Farm Ownership Q and A: Questions from Young Beef Producers' Forum

Farm Ownership Q and A: Questions from Young Beef Producers' Forum

Cultivate Farms
Retiring farmers, Aspiring farmers, Investors

In November 2019 I had the chance to present the ‘one-hour farm ownership pathway plan’ to a crowd of over 300 @Young Beef Producers Forum in Roma Queensland.

I had the pleasure of co-presenting with Claire Coates from Freeland Pork who was our first farmer matched with an investor.

If you haven’t seen that amazing presentation you can watch it here

The Future Farmers Network organised the event and they had questions come in via the cloud which meant there was a stack of questions that we couldn’t get to. So I wanted to take the time to answer these questions here so everyone can benefit.

The context to these questions was a focus on practical ideas on how aspiring farmers can find their pathway to farm ownership.

The questions were ranked, so I’ll leave the highest voted questions till the end. But I think all of them were rippers.

Most of my answers are ‘it depends’

As you listen you will see why we have the focus we have with Cultivate Farms -i.e. a matchmaking service. Because every farm, farm operation and the people involved have different requirements. So there is no one size fits all. People farm for different reasons, people invest for different reasons and retiring farmers want/don’t want to share for different reasons.

Your job as an aspiring farmer is to find 1000 people who might be able to help, in the expectation that one of them you will form a great relationship with and then co-own a farm together.

1. How do we change employer/farm owners mentally towards young people wanting to own a farm like when I first started out I was told there is no possible way to own a farm unless you are born into it?

a) The first mindset we want to change is aspiring farmer mindsets. Just because someone says you can’t do something, doesn’t mean that is the truth. Go ask other people, google, and follow us!

You can own a farm, it is just hard work and you need to partner - watch the ‘one-hour farm ownership pathway plan’ presentation to be inspired.

b) The next phase, which is going to take longer, is to change the mindsets of farmers and retiring farmers.

We are asking retiring farmers to think about sharing ownership to transition off their farm (or stay on forever) rather than selling (if they don’t have kids to take it on).

But sharing ownership with someone else’s kids is a big concept to grasp and it is not for many people. But for those that this could be an option, we simply ask them to consider it, kick it around and chat to friends and family about the concept.

We talk to many retiring farmers who love the idea of sharing ownership while they step back. We are certain that it just isn’t something retiring farmers have even considered. So we need to get more case studies and create more awareness of the opportunity.

c) For current farmers we want to encourage that if they are looking to employ a farmer to work with them, that in order to attract and retain the best, you should offer some form of ownership. 

This doesn’t mean giving them equity in the farm from day one. It just means that you are open to them building their wealth while they work on the farm. This is most likely all that many aspiring farmers want.

It could be that you let them buy into the herd or the crop. That you reduce their wage so that they are sharing in the cost of production, but then sharing in the rewards at harvest. It could be that you jointly buy a property next door that you include in the whole operation. There are many options of giving ownership, again it is about having discussions until you get something that is a win-win.

2. What advice do you have to give young people looking to invest in properties and competing with foreign ownership?

Your unfair advantage is that you are young, motivated, passionate, strong person/couple who want nothing more than to farm in the local region. 

This is irresistible to retiring farmers. You just need to make sure you are approaching the farmers who are being offered deals from investors/corporates. You need to tug on the heartstrings and see if you can get a vendor finance deal and offer the farmer to see their farm vision realised rather than take the money and run.

Here is a video discussing this idea in more detail

3. Wouldn't the investors and retired farmers want the best profits so how do you make money to pay them?

There are definitely investors out there who are just in this for the highest returns possible. They probably aren’t the investors for you. There are plenty of other investors out there that could be suited to what you want

If you wanted to invest and get the highest profits, they probably wouldn’t be investing in farming anyway! There are plenty of other lower-risk investments.

So again the answer comes down to relationships. 

a) You need to find investors or retiring farmers who are like-minded. Someone who understands the farm understands you, understands farming and is prepared to wear the risks (and help you mitigate them).

If the investor is just after a big profit and isn’t taking any of the risks with you, then we would get you to seriously reconsider whether you should go into business with them.

b) The other side of this is that you are the farmer need to know you can make money from the farm and also that you can minimise risk. It is your investment and farm too. You need to be confident in yourself and the farm. If you aren’t you shouldn’t be partnering with anyone.

4. With the recent loss of agricultural teaching institutions such as the ag colleges, how can the knowledge and skills from farmers who've been on the land for decades be passed on?

We are keen on the idea of retiring farmers staying connected to their farm forever and to their community.

a) One answer to this question is that if we can get more retiring farmers to share ownership and be bought out slowly over time by aspiring farmers, then this automatically means that these farmers get to share their knowledge with the aspiring farmer and hopefully other farmers in the area. They might also have more time to mentor. 

b) Another answer is that we have phones now that can record video very quickly and easily. What is kids or grandkids interviewed their parents or grandparents and asked them about their farming legacy and ideas? Sharing this video online will allow others to learn. This is a great idea and I hope people take it up - we would definitely share it.

5. Are cultivate farms goals limited to farm ownership? Or do they extend to creating profitable agribusinesses?

We focus on farm ownership. This is our differentiator and we know is the dream of most aspiring farmers. 

Most people think that farm ownership is the land and business, but it can just be the land or can just be the business or a combination. We don’t care - we just want you to know what you want and we want to encourage you to get it.

