Those of us in agriculture know the statistics: 1/3 of the nation’s farmers are age 65 or older, 50 percent of farmers are planning on retirement in the next decade, half of our nation’s farmland is controlled by farmers age 55 or older, and only 5 percent of our farming population consists of farmers younger than 35. Why this disparity? In discussions with several friends who are entering or have entered the industry, we came up with three top reasons: lack of financial resources, limited access to land and high-risk contributing to low motivation.
Many decide a job in town sounds less risky and more rewarding for them and their own starting families, leaving the prior generations with no heirs willing to carry on the family business. There are other young people who decide they want to take on those risks, but they do not have someone to inherit land from. Then there are the young people who want to go into a different type of agriculture than the family is invested in.
Some individuals today are finding a way to answer both dilemmas – through land transfer arrangements. Traditionally, this occurs when operations are passed to children, but it is more frequently occurring between unrelated individuals. The arrangements vary, but are usually agreed to as some form of partnership between an older farmer/rancher and a younger individual wanting to enter the industry, but having no resources. Rather than passing on the operation immediately, the older farmer stays on for a few years or so, passing on his or her experience and knowledge, giving the new farmer time to gain experience and equity so that he or she can continue the business when the previous owner retires and sells out to the new farmer.
Sometimes, though, the option of land transfer – related or not – is not available to a new farmer. Working on the lending side of the bank, I am often asked what financial resources are out there for young farmers. While these young men and women may be passionate for and have knowledge of the industry, they don’t have the financial backing required by most lending institutions. I would encourage young farmers and ranchers to do the research and to make a plan, before talking to a lender. What programs (government, state, private company, bank) are offered for new farmers? What are the requirements and can/do you meet them? Is owner-financing available? Know what it is you want to accomplish and what is needed to get there. Details are important. Come up with a cash flow and know how and when cash will move in and out of your operation. How will you market your product? Be flexible; acquiring capital (cash) is a business transaction, which quite often requires compromise on both sides. Be sure you have capital or funds on hand as you may be asked to contribute something yourself.
Jessica Bailey is a Credit Analyst in the Agricultural Loan Division at Arvest Bank in Neosho, MO.
