Sunday, September 9, 2012
BEND, Ore. — There are two things Fields Farm owner Jim Fields would like to see happen over the next 20 to 30 years.
Fields, 57, wants to make sure he and his wife, Debbie, can retire happily and still leave something behind for their children. He also wants to make sure his property continues to be a fully functioning farm inside Bend city limits.
“When you’re a farmer, you don’t just do things for yourself, you do them for the future,” he said.
Having a plan for his farm puts Fields in a clear minority. A 2010 study sponsored by the U.S. Department of Agriculture found that less than 40 percent of the country’s farmers have a plan for the future of their land.
This raises concern among those in Oregon’s agricultural industry. Another USDA report found the state’s average farm or ranch owner was 57.5 years old, and more than a fourth of them were already at retirement age.
“More and more people are approaching an age where they’ve got to make a decision about the future of their farm,” said Bart Eleveld, an economist with Oregon State University’s Extension Service who specializes in farm management.
Failure to have an adequate succession plan in place when the farm owner dies can cause a tremendous headache while the family grieves the loss of their loved one, he said. It can even put the farm’s existence in jeopardy.
Every five years, the USDA’s National Agricultural Statistics Service asks the country’s farmers a series of questions about themselves and their farming operations. The agency’s most recent survey, its 2007 Census of Agriculture, found 85 percent of Oregon’s 38,553 farms and ranches were family-owned.
It also found that with an average age of 57.5, not only was Oregon’s average principal farm operator that year slightly older than Jim Fields is now, but that he or she was 7.1 years older than the state’s average farm owner in 1982.
Finally, the survey found the number of principal farm operators in Oregon who were 65 and older had increased by almost 23 percent between 2002 and 2007 while the state’s total number of farm operators decreased during that time period.
“I’m a little bit concerned by these numbers,” Oregon Department of Agriculture Director Katy Coba said in a 2010 statement that came out when the 2007 Census was released. The USDA is currently working on its 2012 Census of Agriculture and should release those results sometime in the next few years.
After it conducted its most recent Census of Agriculture, the USDA teamed up with researchers from Vermont, New Hampshire and Wisconsin in 2010 to conduct a national survey that looked at topics related to future of farms known as The FarmLASTS Project.
One of these topics was farm succession, or the process of figuring out who or what would take over someone’s farm when the principal farmer died or could no longer handle the day-to-day operations. The project’s authors thought farm succession was of particular importance because they found studies suggesting only one-fifth of the country’s family-run farms are successfully passed from one generation to the next.
There are several issues that can complicate that transition, said Mylen Bohle, a staff member at the Oregon State University Extension Service’s office in Prineville. Bohle knows several farmers and ranchers in Crook County who are uncertain about their operations’ future because they don’t have any children or they may have lost their children as the result of an illness or accident.
“I don’t think any of my three children want to be farmers,” Fields said. “The risk/reward and the labor/income ratios (associated with farming) aren’t enough for them so they want to do something else.”
But the FARMLasts project identified another major issue that could complicate a family farm’s transition from one generation to the next: a lack of planning. According to the report, only 36 percent of the country’s farm owners had an estate plan to dictate what would happen to their property after they died, 18 percent of them had planned an exit strategy from farming, and only 12 percent of them had planned for their retirement.
Eleveld said not having a plan in place can threaten a farm’s existence. Depending on a farm’s size and value, the property owners could be forced to pay federal estate taxes of at least 30 percent when it is transferred from one generation to the next. The farm’s owners may have to pay state inheritance or estate taxes as well, he said.
Farm families could be forced to sell their entire operation if they cannot afford to pay these taxes, Eleveld said, cautioning this could be a lot harder than one might expect. While there are lots of people interested in becoming farmers, few of them have the capital — or access to the capital — needed to buy land.
“It’s silly to go out and buy land,” he said. “To expect a working farm to pay for that cash flow is kind of unrealistic.”
But people can avoid this situation through proper planning, Eleveld said, adding that they can structure plans that, over time, would reduce the size of their land by gifting it to various individuals or reduce the value of their land by placing it into trusts so its total value falls under the estate tax thresholds.
Eleveld said a succession plan should spell out whether the operation will continue, who will be responsible for continuing it, and how the income generated from operating the farm should be distributed among the family.
“Every family is different in terms of what they need and what their options are,” Eleveld said, adding his agency has crafted a DVD to help people understand farm succession planning because it can be such a complicated process.
Fields said his farm plan still needs a little bit of work, but so far he and his wife are happy with the conceptual outline they’ve drawn up in their heads to dictate the future of Fields Farm. He plans to divide the land so its most productive three acres — which are closest to his house — can be placed into a farmland trust and the rest of the property can be sold to help pay for his retirement along with their savings and his wife’s pension.
He hopes to continue working the farm as he has been for another five to 10 years before he transfers its operations to a person he trusts who is both willing and able to manage the farm. Fields, and his wife, would eventually give the land in the trust and the house they share to the person managing their farm if he or she continues to keep running it after their death.