Stateline Article March 27, 2019
By: Sophie Quinton / www.pewtrusts.org
Driving around his potato and barley farm in his silver Ford F-150 crammed with yellowing notebooks, Thad Elliott looks out on fields that have been in his family for over a century.
He didn’t want to be a farmer as a kid growing up here in the San Luis Valley, but after decades of planting and harvesting — first as his father’s partner, and then as the farm’s owner — he’s learned to appreciate the family business.
“I guess it’s just a way of life I’ve grown into,” he said, passing the field by the river, where this summer his family will throw him a 70th birthday party. “Working for yourself, not working for anyone else.”
So what’s the hardest part about retiring? The finances? The family conversations?
“All of the above,” he said. “Just doing it.”
Of all the challenges facing American agriculture — low commodity prices, President Donald Trump’s trade wars, climate change — the coming wave of farmer retirements gets relatively little media attention.
But farmland must be passed down to a new generation for agricultural communities to survive. And the last time the U.S. Department of Agriculture checked, in 2012, nearly a third of U.S. farm and ranch operators were over age 65.
Farm operators who don’t have children willing to take over often end up selling to developers or neighbors who may be near retirement themselves. When farmers do have a son or daughter ready to take the reins, poor financial planning, family infighting or lack of communication can still leave descendants no choice but to sell the farm.
The challenge is particularly acute in Colorado, where in 2012 the average farmer was 59, a year older than the national average. From 2011 to 2018, the state lost nearly 7 percent of its farms and ranches and about 187,000 agricultural acres to other uses, according to federal estimates.
Between 1992 and 2012, almost 31 million acres of farm and ranch land have been taken out of production, according to American Farmland Trust, a nonprofit based in Washington, D.C. That’s an area the size of New York state.
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“We’re at a pivot point,” said Colorado Agriculture Commissioner Kate Greenberg. If something isn’t done to keep farmers on the land, she said, “we’re going to continue losing [agriculture] at an incredible rate.”
To support family farms, her agency may expand a state program that dispatches mediators to help farmers address contentious legal issues. Her team has been meeting with farm groups to find out what other help the state could offer.
Transitioning a farm is more complicated than transitioning a typical business, said Todd Hagenbuch, a Colorado State University extension agent who mediates succession planning discussions among farm families through a nonprofit program.
“It’s a family, it’s a business, it’s personalities, it’s history, it’s all wrapped into one big thing,” he said. “And that makes it exceptionally complex.”
Asset-Rich, Cash-Poor
Colorado’s San Luis Valley is a high-altitude plain larger than Massachusetts. Ringed by mountain peaks, the valley is flat and dry, home to small towns, the occasional river marked by cottonwood trees, and mile after mile of irrigation pivot circles. Up here, the sun shines bright and harsh.
Emily Brown, Elliott’s daughter, grew up in the valley, feeding the family chickens and riding inner tubes down irrigation ditches when they filled with snowmelt in the spring. She moved away for college and work, then back to take a job running the county public health department and to be close to family after her first child was born.
Now Brown’s husband, Kyler, is working for her dad as a salaried employee, and the couple — both age 36 — are considering taking over the farm, which comprises a few hundred acres.
Elliott admits it would be easier to retire if he didn’t have potential successors.
“If I didn’t have family around, I could probably do it real easy — I could just rent [the farm] out,” he said. But renting out land often leads to selling off idled machinery, which his children likely couldn’t afford to replace later if they decide to take over the farm. “There’d be just no way to get back into it,” he said.
Perhaps the biggest challenge would-be farmers face is the high cost of land and equipment, compounded by farming’s uncertain and often low financial return.
“Land values, especially in Colorado, completely outpace any viable agricultural business model,” said Dan Waldvogle, former director of a nonprofit program called Colorado Land Link that matches farmers and ranchers without successors with young people in need of land. He now works as the membership coordinator for the Rocky Mountain Farmers Union.
Farmers can be wealthy on paper, owners of tractors that cost $200,000 and land worth millions, but still have very little money in the bank. And they can’t easily sell off their assets — to pay taxes or nursing home fees, for instance — without hurting the farm business.
