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Young Farmers Defy Ownership Odds

Michigan short on innovative assistance

April 11, 2007 | By Julie Hay
Great Lakes Bulletin News Service

  Katie Brandt and Anna Hoekstra combined their own savings with matching federal funds to expand their successful, seven-acre farm in Van Buren County

Soon after Katie Brandt graduated from the University of Michigan, in 2001, she landed her dream job—working as a hired farmhand. Even though she earned a minimal wage, Ms. Brandt learned so much she realized that she was indeed born to be a farmer.

Too often that’s where the story stops for so many young people who want to farm. But Ms. Brandt is now working for herself on her own farm in Zeeland. She overcame one of the biggest obstacles to new farmers—financing the land and the farm operation—thanks in part to an innovative combination of local leadership and a federal business development program traditionally applied to inner city needs.

Known as an Individual Development Account, the program uses funds from the U.S. Small Business Administration to match money that an entrepreneur saves toward needed business investments. Ms. Brandt participated in an IDA program through the non-profit Grand Rapids Opportunities for Women organization. The program paid Ms. Brandt two dollars for every one she deposited in her IDA account; her $1,000 investments, wrung from her farmhand wages, yielded $3,000. The 23-year-old put it toward the down payment on her first farm.

She is now participating in her second IDA. Van Buren County Extension administers the program in partnership with the C.S. Mott Group for Sustainable Food Systems at MSU, with funding from the U.S. Department of Health and Human Services. The program, which is working with 13 farmers in that corner of the state, will again yield $3,000 for Ms. Brandt, who will use it to pay for improvements to her seven-acre operation.

Named "Groundswell," her farm is doing well by selling advance shares of the farm’s produce. Last year, she had 25 customers for the season. This year, she’s looking at up to 60 families buying her vegetables for the entire growing season under a subscription-type of arrangement, called "Community Supported Agriculture."

"I haven’t decided where to put the new (IDA) money yet, but there’s not a shortage of places to put it," she said, laughing. Irrigation is high on her list, as is farm equipment in general. Last year, Ms. Brandt teamed up with her business partner, Anna Hoekstra, to buy much of their equipment, including a new tractor.

Michigan: Show Them the Money
The rest of Michigan’s young and new farmers are not so lucky. Van Buren is the only county in Michigan to run with the IDA idea for young farmers, a program which is taking off in a big way in California. That’s where a group called California FarmLink has increased the total match available through its IDA program by adding local philanthropic dollars to the federal contribution.

Other states have built FarmLink programs, too. Most publish a directory of people seeking or selling farmland, but some do more than that--offering financial assistance, hands-on training, advice on the complications of transferring a family farm to the next generation, or "conservation easements" that make cash payments or grant tax relief to retiring farmers in exchange for their property’s development rights.

Such multipurpose programs work. For example, lessons in business building can help a new farmer navigate new markets and roll out new products. During her first IDA program, Ms. Brandt attended finance classes that gave her long-term planning skills essential to farm management.

"I learned to use Excel software and do simple financial planning," Ms. Brandt told the Great Lakes Bulletin News Service. "Last winter, when we were planning for our first growing season, I had everything figured out—what we were going to buy—before we bought it. I was able to make decisions based on numbers and make better financial decisions. I don’t think I necessarily would have taken that class had I not been pulled in by the IDA."

Many farming experts believe that Michigan needs to develop more such programs. Farming is the state’s second-largest economic sector and the average age of its farmers is over 55 years old. If retiring farmers cannot find new ones to buy their land, these experts say, they will sell to developers.

Whenever a farm becomes a commercial or residential development, they note, it further erodes a crucial economic sector that is under pressure from the state’s sprawling development. For example, the state lost 17 percent of its medium sized farms between 1997 and 2002—almost eight acres an hour, according to one study.

Yet opportunities are opening up for farms like Ms. Brandt’s that cater to local markets and the growing demand for fresh foods. A recent study by the Michigan Land Use Institute and Michigan State University found that determined efforts to increase the sale of fresh Michigan fruits and vegetables could net the state’s farmers up to $164 million in new sales annually and generate nearly 1,900 new farm-related jobs from the farms’ new spending.

