Are There Opportunities to Enter Production Agriculture Today?

Most persons would not be surprised that the average age of Nebraska farmers is increasing. In 1982 there were approximately 1.5 farmers under age 35 for every farmer over age 65. In 1997 the relationship of younger farmers to older farmers had reversed. The latest Nebraska census of agriculture indicates there are about 2.5 farmers over age 65 for every farmer under 35. Approximately 41% of the land and farm machinery in Nebraska ($14 billion) is owned by those 55 years of age or older. That age group owns approximately 46% of Nebraska’s cow herds as well as about 27% of the breeding hogs. The vacuum created by the retirement of these Nebraska producers is going to be filled by someone. Will it be by existing producers who will continue to get bigger? Or, is there potential to bring new farmers/ranchers into agriculture

The Trade Adjustment Assistance Program Nears Completion

The Trade Adjustment Assistance Program (TAA) was part of the American Recovery and Reinvestment Act (ARRA) of 2009. The modified Trade Adjustment Assistance for Farmers Program provided producers of raw agricultural commodities (farmers, ranchers or fishermen), who had experienced significant declines in price or production because of foreign competition, educational and cash benefits. The Trade Adjustment Assistance Program for farmers and fishermen was reauthorized in 2012, however, it was left unfunded; therefore, TAA benefits will come to an end for farmers and fishermen throughout the United States. The final deadline for completion of the education phase of TAA, designed to help producers adjust to the changing economic environment brought on by opening up to global trade and the resulting import competition, was September 30, 2013. The program provided both cash benefits to eligible producers as well as educational assistance to help them create and implement a new business plan to better equip them to compete in the global economy

Long-Term Care for Farmers and Ranchers

The population of the United States is aging. There will be 2.5 million Americans who will have their 65th birthday in 2011, which equates to nearly 7,000 per day. By the end of the year we should have 41 million Americans over the age of 65. The potential cost of long-term care and the impact on the farm business is a significant concern for many Nebraska farmers and ranchers. Many have become increasingly aware of how easily the cost of long-term care can wipe out a lifetime of savings, or hamper the transfer of a family farm, ranch or business to future generations

“The e-harmony of Farm Succession”

The age of Nebraska’s farm and ranch operators continues to trend older. Statistics from the National Census of Agriculture indicates that in 1982 there were 13,436 operators of Nebraska farms or ranches under the age of 35. In the most recent Census of Agriculture taken in 2007, those Nebraska operators under age 35 have declined to 3,353. The 1982 Census indicated the number of operators age 65 and over was 8,777, while in 2007 the Nebraska operators age 65 and over increased to 13,062. Nebraska currently has only 25 percent as many operators under 35 years of age as it did in 1982. During the same 25 year period, those Nebraska farm and ranch operators 65 and over have increased to 149 percent

Does Contribution Equal Compensation?

Should contributions to the success of a family farm or ranch be compensated? One of the most difficult decisions owners of a farm and ranch business confront occurs when one heir returns to the family business, while he or she has siblings that do not. If you start out with the premise that we all love our children and hope to treat them fairly, it follows that if contributions to the success of the farming business are more or less equal we should compensate our children more or less equally. The difficulty arises because the farming heir will many times make contributions to the success of the business that are not equaled by their siblings. If one agrees with the statement that contributions should be compensated, then we must consider how compensation will be provided to the heir that has made the contribution

Nebraska Leads the Way to Help Beginning Farmers and Ranchers

Nebraska continues to lead the nation with efforts to provide an incentive for owners of agricultural assets to rent those agricultural assets to beginning farmers and ranchers. The Nebraska Beginning Farmers Tax Credit program provides owners of Nebraska agricultural assets such as land, livestock, machinery, grain storage, livestock facilities or irrigation equipment a state income tax credit incentive to rent to a beginning farmer/rancher, rather than someone that is more established. Owners of Nebraska agricultural assets can earn a ten percent state income tax credit for providing a beginner a three-year cash lease, or a fifteen percent state income tax credit for providing a beginner a three-year share lease. Owners can be either individuals or business entities such as trusts, partnerships, corporations or limited liability companies (LLC). In order for owners of Nebraska agricultural assets to benefit from the Beginning Farmer Tax Credit program, they must of course, be Nebraska residents or be subject to paying Nebraska state income tax

