WORDS: Terry Brosnahan
Getting on to the land and staying there can be difficult if you are not lucky enough to have a helping farming family.
But is farm ownership harder? Some consultants and bankers say it is not harder, but different.
Buying land has become more difficult. Product prices are higher but so are land and stock. It is harder to service debt.
Some say a sheep and beef farm used to be worth about six to eight times its annual gross revenue. Now it is about 10-12 times gross revenue, dairy about five. Others say it always was about 10-12 times but the capital sums are bigger.
Often a pathway into farming and ownership comes down to the relationship with the owner.
It helps if the relationship is more emotional and personal rather than just about a rate of return on assets. If it is just about money then each party can be miles apart.
The catalyst for farm succession especially in sheep and beef, can be the owner wanting good people to take over. Often an individual or couple are rated within a community and develop a relationship with the landowners.
Leasing seems a good option if not wanting to sell but the rise in capital stock prices makes it difficult. If there is a good relationship between lessor and lessee, the owner of the stock may lease the farm and even the stock too.
One way to help good farm managers to get started towards ownership and retain them is an equity share. There seems to be fewer equity managers as they can become a prisoner to the job, trapped by their share.
Farm consultants and bankers advise new entrants to get the appropriate professional advice entering an equity arrangement.
Owners could enter a contact where the manager is given a minimum income but shares also in profits over a certain threshold.
Farm consultant Chris Garland says equity partnerships are increasing as aspiring landowners leverage in.
“If someone has $500,000 the person can take a 15% stake in an equity partnership rather than trying to do it on their own.”
The Government’s clamp down on overseas investment has hit the $20 million plus farms but the smaller ones are still turning over.
Dairy’s lower sharemilking deals, especially 50:50, are a good way to get on the ladder with the owners supplying the land and gear. However, industry sources say they are becoming harder to obtain.
Farm consultant Ivan Lines says a 50:50 sharemilking agreement is definitely a good option for a dairy farmer.
He has been involved in three
50:50 agreements last year, but there is demand for more agreements to be available.
“I wouldn’t say they are making a comeback but they are certainly not dying.”
A few equity partnerships are happening in sheep and beef. In some cases a family trust may sell the plant and stock but lease the land so they have money.
Lines says a strong business will find a way for succession.
“It’s difficult to do if it is not well set up, the owner is not a good operator and there is not a lot of cash.”
The average age of farmers is said to be over 60, but is that the average age of owners, not those doing the work?
Farm owners have always been an old population. Lines remembers it being 59 when he first started 32 years ago.
It can be stressful selling a farm and then finding a place to invest the proceeds.
Farmers who sell their farms have to find a home for their money. Some farmers lost their investments when finance companies went under during the global financial crisis.
Lines says farm values may go up and down but it is a relatively safe investment.
More and more equity partnerships are being set up with farming people than non-farming investors some of which have been burned by corporate schemes’ charges and non-performance.
His company has set up equity partnerships for sheep and beef farms.
It all comes down to the relationship between partners.
“You’ve got to have the right partners, communicating well and everyone getting something out of it.”
With ageing sheep and beef farmers wanting to exit farming, leasing as an option could become more common.
People are wanting farms to lease but outgoing farmers need to look at all options.
