The average Canadian farmer in 2006 was 52, making farming the oldest occupation in the country. And farmers aren’t getting any younger. Today, the median age of farmers is thought to be nudging 57, or perhaps even 58 because so few young people are getting into farming.
If so, our farmers are the same average age as farmers across the U. S., including in Iowa, home of the intrepid John Baker.
Baker is a lawyer, an internationally renowned farm succession researcher and advocator, and administrator of Iowa’s Beginning Farmer Center. “In Iowa, the number of farmers over the age of 65 is probably three to four times more than farmers under 35 years of age,” Baker says. “About 24 per cent of farmers are at an age to retire.”
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That means an unprecedented turnover in family business leadership will happen over the next 10 to 15 years as baby boomers retire or die. It also adds up to a stroke-inducing amount of assets about to change hands.
Let’s assume a conservative half of Canada’s 166.8 million acres is owned by farmers over 65 and that on average, as Statistics Canada predicts, they’ll live another 20 years. Let’s also assume that that land will switch hands only once in that time.
According to Statistics Canada, an average acre of farmland in Canada sold for $1,394 in 2008. Multiply that by 83.4 millions acres, and it means $115 billion worth of land assets will switch hands in the next two decades.
And that’s not including other assets, like investments, equipment, quota, and buildings or inflation.
The numbers get even more staggering if you consider the U. S. has 5-1/2 times more crop-and range-land, adding up to 920 million acres according to its 2007 Census of Agriculture. Whatever assumptions you make, sums up Baker, “There’s going to be a tremendous amount of assets turned over in the next 10 to 15 years.”
What has got Baker so concerned isn’t what the land is worth. It’s who is going to own and manage it.
“We’ve never had a problem with people owning assets since the reign of Henry VIII,” Baker says. “There’s no crisis in land or farm ownership. The issue here is whether there’s going to be owner-operators.”
Today, only about two per cent of North Americans are farmers, a historical low that is getting blamed for many woes, including our eroding political clout and the growing disconnect between urban consumers and farmers.
The shrinking number of farmers, however, doesn’t seem to be affecting demand for land.
Baker says land usually doesn’t reach the market in Iowa. The vast majority of farmland is transferred in private sales. But when land does come up for sale, it goes to the bidder with the most collateral, and that’s not usually young people. The ability to stay in agriculture is based on access to capital.
The question isn’t whether there’s going to be corporate farms or consolidated farms, says Baker. “I’m more concerned about what this demographic shift is going to do to the state and community I live in and to my fellow citizens in the U. S. and North America.”
— John Baker
“ If you’re concerned about the future of agriculture and your community but you’re not going to retire, what’s that?”
“The biggest export that rural areas have is children and brain power,” says Baker. “You have an aging population which statistically is less educated which means they generally have less earning potential.”
Baker says the shrinking, older rural population will spend less money, which lowers the multiplier effect and results in decaying small towns and the so-called “ghettoization” of rural areas. “If you’re poor in rural areas, you’re less connected to social services than the poor living in urban areas.”
In 1999, Baker and the late Andrew Errington, professor at the University of Plymouth, England, co-founded the International Farm Transfers research project on farm succession and retirement. These surveys continue to be conducted in several Canadian provinces, some parts of the United States and numerous European countries, as well as Japan and Australia.
International Farm Transfers surveys consistently show that for many, farming is more than simply a career. It’s a lifestyle that retirement threatens to completely disrupt.
According to the International Farm Transfers surveys done in 2000 and 2006, only about 23 per cent of Iowa farmers plan on retiring, and 30 per cent say they never will. “From our research worldwide, we discovered that the majority of farmers plan never to retire,” says Baker.
But there can be an unexpected negative, he warns. “Often the trouble with farmers not retiring is that their businesses tend to decline.”
That’s because older farmers manage their farms differently. As we age our business sense naturally changes. Generally, we become more averse to risk, not as creative and tend to avoid change.
Laddering
Even when the young generation is on the farm, the surveys found their parents often retain the decision-making power. In North America, the surveys also found, the last job usually handed off to the next generation is paying bills.
In farming the older generation usually works side by side with the next generation, sharing wisdom, and contributing to the continued success of the farm. This laddering of generations can be great. It is one of agriculture’s strengths. But it can also be problematic.
“My colleague in England coined a wonderful term — ‘farmer’s boy,’” Baker says. “That ‘boy’ is 67 and has an 89-year-old father who still makes the farm decisions.
“They (the older generation) have to train the next generation to make decisions and allow them to make upper-level management decisions,” says Baker. But that isn’t happening, he says. “In many countries, we’re seeing delayed succession, delayed asset transfer.”
Teach how to retire?
“Somewhere between 65 and 70 years old, you ought to get the hell out,” Baker bluntly says. “We live in a free country but, if you’re concerned about the future of agriculture and your community but you’re not going to retire, what’s that?”
He finds it ironic that the same people who complain about the demise of their communities’ schools and churches are sometimes the ones asking the highest cash rent.
The fear around retiring must be demystified, Baker says. He points to the example of Ford Motor Company realizing that many of its retirees didn’t live past two years after calling it quits. They initiated a pre-retirement planning scheme and right away the retirees lasted seven years. The psychological shock of retirement was killing them.
Farmers need to develop a retirement plan and also be willing to retire. Instead of liquidating farm assets at death, a plan and identified successor can help ensure a future for the family farm.
The same lessons need to be learned by the Generation X (1965-80) who are actively farming today. “You should start planning for succession when your children are born,” says Baker. “It can’t hurt your business and will probably help position your business to succeed.”
In the international surveys, the largest portion of retirement income for farmers comes from the net operating income of the farm. Basically, this skims off the top without adding to the gross income. Advanced planning and saving off-farm at a younger age gives the family farm more options.
“With better planning farmers will become more efficient and effective,” says Baker. “Not falling back on the inheritance model will professionalize farm transitions.”
As asset values continue to climb, more farmers are leasing assets and fewer can afford to own land. “Other occupations don’t link facilities with professions,” says Baker. “We need to decouple the farmer-landowner idea.”
Baker helped establish Farm On in Iowa that connects farmers without heirs to young people wanting to farm. In the program, 10 to 15 young people sign up for every older farmer. About 200 links have been created over the years.
In the end, Baker says, succession is an issue that goes to the heart of sustainability. “The farm has to sustain the environment, it must provide a sustainable income, and it also has to sustain the community,” says Baker. “Lastly, it must be capable of moving at least one generation.” CG
