Commodity prices and land values: Tips when planning for succession

As primary producers benefit from some of the best livestock and grain prices in history, the thought of returning home to the family farm might seem more realistic and viable for the next generation of agri-enthusiasts, compared to those faced with a similar predicament a decade ago.

Rabobank head of succession planning Rosemary Bartle said the thought of planning for the future was often a challenging and sensitive task for farmers, but something that needed to be done sooner rather than later.

"The impact of the good commodity prices and financial profitability that farming businesses are finding themselves in is making the industry more attractive to the next generation," she said.

"We're seeing more of the next generation who are putting their hands up and saying they would like to be involved in the business."

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Speaking after the Gippsland Red Meat Conference in Bairnsdale, Ms Bartle said generational attitudes towards farming had significantly changed since the mining boom of the mid-2000s and earlier, largely due to higher commodity prices and better profitability among farming enterprises.

"It was hard to get children back on the farm because of the disparity between wages of the mining sector versus what was happening in agriculture," she said.

"But now with commodity prices and profitability ... it's more attractive from a financial perspective for children to come home."

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One of the major concerns among primary producers, according to Rabobank insights, is increasing land prices and how to split the inheritance among on and off-farm children.

"When you're trying to look at making inheritance fair, it's very hard for farmers to work out how to we get a reasonable amount of inheritance to the off-farm children," Ms Bartle said.

"When they're considering inheritance and what they're wanting to achieve with the business, it's often the case they want to the farm business to remain intact.

"It is more difficult than what it was a decade ago because of the way land values have increased."

Ms Bartle said many young people who were forced to work from home during the pandemic, including returning home to the family farm as opposed to working or studying in the city, were more aware of the advantages of country living.

"I think that became particularly evident during COVID because off-farm children who are working in town suddenly didn't have to work at the office and could work from the farm," she said.

"We've seen quite a few people who went back to the family farm to work, and many thought they would rather leave their city jobs to work on the farms.

"That can put more pressure on the farming business because it has to have the capacity to accommodate people and be profitable enough to enable other family members to be part of that farming business."

Ms Bartle, who has worked with Rabobank for six years, said the most important aspect when discussing farm succession and inheritance was communication.

"They are difficult subjects to talk about but if we don't sit down and talk about it, it's not going to get very far," she said.

"Starting early is also important because there are more options available and time to implement them, and people have clarity about what is going to happen down the track"

Another key aspect of succession planning, Ms Bartle said, was to involve the whole family with planning phase.

"Including all family members and in-laws is important and anyone who is in the family and will be impacted by the decisions made need to be involved in the discussions," she said.

"The family needs to get to agreement on all aspects of their succession planning, it needs to be documented and it needs to be reviewed based on certain trigger events.

"It might be someone wanting to come into the farm or someone wanting to leave, it might be death, divorce, marriage or injury basically anything that changes the family circumstances."