Sustaining Northeast Farms for Future Generations

Sustaining Northeast Farms for Future Generations

Summary

Sustaining Northeast Farms for Future Generations” is a three-year collaborative project
that will educate 400 agriculture producers on farm succession planning issues and
resource conservation policies so that future generations of farmers will operate
profitably and protect our natural resources. Of the anticipated 400 farmers receiving
information on farm transfer planning, 150 will take two-three of the following action
steps for farm transfer: 1) Contact organizations to learn more about farm succession and
natural resource protection. 2) Talk with family members about the human and natural
resource needs of the farm; 3) Identify, train and mentor a farm successor; 4) Develop a
better understanding of farm transfer and natural resource protection options;
5) Inventory and evaluate human and natural resources of the farm; 6) Increase awareness
of natural resource and farm transfer programs. 7) Understand loan options and the
farm’s financial position; 8) Understand the tax implications for land use planning, estate
planning, and farmland protection; 9) Schedule meetings with attorneys, accountant or
farm transfer/resource protection staff; 10) Transfer livestock/machinery/management/
land to the next generation.

Objectives/Performance Targets

Of the 400 farmers receiving information on farm succession planning and land-use conservation policies, 150 will take at least two-three action steps to transition their farm to the next generation and/or protect their land resources within three years.

Accomplishments/Milestones

1. Farmer education needs will be identified through farm succession survey returns—

After some initial setbacks, the Farm Succession Questionnaire was mailed to 3890 farmers in PA and NJ on March 7, 2005. 1945 were mailed to PA farmers and 1945 were mailed to NJ farmers. The number of surveys mailed from each state and the selection process was determined strictly by the NASS office. They indicated that this number of mailings and a follow-up should yield a statistically reliable response rate. A follow-up mailing consisting of a cover letter, the survey, and a postage paid envelope was completed on March 29th. According to the Beginning Farmer Center in Iowa, the number of surveys returned was double the percentage of surveys returned for Iowa and Virginia. This meant additional work on the coding of the surveys by the stat lab, so there are delays in getting an analysis of the data. A summary and final report will be generated in the near future.

A majority of the results for Pennsylvania are included as a separate document in this report. What is consistent across the states who have conducted the survey is the high percentage of farmers who say they will never retire or semi-retire. North Carolina conducted the same survey during the same time period adding to the number of states working to obtain data on farm succession.

For example in PA 69% of farmers say they will not retire or they will semi-retire; 70% in VA say they will retire or semi-retire. The number of farmers who have not identified a farm successor in PA is 64% in PA and in VA is 70 %. The number of farmers who have not discussed their retirement plans with anyone including family members is 21% in PA and 29% in VA.

Clearly this indicates the need for greater effort to reach out to farmers about succession planning. If farmers do not retire or only semi-retire it typically means they live on the farm until they die, gradually winding down the business and selling off some of the assets of the business. When a successor has not been identified or retirement planning has not been discussed the farm business continues to decline. Our efforts to encourage farmers to actively pursue the farm succession process must be intensified.

2. Listening to 8-10 farmers outline their educational needs through focus groups
A follow-up focus group of farmers was conducted in September 2005. This group included 5 part-time farmers who were new or just getting started in farming and actively pursuing a farm career by completing a farm business plan.

Several questions these new farmers were asked to respond to included the following:
1) Is there a problem in getting young people started in farming? What is it? How should we tackle it?
2) In your mind what is the most important issue confronting farmers in farm transition to the next generation? How well do you feel you understand this issue? How have you addressed it?
3) What is the most important issue confronting beginners who want to get started? What can an individual farmer do to address this issue?
4) What is the least important issues confronting farmers regarding farm transfer?
5) Do you believe that we need to heighten awareness of the need for transfer planning? If so, what methods should we use to accomplish this?
6) What do you think motivates farmers to begin the transfer process? How can we use this to encourage more farmers to take action on farm transfer? What do you think motivates farmers not to begin the transfer process? How can we change this to encourage more farmers to take action on farm transfer?
7) Do you think retirement planning is important? What motivates farmers to retire? What motivates farmers to not retire?

