The
ability for young families to own a farm in their 20s, without inheriting, is
almost impossible.
But things are changing and the rise of equity investments
could be a great solution to not only get
young families on the land, but provide an innovative succession option for
farmers wanting to step back and for community groups seeking to rejuvenate
their communities.
Currently,
any young family with the vision of owning their farm needs $5m. No-one has
that amount of capital and no bank is going to back them. This is one of the
reasons why aging regional communities are going to continue to shrink because
they aren’t able to attract and retain the best new young people.
It doesn’t
have to be this way and the answers are in the hands of the current generation
on the land. Farmers looking to step back could be playing a more pro-active
role in helping new young families get established, and they can do so while
still retaining their own ties to the land.
Many farmers don’t have children to
pass their farm onto and don’t like the idea of selling and losing the
connection with the farm they love. In these instances, equity investment
arrangements might be a great way to ensure a positive outcome for themselves
and a young family.
Equity
arrangements involve a number of people joining together to become shareholders
and mutually own the land as well as operations.
In order to
understand how attractive equity investments are for young families, we need to
understand their requirements and compare this option to other farm ownership
models.
The
requirements of new young farming families can be boiled down to the desire to
own the farm (part or whole), be the manager (the ability to call the shots)
and have the support they need (advisors to help find and manage their farms).
The table
summarises the suitability of different farming options in meeting these three
requirements.
Option
|
Ownership
|
Management
|
Support
|
Inherit
|
★★★★★
|
★★★★★
|
★★★
|
Loan & savings
|
★★★
|
★★★★★
|
★
|
Vendor finance
|
★★★★
|
★★★★
|
★★★
|
Lease
|
★★★
|
★★
|
Lease to buy
|
★★★
|
★★★
|
★★★
|
Share farm
|
★★★★
|
★★★★
|
★★★★
|
Farm Manager
|
★★★★
|
★★★★★
|
Equity
|
★★★★★
|
★★★★★
|
★★★
|
Cultivate Farms
|
★★★★
|
★★★★★
|
★★★★★
|
Vendor finance was once a popular option for property
transition and is a great way to achieve farm ownership without
having to first get a loan. However, given the high price being achieved for
property at the moment, retiring farmers are opting to sell on the open market.
Leasing land focuses the farmer on the operations only and
can be a lucrative venture. However, most young people are determined to own
the farm and therefore this option hasn’t been taken up as readily as other regions
such as Europe.
Sharefarming is a means of cost and profit sharing, where the
new farmer usually increases equity over time. It is prevalent in the dairy
industry and should be expanded into all types of farming.
Cultivate Farms is a new social enterprise, which is
an equity arrangement matching investors and retiring farmers with new farmers
to own and operate the farm together. The Cultivate
Farms model is a great option for existing farmers looking to pass on their
land without completely losing the connection to the land they have cared for
and love.
This has been another article from the Hashtags and Hectares Series. Four agriculture entrepreneurs writing agriculture back up the charts.
Author: Sam Marwood is
co-founder of Cultivate Farms. For further information go to www.cultivatefarms.com or email Sam at sam@cultivatefarms.com.
Airlie Trescowthicke - Farm Table | www.thefarmtable.com.au
Ella Shannon - AgDraft | www.agdraft.com.au
Mitch Hughes - Adventive | www.adventive.me
No comments:
Post a Comment