Farm Succession and Red Angus: An Eye to the Future?

Clifton Martin, OSU Extension Educator, Muskingum County (originally published in the Ohio Farmer)

Utilization of an advisory team can help with the support required to sustain a farm business for future generations.

This was a game-changer. When I departed a farm tour this fall I was struck by a deep sense of the importance of what I had just witnessed. The layers were peeled back to provide a brief glimpse into the life of one particular farm family, their farming operation and their triumphs and struggles. In an effort to improve what they do and out of a commitment to their continued success, they allowed our tour group into the potentially vulnerable space that is their lives, finances, and future of their farm.

When I stepped foot on the farm I felt I had entered a fairly average farm, though as many are it was a place of beauty and pride. A long farm lane took a sharp left and ended in the drive of a small older home. Behind the home off the right corner were a few grain bins one hundred yards out. Down the slope to the right was the main farm lot with two smaller-sized farm buildings: one for equipment and the other for handling livestock. The buildings were older, painted white, unheated, showing a few signs of age. Pastures, corn, and soybeans surrounded the farm lot across rolling hills. It was a cloudy day in October, 42 degrees, with a slight wind. After two hours outside I would soon agree that it was cold.

We met the farm family as soon as we arrived which consisted of two generations farming side-by-side. There were shared enterprises and independently managed enterprises, but I would really call this a classic father-son operation, who were 2nd and 3rd generation. They benefit from the success of the first generation, but are finding their own way today. The main enterprises that sustained the farm were grain crops and beef livestock. We went off over a hill and were greeted on the other side by a herd of Red Angus, grazing in a fresh paddock to create that hillside view packed with animals that shows up in magazines. The idea was we would enjoy the view and have our question and answer session right there with the farm managers. But, as soon as the animals heard the farmer’s voice, mooing and bellowing commenced. It was something to set in that hollow and be surrounded by all these bawling animals.

Hopefully you recognize this farm as positive as I saw it. But ultimately, some lessons really stand out in my mind about this farm. It was in a good place: most of the assets were paid for, income was higher than expenses, they had a reputable brand, there were strong channels of communication, and they had access to multiple markets, among many other positive things, I am sure. So, what were the challenges? We learned that father had no living will and we learned that the farm was in an LLC structure, but it was questionable if it was done correctly for the farm. They shared that financial records existed but without a regular recordkeeping system and we learned that there were off-farm non-farming siblings with an inheritance interest. I could see the ambition of youth meeting the tempered view of experience, the son was living in the home as an “in kind” benefit but did not own the home, and the son was growing in confidence and vision with dreams for the farm that was still owned by, and driving income for, the parent. This was a true farm business succession case study.

There are probably several ways to describe the risks, but I have settled on a lack of future planning as the main risk that stands out to me. Fortunately, they were making great strides to close this gap. They face the reality that the farm is in a great place today, but will it be in three years? Or in 10 years? Will it weather a storm? There was a real gift here: two generations working side-by-side, with a new generation ready to go and keep the farm business running. Ultimately, should tragedy or misfortune strike that farm today, it was questionable if enough pieces would be left for the farm to survive in three years. Legal risks threatened the ability of the next generation to own and manage the business which highlighted that question: What does it take for a farm business to change hands from one generation to the next? It was remarkable to see all those Red Angus in one place, and to discuss this with the family.

One concept we ag practitioners promote is the concept of an advisory team to the support the farm business. Who can you rely on outside of yourself to give you sound advice to run a successful business and ensure it can weather a storm? At this farm, that was the next step. Sometimes that is tough to do because you may find yourself operating out of a position of the strength and provision where you have been able to make sound decisions for a number of years. You just paid off the whole farm with the nothing but your own sweat and time. But I continue to see that successful farm businesses always have a team of trusted advisors that is relied upon for sound guidance. These may be attorneys, tax preparers, accountants, marketers, or other industry consultants. And yes, sometimes you may have to pay for some services.

Some of us have ten animals on a few acres and some more spread across hundreds of acres. At the end of the day, are you thinking about the future of these assets? And are you ready for the day when you need to relinquish control? How will you do that? Who will ensure that you are on a path that the legal framework of our society will accept, and can you navigate that? We all agree that farms are important and we need them in our communities. Your beef operation matters, but can you ensure that you can leave it a good state for your successor?

These were the lessons and questions that I saw that day, when we stood in the field with the cows. Farm succession is forever. Or to put it in more common terms, change is inevitable. Managing risks requires relying on others and in my short Extension career I have learned that we all need to build community and work with people we can trust to navigate issues we struggle to understand. You have a good thing going. Enjoy the reward, but, have an eye on the future.