Peter Callan, Extension Agent, Farm Business Management, Northern District
In late May I had the opportunity to travel with a friend to visit the farm and ranch that she grew up on which is located 150 miles southeast of Calgary, Alberta. This is an area that has dry land farming and ranching where the stocking density is four cows per quarter section (160 acres). Within the last two months two disasters struck a fourth generation rancher/farmer and his family.
In April 2015, this rancher and his family lost their home and all its contents due to a devastating fire. On May 1, 2015 tragedy hit again. The rancher was electrocuted and died when the booms on a crop sprayer touched an electric power line. He was 45 years old and left behind a wife and three children between the ages of five to ten years of age. This young rancher operated a custom farming business which was an integral part of the local agricultural economy.
Many of the older farmers depended on this young rancher to perform custom air seeding and spraying crops as way for them to benefit from new technology and remain in business. Currently, a neighboring farmer’s son who graduated several years ago from high school is helping operate the farm equipment in the custom farming business. The inevitable questions of what is going to happen to all the land holdings and what will happen to the farm equipment were frequently brought up during conversations with many local farmers and ranchers. Does the wife have life insurance to pay for the equipment and hire someone to operate the custom business? When the business was established; was a plan developed where the business would remain in operation if the owner was forced to exit due to death, disability or unforeseen circumstances?
In the enthusiasm, hope and excitement that accompany the establishment, expansion and/or transfer of a business to the next generation, we forget that the best laid plans sometimes do not work out. Consequently, farmers should take actions (e.g. purchase life and disability insurance) that would enable their businesses to operate in the event that they suffered a catastrophic event that prevented them from working on their farms.
The business exit strategy is a way for the farm owner to a establish process to preserve hard earned equity in the business for themselves and their heirs. Remember, all farm businesses will at some point be transferred to a family member or someone else. Do you have a farm transition plan that will preserve business equity for your family members?
Farm transition programs will be held on September 23 in Culpeper at Pepper’s Grill and September 24 in Warrenton at the Fauquier Hospital. Both programs will be from 6:00PM – 8:00PM and dinner will be served. Please contact me at the Culpeper extension office to register for a program. firstname.lastname@example.org and 540-727-3435.