Opportunities and communication combine in new era of agriculture

2017-08-18T06:21:00Z Opportunities and communication combine in new era of agriculture Illinois Farmer Today
August 18, 2017 6:21 am

George W. Bush was known for making unconventional phrases and pronunciations while public speaking.

The term “Bush-ism” became a popular description of these “made-up” words during his presidency and today is the basis of several websites and books.

Reviewing my thoughts before being introduced this week to speak to a group of young farmers and their families on transition planning, it occurred to me that the young audience was in a position of opportunity and in need of evolving communication skills.

I have consciously included two parts to speaking appearances on transition planning over the last 25 years. The first part is an outline of the macroeconomic issues (and subsequent opportunity) that we currently face in agriculture.

It was fitting that on the front wall facing these young farmer attendees was a giant decorative sign with a farm scene that read “Opportunity” in bold letters.

The second part of each presentation is usually modified to fit the type of audience attending. In this case, we would discuss the “who, what, where, when, why and how” of communication for young farmers and the important role that it plays in transition planning.

The magical moment for me was the combination of opportunity and communication forming the made-up “Bush-ism” of “opportunication.”

This word, although awkward and hard for me to say at first, made perfect sense. This group of young people have an unbelievable opportunity in front of them.

One of the most important things they can do for their future is to find a way to communicate their goals and aspirations to capitalize on the opportunity the older generation can generate.

To be successful in modern production agriculture, young farmers will need to know how to “opportunicate.”

Each of those young farmers were in search of ideas on how to continue their livelihood with the reality that they are in an industry with little to no margin, impossible start-up costs and a shortage of land priced at levels that don’t require subsidization.

Individually, any of these issues can be difficult for a mature farm operation and fatal for one with less experience. These issues combined will almost certainly make farming impossible without significant help from a mature “farm mentor.”

Opportunity

There has been a “perfect storm” brewing in agriculture for years. With any storm comes opportunity for alteration, evolution and development for those who are prepared.

A majority of farm real estate in Iowa is currently owned by people who are 65 years and older. The folks in this age group have accumulated quantities of land and enjoy the purchasing power of economies of scale.

Although this age group can afford to subsidize land purchases that may not independently cash flow, they will also distribute their estates in an unprecedented transfer of wealth in the next 12-15 years.

The average price of farmland is the highest it has been in history. There are many contributing factors for this, including low interest rates and the ability for the current landowners to subsidize new land purchases to name a few.

Land acquisition cost (rent or purchase) is outside the range of profitability. It is disheartening for producers to realize their cash flow limit for new land acquisition could be as much as 50 percent under what the open market currently demands for land rent or purchase.

Farming is a way of life. Continuing the legacy of a family farm is a fundamental desire that most families want to achieve even though they know it will be an uphill battle.

A farmer will work diligently over a lifetime (or maybe the equivalent of two lifetimes). They may have scrimped, saved and sacrificed more than conceivable to get to the position they currently enjoy. Giving this up is not an easy task.

Favorable interest rates that have been promising for a long time may change in the future and remind us of a painful past.

Our population is living longer. There are many farm owners who will live into their 80s and 90s with a farming heir in their 60s and 70s. This “sandwich” generation will want to own the farm, but may not have an opportunity to own the land during their prime land-acquisition years.

“Nothing tests the metal of a family more than a shared inheritance.” This statement is a perfect description of a family stretched trying to decide what a “fair” distribution of farm estate would look like.

Unfortunately, there are fewer farmers feeding more people in the world. Farm operations will be forced to grow to compete with the current trend in agriculture. The risks associated with this competition make it difficult for survival.

Any one of these factors individually could mean serious problems for a farm to continue to the next generation.

A combination of these multiple factors all occurring at once will, on one hand, result in an unusual turnover in farmland ownership. On the other hand, this turn-over could provide unusual opportunity for those who are prepared.

Communication

The need for communication cannot be over emphasized in any transition plan.

The farm mentor needs to be honest about their intentions. Top-dollar rent may come with multiple renters over time and no long-term commitment from a tenant to care for your land.

The young farmer needs to show the mentor the desire and ability to take over an operation and make long-term successful business decisions worthy of an opportunity.

Young farmers need to communicate their goals for the operation with a written plan, while mature landowners need to consider some of the sacrifices necessary to continue the land ownership legacy.

Farm transition can be the ultimate partnership. Both sides need to be constantly aware of the intentions and level of commitment in the day-to-day operation (revenue, expenses, production, labor and management).

Like a marriage, there is no easy answer. Compromise and communication will endure selfishness and silence.

From government loans and tax credit plans, to matching programs designed to identify aging farmers who have no heir to pass their life work on to, there are many programs available that are worth exploring for a young farmer who is willing to partner with a farm mentor who is willing to work to preserve a way of life.

In the absence of an open checkbook, young farmers and mature land owners need to prepare for the pending opportunity that agriculture has in front of us to work together with open communication and an open mind for the future of our industry.

My hope is not only that young farmers and mature landowners will be able to identify each other (whether they are related or not) but also consciously work on a plan to “opportunicate” their common transition goals to keep the operation viable for generations to come.


For 25 years, Steve Bohr has been a partner in the farm continuation firm of Farm Financial Strategies, Inc. For additional information on farm continuation issues or if you have a question please contact Steve via email at Bohr@FarmEstate.com or by phone at 800-375-4180.

Copyright 2017 Illinois Farmer Today. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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