'I want to take a step back but I don't have a successor'

Some 82% of farmers have no succession plan in place, according to a recent survey from ifac. If there is no obvious successor and the farmer is ready to retire, there is always the option of a farm sale or long-term leasing of land.

However, one of the barriers to succession and land transfer is the fact that, in many cases, a farmer’s identity and self-esteem is linked to their job.

Research carried out by Shane Conway in NUI Galway shows that farmers resist transferring the farm on the basis of an anticipated loss of the recognition and social status that has accompanied their position as an active and productive farmer in society.

“As an older farmer’s symbolic capital appears to be founded not only on their past achievements but also on present production, the thought of being ‘retired’ is found to be particularly arduous for them. Consequently, even the most sophisticated of family farm transfer plans are of little value if policy makers and practitioners are not adequately cognisant and understanding of ‘the language of farming’ and how painful it is for the older generation of farmers to ‘let go’,” states Conway’s paper on the subject in the Journal of Rural Studies.

If the farmer wants to maintain a level of involvement in the farm, there is the option of other business models such as contract rearing, cow leasing or share farming.

Tom Curran, farm structures specialist with Teagasc, outlines these options.

1 Contract heifer rearing

This is an agreement to rear heifers between a heifer rearer and a dairy farmer. A written agreement is essential between the two parties. The benefit of this option is that it provides a steady monthly cash flow for the rearer and the risks associated with market price fluctuation are eliminated as there is no money tied up in buying stock. It can help to increase the stocking rate and output on the farm.

For the dairy farmer, it means that replacement heifers are taken off the farm, potentially allowing for cow numbers to be increased on the grazing platform. It also frees up labour to specialise on dairying. It works well for dairy farmers in an area where rented land is scarce or too expensive.

2 Long-term land leasing

There are income tax incentives for landlords for long-term leasing of land.

Lease duration and tax-free threshold per annum:*

* Threshold includes Lease fee & Basic Farm Payment. The payment is liable for USC and PRSI

* Thresholds may be doubled where land is jointly owned

The written legal lease must be stamped by Revenue. The lessee has a better security of tenure, plus a more secure return on capital invested. Meanwhile, the lessor benefits from the income tax incentives and the land is more likely to be looked after better.

3 Share farming

This option sees two independent businesses run on one farm. The landowner provides the land, facilities and in some cases the stock. The share farmer provides the labour and in some cases the stock or machinery. In theory, the greater efficiency from this model will be of greater benefit to both parties.

In a sharemilking scenario; one person provides the land and the other provides the cows and labour. The landowner is responsible for upkeep of the farm. The costs are split and so too are the milk cheques. In theory this is a fairer system than long-term leasing because in a bad milk price year the farmer is not the one bearing the brunt of the poor price, it is shared equally. However, the tax incentives favour the land owner.

Share-milking: John Joe Dunne, Mountmellick, Co Laois

“There was a number of issues that came together at the one time; I was getting older and my family weren’t immediately interested in farming – they had been to college and had their own careers. I was a passionate farmer, but the fact that I was getting older made me less able for the physical work."

You can listen to John Joe's story here:

“The first thing I looked at was share- farming or some sort of lease arrangement. I had been in France in the late 70s on a study tour and I was tremendously impressed with the structure they had and the fact that they could share land, machinery and stock; maximise their income, maximise their lifestyle and continue farming.

“Sometime about five years ago I was at the Ploughing, every year I visit the Macra stand. I happened to see land mobility service and I went to make enquiries. I was introduced to Austin Finn and the rest was history.

We exchanged legal arrangements with our solicitors and with the land mobility service. It took a number of months to put the pieces together and put our own imprints on the 10-year agreement

“I’m in my 70s, I own the land and 50% of the dairy herd. I was in dairying previously and lost the cows through disease and went drystock farming. I realised drystock wasn’t the option for share-farming because of the income limits. So I decided to go back into dairying and put in a new milking machine and bulk tank in an existing shed. I linked up then with Gareth Kirwan, I found him through the land mobility service.

“We exchanged legal arrangements with our solicitors and with the land mobility service. It took a number of months to put the pieces together and put our own imprints on the 10-year agreement.

“He looks after the day-to-day management, I’m involved in the decision-making with him in relation to ongoing situations like reseeding and fertiliser usage. We pay half the bills and take half the income each.