We don’t even mind if you don’t want ownership - you need to be self-aware enough on what you want out of life and whether you can handle having all the problems on your shoulder, or you’d rather work for someone who has those problems.

6. What is the biggest roadblock young people who want to own a farm run into aside from personal motivation

I think the answer to this varies from person to person. But here are my thoughts, after talking to hundreds of aspiring farmers, as to what is stopping them pursuing their farming ownership dreams.

a) Knowing it is possible

b) Having people alongside them who will support them and get the vision

c) Patience: this is going to take years. It will happen if you’re good enough and you want it. 

c) Persistence: You can’t stop when people say ‘no’. You will get 1000 no’s. It’s your life, and if you want this dream, then it’s up to you to make it happen. Keep asking, keeping proving you’re the best and keep getting up each morning

d) Willingness to speak your vision: we find so many aspiring farmers are embarrassed to tell people of their bold vision. App developers don’t. Why should you? You need to tell people, or else how are people going to know what you want, and then how can they help?

e) The skills - go be the best. If you’re not the best, why would someone back you? You need to prove you have the skills, so go and get them. Do what you have to do know how to run a farm.

7. How many deals would a candidate look at before securing a successful one?

Between 1 and 500.

You will go find dead ends and need to start again.

Have the attitude that you are finding multiple opportunities at one time and be continually finding more. Never pin all your hopes in one opportunity.

8. How involved do the investors that approach you to want to be in the farming business?

Some investors want a lot of involvement, some don’t want much at all. Again it depends on the individuals involved. I would say at the very least the investor is a Director in the company and they are briefed regularly and meet on the farm a few times a year to work through the high-level strategy together.

9. Do the arrangements result in profit sharing with the existing owner?

Most likely this is the outcome but again depends on the owner. There might be owners who just want to land bank and might be happy for you to keep the property running and not take any money, while others want to have the profit share as well as capital gains on the land.

10. Practically, is the investor the one buying the farm then entering into an agreement with you or are you taking money from the investor to then go and buy a farm?

Definitely the former.

You will be going into some form of joint venture arrangement which is legally binding. You shouldn’t enter anything without an agreement. 

There would be no way an investor would let you handle their money. So it is partnership to go and find the farm, confirm how you’ll run it and then have all this documented and agreed to.

11. Return on investment in ag is so low - how do you make a living and pay back your investor?

Some operations might not be profitable. So unless you can show how you will make money and reduce risks, why would anyone invest?

But having said that, maybe there are investors who are happy with a very low or no return (might not be happy with going backwards).

12. What returns in investment are the investors looking for when they invest?

It depends on the investor. 

There might be other returns that the investor is after other than financial:

- Being able to stay there with family on weekends

- Bragging rights

- Better or equivalent to having money in the bank

- Tax benefits

- Nostalgia 

- A link with their current business (i.e. butcher or food brand)

13. How is ownership transitioning? Are the new operators reinvesting profits to the owner to effectively pay off the farm?

The goal of Cultivate Farms is for aspiring farmers to have some ownership at the start (which could be quite small) which increases over time.

The increase over time could occur in a number of ways

1. Reinvesting farmer profits into the business to buy out the investor

2. Taking a lower wage to transfer to equity

3. Profit shares

4. Bonuses

14. Not sure how to word this without sounding cynical, but wondering if there are any fail stories from Cultivate Farm matches and how has the business learnt and grown from these mistakes?

We don’t have failures as such, but we are continually uncovering what value we can offer to aspiring and retiring farmers. Luckily all the people we deal with have the same mindset that sharing ownership is a great solution, but that the pathway to get there is many and varied.

We have had people respond to our posts suggesting we are a hoax. I can see why they would say that - farm ownership does seem impossible. 

We know there are skeptical people out there with our intentions and don’t understand how this can work. So our job is to stick around and continually present content to inspire people of the possibilities. 

There are people who hate the idea of sharing ownership of their farm and don’t see us as relevant - that is fine as well.

We have farms that haven’t had an application. There are just some farms that aren’t attractive to most aspiring farmers. So this is hard to find a farmer - but we continue to look and get attention to increase our chances of finding the right farmer.

We have had one match that fell through because the farmers couldn’t agree on the pathway of ownership in the end, but we are going again with both parties and there is no ill will. Because we say this from the start - it is about a relationship, and you can’t know if you are a good fit until you start working together.

15. What happens if the farm doesn't turn a profit? E.g. multiple drought years etc.

First, we would make sure the farm has a plan that outlines what will happen in the worst-case scenario - i.e. no longer profitable whether the fault of either party or of the environment. Both parties need to know their risks in investing. And there are plenty

But if the farm doesn’t make a profit, then it is up to both parties to figure out the next steps. Do you keep going the same way, do you try new things, do you get more investment, or do you decide to sell and walk away?

16. What kind of preparation does a young farmer need before approaching a retiring farmer or investor? Do they need an existing business that needs growth or just a solid business plan and budget all set out?

Yes, the best way to convince an investor or retiring farmer is to show you have already risked your own money, you have made money and you are dedicated to farming.

We encourage all our farmers to be a farm manager and/or lease your own bit of dirt to prove your skills. If you haven’t, then it is a big risk for the partner to back you. 

Get out there and prove you are the best so that it is easier to open doors with those who can back you.