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Published September 09, 2013, 10:20 AM

Creative deals

After four decades of farming, Kevin Carley was ready to pass along his dairy operation in central New York. And his son-in-law was eager to take charge.

By: Michael Hill, Associated Press

ALBANY, N.Y. — After four decades of farming, Kevin Carley was ready to pass along his dairy operation in central New York. And his son-in-law was eager to take charge.

But simply selling operating farms — pricey pieces of land with barns and animals — can be costly and complicated. So the pair structured a deal that phased in control to son-in-law Dan Dimon, leaving Carley as an employee.

“I just didn’t want to give up, so we both had to do a trust thing where I just handed him the steering wheel, and I said, ‘OK, I’ll ride shotgun,” says Carley, 57, taking a break from work at the farm in Pompey.

The need to be innovative in selling farms to the next generation is becoming more urgent as farmland prices rise and farmers get older. Some farmers have come up with different strategies to make sure the younger generation can continue to work the land.

“It is a concern, especially when you have less than 1 percent of the population producing the food for the whole country,” says Edward Staehr, executive director of NY FarmNet, an Ithaca-based not-for-profit that helps farmers with succession and other issues.

The number of farmers who are 65 or older grew by 22 percent nationwide in the five years ending in 2007, according to the latest federal statistics. Based on the advancing age of farmers, the American Farmland Trust estimates that at least 230 million acres are likely to change hands in the next 20 years — or roughly a quarter of all farmland.

At the same time, the price of farmland has been rising steadily around the nation. Staehr notes that even inexpensive farmland can run $1,000 an acre, with prime land going for many times that.

In central New York, Carley’s family has been milking cows and growing crops on land they’ve owned since 1938. Dimon came from a construction background but took to farming and was interested in taking over Carley Farms. He says it would have been difficult to buy the $500,000 farm outright.

Dimon, 28, started in 2009 by buying about two dozen calves, building up some equity. Carley gave Dimon a 10-year, zero-interest loan for the rest of the herd. He paid cash made by selling the farm’s crops to pay for the main part of the farm with the barn. He has a lifelong lease on the rest of the farm. He kept the name Carley Farms. The two generations work side by side milking 60 cows and growing crops.

“They wanted to see the farm succeed,” Dimon says. “The logic behind it was a win-win.”

Staehr, whose group begins a two-day conference on farm succession Sept. 24 in Syracuse, says that type of pre-planning is necessary. Dimon was groomed for the job and built up equity over time. He says other farmers help the next generation build equity in similar ways, with maybe every third calf going to the new generation.

Illinois-based Iroquois Valley Farms was founded in 2007 to help young organic farmers by offering them long-term lease deals on farmland the private company purchased. That way, a young person who doesn’t have $500,000 to buy a parcel can still get into farming or expand their operations, says company founder David Miller.

“Purchasing farmland ties up a lot of capital,” says Andy Ambriole, an organic corn, soybean and wheat farmer in Roanoke, Ind., who added 120 acres to his existing farm through Iroquois last year. “So I’m able to invest the capital that would be tied up in the land in other areas of my business.”

Perseverance

In other cases, it takes perseverance, such as when brothers Chip and Peter Shafer bought Nanticoke Gardens, an established bedding plant business near Binghamton, N.Y., in 2011.

“We needed a banker that was going to be creative,” Peter Shafer says.

The Shafer brothers visited four banks and consulted with FarmNet in search of a loan structured in a way that took into account the business’s income stream. The brothers put together a comprehensive business plan that highlighted Peter’s business background and Chip’s knowledge as a grower who had been working at the Endicott business since 1999.

Two years later, they’re doing well.

“Even though the business had a very good history of growing and selling plants, it’s very hard to leverage that when you go to a bank,” Chip Shafer says. “It’s not really cans of soup that you’re buying and you’re selling.”

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