By Joleen C. Hadrich and C. Robert Holcomb
Farmers are entrepreneurs and finding
the resources to start their operation can have direct implications on their
financial success over time, which is the topic of the second installment of
the “Top Farmer” newsletter series. Of the 334 survey respondents, 18% of the
farms started independently without any help from family, 47% reported
receiving help from their parents while operating their own farm independently,
25% are currently farming with family members in a partnership, and the
remaining 10% used other strategies to start farming.
These statistics differ when we split the
sample between the 20% most profitable and 20% least profitable farms, measured
by the adjusted net farm income ratio.
Thirty percent of the least profitable farms reported starting their
farming operation on their own, while only 13% of the most profitable started
on their own without assistance. Over
half (60%) of the most profitable farms received help from their parents while only
39% of the least profitable farms received similar assistance. These two
statistics demonstrate a very important fact—starting points matter. Having a family member provide assistance to
a beginning farmer help facilitate capital accumulation, farm management
decisions, and the overall success of the farm.
The average age of the survey
respondent was 52 years old with 28 years of experience. The participants in our survey who received assistance
from family members tended to have higher profit levels over time. Surprisingly, only 22% of all survey
respondents indicated they had a formal transition or succession plan in place.
As farmers are making long-term plans it is recommended they consider how they might
incorporate the next generation into their farming operation to create a competitive
advantage for their farm legacy.
In 2019, University of Minnesota
Extension and the Minnesota State Colleges and Universities Farm Business
Management (FBM) Team is providing 12-one day workshops and 3-two day retreats
across Minnesota on this very topic. The
overall objective of the, “Farm Transition and Estate Planning: Creating Your
Farm Legacy,” program is to provide participants with individual, family,
retirement, and business goals to create a foundation for the farm transition
process. Transition plans provide a
planning horizon, which may last anywhere from 5-15 or more years. This program will cover an array of
transition strategies, financial implications of multiple generations on the
farm, in addition to tax and estate planning strategies. More detailed information regarding this
program, including dates and locations, are available at: http://z.umn.edu/transitionworkshop.