So young people don’t just struggle to buy farms; they also need help from accountants, lawyers and bankers to inherit them.
To avoid estate taxes, farm families need to wrap their assets in trusts, limited liability companies and limited liability partnerships. They need mechanisms to allow a retiring farmer without a 401(k) to continue to draw income from the farm after his child takes over ownership. They might need livestock leases, conservation easements or options to purchase.
Brown said she’s had trouble figuring out which tools would help her family. “It’s almost like you need a menu,” she said, standing outside the farm’s potato storage shed and spreading her arms in exasperation. “Here’s what you’ve got, here’s the 10 different options you have.”
Jenna Keller, a lawyer based in Craig, Colorado, who helps rural clients with estate and tax planning, said expert help may be getting harder to find.
“Those issues that are facing farmers and ranchers have reached such a level that they really need some specialized services,” she said. “They need an accountant who knows the difference between a replacement heifer and a breeding bull.”
But many rural tax and estate planning specialists also are retiring, Keller said. Her company has been taking over closing law practices in Colorado. “We’re trying to figure out how to keep the doors open on an office, so there’s at least some place for people to go in a community to video conference with us,” she said.
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The Family Inheritance
Estate and succession planning also requires dealing with family drama, from sibling fights to conflicts over whether dad still gets to make management decisions in his retirement.
“Farmers and ranchers, historically, are not very communicative within their family talking about these things,” says Jeff Tranel, a Colorado State University extension specialist who acts as a mediator and holds workshops on farm succession planning all over the state.
Sixth-generation farmer Elena Miller-ter Kuile says her grandmother was no exception. Her grandmother’s will, which split two family properties among five children, almost cost Elena’s father, Alan Miller, the farm he’d worked for decades.
Elena and Alan grow hay, oats and barley and raise sheep on 400 dry, rocky acres near La Jara, a small town in the San Luis Valley. The farm has never been a big moneymaker, and both father and daughter sometimes take odd jobs to make ends meet.
Yet after Alan’s mother died in 2015, an appraiser said the farm was worth $1 million.
“We have the oldest water rights on the [Alamosa] river,” Elena, 31, said of the valuation. “That’s really the bottom line.”
The will set off a bitter family fight. Alan inherited half the main farm, but he and Elena knew they couldn’t make a living on a smaller property – and they didn’t have the money to buy the rest of the land. They called in a mediator, but the family spent more time trading insults and airing grievances than coming up with a solution.
Eventually, the father-daughter team hired Keller, who helped them reach a settlement that allowed them to buy the rest of the farm. They paid for it by renting out a water right and putting the property under a conservation easement paid for by the Rio Grande Headwaters Land Trust — a designation that means the farm cannot be developed and will significantly reduce the value of the property.
Now Alan, 61, is facing the same dilemma his mother faced. Standing in the dusty doorway of Elena’s bungalow, sheep bleating in a field nearby, he mused over whether it was fair to bequeath one daughter a huge asset and leave his two other daughters very little. But if there’s one child taking over the farm, “then we have to support that steward,” he said.
“It’s a family, it’s a business, it’s personalities, it’s history, it’s all wrapped into one big thing. And that makes it exceptionally complex.”
Todd Hagenbuch, extension agent COLORADO STATE UNIVERSITY
Succession planning starts long before families begin drawing up legal documents, said Callie Hendrickson, who conducts trainings on family communication for the Colorado Farm Bureau. She tries to help participants address power dynamics and resentments that can fester over time.
The gruff farmers and ranchers who come to her workshops often discover they have the same problem, she said: how to deal with dad. “How do you transition from the kid, who was there to do whatever dad wanted, into a decision-maker and a manager, and eventually into making the decisions?”
Hendrickson said she’s worked with farmers who are 40 or 50 and still working for their grandpa.
Young people who buy or lease land from a stranger face similar tensions. Colorado Land Link, the program that pairs young farmers in need of land with older farmers in need of successors, has struggled partly because of high land prices, Waldvogle said.
