Profitability critical for farm succession

This year is the United Nations International Year of Family Farming, and in New Zealand a spotlight is being focused on the issue of succession on family farms.

While the issue of succession is not new, traditional models of farm ownership are changing at the same time as land use change, presenting new challenges for family farms to tackle, members of the agriculture industry say.

Federated Farmers national president Bruce Wills said the topic was a critical and difficult issue for the agriculture industry.

The biggest contributing factor to succession was profitability, he said.

''If you have a profitable farm, business succession is a lot easier.''

As a result, succession on dairy farms was at present far more economical than on sheep or beef farms.

Because succession was a profitability issue, Federated Farmers would help farms become as profitable as possible, he said.

However, succession was a complex and difficult subject with no easy options.

Well-known sheep and beef farmer Doug Avery, of Seddon, who would be speaking on the upcoming Rural Women NZ roadshows about succession, also said profitability was the key factor in successful succession.

''My family has been involved in farming for 170 years and that tends to suggest that we know a little about succession,'' Mr Avery said.

''The key focus is a profitable farm. Without that, forget it.''

Being dynamic and having the ability to adapt and evolve with changing environments was a defining factor in enabling succession, he said.

The ability to do so was especially important in the current condition of agriculture, as many farms converted to dairying, and environmental issues came to the fore.

If someone felt they had come to a point they could not learn any more, it was time to step aside.

''Young people can do amazing things, but [we] need to make sure they don't miss their chance.''

Mr Wills said corporate ownership of farms was becoming more prevalent, driven by high-value dairying and rising land costs, resulting in fewer family-owned farms.

He did not think the increasing number of corporate-owned or equity partnership held farms was negative. Instead, it showed health and diversity in the industry.

''Family farms will, for the foreseeable future, remain the cornerstone of New Zealand farming.''

However, Mr Wills said it was important to bear in mind that rural properties in New Zealand carried about $52 billion in debt, and that would have an impact on the ability of families to remain in farming.

In comparison, corporate farms would find it easier to survive when farms and land were more expensive, he said.

Rabobank NZ manager of succession planning, Tony Hemmington, said the increased value of farms was a part of what was making succession planning so topical.

Many farmers were looking to protect the secure investment in their farms, which were worth much more than they used to be.

Ensuring succession could provide financial security and support for more than one generation of a family.

Mr Avery said in the years to come there would be more corporate farming in New Zealand, but it did not have the ''skin in the game'' that family farms had.

They had greater opportunity to create dynamic solutions to issues that would affect succession, he said.

John Redpath, a director of Coach Approach, a succession planning consultancy, said for a lot of people, the hardest part about succession was figuring out how to start the process.

The key to planning succession was starting early, he said.

The number of people asking for help in succession planning had also significantly increased, he said.

Often, there was a difference in plans and expectations between generations.

An important part of succession planning was keeping business decisions separate from emotional decisions, he said.

- Leith Huffadine.