Non-traditional farm transition planning and value transfer via mentoring and creative lease agreements

Commodities

Practices

Farm transition is generally assumed to be through
intergenerational transfer or sale of farmland. However, a
rapidly increasing number of aging farmers, especially those of
small, highly diversified farms, want to continue owning and
living on their land while finding others to manage it. These
farmers are highly motivated to mentor and provide land and
production access to young farmers. Current models for farm
transition lack innovative strategies and structures that would
allow the young farmers to acquire equity or capital that does
not involve land transfer. This grant will explore meaningful and
valuable mechanisms to support value transfer from experienced
farmers to young farmers through a variety of pathways that
provide land and production capacity access as well as mentorship
to young farmers while preserving the ability of retiring farmers
to continue living on their farms. Historically, accumulation of
equity or wealth by young farmers has been primarily achieved
through land ownership and subsequent investment in
infrastructure and production capacity. With increasing land
values due to rural to suburban development, availability of
farmland has decreased and become less accessible. Young farmers
often lack the financial ability to buy established operations
and/or lack the skills to take over such operations.

SOLUTION:

Increasing sustainable farming requires that farming expertise
and land not be lost as the demographics and financial realities
of farming change. We will work with a diverse team of
professionals (i.e. legal, financial, UMN Extension, etc.) to
determine meaningful, equitable and valuable mechanisms to
support value transfer from experienced farmers to young farmers.
The value transfer mechanisms will include both financial gain by
the young farmers (mentees) and a long-term plan for the farm
owner. While this project will focus specifically on developing
these tools for the Clover Valley Farm – Roper Farm partnership,
we will involve other farmers who are in similar situations so as
to provide broader context for the transferability of this
projects results to other farm owners and young farmers. We will
work with UMN Extension Farm Transition professionals and Farm
Commons to develop a tool kit for non-traditional farm value
transfer opportunities.

Mechanisms for value transfer that we will explore/ develop may
include:

• Short to long term lease options (1-3 year, with options to
  extend) that provide:
  • Access to land/production, buildings, and other farm
    infrastructure for mentees.
  • Plan for maintenance of production capacity and farm
    infrastructure (who is responsible for what, financial and
    labor)
  • Memorandum of understanding (MOU) of what each
    participant will contribute to and get from the arrangement
    (i.e. the scope and depth of mentorship provided by the farm
    owners, the labor exchange provided by the mentee)
  • Eventual option to buy if desired by both parties.
• Management training and business transition plan
  • Create an annual timeline for management activities (i.e.
    pruning, pest management, harvesting, understory management,
    fall/winter preparation, etc.) along with estimated
    labor/time and supplies needed
  • Introduce/train on farm record keeping tools (i.e.
    harvesting, time/labor cost, accounting, etc.)
  • Introduce/train on farm food safety protocols for both
    production and value-added processing.
  • Provide historic harvest records and pricing for
    financial farm planning purposes.
  • Provides introductions & contacts with existing customers
    to facilitate smooth business transitions
• Financial incentives
  • Beginning farmer tax benefits to farm owner
  • Accumulation of wealth by mentee (i.e. cash, equipment,
    etc.)
  • Ability of mentee to build their farm name/brand and
    skills
  • Low/no cost leasing by mentee
• Business structures and/or entities that support “value
  transfer plans”
  • Non-profit
  • Durable agricultural easements
  • Trust
  • Life Estate
  • Eventual purchase or gift transfer (in the model of land
    back or reparations movements)
  • An innovative easement known as a Profit a Prendre that
    could ensure access to the land for
    harvesting perennial crops, regardless of who owns title to
    the land.
  • Others

OBJECTIVES:

1) Create lease and MOU agreements that allow for the
establishment of clear expectations between farm owner and farm
mentee.

2) Create multiple alternative pathways and mechanisms for the
farm mentee to acquire financial wealth through the
land/production access and mentorship provided.

3) Establish planning documents that allow for both farm owners
and farm mentees to clearly establish their needs and goals,
for effective pairing of and planning among farm owners with
mentees.

4) Share findings through farm field days and dissemination among
UMN Extension programs and through other organizations
active in land access, emerging farmers mentorship and farm
transition.