But it’s also extremely difficult for farmers to give up day-to-day control over their land, he said. The Land Link program doesn’t have the resources to offer mediation or matchmaking services to ensure participants can work well together. “To probably no one’s surprise, we had a lot of epic failures with our matches,” he said.
Emily Brown said her husband, who’d rather run a horse or cattle ranch than grow potatoes, researched the Land Link program before they got involved in the family farm. But they decided it was unlikely to work for them. “We’ve both realized that maybe that works in a few situations,” she said, but for a lot of families, “it’s gotta be a really special relationship.”
Brown, her husband, mom and dad went to one of Tranel’s legacy planning workshops last fall. After Christmas, the whole clan, including Brown’s two sisters, headed to a local restaurant for a family meeting. Nothing was decided then and there.
“My mom and dad have had plenty of conversations, we’ve tried to talk to my dad … It’s a whole process,” said Brown. She and her husband aren’t certain they want the farm. And her dad sometimes seems torn about the long-term viability of the business, she said.
“I think my dad just knows that water is always an issue here, and might be getting harder,” Brown said. “And farming is hard.”
Young Farmers Can’t Farm Without Land
By: April Simpson /www.pewtrusts.org
In some ways, Jamie Tiralla and her family represent farming’s past and future.
Tiralla, 36, grew up in rural Calvert County, Maryland, but didn’t know anything about farming. Her husband’s family, meanwhile, has had its hobby farm for nearly a century.
They moved onto the rolling, 115-acre farm 12 years ago, immediately after celebrating their wedding reception in a barn on the property.
“When he said he wanted to move to the farm and start farming, I was wholeheartedly supportive, but I didn’t have any idea what it meant,” Tiralla said recently.
And if the young couple hadn’t had Benson Tiralla’s family land, they might have chosen to do something else entirely.
Access to affordable land is a chief barrier across the country for young farmers, especially those who are new to agriculture and lack the resources and institutional knowledge of those who grew up on family farms they may inherit.
Young farmers such as Tiralla are in the minority as America’s family farmers have been graying for 40 years.
Since 1978, the share of principal farm operators who are 65 and older has grown, according to the USDA Census of Agriculture. Meanwhile the share of younger farmers has declined.
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Just 4 percent of America’s family farms have principal operators younger than 35, while nearly a third are led by someone age 65 or older, according to the U.S. Department of Agriculture’s 2012 Agricultural Resource Management Survey. The average principal farm operator in 2012 was 58 years old.
Facing high farmland prices and a capital-intensive industry, farmers under the age of 40 are at a unique disadvantage in becoming the next generation of landowners.
One-tenth of America’s farmland, or 91.5 million acres, is expected to have changed hands between 2015 and 2019, census of agriculture data shows. In the Northeast, Plains and West, a larger share is expected to be transferred than in other regions.
Meanwhile, the price of farmland increased almost 2 percent in 2018 to a national average of $3,140 an acre, with average prices as high as $8,080 in Iowa, $9,000 in California and $12,700 in New Jersey.
“You’re talking about significant capital expenditures before you even plant a seed,” said Andrew Bahrenburg, national policy director with the National Young Farmers Coalition. The Hudson, New York-based nonprofit advocates for policy changes and connects young farmers through local chapters.
“Pack on to that difficulty with student loan debt and lack of experience,” he said, “and you’ve got some significant structural barriers to getting young people in.”
Many young farmers are new to the agriculture industry. They didn’t grow up as “farm kids,” raised on family farms and among elders who passed down knowledge collected over generations. In states like Rhode Island, which has the country’s most expensive farmland at $13,800 an acre, it’s tough for young, landless farmers to compete.
Jamie Tiralla shows a package of goat meat in the family’s freezer. The Tirallas also sell grass-fed beef, pasture-raised pork and lamb through the family business, Monnett Farms. The Pew Charitable Trusts
But young farmers are helping themselves through advocacy, entrepreneurship and innovative practices. They pushed for recognition in the federal farm bill, which tends to be geared toward large-scale commodity producers.
Congress passed the bill this week and President Donald Trump was expected to sign it into law. Advocacy groups representing young farmers say they aimed for a bill that increases funding for farmland access and conservation.
