Leaving A LegacyLeaving A Legacy
Don't let the present-day hog crisis sidetrack your succession plans. Whether digging in to survive the most sustained economic crisis in the pork industry's history or seeking a buyer for your hog operation, the decision is not an easy one. Many pork producers have invested significant monetary and sweat equity into their pork production enterprises only to realize that the likely candidates to take
January 15, 2010
Whether digging in to survive the most sustained economic crisis in the pork industry's history or seeking a buyer for your hog operation, the decision is not an easy one. Many pork producers have invested significant monetary and sweat equity into their pork production enterprises only to realize that the likely candidates to take over the operation — family members, long-time employees or nearby neighbors — may have little or no interest in doing so.
But there are young and ambitious men and women who dream of raising their young families in a rural setting and dedicating their life's work to producing quality pork.
The challenge of identifying those two camps and bringing them together is the work of the International Farm Transition Network (IFTN; see www.farmtransition.org). The goal of IFTN is “to provide resources to help our next generation of farmers.” The most active of the 19 member states with similar programs is Iowa's Beginning Farmer Center (IBFC) (www.extension.iastate.edu/bfc), anchored in the Extension service offices in Urbandale, a western suburb of Des Moines. The IBFC goal, is also straightforward: “To provide a service to help preserve the family farm business by matching beginning farmers who do not own land with retiring farmers who do not have heirs (who want) to continue the family farm business.”
The Iowa initiative is appropriately called “FarmOn,” and it focuses on farmers who plan to retire in the next 5-10 years and who are motivated to help young farmers get started.
John and Colleen Adam fit this category. They have spent 45 years of married life working side-by-side to build a pork and row crop enterprise they call Lakeview Pork, Inc., near Richland, IA. The Adams managed and expanded their farrow-to-finish enterprise through nearly four decades and, more recently, reconfigured their facilities to a contract farrowing unit with 1,800 sows.
The Adams' four married children — two daughters, two sons — and their families have chosen other careers and lifestyles, leaving the Adams with the hard decision of whether to ease out of the hog business and eventually transition their row crop acres to tenant farming, or to give a young couple an opportunity to work and possibly buy into their farm business in southeast Iowa. They've chosen the latter.
Over 1,200 miles west, in Utah, a young, ambitious couple dreamed of raising their four young girls on a farm with livestock. Isaac and Katie Phillips had 10-15 sows on a small acreage where they raised and sold feeder pigs and show pigs. Isaac supervised a work crew of inmates from the local prison. Each time the Phillips made the 20-hour trip to Iowa in search of quality breeding stock, they were struck by the sheer greenness of the corn and soybean fields, the size of the hog operations, and the warmth of the people.
Returning from one such trip, Katie Phillips turned to Isaac and said, “I think I could live there,” and that's about all the encouragement he needed to begin searching for a way to get started farming in Iowa. His search took him to the IFTN web site.
“I learned that they were trying to transition elder generation farmers to a new generation of farmers,” Isaac explains. Each time he searched for “beginning farmers,” Iowa's Beginning Farmer Center popped up. That led him to Farm Transition Specialist Dave Baker, who coordinates the FarmOn program aiming to match experienced farmers with beginning farmer candidates.
The Beginning Farmer Center currently has a database of over 300 beginning farmer candidates with aspirations to raise everything from pumpkins to pigs. The database currently lists only 34 forward-thinking retirement candidates, about half actively seeking a successor.
FarmOn application forms request basic personal and background information, goals, preferences and aspirations. Baker spends much of his time reviewing applications and interviewing candidates, then bringing them together when a match looks promising.
“To truly know a person, you need to sit down with them and talk face-to-face; talk about family and goals,” Baker explains. “Part of the secret to getting two parties together is asking what each other wants, and can they work together? The ambition level has to be high and they each need a true passion to make it work. There will be hardships. There will be pitfalls. But the attitude needs to be that they will each take it as it comes and work it out. In the end, the decision whether it is a good match is up to the farmer and the young person — not mine.
