Almost two-thirds of Oregon’s agricultural land will be changing hands in the next two decades, but the vast majority of Oregon farmers and ranchers have not formalized plans to pass their land and businesses to the next generation.
This is just one of the sobering findings of a research report published in September 2016 by Oregon State University, Portland State University, and Oregon nonprofit Rogue Farm Corps – The Future of Oregon’s Agricultural Land.
But do these statistics ring true for Oregon’s farmers, ranchers, and agricultural landowners? What does farm and ranch succession look like on the ground? What education, policies, and programs can help address the issues that are arising?
To help answer these questions and share the findings with farmers and ranchers themselves, one of the researchers – Nellie McAdams, Director of the Farm Preservation Program at Rogue Farm Corps – went on the road. Since January, she has travelled 3,445 miles within Oregon, visiting 21 communities in 21 counties, presenting to 918 people, including 642 farmers and ranchers. She has 10 more events planned for April.
Ms. McAdams’ visits include research presentations to Farm Bureau, Soil and Water Conservation District, and Livestock Association meetings, as well as full succession planning workshops with presentations from attorneys and landowners who have been through the process. She has heard confirmation of at least ten succession plans that were begun as a result of these efforts.
And so far, the research has run true with Oregon farmers and ranchers. “It’s clear that they identify with these challenges,” said McAdams. “They see their neighbors’ farms being sold off after they pass away and they fear the same thing will happen to them. But they don’t have a successor, or they don’t feel ready to address the family issues that need to be resolved in order to plan, or they just don’t know where to start.”
Said one Tillamook farmer: “It’s a burden. It’s paralyzing being the 4th generation and having the 5th generation coming up, but not knowing if it’ll work out.”
Why Succession Can Be So Challenging
For many farmers and ranchers, their occupation is their identity. It’s difficult for them to retire from being themselves. This causes farmers and ranchers to work extremely hard, far past normal retirement age for many professions, and idealize dying in the saddle or on the tractor. But it also makes it more difficult for them to pass the reins: to transition management and financial roles and decisions to the next generation in time for them to become confident successors of the business.
Many farm children do not necessarily want to return to the homestead and run the family business, especially if the business is not financially successful. When this is the case, their parents often do not plan for succession, thinking that there is no point and that their kids will simply divide the estate equally. Farms and ranches, being land-rich and cash-poor, often have to sell off land in order to divide the assets between heirs, especially if planning has not been done. This fragments farms into smaller parcels that will be more difficult to earn a living from and might become more vulnerable to development in the future than larger contiguous blocks.
Meanwhile, many first-generation farmers and ranchers would gladly begin to work into existing farm businesses and eventually earn management and ownership roles. It is exceedingly difficult for these beginning farmers and ranchers to start and grow a business if they do not stand to inherit land and infrastructure. They must have the training and experience, to build a track record and accumulate the collateral, to get the financing to buy the land and infrastructure, to scale up so that they can hire the employees, to eventually make a living wage. This can require decades of back-breaking work and a few, well-timed lucky breaks.
Increasingly, farmers are looking for successors outside of their families. These might be farm managers or interns who have become familiar with the land and love stewarding it. Passing land to such successors can take a great deal of thoughtful planning and a lot of legal work, but can be one way of passing on a legacy.
Working Lands Easements
Another way to preserve the farmer’s legacy while helping plan for succession and helping beginning farmers access land is to convey a working lands easement. This is a conservation easement where the landowner sells or donates property rights that they would not use on their operation anyway (like permitted residential development, aggregate mining, or any of the 50+ exceptions to Exclusive Farm Use zoning) in exchange for cash or a charitable deduction.
A working lands easement not only preserves the land for agricultural use, but provides a cash-poor farmer with liquidity from an otherwise illiquid asset (real estate), and also reduces the fair market value of the property for the next generation of farmer or rancher. In Oregon, nonprofit land trusts and governmental entities like Soil and Water Conservation Districts can hold easements, creating a partnership between conservation and working landscapes.
There has been growing interest in these working lands easements, and there is currently legislation that would help support this tool. House Bill 3249, the Oregon Agricultural Heritage Program, would fund easements and other voluntary conservation measures, as well as farm succession planning.
“I see it as a win-win-win for keeping our farm land base, helping agricultural landowners with succession, and helping our beginning farmers and ranchers access land,” said Ms. McAdams.
The research team of OSU, PSU, and Rogue Farm Corps are committed to bringing more information and tools to the table to address the potentially large-scale challenges related to unplanned farmland succession in Oregon. They are applying for additional funds to support research and extension efforts, and collaborating with fellow resource providers and stakeholders through the Oregon Community Food Systems Network and other coalitions.
“Healthy food systems depend on healthy farm businesses,” said Lauren Gwin, one of the lead researchers for the farmland report and the Associate Director of OSU’s Center for Small Farms and Community Food Systems. “And for many of Oregon’s farms with aging operators, it’s now or never in terms of providing resources to help them with succession.”