In response to whether there was a problem in getting people into farming? One farmer said, “There is a big problem. Availability of land to lease and eventually purchase is a big problem for beginners.” He went on to say, “We all know my money can’t compete with a developers’ money.” Explaining how he got started he said, “ I didn’t have any equipment. I planted 1500 tomato plants by hand the first year, every year you can get a little bit bigger and buy more equipment and the things you need. Start-up money is always a problem-you can rent or lease it, but it can be extremely expensive.”

A second farmer said money ties into everything, you can start on a small scale, but that isn’t going to produce enough to pay the bills. Older people who farmed all their lives have the assets, but are aging, the younger people have the labor. If you can work out an agreement between the two, that ‘s where you want to start, like what PA Farm Link does. Land is biggest issue.”

Another response included: “We have a handful of farmers in our area, they are established. I can’t compete with the full-time farmers for land —what do I do? Go elsewhere? Land is going to be the biggest issue. When you leasing you live from year to year. You can’t project anything. How do I replace the land I was renting when people sell it?”

A fourth response was: “Beginners need to focus more on simpler, less expensive ways to do things and try to find multi-use for facilities and equipment to offset some of the costs.”

When responding to the most important issues confronting farmer in farm transition, they said: “My grandparents have told us we’ll get the first chance to buy the farm—it would sell for development for a lot more than we could afford to pay for it—how do they keep all the siblings happy—what it they don’t tell anyone or put it in writing? They’ve been very good to us; they are helping us to get started. They don’t think there’s a need for putting it in writing. My grandparents are the glue that holds everyone together, if they are not there and we don’t have it in writing, then what happens. When money becomes an issue they (family members) aren’t going to be as tight as they are now. They could care a lot about the money.”

A second farmer said: “Siblings, in-laws, relatives, they all come out of the woodwork when someone passes away.”

Another issue beginners have to look at is the area where they want to farm. Is it surrounded by development? We talked to another farmer, he was surrounded by development, his kids wanted to be farmers but they only had 20 acres. Should he sell out and go somewhere else where the land was cheaper and they weren’t surrounded by houses. What is in the best interest of the kids? On the other side of that, you could capitalize on it also—because you have customers all around you.”

What motivates farmers to retire, what motivates them not to retire? “The younger generation needs to think about retirement of older farmers—farmers want to retire on their farms. These guys need some standard to provide a good retirement besides selling their farms. Social security doesn’t pay enough.

A second farmer said her grandparents still live on their farm. “They are not able to do it full time anymore so they are renting the land to a neighbor. Grandpa still wants to have his hands in it. That’s his legacy—he is helping us get into it. We help them and they can live in their own house for as long as they are physically able. Helping the next generation along can be a motivator. Maybe they don’t retire, because they don’t have anyone to help along. Since we are involved, their attitude has changed and their health has improved for the better—they’re happier.”

This last comment ties into the survey results indicating that those who don’t have a successor, generally think of themselves as semi-retired or that they will never retire. As this new farmer indicated, helping older farmers seek out a successor may in fact make them happier and healthier. At the same time delaying retirement works to decapitalize the farm business and inhibit the next generations ability to get started in a timely way and be able to realize their goals and objectives for the farm business.

3. 300 farmers will attend educational workshops on farm start-up and farm succession.
At the core of family farm ownership is the capacity of the land and the family to create a productive business operation. Without a profitable, productive business the incentive to sell to developers is overwhelming. The critical time period when most farms go out of production and into housing developments and shopping centers is when the farm family is considering retirement. If the younger generation is not interested in making farming a career, then the pressure to sell to developers increases further.

To see their business survive into the next generation, families must resolve three universal dilemmas:
How do we retain an adequate retirement income?
How do we treat the children fairly?
How do we manage the farm transfer so that the farm business is not burdened with unreasonable debt?

Farm Succession—244 attend
Pennsylvania Farm Link held five educational “Passing on the Farm” workshops for the fall-winter of 2004-2005. They were November 15, 2004 in Washington, PA, January 6, 2005 in Clarion, PA, January 19, 2005 in Union County on January 26, 2005, in Nazareth on February 10, 2005, and in Lebanon on February 17, 2005. Two additional workshops focused on farmland preservation and farm transfer were held in Chester County on 2/8/05 and in Montgomery County on 2/24/05. Beginning Farmer workshops on farm start-up were held on February 26, 2005 in Harrisburg and in western Pennsylvania at Slippery Rock University on June 25,2005. A family decision in a farm transfer workshop was held in Lancaster County on June 13, 2005. A total of ten PA Farm Link workshops focused on the farm start-up and transfer.

