For farmers contemplating retirement, the choices are often limited to selling outright, or leaving in a coffin. But there are more attractive compromise options available, as long as farmers and new entrants are prepared to swallow a “dose of reality and not get greedy”.
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As Australian farmers age, the dilemma posed by retirement has focused renewed attention on leasing, share-farming and equity agreements as a way for older farmers to make a transitioned exit from their farm business, but also stay living on their farms if they choose.
Some of these more innovative models are also offering sorely needed opportunities for young aspiring family farmers to get a foot hold in an industry looking for new investment and innovation, but also limited by scarcity of land and high prices. New entrants also face stiffening competition from established farmers and large scale corporate investors.
Despite the challenges for young farmers, opportunities are emerging, along with some new thinking, particularly in regions where small to medium sized farms are run by older operators looking towards retirement, according to some keen industry observers.
“There are great opportunities for those farmers prepared to relinquish some control but there are also significant risks if people get it wrong,” McMichael & Associates consultant, Jim Symon, said.
While leasing was still the most common method for older farmers to transition into retirement, more innovative arrangements that shared responsibility and risk or provided equity buy-in were increasingly being considered, he said.
Mr Simon, who has negotiated flexible deals between farmers and family members and third parties over a wide area of Southeast Australia, will be one of 10 experienced panel members who will front a farm transition workshop in Cooma on August 12.
Sponsored by the Monaro Farming Systems group and the Department of Primary Industries Rural Resilience Program, the workshop follows a successful seminar held last November when around 100 people sought practical advice on the range of farm transition options available.
Rural Resilience officer, Ted O’Kane, said the overwhelming interest in this issue and feedback from the previous forum indicated a strong appetite for more targeted information that farmers could use to start the often vexed process of leaving the farm. Similarly, transition arrangements for retiring farmers provided potential opportunities for younger operators seeking an entry into a farming business.
To explore both sides of the equation, the workshop would employ a Q&A style panel with speakers covering legal, accounting, financial, social and practical questions as well as providing an insight into some of the more innovative options available. Participants would have the opportunity to consult individually with panel members to explore their own “next steps”.
Indicative of the range of new possibilities, according to Mr Symon, was the crowd funding and private investment model being developed by young Albury entrepreneurs, Sam Marwood, and Tim Hicks, whose Cultivate Farms enterprise, has attracted recent media attention.
Mr Symon is advising Cultivate Farms on “some reality parameters” to determine what production targets are achievable and how to meet its projected returns on investment from the small and medium sized enterprises it is seeking.
Whether it was a new tech based crowd funding model or a traditional farm lease, the fundamental lessons were the same and could sometimes be difficult for both parties to swallow.
“When these deals hit some difficulty or fail, nine times out of 10 it is because the lessor or owner is too greedy or the investor is too optimistic, or both,” Mr Symon said.
“To bring some harsh reality to bear on these deals, we need really robust data on farm production and financial performance and often farmers don’t have this information. But if you are trying to lease your farm, you can’t expect someone to pay what you have not been able to make from the business in the past five years,” he said.
Still, with time and careful consideration, there were many examples of successful and flexible deals that met the needs of both parties.
“If the relationship and agreement are really open, the deal will usually work. But you have to be really comfortable with, and trust, who you are working with,” Mr Symon said.
For more information on the farm transition workshop, contact Ted O’Kane, DPI Goulburn, ph 0427 781 514, or Nancy Spoljaric, Monaro Farming Systems, ph 0438 066 322.