Barriers to Successful Farm/Ranch Business Transfers

Many farm and ranch business owners desire a successor, someone who will continue the business after the current owner retires and/or eventually dies. Finding the right person is obviously the first step in the business succession process. Some have found a family member who is interested in taking over the business. Some have found a neighbor or friend and others have made connections with complete strangers. Most often the successor is a family member, a child, grandchild, niece or nephew, but finding the right person does not automatically equal success. There are barriers that prove quite difficult in many cases. The three most critical barriers to success are: Communication, Management Transfer and a Financially Feasible Plan

Beginning Farmer Numbers Grow in Nebraska

According to the 2012 USDA Census of Agriculture, NASS, a 30-year trend of declining numbers of farmers under 35 years of age appears to be, at least temporarily, reversing. As Figure 1 shows, Nebraska’s principal farm/ranch operators in the age group under 35 grew by 1,394 – from a total of 3,353 in 2007 to 4,747 in 2012. The previous 20-year history indicated overall losses in the number of beginning farmers from 12,609 in 1987 to a low of 3,353 in 2007. Nebraska’s total number of farm/ranch operators in the state grew as well, moving from 47,712 in 2007 to 49,969 in 2012 also apparently reversing a long-term trend of fewer and fewer farm operators in Nebraska

Working With Your Banker

Commercial ag bankers are in the business of making loans. But not just any loans. They want to make good loans. A good loan is somewhat subjective, but there are many factors that lenders evaluate to help them decide if you will be able to pay back both the principal and the interest, as well as maintain a mutually profitable, long term business relationship

Factors Influencing Generational Transfers of Farm/Ranch Assets

Introduction The University of Nebraska began educating farmers and ranchers in the area of farm business succession planning over 25 years ago. During that period over 1,000 Nebraska farming businesses have received assistance transferring their farm business from one generation to the next. Early efforts focused on the farm financial aspects of the transition process, however, because of farmer evaluations, educational efforts have shifted focus to communication skills and the importance of the business succession planning process. Trends in United States agriculture over the past 25 years indicate the importance of farm business succession planning and the urgency created by increased concentration of land ownership in fewer and older hands. According to the U.S. Agricultural Census taken by the National Agricultural Statistics Service, the average age of U.S. farm operators has increased from 50.5 in 1982 to 57.1 in 2007 (United States Department of Agriculture 2009). While the number of total farm operators has only decreased by 36,184 or 1.6%, operators over the age of 65 have increased by 256,058 or 64%. Therefore, the over 65 age group as a percentage of all operators has increased from 17.8% in 1982 to 29.7% in 2007 (United States Department of Agriculture 2009). During this same time period there were 237,533 or 66.7% fewer farm operators under the age of 35, which, as a percentage of all operators, indicates operators who are under 35 years of age have decreased from 15.9% in 1982 to 5.4% in 2007 (United States Department of Agriculture 2009). Dr. Michael Duffy, Director of the Beginning Farmer Center at Iowa State University, has researched the concentration of Iowa land ownership by those 65 years of age and older. His data, published in “Farm Succession in Iowans”, 2000 indicates land owned by those 65 and older has steadily increased from 12% in 1920 to over 55% 2007. Similar trends have occurred throughout much of the Midwest United States. There are several barriers preventing younger people from entering production agriculture in the U.S. including the high capital costs of land, machinery and other farm assets, the increased mechanization of farming, U.S. tax policy, tight profit margins for many sectors of agriculture, ease of operation of modern farm equipment, pride of ownership, love of the land, the “no one can do it as well as I can” attitude of current farm business owners, deficiency in communication skills, lack of retirement planning by the current farm operators, and lack of planning for a successor (Ahearn 2009) Although many barriers exist, interest from younger “want to be” farmers remains high. Many U.S. states have linking services that match farm owners with prospective successors, e.g. International Farm Transaction Network: Fostering the next generation of farmers at: http://www.farmtransition.org/ and the Center for Rural Affairs Land Link program. at: http://www.cfra.org/resources/beginning_farmer/land_link , and all linking programs indicate the number of younger potential farmers is several times larger than the number of older farm owners willing to participate in the linking programs. A farm/ranch business is more than only the farm assets. The farm business includes people, the assets and liabilities of the farm business finances, the day-to-day operation, the marketing and purchasing as well as the labor, management and decision making aspects. Owners of a farm business make either a conscious or an unconscious decision regarding whether or not to actively pursue a successor for their business. Many farmers do not consciously consider the question, “Do I want my farming business to continue after I am gone?” They simply go on day after day doing their work as best they know how. One day simply turns into the next which turns into a week, and then a month and eventually fifty years have gone by and the question is asked, “Where has all the time gone?” Without thoughtful planning for succession, the unintended consequence is that there are fewer and fewer young farmers entering the business and ownership of land becomes concentrated into fewer and older hands