move from one generation to another. This is an area in which some families really struggle according to Hanson. Even if the farm is transferred successfully, the control of the operation can still be an issue. “Not doing it dad’s way can still be an issue,” said Hanson.
What to do with the family farm is one of the most emotionally charged issues for a family. Yet, successfully moving American agriculture to the next generation is vital for the future of our economy and our society.