Money, Management & Margins
A focus on how cabbage—the monetary kind—helps seed new farms and give young producers a start in the business.
By Karl Wolfshohl
General farm organizations and commodity groups ably develop young farm leaders. And a few state-based programs teach young and beginning farmers certain aspects of running a business. But finding one program that applies broadly to the overall management of a farm is quite a challenge. And experts say that learning management skills goes hand in hand with what young farmers tend to lack most—cash.
Connections to Cash
“The biggest need for young farmers is access to capital along with overall risk management training,” notes Danny Klinefelter, a Texas A&M agricultural economist who has led TEPAP, The Executive Program for Agricultural Producers, for 20 years. (Young farmers also frequently mention the difficulty of finding land to rent.)
TEPAP targets experienced managers and executives, nationally and internationally. TEPAP grads have formed peer groups to meet and bounce ideas off each other. Klinefelter says these groups can answer basic questions that young farmers ask.
“What haven’t you considered?” he asks. “What are your alternatives? How do you find those areas where you need to improve? How do you evaluate new opportunities? How do you deal with employees?” He says peer groups provide a trusting, confidential environment for discussing these issues.
The Farm Credit System helps young farmers get a grip on finances in various ways in the regions it serves. In 2010, this network of borrower-owned cooperatives lent $7.3 billion to young and beginning U.S. farmers, significantly more than any other lender, including the U.S. Department of Agriculture.
“If we’re not financing enough young farmers today, there won’t be enough old farmers in a few years,” reasons Gary Matteson, who is vice president for Young, Beginning, and Small Farmer Programs and Outreach with the Farm Credit Council, an advocacy group for the Farm Credit System.
Both USDA and the federally chartered Farm Credit System have mandates to help young and beginning farmers, partly because youngsters aren’t entering the business so often these days.
Farmers are getting older. The average principal farm operator was 50 years old in 1978 but was 57 by 2007. USDA’s Economic Research Service says a declining number of young farmers and an increase in the number of aging farmers seem to be fueling this trend. More than a quarter of U.S. farmers were 65 or older in 2007.
Matteson says that in some regions where agricultural colleges have cut back, Farm Credit teaches financial skills to young farmers. In other parts of the country, a local Farm Credit cooperative may lend to young farmers at a lower interest rate than established producers get.
FarmStart, offered by Farm Credit East in the northeastern U.S., makes equity investments in operations for young farmers. “It’s essentially for getting young farmers started when they’ve got a great idea or business plan,” Matteson says. “They may have the smell of success but no equity, and if they applied for a loan, they would be turned down because they don’t meet the standards. FarmStart invests up to $50,000 and comes along with heavy-duty mentoring in financial analysis and management.”
Farm Credit University, with its AgBiz planner program, is a product of AgFirst, the system’s branch in the Southeast. Originally used for training loan officers, this short course in farm and financial planning and management has been most active for young farmers in North Carolina.
“Farm Credit University makes you look at yourself and your operation in depth,” says graduate Andrew Burleson of New London, NC. He partners in a farm business with his cousin, dad and uncle.
“Our ultimate goal was to write a business plan,” Burleson says. While he is the one who attended the classes, talking about what he learned helped all partners get on the same page. “It made us sit down and answer questions we assumed we knew. Being a family, we assume a lot of each other.”
Northwest Farm Credit Services (in Washington, Oregon, Idaho and Montana) has AgVision, tailored to large-scale grain farms. In it, a young farmer trying to join the family operation may attend a short course in each of two years to learn financial skills and business planning.
“Northwest Farm Credit found that they really needed to include the parents,” Matteson says. “The young farmer attends the first year and then the parents join him the second year, to plan transition and management of the farm.”
Matteson considers it significant that the 2007 Census of Agriculture showed the most common secondary business on the farm became selling products directly to consumers. This supplanted custom farming, which had been in second place for years beforehand. He sees young farmers as a large part of the new trend.
“But whether it’s tomatoes for a farmers’ market or 1,000 acres of corn and beans, management and financial skills are essential, because the financial risks being pushed down to the farmer are increasing,” Matteson says. “A lot of credit went away during the financial crisis, and volatility of credit available will be a continuing problem. People will have to manage their cost of inputs and marketing better, using appropriate risk-mitigation tools. That’s the kind of managerial talent that young farmers have to have.”
Business Education a Must
While there are a few how-to courses available for young people who are farming, experts say earlier training is most helpful. Matteson commends FFA, where “teachers prepare students to be problem solvers.” Others opine that college courses—although not necessarily the study of agriculture—are most helpful.
“If parents are sincere about an offspring coming back and running a farm or ranch, they will encourage that offspring to get a business degree first,” says Stan Bevers, a Texas A&M agricultural economist. Bevers guided a program for beginning farmers for two years but found it very difficult to persuade them to sign up for a lengthy commitment. “Dad can teach the production, but where we’ve fallen short is that nobody on the place usually has the ability to teach them all the necessary business skills.”Show Full Article