High Plains Journal readers have unique access to a varied roster of agricultural experts through its slate of farmer education events. And while the current pandemic has in-person events sidelined for various reasons, the Journal has committed to bringing the experts to its readers through online seminars.
Roger A. McEowen is professor of agricultural law and taxation at Washburn University School of Law and will be a featured speaker at the now virtual Sorghum U/Wheat U on Aug. 11 to 12 and Cattle U Sept. 8 to 11. His topics will include succession planning and how to expand farming and cattle operations.
McEowen works to help farmers and ranchers plan for the unexpected and maintain the operations and assets they’ve built over the course of their lives. He also advises them when they want to make those operations larger.
The timing of an operation’s expansion could depend on when a nearby piece of farm ground comes up for sale or when a matched set of young cows come through the sale ring. Either way, producers need to be ready when it’s their turn to bid.
The most important tools to build a foundation of expansion are money and good credit, he said While there are other factors involved, those two are the keys that open the gate.
“Have you done the right things for years and decades to be successful in terms of having a war chest to expand when the opportunity hits?” McEowen asked.
Yes, you read that right—years and decades. There is no overnight solution to prepare an operation for when the land is offered or the cattle arrive.
“Slow and steady growth over a period of time with as little leverage as possible is a great strategy,” he said.
Leverage is debt and debt reduces buying power and flexibility when the time comes. Without excessive debt, a producer can make an offer to expand their operation with confidence.
Forget the stereotypes
Farming isn’t the solitary occupation it once was. When working with business partners, corporations, landlords and the federal government, it pays for a producer to have a trusted team seated on his or her side of the table. McEowen urges young farmers to employ three experts.
A good agricultural attorney is the first of the essential three. McEowen said to forget the stereotypical lawyer in this case.
“There are some that give the rest of the profession a bad name, but your ag attorneys are not like that,” he said. Also don’t assume an attorney in a major metropolitan area is going to be your best option. McEowen said because of the unique legal and tax rules in agriculture an attorney in a smaller town is the place to start. They are often more familiar with the finer details of agricultural laws that can help farmers and ranchers.
“I have seen so many times over the years that farmers are disserved by going to a large firm in big cities because ag is so unique in terms of the rules,” he said.
A good agricultural tax practitioner will take the next seat at the table—right next to a financial advisor or farm management specialist.
“A good farm management specialist, like somebody from Kansas State Farm Management Association, those are people that are familiar with ag tax issues,” McEowen said. “In successful operations, those three people are always present.”
Producers need to trust that their team will keep the operation’s finances and goals in focus.
Mind the land mines
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As with any agricultural operation, there are land mines to look out for when expansion takes place. Divorce, death and bankruptcy are rarely positive events but when they happen to business partners or family members working as business partners those unfortunate realities can stop a successful business on a dime.
“You’ve got to cover these bases,” McEowen said.
They may be uncomfortable topics to discuss but necessary when drawing up agreements and plans for the future. This is where an experienced agricultural attorney will earn his or her keep.
McEowen added, “Farmers have got to get over the issue of not wanting to pay for competent legal help.”
As an example, McEowen mentioned a past client who didn’t want to spend the money it would take to adequately protect his family and his assets. He was in his mid-60s and worth over $20 million when he was given less than a couple of years to live after a terminal cancer diagnosis.
“The plan would have saved him about $12 million in tax,” McEowen said. “The family had to write a humongous check to the federal government when he died because he didn’t plan.”
Having a plan in place would have kept his operation intact and his family business going for future generations.
Tied to economics
In order for a young farmer to buy farmland, pastures or cattle, the current owner of those commodities has to offer them for sale. McEowen is keenly aware of the emotions tethered to those transactions.
“It’s just tough,” he said. “It can be brutal.”
He points out that during the farm crisis of the 1980s those farmers that didn’t carry a heavy debt load were able to outlast the market downturns. While others struggled, they could expand. Expanding any type of agricultural endeavor requires a strong foundation with minimal debt weighing it down.
You can learn more about agricultural law topics that farmers and cattlemen need to consider from McEowen when he kicks off the virtual Sorghum/Wheat U Aug. 11, and in his virtual session during Cattle U Sept. 8 to 11. Register for free and check for updated speaker schedules online at www.hpj.com/suwu and www.cattleu.net.
Jennifer Theurer can be reached at 620-227-1858 or [email protected].
