No tornadoes in Western NSW

No tornadoes in Western NSW 10 March 2017 Peter Debus Today’s Australian Financial Review has an article regarding farm succession in Iowa, illustrating that many farm succession issues are universal. In her article “Retirement the kiss of death: Many Iowa farmers don’t plan to put their feet up”; Christina Capecchi of The New York Times writes that: “Only 49 per cent of Iowa farmers have identified a successor to eventually run their farm according to the 2014 farm poll.

Many avoid the topic because they equate retirement with mortality. They are quick to relay stories of farmers who died shortly after retiring – presumably, they imply, because of loss of purpose. Even those who have selected a successor are loath to pick a retirement date and actively prepare for it. It took a tornado for Vaske’s father, Art, to retire and move to town. He had been milking cows twice a day until his early 70’s. Then a tornado wiped out another son’s farm building, prompting Art to invite that son to move on to his farm.” And further: “But farmers are in no rush, guided by a reversal of convention wisdom on retirement.

While many Americans fear they could work themselves to death, farmers see their livelihood as their lifeline. Success does not allow them to quit earlier, it prods them to keep going. Any they don’t envy retirees – they feel sorry for them”. The article identifies a number of similarities with Australian farming experiences (refer to our Blog on 3 April 2015 “ABS report indicates significant change in farming”): The average age of principal farm operators in the United States is 58, up from 50.5 in October 1982. In Australia since 1981, the proportion of farmers aged 55 years and over increased from 26% to 47%. In the US, one third are at least aged 65. In 2011, almost a quarter (23%) of Australian farmers were aged 65 years or over, compared with just 3% of people in other occupations. 15% of Iowa farmers plan to never retire with another 20% saying “they plan to eventually semi-retire” – an expression perhaps lacking intent. Many do not have a formal retirement fund. Christina observes that “the same fierce independence that drew them to farming characterises their retirement approach: free of pensions, unions and so-called experts”. It is a wonderful observation, and one that identifies a major barrier to farm succession in the US and Australia.

Farmers simply have no desire to retire and are fiercely independent in their thoughts on the subject. “Amanda Van Steenwyk who leads a succession planning program for Iowa Farm Bureau, said the worst-case scenario can be devastating. “From the lack of planning, the farm will get split up – or even worse, the family will get split up” And there it is. In my experience, the greatest challenge working in the farm succession environment – balancing and working with the fierce independence of aging farmers, their reluctance to retire, yet alone name a date, and the risk of the worst case scenario. There is no silver bullet to achieving this balance. But a recognition by all parties involved in a family succession discussion of the barriers and possible outcomes goes a long way towards developing appropriate solutions for each family’. Peter Debus is a director of PrincipleFocus, a Chartered Accountant and Chartered Tax Adviser.