AgDM newsletter article, September 1999

A different concept for young farmer entry

By Harry Tucker, Extension Farm Management Specialist, 319.754.7556,

A young person's effective entry into farming has nearly been shut off because farming has become a matter of efficient use of resources, thin margins, and huge capital.  Today there is discussion about the perceived problem and the financial support programs that have been used for several years.  Another strategy being tried is to link young entrants with the resources of older farm owners.  Most of the efforts and good intentions of the people trying to address the issue are failing simply because of the capital barrier.

Far too often we have young persons willing to begin farming with depleted land, depleted buildings, depleted machinery, and nearly all assets on borrowed money.  A typical annual cash flow in this situation might show $64,000 cash in and $62,000 cash out, assuming producing and selling things go well; placing the person or family below poverty level.  The scenario continues with both the person and spouse being advised to seek off-farm employment. The system grinds down slowly from there.  There must be a better plan.

Different concept

Capital sources such as Farm Service Agency (FSA), Farm Credit Services (FCS) and Iowa Agricultural Development Authority (IADA) should expand alternatives for young entrants to allow their entry into large production units as a limited partnership (LP) investor.

This is how it might work. A large dairy called Twp. (Township) Dairy LP or a large wean pig sow unit called Twp. Wean Pork LP is offering investment shares to prospective investors at $50,000 per share.  Twp. Dairy LP, a proposed 2000 cow unit, will:

My young farmer enthusiast should be able to visit FSA, FCS and/or IADA to borrow $200,000 at reduced rates as his/her investment capital.  He/she becomes a 5 percent owner of what should be a very competitive, long-term business.

Twp Dairy LP will:

From this cash the young farmer can make payments on the original capital investment loan or perhaps begin to buy additional shares in Twp Dairy LP.  He/she has a chance to live like a human being.  The associations and contacts through Twp. Dairy LP with other successful investors and agriculture leaders could prove invaluable in the growth and development of the young farmer.

In this discussion I do not attempt to prove or detail all of the pros and cons of this concept. I simply propose a fresh concept to a problem that is no longer affordable.

 

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