Provincial Ag Scene - Spring 2017

April 15, 2017

Transition Planning vs. Succession Planning

With Canada's aging population, we are seeing an enormous transfer of wealth, one that will continue for years to come. Included in that population are farming parents, many of whose children have chosen non-farming careers and will end up inheriting all or part of the family farm.

The term "farm succession planning" usually implies that one or more farming children will take over the farming operation in some fashion as their parents move away from actively running the business. With the increasing number of farm kids choosing different careers, a more appropriate term is "farm transition planning". It encompasses transfers of farm ownership regardless of whether the heirs farm the land themselves or not.

Lawyers, accountants, financial advisors, farm managers, and other professionals have been helping farmers with succession planning for a long time. Its visibility among aging parents, as well as their children, has given rise to inquiries being made of other organizations for help. In particular, farm advisory associations, family business organizations, and government ministries are being approached for assistance.

In a response to these needs, Alberta Agriculture and Forestry conducted a series of Farm Transition Planning Workshops this past winter. Held in a number of communities throughout the province, they consisted of two days in each location, about a month apart. The attendees ranged from farm couples accompanied by a son or daughter who will take over the farm, to individuals and couples who have no one to succeed them in their farming operation. The first day was facilitated by an experienced family business professional and was devoted entirely to recognizing family dynamics. The objective was to help attendees understand the importance of dealing with family interactions and relationships, as well as potential strategies for clear and effective communications. For the second day, advisors from the law, accounting, and financial planning professions presented to the group in the morning. In the afternoon, attendees met privately with each of the advisors for preliminary advice on next steps in their planning process. Comments from participants indicated this was a positive and helpful experience.

Transition planning takes a serious amount of time and effort, but without it, the consequences are not likely to be pleasant. Some people compare the timing for transition planning to the timing for planting a tree. The best time to start was years ago. The second-best time to start is today. Call us to discuss how we can assist you in the generational transition of your farm or ranch.

Sustainability in Agriculture

Consumers are increasingly concerned about their environment, including how it is affected by agriculture. They want easy access to nutritious, flavourful, affordable food, but also want the comfort of knowing it hasn't been grown in a way that damages the environment.

It is common for people to believe environmentalism is the sole philosophy that will deliver them safe food and save the planet. There is more to it than that. For environmentalism to work and have staying power, it needs to work in conjunction with economics and social issues. This gives rise to the concept of sustainability. It is important to consider the definition of the word "sustain" in this context - it means to strengthen or support.

Sustainability is often described as meeting the needs of today without compromising the needs of future generations. It is about improving the standard of living by protecting human health, conserving the environment, using resources efficiently, and advancing long-term economic competitiveness. Integrating environmental, economic, and social priorities into policies and programs supports action at all levels - citizens, industry, and governments.

Dealing with the environmental aspect, farmers may use methods to enhance soil health, minimize water use, and reduce practices that contribute to pollution on the farm. They will be considered good stewards of the environment if they follow certain acceptable practices.

As for the economic component, farmers producing the food must be profitable. If farmers are subject to restrictions that make it impossible for them to make a living, they eventually exit the business and stop producing food altogether. This also applies to the people and organizations further along the value chain as agricultural products are refined and prepared for consumption. The good news is that many environmentally sound practices actually increase the long-term profitability of the farm.

When we talk about sustainability with regard to social issues, it can be described in terms of consumers' desire for the wellbeing of others. People concerned with sustainability can look for foods grown in certain ways. They could include methods that promote farmer and farm worker health and safety, those whose production methods are kind to the environment, or those that benefit the local and regional economy.

If the components are in place for sustainable agriculture, all of society benefits now and into the future. At FNC Serecon, we are focused on helping landowners achieve their goals for sustainability on their property.

Land Stewardship Tip - Crop Rotation

When people rent their land to a farm operator, they need to know that their land asset is being treated correctly and in a sustainable manner. One fundamental aspect of good land stewardship is proper crop rotations.

The growing region dictates the suitable crop species, as well as which sub-species and varieties can be grown for the best results. An example of an acceptable crop rotation is a three-year period that sees the first year as canola, the second as wheat, and the third as peas or other pulse crop (eg beans, lentils). Pulses can be an especially valuable part of the rotation, and a good crop can be especially profitable for the operator. While enhancing soil health, pulses also contribute significant amounts of nitrogen back to the soil for use by the next year's crop.

Landowners need to know the right questions and the correct answers so they are informed as to how their land is being treated. If this vital component of preserving your land is not something you're equipped to perform, just give Jim Robinson at FNC Serecon a call at (780) 488-7440 and chat about how we can help.

Surface Lease Rent Monitoring

If you have a surface lease on your land, it may be time to take another look at your rental agreement. With the instability in the oil and gas industry and the number of abandoned wells climbing, it can be common for rental reviews to be missed.

The requirements around rent reviews vary from province to province. In Manitoba, Saskatchewan, and B.C., it is up to the landowner to request a rent review. In Alberta, the law states that the operator of a surface lease must notify any landowner who is eligible for a rent review, although it is a good idea for the landowner to be aware of rent review dates in case their tenant neglects to initiate a review. In any province, there can be rental agreements that are not updated, causing the landowner to be paid insufficient rents.

Surface lease agreements outline that a landowner will be compensated yearly for ongoing operations on private land. The level of compensation is based on loss of use (the cost of not being able to farm the land consumed by the surface lease), as well by for such things as nuisance, inconvenience, and extra time spent farming around the obstruction created by a surface lease.

In the western Canadian provinces, rental review dates vary between three and five years. It is a good idea to check the specifics of a lease to ensure proper compensation is ongoing and up-to-date.

If you would like some advice on a surface lease issue, please touch base with Trevor Birchall at (403) 216-2113.