Issues Facing Beginning Farmers and Ranchers

July 9, 2007Michael Duffy

Director, Iowa State Beginning Farmer Center

Access to Land Resource

• Increasing land values limit ability to purchase

U.S. Average Land Values

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

1950

1953

1956

1959

1962

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

Percent Change in Land Values by Region, 2002 to 2006

0%

20%

40%

60%

80%

100%

120%

Northea

st:

Lake

Sta

tes:

Corn B

elt:

Norther

n Plai

ns:

Appala

chia

n:

South

east:

Delta S

tate

s:

South

ern

Plains

:

Mou

ntain

:

Pacific

:

48 S

tate

s 3/

Current Percentage Changes in Land Values, 7th Federal Reserve District

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

IL IN IA WI 7th District

1st Quarter '07 April to April '07

Access to Land Resource

• Increasing land values limit ability to purchase

• Increasing rents and changing rent options limit ability to access land

Percent Change in Cash Rent by Region from 1999 to 2006

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

North

east:

Lake

Sta

tes:

Corn

Belt:

North

ern

Plains

:

Appal

achia

n:

South

east

:

Delta

Sta

tes:

South

ern

Plains

:

Mou

ntai

n:

Pacific

:

48 S

tate

s 3/

Distribution of Rented Land in Iowa by Type of Lease and Year

0%

10%

20%

30%

40%

50%

60%

70%

1982 1992 2002

Cash Crop Share Other

Access to Land Resource

• Increasing land values limit ability to purchase

• Increasing rents and changing rent options limit ability to access land

• Competition for land as existing farmers try to expand

Percent of U.S. Farmland by Farm Classification

0%

10%

20%

30%

40%

50%

60%

70%

1910 1925 1935 1945 1954 1964 1974 1982 1992 1998 2000 2002 2004

Full Owner Part Owners All Tenants

Existing Farm Transition Possibilities

• Changing demographics of farmland owners

Percent of U.S. Farmland by Age of Owner

0%

5%

10%

15%

20%

25%

30%

35%

< 25 25 - 34 35 - 44 45 - 49 50 - 54 55 - 59 60 - 64 65 - 69 > 70

1988 1999

Distribution of Iowa Farmland by Age of Owner and Year

0%

5%

10%

15%

20%

25%

< 25 25-34 35-44 45-54 55-64 65-74 > 75

1982 1992 2002

Existing Farm Transition Possibilities

• Changing demographics of farmland owners

• Retiring farmers planning or lack of planning

Farmer Retirement Plans by State

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

IA VA NC PA&NJ

Never retire Semi-retire Retire

Percent of Iowa Farms with a Successor Identified

0%

5%

10%

15%

20%

25%

30%

35%

40%

All Farms Sales > $250,000

Percent of Anticipated Retirement Income by Source

0%

5%

10%

15%

20%

25%

Land Sale LivestockSale

Asset Sale OtherProperty

Sale

Existing farm SocialSecurity

RetirementPlan

Investments Other

Semi retire Fully retire

Use of Planning Tools by Retirement Plans

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Pension plan Estate plan Will

Never retire Semi retire Fully retire

Farm Technology

• Tight margin farming that requires a large volume to generate an adequate income

• Preferential pricing for large volumes of commodities

U.S. Farm Expenses by Category

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,00019

10

1914

1918

1922

1926

1930

1934

1938

1942

1946

1950

1954

1958

1962

1966

1970

1974

1978

1982

1986

1990

1994

1998

2002

(mill

ion

dolla

rs)

Manufactured inputs Capital consumption Factor payments

U.S. Agriculture Total Expenses and Return to Operator

$0

$50,000

$100,000

$150,000

$200,000

$250,00019

10

1914

1918

1922

1926

1930

1934

1938

1942

1946

1950

1954

1958

1962

1966

1970

1974

1978

1982

1986

1990

1994

1998

2002

(mill

ion

dolla

rs)

Total expenses Return to operator

Return to Operator as a Percent of Total Expenses

0%

20%

40%

60%

80%

100%

120%

140%

160%

1910

1914

1918

1922

1926

1930

1934

1938

1942

1946

1950

1954

1958

1962

1966

1970

1974

1978

1982

1986

1990

1994

1998

2002

Issues Facing Beginning Farmers and Ranchers

• Ineffective entry strategies • Inability to acquire initial capital

investment • Identifying viable farm entry enterprises• Obtaining appropriate financial,

managerial, and production skills• Effective risk management tools

Issues Facing Beginning Farmers and Ranchers

• Lack of supplemental employment opportunities

• Difficulties transitioning farm from one generation to the next– Lack of qualified help in formulating exit

strategies– Unwilling to give up managerial

responsibility and unwilling to transfer ownership of assets.

Income Opportunities

• Slow food/local food movements are opening options and alternatives for beginning farmers and ranchers.

• Farmer’s markets are providing new outlets and the opportunity to sell a story

• Food safety concerns• Internet opening many new avenues• Alternative production and crops

- insurance- risk

Final Thoughts• There are some significant issues facing

beginning farmers and ranchers over the next few years. Some of these are structural and some are related to the current situation

• Beginning farmers and ranchers face a different situation than in the past but this adds a lot of options.

• Credit will be helpful but it will not guarantee success. The beginning farmer and rancher will have to work based on their goals and the resources available.