The farm bill compromise includes those provisions, increases funding for training, and establishes a beginning farmer and rancher coordinator in each state.
Young farmers also are sharing resources through their organizations and promoting agriculture education, which Tiralla, former vice president of the Calvert County Farm Bureau and former chairwoman of the Maryland Farm Bureau Young Farmers Committee, said will be a primary focus for the group’s young farmers committee in 2019.
‘Shark Tank’ for Ag
Agriculture education can focus on more than just farming. Last week, a value-added agriculture summit drew students from Maryland high schools alongside a business-casual crowd of farmers, investors, owners of small food businesses, and state and county agriculture representatives.
The summit highlighted a range of agriculture opportunities. Tiralla, a leader in the Maryland Farm Bureau who owns the marketing company All Ag Media in addition to working the family farm, helped organize the daylong event.
“No matter how good of a farmer you are, you can’t be successful if you’re not part of a community,” Tiralla said.
Value-added agriculture increases the economic value of a raw agricultural commodity by altering its form, such as making cucumbers into pickles. The summit counted agritourism — all those corn mazes and pick-your-own operations — in its definition.
The summit also pushed innovation through a “Shark Tank”-style pitch competition for entrepreneurs. MADTECH, a Huntington, Maryland, company that won $7,500 in the contest, operates drones that allow farmers to survey crops and monitor their land.
It boasted that its technology provides real-time remedies to save fertilizer and relieves farmers from canvassing fields with pencil and paper in bad weather.
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That’s the kind of value-added business that attracts the next generation of agriculture managers. The drone presentation was 14-year-old Jenna Seiss’ favorite thing she saw at the summit.
“I liked how they said that it could measure the soil and if it’s bad or not,” said Seiss, a ninth-grader at Smithsburg High School in Smithsburg, Maryland. “A lot of farmers, they don’t really know the source of the problem and drones really help solve it faster.”
Seiss was among the six high school students agriculture teacher Lee Ruark brought to the summit. Ruark said he knows his students won’t become farmers, so he aims to instill a passion for agriculture. “A lot of the kids today, they want high-tech, they want high-wage jobs,” Ruark said. “They don’t see agriculture as either one of those.”
Seiss helps on her grandfather’s cattle farm but has not yet landed on a profession. She’s torn between becoming a doctor and a veterinarian.
Agriculture is very different than it was when Ruark, 48, grew up on his family’s poultry and cattle farm in Princess Anne, Maryland. Back then, he recalled, family farms were more common.
Ruark left home in 1988 to study agriculture at Virginia Tech with plans to return home and manage the farm. But by the time he graduated, his parents had filed for bankruptcy. The farm was gone.
Of his six immediate neighbors who were farmers when he was growing up, only one remains on their farm, Ruark said. His family losing the farm prompted Ruark to pivot and became an agriculture educator instead.
Wineries, craft breweries and distilleries are growing, while younger industries such as agritourism are expected to expand, according to a study by the Business, Economic and Community Outreach Network at Salisbury University, known as BEACON, and commissioned by summit organizers Grow & Fortify.
“For people who earn their living from Mother Earth, one way or the other, value-added agriculture doubles their take-home pay on the average,” BEACON founding director Memo Diriker, who presented the study’s findings, said in a telephone interview. “That’s good for them and that’s good for the state, because that money churns the economy.”
Marshal Cahall, a 29-year-old grain farmer on Maryland’s Eastern Shore, learned the importance of business diversity in agriculture as a teenager. He recalled his family losing money on its dairy farm for three consecutive years before selling their milk cows and making farming a second source of income.
The experience didn’t dissuade him from entering what he described as a “tradition-based business.” Instead, he said he’s open to different opportunities, whether they’re in farm-based entertainment.
“Let’s face it: We can’t all be 10,000-acre farmers,” Cahall said. “It’s about finding your way to be successful as a member of the agriculture community, finding a way to a successful business model, and I think that’s going to be different for everyone.”
