What You Need To Know About Family Farm Ownership

By Jon Rosen

07 /08 /19

Running any kind of business with family members can be fraught with potential problems, but operating a farm where different family members have a say is uniquely difficult. Sensitive management issues like crop selection and rotation, soil health and marketing require close cooperation and collaborative decision making.

Automated processes and modern equipment have gradually shifted the capital/labor equation in favor of capital. With more women entering farming as decision makers and owners, there has also been a re-balancing of family dynamics in the farming industry.

What do people need to know about running a family farm?

It may sound obvious, but a family farm is a business. All parties involved have to understand that no matter how long you have known a relative, there has to be an understanding that the business of a family farm has to be transacted in an arm's-length manner.

Picking up on the first principle, it is vital that everyone who is going to be involved in the management of a family farm gets to know one another before there is a commitment. Operating a farm is not a situation where you want to work out the kinks on the job.

A third factor is to understand that since it is a business, the ups and downs of farming have to be considered. In volatile times, such as the tariff situations we are currently dealing with, it is crucial that growers have the patience and understanding to deal with the challenges. Family farmers must stick together through thick and thin.

What are the key issues relating to farm finance and succession?

One thing that is essential is to have a buy-out plan that addresses the needs of active participants in a farm and passive owners. It is common for a new generation to have some who want to farm and some who don't. The stakes are high: equipment for most farms has a value of $1 million or more, and land is becoming more valuable all the time. If a family member wants to opt out, then there should be a plan to do that.

Finally, a succession plan should address important details like gifting, purchasing and long-term contracts that are all components of structuring the succession of a farm from one generation to the next. Something that needs to be addressed is how to treat both farm and non-farm participants. It is my personal opinion that active farm participants should accrue more equity since they are the ones creating value.

How does Halderman fit into the value proposition?

As you know, we perform farm appraisals for owners and long-term planners who are typically attorneys. Banks and estate planners are the other two main users of our appraisal work. Of course, for absentee owners, we identify tenants who will treat a farm as if it was family-owned.

At Halderman Real Estate and Farm Management, we provide an array of financial and operational services to ensure your farm's value is maximized. We look forward to discussing your needs relating to farming and farmland.