“As a neutral party, I try to sit down with them periodically to benchmark their progress, ask the difficult questions that need to be asked and have them consider various scenarios and how they would handle them,” he explains.
“John and Colleen Adam are my ideal farmer candidates,” Baker continues. “They understand that they need to begin turning over the reins slowly. They have a wealth of knowledge that they can pass on. They can mentor a young person and they are willing to do that.
“Isaac (Phillips) is the ideal young candidate. He's hardworking, willing to relocate, he trusted me and he trusted the Adams,” he adds.
Lakeview Pork's History
Newlyweds in 1964, the Adams were in the hog business from Day 1. They started with a few sows, “then every year we would build a lean-to onto the barn and add a few more sows,” John explains with just a hint of exaggeration.
In 1981, they were named National Outstanding Young Farmer by the U.S. Junior Chamber Jaycees. “That changed our life,” John says. “It gave us a base of good farmer friends all over the United States.”
Next Page: Finishing Manager Wanted
Their growth proceeded through the good years of the '60s and '70s, selling feeder pigs and Isowean pigs, and finishing a portion of their annual production. But when times were hard, feeder pig buyers became scarce; so in 2003, the Adams signed a contract to farrow 1,800 sows for Eichelberger Farms of Wayland, IA.
They also began discussing some succession options, knowing their four children were not interested in taking over the hog operation. The Adams filled out the FarmOn application forms and submitted them. In Utah, Isaac and Katie Phillips did the same.
Dave Baker reviewed the applications and recognized the potential for a match. He gathered more information, visited the Adams twice and talked several times with Katie Phillips on the phone as Isaac was not accessible while on the job.
Isaac remembers: “One day we got a message from John (Adam), so we quick whipped out the map to see where Richland, IA, was.” Soon they were talking and sharing more information, and the Phillips began planning another trip to Iowa.
The couples spent a day touring the farm, the community and the local church. Isaac returned twice more. “It was a long-distance move for us, as well as moving away from family,” he explains.
But the fit became more comfortable. Their agreement began with a handshake as Isaac joined the operation as an employee.
“We debated whether to get a partnership going on the hog operation a year ago, but the way the hog business was, I couldn't recommend any young person jump in,” John explains. “If we lost our farrowing contract, there wouldn't be a whole lot here. I assured him that his job was secure. We'll find something for everybody to keep busy until the hog business turns around a little bit.” Lakeview Pork is incorporated and owns the hog buildings and cropland.
“Colleen has done just as much as I have with the hogs and the crops,” John continues. “I told Isaac when he came here that his job description was to make my wife's job easier, and he's done a good job of that. At some point in time, Isaac and Katie can purchase whatever percentage they want.”
Currently, Colleen and Isaac manage the farrowing barns. Katie Phillips works at a local bank. And another daughter was added to the Phillips family.
“We both have ideas and preconceived notions about things,” Isaac continues. “The important thing is that we sit down and talk about them. I've got a lot to learn. It's been a wonderful opportunity for me to do something I've always wanted to do. I would like to see this business grow, through farming, land acquisition and a few cattle. This is John and Colleen's legacy. If it also gives me a springboard to own and expand the operation, that's what I want to do,” he adds.
“It hasn't progressed as fast as perhaps we hoped it would simply because of the hog market,” Colleen explains. “It requires patience. Within a year, we will know where the hog business is headed. In the past, the hogs have been the money-making part of the farming operation, and I think it will be again.”
“In my mind, Isaac's strongest attribute is his attitude. He's always been very positive,” John adds.
Finishing Manager Wanted
Bill Schnormeier's experience with finding a good match has been less successful. The Hubbard, IA, crop and hog farmer has worked with Dave Baker for 5-6 years, trying to find a manager-partner for three finishing sites — six barns with nearly 10,000 finishing spaces. Schnormeier also runs about 1,600 acres of corn and soybeans. About half is rented.
