As a 22-year-old kid, I am not sure I understood the significance of his message. Not being a voracious reader, I decided to focus on building relationships.

After 30 years in agriculture, I understand the importance of surrounding yourself with the right people. Shortly after we first met, my mentor introduced me to the publisher of Iowa Farmer Today.

Sixteen years later, I sent my first editorial column to him concerning the perfect storm that had been brewing in agriculture. The fundamentals prevalent at that time still exist (and even more today than ever).

Perfect storm elements

It is significant to recognize the elements that are now coming together to cause discord for some and opportunity for others in agriculture.

Age of the Landowner: 60% of farmland in Iowa is owned by people who are 65 years and older, and 34% is owned by people 75 years of age or older. This age group has accumulated land and consequently economies of scale.

Although this age group can afford to subsidize land purchases that may not cash flow on their own merits (82% of Iowa land is debt free), this age group will also distribute their estates in an unprecedented transfer of wealth in the next 10 years.

Land Values: Iowa State University tells us in the most recent land survey that the average price of agricultural land is at historical levels at $11,411/acre.

This subsequently means that the barriers of land ownership is high and the cash flow needed to acquire new land through purchase or rent is outside the range of profitability.

It is disheartening for young producers to realize their cash flow limit for land acquisition is below 50% of what the open market currently demands for land sales. Now “rent auctions” are starting to emerge in the marketplace. Young producers do not have the ability to subsidize the competition.

The Farm is a Legacy Asset: Farming is a way of life and farm families are passionate about keeping it that way. Continuing the legacy is a fundamental desire that a vast majority of families want to achieve even though they may not have a specific plan to succeed.

Control: For an entire lifetime, a farmer works diligently on their farm. They have scrimped, saved and sacrificed more than conceivable to get to their current position. Giving that up is not easy.

Limited Advice: There is an on-going struggle in rural communities for farm families to seek out specialized advice. In medicine, general practitioners refer health issues to specialists. This does not seem to happen as much in estate planning in a rural community.

Interest Rate Changes: Interest rates have been at all-time lows — until the last 6 months. Rates have now turned. Those who are not old enough to remember the 80’s may be unprepared for what lies ahead.

Longevity of the Landowner: People are living longer. If a landowner lives into their 80’s and 90’s with farming heirs in their 60’s and 70’s, there may be a generation who wants to own the land, but may not have an opportunity until they are beyond their “land buying” years.

Farmers are Deferrers: It is human nature for a farmer to defer income tax, grain marketing decisions and transition planning. This brings emotion into the decision making process. “Kicking the can down the road” may cause more long-term grief than short-term relief for a transition plan that has deferred too long.

Fair vs. Equal: Nothing tests the mettle of a family more than a shared inheritance. This statement has never been more accurate than in a current farm estate trying to decide a “fair” distribution of an over-valued farm estate.

Tax Law Uncertainty: We must keep an eye on constant income tax law changes and the reduction in the estate tax exemption set for January 1, 2026. Your skill level in navigating this uncertainty could be a difference maker for your family farm.

The 11th (Newest) Element

For the first 30 years of my career, we focused on transition planning with families who have a farm heir.

After a discussion with a long-time friend about agriculture’s perfect transition storm, we agreed that a new element in the transition storm could be the most concerning of all. 

The 2017 ISU Extension Ownership and Tenure survey told us that approximately 16,000,000 acres of Iowa farmland is rented (53%) and approximately 10,000,000 acres in the state (34%) is owned by individuals with no farm experience.

The real macro-economic issue in farm transition may not be transition within the family, but a transition plan for families who do not have a farm heir in line to be the next steward of the land.

In each county in Iowa, there are approximately 300,000 acres farmed by approximately 700 farmers. For every farmer under the age of 35, there are six farmers over age 65.

In the next decade, the real concern for our rural communities will be the transition of approximately 100,000 acres in each county (34% owned by people 75 years or older) at a time when only a select few can afford to own our most important resource.

Who will own agriculture in the future?

Perfect storm

These factors individually could mean serious issues for a farm’s next generation. My concern is that there is a combination of multiple factors all occurring at once which could result in an unusual magnitude of issues — the “perfect storm.”

We need to be increasingly conscious of transitions of land that might flow to those outside of our own communities. This puts a greater emphasis on the landlord/tenant relationship.

Solid long-term rental relationships are going to be an important factor for survival for the next generation of producers.

The future of production agriculture will favor producers who have a plan and the ability to communicate that plan to the next generation of landowners.

A producer will need to be a conservationist who can negotiate multiple lease strategies with multiple landowners in multiple states with multiple levels of experience.

A producer will need to be transparent with landowners regarding income and expenses while exhibiting honest and forthcoming farming practices that include fertility, conservation and improvements.

In hindsight, my mentor could have said that a farmer will be the same person 10 years in the future except for the books you will read and the landowners you will align with.

My hope is that the next generation of producers and the next generation of landowners will prepare for the coming storm of land transition while being mindful of leaving a mark in the community that might accumulate in a positive manner for the future of our industry.

For 30 years, Steve Bohr has been a partner in the farm continuation firm of Farm Financial Strategies, Inc. For additional information on farm continuation issues or if you have a question please contact Steve via email at Bohr@FarmEstate.com or by phone at 1-800-375-4180.