“I like to have the involvement. I go to the merchant and we negotiate a price at the start of the year for the big inputs. One load of nuts comes in my name, the next in his name. I have an involvement all the time and I’m recognised as an individual farmer. Two farmers working together under an agreement.”

Long-term leasing: Dermot Gillespie, Griffinstown, Co Wicklow

“I have been leasing my farm to Saturn farms for four years now. First of all, I talked to the family and no one wanted to farm. All of them are educated and none were on the payroll.

“Then the question was did I want to sell the farm, retire and go to sunnier climates? I didn’t want to sell it. Then I was looking at the notion of going in to partnership with someone. I sat down to decide what I wanted out of that. I wanted security, I wanted an income, I wanted an interest in the farm, I wanted that, at the end of whatever arrangement we had, the farm would still be looking good and I didn’t want it to interfere with succession planning.

“The agricultural adviser was very helpful, he knew someone who knew Bill O’Keeffe [Saturn Farms]. The pair of us got together, he came up and looked at the farm and thought about it. I went down to have a look at what he was doing. We entertained Bill here and spent the afternoon talking about what was on and what wasn’t on and negotiated from there.

“Bill put in a sharemilker. Before any arrangement was signed I got to meet the sharemilker.

I’m not in the arrangement because you can’t lease land to yourself

“I have no say over who is employed on the farm, they’re farming it, it’s their problem. If there’s cows roaring it’s not my problem.

“Payment of rent has not been an issue, but if they do well it effects the amount of my lease income. We sit down once a quarter and look at the accounts, talk about what’s happening on the farm and if there’s any problem we thrash it through.

“I’m not in the arrangement because you can’t lease land to yourself.

“It’s only at his stage I’ve gotten used to the notion I can do what I want when I want. It (dairy farming) was pretty full-on until the day I leased it to them. I get great pleasure out of seeing them running it. I would have been quite intensive but these guys would open your eyes. The arrangement we have is that he has to provide the land back to me in the same order as it was in the beginning at the end of the lease. Each of us each year put in a sum of money for farm maintenance.

“Think about it before you do it and know what you want.

“I would have been pretty physical farming. You don’t just stop just like that. What I did was I had a project. There’s a laneway down to the farmyard that was overgrown with blackthorns. I proceeded into it, dug up all the roots and planted myself a wildflower meadow. It took me almost a year. I went out when I wanted something physical to do. It kept me amused, you do need something.”

Contract rearing: Jim O’Leary, Ardfinnan, Co Tipperary

“I was dairy farming and didn’t want to fully retire. A guy the other side of the village asked me if I was interested in contract rearing his calves for him.

“I get the calves at two-weeks-old, they go back to him in-calf at two-years-old. It works well for me. I’d be very busy when feeding calves but they’re out at grass now and off meal. Springtime is busy between the calf feeding and AI. Breeding season starts around 22 April and it’s a big responsibility. This year I did AI for 11 days and then two bulls went out with them.

“I have a second lot of calves just in for summer grazing as well.

“I’m busy enough without being too busy. If I’m away, the farmer who owns the calves looks after them. But for example, on a Sunday morning I give half an hour looking at the calves and then I’m free to go to the match in Thurles, which is a big change from dairying.

I’d recommend contract-rearing but it completely depends on the person you get mixed up with, it’s like getting married. I was really lucky

“I had the expertise, just brushed up on my knowledge on milk replacer. I had the infrastructure. I’m still in a dairy discussion group.

“I’d recommend contract-rearing but it completely depends on the person you get mixed up with, it’s like getting married. I was really lucky. Having a contract is important because things do crop up, for example if one of the heifers dies.

“Everything that happens on my farm I pay for it. I get paid monthly, rearing is an expensive business. It costs €200/calf to get them ready for grass including the cost of milk replacer, starter meal and calf nuts. But then for the next five months they only cost about 30c/day. In the first winter they cost €1/day with meal and silage. You need to know your costs.

“We went to Teagasc in Clonmel, sat down with the adviser for two and a half hours going through all the costs. We came up with a cost of €1,050 to get a heifer to the point of calving down.

“You’d make a living out of it. You’re utilising the farm and there is no risk; you’re not depending on meat factories to hold price the week you’re selling.

“I have three daughters and none of them wanted to farm. So I had the option of doing the contract rearing or selling the farm, I wasn’t ready to jump out.”

Read more

Succession case study: my daughter will soon turn 35, should I transfer now?