The hog sites were built over a span of 10 years, starting in 1995. Finishing contracts, held with The Maschhoff's, Carlisle, IL, are set to be renegotiated in 2010.
Schnormeier's ideal candidate has some hog experience, and “is willing to spend a lot of hours and make some sacrifices,” he says. “That's what I had to do to get all of this started.”
Responsibilities include the care and management of the pigs, ordering feed, marketing hogs on a timely basis, and pressure washing the facilities before restocking.
“From the time a barn is emptied until it is ready for a new group is about 20 hours of work per barn. Sometimes we cut it pretty close,” he acknowledges.
A dependable, hardworking person is paid $5.25/pig space, so the annual salary is nearing $50,000. Another $1/pig is available for hitting market weight targets. “If we can push 24,000 hogs a year through those buildings and he can average 50 cents/pig in incentives, he can make another $12,000,” Schnormeier explains. A house and vehicle are additional perks.
About four years ago, Schnormeier had a good FarmOn candidate. He and the candidate met with the banker and an accountant to develop a strategy, but at the last minute the young man decided to buy into his father's short-line manufacturing business.
Schnormeier started over. He reviewed more applications and narrowed the list to three prospects — a couple from Pennsylvania, two men from Alabama and another from Ontario who is raising hogs with his brothers.
“I like to talk with them two or three times to get to know their family background, their work ethic. If they are raising hogs, I'd like to go and see what they are doing with their current operation before I'd be willing to turn my operation over to them,” he says.
Schnormeier expects to work closely with the right candidate for six months to a year. “Every operation is different. There are new and better ideas. I would give them a year or so with the hogs to see how it worked out, if it was what they wanted. Eventually, I would swing over to 50-50 cash rent leases with the hogs — and the land, too, if they wanted. They wouldn't have to come up with their half of the cash rent right away. I could cover that, but I would want that half before the end of the year,” he explains.
Next Page: Better Times Ahead
Schnormeier, 61, was considering retirement at 62, but since has pushed it back to 66. “With someone to take care of the hogs, that would take some pressure off,” he says.
He hired a manager for the finishing units last fall, but remains open to bringing in a young person. “We could still bring someone in on the beginning farmer program to help take care of the hogs and do some crop work. With the three sites, it's too much work for one person to do for 365 days a year. I know, I've done it,” he assures.
Going forward, Schnormeier plans to work with the Beginning Farmer Center while keeping his eyes open for a local candidate. “So many people can't get started in farming without some help. If the right person came along, I'd work with them for a few years to get them started,” he adds.
Better Times Ahead
Baker admits the hog market the past two years has put a crimp in the FarmOn program's ability to get like-minded parties together.
“The hog market has really turned my program upside down, but a hog enterprise has probably always been the best opportunity for a young person to get started in farming. It's labor intensive. The capital requirements are generally less than the land and machinery needed for crop farming, and usually someone will finance the buildings.
“Some of that has changed. Look at the equity lost by the retiring farmers. It's more difficult to cushion their transition, knowing whether they will get their money back out of the buildings and equipment — at least in the short term,” Baker continues.
But this is not a short-term process, he reminds. To have a match work successfully, it will take 5-10 years. “I'm in desperate need of the older generation to step up and think about what will happen to their business. The idea of passing on the family farm should be a positive experience, to help a young family get started, to be a mentor.
“It's also about the day to come when they would like to enjoy things a little more, to travel, to see their children and grandchildren. Will they consider this program as an answer to their slowly getting out, to recoup some of the dollars in equity from that business as opposed to just selling it off and taking whatever they can get?” he continues.
“Do you want to be known for running a lot of hogs for a lot of years and then have a big farm sale? Or, do you want that business to continue to the next generation?” he asks. “There's a generation gap (between farmers thinking about retiring and young people dreaming of a career in hog production). The way to narrow that gap is through communication (whether with a prospective young farmer or a family member), and doing things for each other. This can be something positive happening in the pork industry today. This can be the good news,” he assures.
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