California: Learn by Doing
Another approach some states are using is "incubator farms," which provides land for new farmers on a temporary basis so they can get their businesses and savings going, learn the trade, and buy their own places.

Juan Perez, who is now a farmer in Salinas, Calif., knows firsthand what a difference a combination of training, high quality equipment, and financial assistance can make. Mr. Perez and 23 other farmers at the Salinas-based Agricultural Land Based Training Association (ALBA) worked at an incubator farm, carefully renting equipment on an as-needed basis while taking farm classes, learning from a mentor, and leasing land at rates well below market rates. The classes are taught in both English and Spanish, which accommodates the fastest-growing segment of farmers in both in California and across America—Hispanics.

At the incubator, aspiring growers learn about many aspects of farming—managing cover crops, marketing, even tracking public policy that affects agriculture. After classes are over, they plant half-acre plots and, depending on their success and business plan, slowly expand their acreage. The students make money by selling their produce to ALBA, which in turn sells the produce—all of it organic—at a popular farmers market in Monterrey County.

These neophytes pay more for their leases as they work their way up the ladder from student farmer, to farmer, to commercial tenant. Once they are commercial tenants, they mentor other new farmers until ALBA helps them move to land of their own.

Mr. Perez now runs his own Community Supported Agriculture farm from his two-acre ALBA plot. Weekly, he delivers boxes of fresh produce to about 40 clients on the California State University Monterrey Bay campus. He also sells directly to Hispanic tiendas, or markets, in the area. His busy schedule also includes the 24 credit hours he is taking at the university.

Mr. Perez said he’s looking forward to expanding his operation, J&P Organics, after he graduates in May.

"I want to continue with my farming and expand our acreage and get more land to do farmers markets," he said. "I want to get organically certified under my name and get more people and more restaurants subscribed to my CSA. I don’t know where I’d be without ALBA."

Working with California FarmLink, Mr. Perez is now looking for land just outside of the Salinas Valley and exploring that state’s own IDA program.

Iowa: All in the Family
While brand new farmers like Mr. Perez search for land to buy, longtime family farmers look for ways to pass their businesses along to their offspring.

That is the kind of challenge that Joe McGovern, the land stewardship director with the Iowa Natural Heritage Foundation, in Des Moines, tackles. Mr. McGovern said that, even seventh-generation family farms in Iowa, the epicenter of the Corn Belt, face development pressures from suburban sprawl and the growing market for second homes. That further complicates the already difficult task of using estate and business planning to smooth intergenerational transitions.

Mr. McGovern said that many Iowans are now using conservation easements, a farmland preservation tool previously associated with the East and West Coasts, to keep family farms in business and aid the transfer of land from one generation to the next.

"I think it’s been happening on the coasts, where they’ve seen the development pressure," Mr. McGovern observed. "Now we’re seeing it in the Midwest. Estate planners are really seeing conservation easements."

Such easements, he noted, are particularly helpful for retiring farmers who want to keep their land in agriculture while building equitable inheritances for their children. The easements allow farmers to cash in their property’s development value, permanently protecting the land from commercial or residential development. That reduces both the property’s value and its taxes. In return, participating farmers receive per-acre payments that reflect the difference between their land’s market and agricultural value; in Iowa, the funding generally comes from land conservancies.

In some farm families, he points out, not all children want to be part of the farm business. This can pose a tricky question for retiring farmers as they try to pass land to one child and a cash inheritance to another. Without these so-called "intergenerational farmland transfer plans," families can be much divided over how to handle an estate. Such transfer plans generate cash for inheritance payments and, because the farm’s value is lowered by selling off its development rights, lowers taxes for the child or children who want to keep working the farm.

"It’s a win-win for everyone," Mr. McGovern said, "especially from a natural resources standpoint. Open space is preserved and the family farm can stay in the family."

Julie Hay is the Michigan Land Use Institute’s Leelanau County policy specialist. Reach her at julie@mlui.org

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