One of the biggest struggles beginning farmers face is access to farmland, and in particular, affordable farmland. Over 90 million acres of farmland are expected to turn over to new owners in the next decade. The USDA released the results of the latest TOTAL survey in November of 2015. This survey reached 400,000 landowners, leasers and renters. This survey revealed some very interesting data that has many implications for beginning farmers in regards to land tenure. However, just because land may be available for purchase or transferred to new owners does not necessarily mean that beginning farmers will be able to purchase farmland.
In order for a beginning farmer to purchase land, many moving pieces must come together such as land for sale, purchase price, loans and finances—and all of this must happen at the right time for both the buyer and seller. However, there are a lot of creative solutions that could be pursued to help a beginning farmer acquire a farm. These solutions can make sense for both the beginning farmer as well as the retiring farmer. An example of a farmer who committed to selling his farm creatively to a beginning farmer is Cliff Millsapps. In the article below, Cliff shares his story and outlines his solution for ensuring his family farm transfers to a committed beginning farmer.
By Cliff Millsapps
GARY, South Dakota: There wasn’t a son or daughter looking to take over my operation, and I didn’t want to auction it off to just anyone either. I had years of moving the operation toward a more ecological balance, and I wanted to transition to someone like-minded.
For the right person or family, my property was capable of building equity and providing a modest living and I wanted someone careful, but not afraid to pursue new ideas. There may have been some luck involved, but I’ve outlined the things that aided in my success.
The first task was to convince myself to retire. Not a fence sitter decision, but a decisive one.
Then I put feelers out everywhere, letting people know that I was looking for someone to take over. Advertising a little, I told about the great perks, left off the part about the pay. At least at first.
One thing that may have helped me find someone was that the operation wasn’t overly equity intensive. A couple hundred grand in cattle, thirty grand in equipment, and after a conservation easement, a half million in property. And, the property could be leased until the equity was accumulated to get the loan to buy it.
Of the interested people, a few were serious and I decided on a young neighboring woman. She had already started a small grass-fed beef side operation as part of her family’s cow-calf and grain operation.
She had some experience, a similar direction as mine, and most of all a really positive, open minded, and realistic outlook. Also, she seemed willing to live frugally and work at building equity for a while.
I was upfront about how soon I would be willing to move over, and we both had and asked a lot of questions, letting each other know what commitments we were willing to make. No snap decisions, but no stringing each other along either.
Probably the one thing that hangs up most non-family transitions today is land values. It may be an issue even within families.
What I wanted more than money was to see the land treated well, and also to have it make a living for the next generation. I didn’t want to give it away, but was willing to make the terms so the next operator would be likely to succeed.
What really helped the ecological ethic was selling a conservation easement, which for those of us without a wad of money, allowed some money for retirement projects.
For the prospective grazier looking for land, you might look to see who has put land in conservation easements. The rents or purchase price could be a lot lower, but most, if not all, of the production potential is still there. The same mindset that puts a conservation easement on land, will likely be willing to lease it for much less to someone looking to operate it in an ecological fashion.
Having some money for retirement projects makes it easier for me to help try getting the next operator going. I gave her the security of a five-year lease at a rate I felt should allow her to build equity. Equity can provide collateral, and with collateral she can get the type of loan needed to buy the land someday.
I want her to have a chance at owning land, the same opportunity I would have wanted if I were in her position. I went so far as to write the contract so that most of the rent will be applied to the purchase price, which makes it more likely that they will buy it down the road.
Even if I should die and my heirs auction the land off at the end of five years, she or her family will have some credit toward the winning bid. This gives her incentive to invest in long-term projects. Conventional operations that are successful often get a leg up to get past the initial years, and it has been shown that conservation-oriented operations can eventually stand on their own, but benefit from the same help.
So, if we landowners find a new operator willing to put in the long hours and hard work, we should help them get through the early years’ pitfalls, and increase the number of less exploitative farms that can be seen as financially viable.
This article was originally featured in the Stockman Grass Farmer as the article, How to Transition A Ranch To a Non-Wealthy Successor, in the October 2015, Volume 15 issue.