To date, 1479 farmers were invited to the Passing on the farm workshops. A total of 244 participated in the workshops this year. Information on family, business, legal, farmland preservation, financial, and estate planning issues were provided to all participants. Evaluation results revealed farmers increased their awareness of the issues and the need to take action in their planning for a successor. Almost 100% of the participants said that the workshops helped them plan their farm transfer and make them more aware of options available to them. Action steps participants took include:
· 82 % are working at developing better communication among farm partners
· 95% have a better understanding of the tax consequences if they didn’t develop a succession plan
· 88% had a better understanding of their options in a farm transfer
· 43% plan to meet with a financial advisor or accountant to review their business records
· 61% plan to talk to an attorney about their farm transfer
· 70% had a better understanding of the loan programs available to finance a transfer
· 86 % said they plan to learn more about farm transfers

Passing on the Farm workshop for 2006 are scheduled for January 19th in Westmoreland County, January 24th in Lancaster County, February 1st in Perry County, February 9th in Mercer County, February 16th in Schuylkill County, and February 23rd in Wyoming County. To date 1037 invitations were mailed, another 800-1000 will be mailed in January of 2006.

Farm start-up –118 attend
1838 potential or beginning farmers were invited to attend the New and Beginning
Farmer workshops in Harrisburg and at Slippery Rock University. 118 participants attended these workshops. 33% are considering farming, 32% are currently employed on farms, 11% rent farms, and 24% own farms.

Follow-up with these participants indicate that:

80% said they started working on a business plan,
65% were looking into additional markets,
50% had a better understanding of how to structure their farm entry,
76% had a better understanding of options available to help them get started,
46% said they plan to talk to other farmers about getting started in farming,
50% plan to learn more about farming.

Impacts and Contributions/Outcomes

A. The first focus group recommended ways that farmers can be helped to transfer their farms. They include:
1. Conduct “how-to” educational workshops on farm transfer. These workshops should cover the basics and focus on the need to start planning as soon as possible and identify resources that can help farmers.
Our response: This year six workshops were held attracting 244 farmers.
2. Write about farm transfers in farm publications, include case histories to illustrate farm transfer issues and how families handle those situations.
Our response: 6 Columns were written in Lancaster Farming on farm transfer
Issues. This will be an on going service we provide.
3. Develop case histories on farm transfer illustrating different situations and how they were handled. Using examples of what went wrong is just as important as what was handled well. Work to get these published in agricultural publications. Our response: One case history on a family farm transition at market value was written, more will be forthcoming.
4. Educate farmers on the problems that occur if they don’t plan in workshops and print media.
Our response: Problems associated with lack of planning are included in both print publications and workshops.
5. Develop a network of farmers that could be called on to talk to other farmers about farm transfer issues—what they did, resources they used, problems they addressed or didn’t address.
Our response: We started working on establishing a network of beginning
farmers this fall. An annual event will be planned. Farmers who have
transferred their farms or are in the process are included in the Passing on the
Farm workshop. We will explored the possibility of developing a network of on
transition issues in the spring.
6. Develop a checklist of issues for farm transfer that need to be addressed so that more farmers understand the need to take action and know what to do.
Our response: A Checklist was developed and is included with this report. All future participants of “Passing on the Farm workshops will receive a copy.

C. A few examples of farmers who took action as a result of this project.

Passing on the Farm Workshops
W9
Said the workshop helped very much in planning for his farm. As a result of the Washington Passing on the Farm workshop this individual talked to an accountant to determine financial viability for transfer, talked to the Conservation District about stream bank fencing, and plans to follow up with his attorney.

U26
Planning to talk to an estate planner, they did talk to a land trust about putting a conservation easement on the farm, and talked to the bank about financing the next generation, Said the most important part of the workshop was supplying the motivation to get everyone thinking, what to do, and where to go—we had no idea where to begin. Referred to a farm knowledgeable attorney.

N22
Plans to talk to his accountant, He will talk to his attorney about equitability and fairness with his son. He has two sons on the farm and two sons off the farm; feels the ones on the farm should have first priority. Most important part of the workshop was “If you have your mind mad up you’d like to do something, then do it.” “My interest is to transfer one farm to my sons and the other part set up in insurance so when things happen you make it just a little bit easier to keep on going.

Collaborators: