By Connor Lynch
You grew up on a farm, live in the country, like the lifestyle. But your family’s farm isn’t an option. Maybe one of your siblings put in too much sweat equity and got the farm when you weren’t interested. Yet, you want to be a farmer.
You’re young, you’re hungry and you have a lot more enthusiasm and dedication than cash. What do you do? The first thing to know is that there are opportunities — although they are few — with no money down. The latest example is Renfrew County crop farmer Bert Welten, who is looking for a young protégé to take over 200 acres and the farmhouse over 10 years. Find out more by contacting Welten at email@example.com.
There is also well-documented need, and opportunity, for people to take over Canadian farms, said FCC agriculture transition specialist Patti Durand. Almost half, 48 per cent, of farms in Canada don’t have an identified successor, Durand said.
Farmers Forum talked to farmers and Farm Credit Canada specialists to provide this list of how to get to owning your own farm.
1. Build a good credit rating
Since a young farmer will be relying heavily on his own credit, the credit rating is key. Build it up early. If your phone company gives you a hard time, don’t protest by not paying your phone bill. That will affect your credit rating and make it harder for you to borrow money and harder for anyone to trust you. Durand said she hears the protest-over-the-phone-bill story surprisingly often. But you need to buy on credit to get a credit rating. Pay everything off on time and in full whenever possible, and don’t attract too many credit checks. While good business practice might be to get multiple quotes before buying new equipment, if the companies check your credit score every time, you might get flagged as a credit seeker and that can hurt your credit rating, said Durand. “It suggests you have a hard time getting credit,” she said.
2. Build your reputation
Are you a good worker? Are you responsible? Are you trustworthy? Are you easy to work with? You will need to rely on other people as references. A young farmer with limited funds and experience is bartering on the strength of his reputation. Said Durand: “These are not complex ideas. They’re probably kind of intuitive. But people skip the obvious stuff. Communication and relationships are important. Foster that.”
3. Advertise yourself
Most farmers aren’t going to be advertising for a successor, said Durand, so the onus falls on the wannabe farmer. Get the word out on what you’re looking for. Talk to people you know. Tell them to pass it on. You have to find a farm where the kids don’t want to take over.
4. Be honest about your goals
When you do find the right farmer, be clear about what your long-term goals are, and know what you are and are not contributing. If you want to own everything on the farm, be clear about it. It benefits both of you in the long run, Durand said. You say you want the purchase to include the farmhouse. The owner might say “no” but now you know where you stand.
5. You don’t always need money
An Eastern Ontario fertilizer salesman joined one dairy farm with no money down. Two Russell-area dairy farmers and brothers, Tom and Martin Schoeni, didn’t see their children taking over the farm. Without a successor, they likely would’ve scaled back and sold eventually sold the farm. But it turned out their fertilizer salesman, Erich Beugger, a younger guy, was keen on being a dairy farmer and had tried to get into the business once before. So, they cut him in on one-third of the growth of the farm. What that means is that Beugger owned nothing of the current value of the farm when he signed on but would own 33 per cent of the farm’s increase in value after that.
6. There are two loans for that
There is already a loan program in place for that scenario, said FCC director of pricing and products André Fagnou. Called the “Transition Loan,” it is a three-way agreement between a prospective young, new partner, FCC, and an established farmer. The typical arrangement involves the established farmer selling to the new partner but the newbie doesn’t pay up front. The cash payment gets broken up and set out over a period of time, often to a maximum of five years, and is financed by FCC. The young farmer might not have two dimes to rub together but doesn’t have to pay anything up front, and can pay back his loan over 25 years if he needs to. The farmer selling gets paid over time as the new partner starts earning money that he can use to pay for the purchase. It is, in effect, buying something from someone with the work you put into it. The agreement ensures that the established farmer gets paid, can continue to earn money from the farm and pass it on to a new farmer in a viable way. It has an advantage to some farmers selling the whole farm in one go: Spreading out the income from a sale over time means that taxes are much more agreeable.
There are conditions. For one, the loan is designed for buying land and buildings. It normally doesn’t include equipment, so a separate arrangement to get the equipment may need to be put in place. Your background matters too; FCC will be much more comfortable financing an active farm worker who grew up on a farm, versus someone who’s been out of farming for a while or who has never farmed before. Convincing the FCC to fund you means having a convincing marketing plan, with detailed and realistic income projections.
A young farmer with some cash on hand can also use FCC’s Young Farmer Loan. It’s up to $1 million, and only requires 20 per cent down. A farmer with $200,000 burning a hole in his pocket would qualify for $1 million from FCC. But for a farmer in, say Prescott-Russell, where the median price for farmland is $10,000 an acre, the full loan would only get him 100 acres of land, and if he needs 20 per cent down he still has to come up with $200,000. An aspiring Renfrew County farmer, where prices are closer to $4,000 an acre on average, would have an easier time.
Be warned, young farmer; that $1-million limit is a lifetime cap. Once you’ve borrowed that much under the program, that’s all you get.
Fagnou said that most of the farmers taking advantage of the “transition loan” are either crop or beef farmers. Dairy farmers have their own program to get young farmers into the industry, although it still costs them almost $288,000 just for their initial quota of 30 kg.
7. Be creative
Young farmers have made a go of it even with just some land, said Lindsay cash crop farmer Joe Hickson. He heard of a young farmer with some acreage he’d inherited but no equipment. An agreement with an established farmer let him borrow equipment for his crop, harvesting the older farmer’s crop in exchange.
Small-town support in the agriculture industry makes it easier. Said Fagnou: “There does seem to be a real willingness from producers, whether from the camaraderie of the industry or what, but they’re willing to help that next generation.”