In 2011, Howard and Jannette Besser found themselves at a crossroads. The pair, who farmed 3,000 acres near Plumas, Man., had reached their 50th birthdays, their sons were not interested in farming, and they could see they’d have to start purchasing bigger, newer equipment if they wanted to carry on.
“We decided to step out,” Besser says. “But slowly.”
Demand was high. The morning Besser opted to rent out some land, it was gone before breakfast. But the Bessers were content to take their time finding the right buyers.
Over a period of three years, they sold some land to their long-term renter, a nearby farmer. The first piece sold at $1,000 an acre; now, an acre fetches $3,500, which means they’d have missed all that appreciation if they’d sold the farm lock, stock and barrel that first year.
Playing the long game also paid off when it came to selling equipment.
“We didn’t get too excited about selling equipment. I did custom work with it and paid out outstanding loans and waited until I could sell it for what I wanted,” says Besser.
His grain dryer is an example, Besser recalls. “I had done some custom work with it and then a year came along where it turned wet in the middle of the season and they couldn’t get dryers fast enough, so I sold my dryer for the amount I paid for it.”
“Same with the four-wheel-drive tractor — it took a couple of years to sell it for what I wanted. I custom combined for three to four years and then got a really good price for my combine and straight-cut header.
“I had little farm loans — a little on this and on that, stretched out for seven to 10 years, and I just paid them out as I sold the equipment, and it was very light for me tax-wise.”
Of the 3,000 acres the Bessers had farmed, 1,500 was rented land. Toward the end, they were farming 1,100 acres, which they rented out for three years prior to selling the last pieces of equipment.
It took hours on the phone, Besser admits, but the Bessers saw value in being patient. Some equipment sold locally — within 20 miles — but the rest sold to other parts of the province. Some pieces went to dealers and sat on lots for a period of years before selling, but the Bessers always waited until they were happy with the deal.
Three or four years before Besser sold his semi-tractor, he quoted a price to an interested farmer. Besser custom hauled some grain, sold the trailer, and then parked the semi in the yard, where it sat.
Years later, Besser got a call. It was that same original buyer on the line who “suddenly desperately wanted that truck” — and was willing to pay the original asking price.
“It’s a totally different game when you get into the position where you don’t have to sell but it’s out there to sell,” Besser says.
“The right buyer always comes along if you’ve got good stuff, if they want it and there’s a need for it.”
These days, the Bessers aren’t full-time farming, but they’re keeping their hands in the game.
“We have a strong connection to our land. It’s hard to up and sell.”
Don Forbes of Forbes Wealth Management in Carberry, Man., is the Bessers’ financial planner. He says most farmers have no interest in leaving the family farm a moment before they have to. Rather than selling the farm on a turnkey basis, they often opt to reduce the scale of their operations and retain the homestead so they can stay on the land.
“Sometimes there’s a century farm and there’s a huge emotional attachment,” Forbes says. “It’s a huge time period, and there have been trying times when farmers kept farming because they loved it, not because of profitability.”
Most times when Forbes works with farmers who don’t have successors, they choose to slow down gradually — they stop investing, rent out land or auction off equipment, or continue farming on a less aggressive scale, putting land to hay.
“They have been outdoors and in control of their own destiny all their lives and then all of a sudden they’re in a condominium. Most of them (prefer to) say, ‘I’m leaving the farm in a pine box,’” says Forbes.
Retiring farmers who have less of an emotional attachment to the land, Forbes says, might opt for a realtor to sell the operation wholesale. “The stories you hear in the coffee shop are that they can extract some nice valuations,” he says.
Forbes says few farmers opt to sell their operations and equipment piecemeal over a long period the way the Bessers did. Instead, trusted neighbours or their children will typically buy or rent the land and equipment from the retiring farmer, removing the need to formally advertise or use a realtor.
Whatever route they take, Forbes says retiring farmers should first examine how they feel about selling the farm. “They should always ask, ‘What’s the emotional aspect here?’ How can we address that first?” he says.
To list or not to list
Douglas Gunn is a St. Thomas, Ont. lawyer who advises farmers on succession.
In Ontario, Quebec and Saskatchewan, farmland continues to increase at a rate slightly above the national average, according to FCC’s 2019 farmland values report.
Gunn says farmers looking to sell have lots of options: they can sell to a neighbour, list the farm with a realtor or put out a call for tenders.
Listing with a real estate agent gets a farmer much broader exposure and might net the best price, but commissions can be in the range of four to five per cent, a “significant bite out of the proceeds,” he says.
Another option is to work with a lawyer to identify the probable purchasers within the immediate area and let them know the farmer is interested in entertaining offers. Perhaps 75 per cent of Gunn’s farm clients have sold their farms that way, he says. When the farm is sold directly by the owner, he or she can sometimes discount it.
“That makes it more attractive because buyers know instead of getting the value of the property plus commission they can get a better price by negotiating directly with the retiring farmer,” he adds.
The key, he says, is to generate competition by identifying multiple potential buyers.
The first step retiring farmers should take is to ask, “Who is the probable purchaser?” says Gunn. “If it’s a farm nestled between other farms on good land, it’s highly unlikely that you’ll be having someone from Toronto or Mississauga buying that property — it’ll be neighbouring farmers.”
But listing results can sometimes be “extraordinary” — particularly when the farm is in close proximity to an urban area and has future development potential.
“Sometimes farmers who have farmed for decades don’t have a sense of how far the municipality has encroached outward,” he adds.
Alister Maclean, a realtor with Sutton Group in Ingersoll, Ont., says he advises farmers to take advantage of their position by selling while their farms are in full operation, but most livestock farmers in the area typically dispose of equipment and the “outer reaches” of their land and retain the home parcel in order to live on the farm into retirement.
“In Ontario we have these 100-acre farms and (one farmer) may own a dozen or more so they sell them off annually and rent them out for income and sell the home place at the end of it all,” says Maclean.
If they opt to sell over the fence, farmers end up selling to the tenant who doesn’t pay as much because they don’t have to compete for it. “Then there are those who take advantage of a good strong market and can maximize on dollars and cents if they expose it properly,” he says.
“Every farmer has his own idea how they should exit. Some want to give the young farmer a break. There are as many ideas out there as there are farms.
“There’s no right or wrong way, it’s just whether or not they want to achieve the best price for their retirement.”
Howard and Jannette Besser live in Arizona during the winter, but the rest of the year you’ll find them in the family farmhouse. Their son has taken on some cattle and still uses a small amount of land. Their trusted relationship with the man who bought their land has made this arrangement possible, says Besser.
It was late April when we last talked to the Bessers for this article, but Besser didn’t have anything to plant. Instead, he was looking out the window at the farmyard when suddenly he paused.
Then he mused, “There’s a good $200,000 worth of stuff that could be sold yet — hopper bottom bins, tractors.”