Helping Young Farmers Access Land
Cahall has benefited from one of several programs that help young farmers access land and incentivize older farmers to share their resources. He purchased a 171-acre Maryland farm through a USDA Farm Service Agency loan, often an entry point for beginning farmers.
In 2018, Minnesota began offering tax credits to landowners when they rent or sell farmland to beginning farmers. Nebraska and Iowa also are among states that provide landowners tax credits when they rent agricultural equipment or assets to beginning farmers.
The National Young Farmers Coalition pushed for the farm bill to increase support for the USDA Conservation Reserve Program’s Transition Incentives Program. The program offers money to retired or retiring landowners who sell or rent the land to a beginning farmer or rancher or a member of a socially disadvantaged group.
Bahrenburg of the farmers coalition said the group is pleased the compromise farm bill increases program funding to $50 million annually and directs up to $5 million for outreach and technical assistance for beginning farmers and eligible landowners.
Jamie Tiralla, her daughter, Caroline, 8, and her son Isaac, 3, feed the goats. The Pew Charitable Trusts
Last year, the Maryland Agricultural and Resource-Based Industry Development Corporation, a quasi-public economic development organization known as MARBIDCO, started its Next Generation Farmland Acquisition Program with $2.5 million in state funding. Annual program funding has been renewed through 2022.
Since it began, Next Gen, as the program is known, has invested nearly $3.5 million in nine conditional purchases in six Maryland counties. The program is geared toward beginning farmers, defined as people who don’t own a farm or ranch or own less than 20 acres.
In addition, eligible farmers must not have operated a farm or ranch as a principal operator for more than 10 years, and must have at least one year of farming experience and expect to be highly involved in the operation.
Young and beginning farmers can receive up to $500,000 for a down payment at a real estate transfer settlement. The farmer then has seven years to sell the permanent conservation easement on the farm to a rural conservation program. If that doesn’t happen, the easement is granted to a statewide or local farmland conservation program or rural land trust.
Participants are required to buy at least a 50-acre parcel, unless their land is next to an already preserved property. The program doesn’t benefit farmers who can afford only smaller parcels. “That’s one area where we have a void right now,” said Stephen McHenry, MARBIDCO executive director.
McHenry met with USDA officials Wednesday to seek funding for Next Gen properties smaller than 50 acres.
Some experts imagine farmland transitions undergirded by hard work and personal relationships.
“My dream has always been to have a policy-supported sweat equity arrangement,” said Kathleen Merrigan, executive director of the Swette Center for Sustainable Food Systems at Arizona State University. “A new farmer would be coupled with an old farmer, and they would build equity in the farm through some period of years while they’re learning the ropes, which would be a risk mitigation strategy for everyone involved. But we don’t really have those mechanisms.”
Rhode Island is starting a program to buy farms and sell them to farmers at a lower cost, although the state retains development rights.
Farm Kids
Should Tiralla’s children, ages 8, 6 and 3, take over the family farm, they’ll continue a long local history. Their ancestors arrived in Calvert County in the 1700s.
Their days begin in the two-story Cape Cod house that was gifted to their father’s great-grandmother in 1920. The children roam freely, careful to stay a safe distance from a native azalea bush their great-grandfather planted next to the house for his mother.
On a recent morning, Tiralla got her elder children off to school, and Isaac to her in-laws, who live on a 35-acre farm next door. She fed the 60 breeding ewes and dozen goats. About 16 cows grazed in the distance.
Weekends are spent helping to feed the animals and making farm rounds with their father. Isaac, 3, often runs into the middle of the herd of sheep and giggles when they scatter. Caroline, 8, and Henry, 6, do their homework at a seasonal farmers market, where the Tirallas sell the family’s Monnett Farms meat products.
There’s hope that one of the children will want to continue the family business, Tiralla said. But if not, their upbringing is teaching them life lessons, such as processing life and death, and how interconnected they are to their surroundings.
“My 3-year-old was at the bus stop one day; he was looking around and waved his arm. He said, ‘It’s the whole world, Mom.’” Tiralla said. “I think he grasped the idea that we’re part of something much bigger than just himself and this farm.”