Age Trends and Succession Planning
Based on the two most recent USDA Ag-Census data years of 2007 and 2012 age data shows some alarming trends. Between the two years the number of operators 55 years and older increase by 8 percent, while the total number of operators decreased by 3 percent. In 2007 the number of farm operators in Iowa over the age of 55 was 49 percent and in 2012 that number increased to 54 percent.
What does this tell us?
There are more young farmers leaving farming than there are older farmers leaving. This means a drop out at the beginning not a moving on to retirement for older farmers. The number of operators over 55-year-old is increasing even while the number of total operators is decreasing, increasing the share of older operators rapidly. Thus, less people are farming and more operators may be finding it hard to pass farms on to the next generation.
One action plan that can assist in combating this trend is having a strong succession plan that will encourage the next generation to feel that success can be found on the farm. Some important steps can be gleaned from a recent article by Michael Langemeier at FarmDoc Daily.
1. Aligning Goals and Objectives: It is important that the successor of the business to be of the same or similar mindset, as to the future of the business, for the plan to be successful.
2. Aligning Skills and Responsibilities: If both the older and younger generation have strong technical farming skills (e.g. production and personnel management) but neither have business analysis skills (e.g. financing and marketing management); it may be important to consider early how necessary skills will be acquired by the younger generation as a condition of returning.
3. Introduction to Decision Making Authority: In stages, decision making experience must be gained by the younger generation. This can be achieved by small portions of the enterprise being placed upon the shoulders of a younger generation, then mentoring and allowance/correction of mistakes being made on a small scale.
4. Decision of Management Responsibility: Once opportunities to manage small portions of the farm have been successfully understood, whole farm management decisions must be shared in varying degrees. See Table 1. (Source Langemeier, 2017)
Source: Langemeier, M. "Transferring Business Management." farmdoc daily (7):64, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, April 7, 2017.
5. Management withdrawal: Finally, there comes a point when all management responsibility is entrusted to the successor. This is a vital step, often farm succession plans plateau or fail when in successor feels that their say and efforts are not being integrated and valued in the business. Additionally, it is vital that the successor respect and involve the older generation in helping with the operation to the extent desired, this can ease the transition period out of active involvement in management.
Succession planning is vital, no matter the size of the farm, starting early and planning for success will increase the interest in returning younger generation farmers; as well as invigorate more aggressive and full bodied long-term farm management planning. Of course, better planning means reinvigorated rural vitality and more profitable Ag-businesses to support families and communities in Iowa.
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Preston Lyman is a Research Analyst with Decision Innovation Solutions (DIS). DIS is an Iowa-Based economic research firm which provides regular farm economics research and analysis to the Iowa Farm Bureau staff and members.
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