Tackling the issue of succession vital in securing future global food supply
According to the recently published book 'Future of Farming', the farming population is aging rapidly. In the United States, for example, the average age of a farmer in 1974 was 45, while today the average age is 58. In the EU, only 6% of farmers are under the age of 36. This is a critical issue, with the USDA estimating that every twenty years the number of people dependent on a farmer’s output will double. With most farms in family hands, succession is a crucial part of the solution.
The situation is similar in the Asia-Pacific region, with 52% of Australian farmers aged 55 or older, while over the past 30 years the average age of farmers in Australia increased from 44 to 55. Bart IJntema, Senior VP F&A Development at Rabobank International, explains: "Overall, the numbers show a clear problem; there is an undeniable trend of aging farmers.At the same time, and this obviously varies per country and is dependent on e.g. the economics of the farm business, the next generation does not always seem keen on taking over the helm.”
Working hard for little pay
The succession issue is caused by a number of factors. According to Joris Baecke, the former chairman of CEJA, the organisation of European young farmers and a crop farmer himself in the Netherlands, the business case for farmers no longer seems to add up. Baecke: “Mechanisation and innovation enabled farms to increase their scale of production, although increasing the scale of production is becoming increasingly difficult. The financial costs are now so great that it is becoming difficult for many farmers to make money. And farmers also increasingly face societal demands regarding topics such as bio diversity, the environment, animal welfare and climate change.” Another challenge for succession is the economic viability of farming. In some parts of the world, farming is not as profitable as it can be, due to the position of farmers in the supply chain. Although food prices are rising, farmers’ margins have increased much less than agricultural commodities prices would suggest. Farmers get squeezed between highly consolidated upstream farm input suppliers and downstream customers. “In the past it was culturally determined who took over the running of the farm, while today successors are better educated and also look at other opportunities. Why would you take over a company that requires you to run up debts, work extremely hard and earn very little?” says IJntema.
Not all doom and gloom
However, take inspiration from the Hollywood-like tale of Christina Kress, a 24-year-old farmer from the South American country Paraguay. She inherited the responsibility of taking care of the family farm. A community of farm workers and their families depend on her farm and business for their livelihood. When Kress's father passed away in 1998, she was too young to succeed him in her family-owned company. However, at the age of 20 Kress became CEO of Grupo Kress, which comprises the family farm and several associated companies, set on 20,000 hectares of land. Cristina combines a passion for farming with sound business thinking; she integrated up the chain with her own processing and packaging facility, which improved her position in the supply chain.
For a successful succession process, a farm needs to be prepared for succession instead of preparing a successor on the farm. Formalising the succession process, ensuring transparent communication, rethinking the governance structure and hiring a specialist to facilitate the succession process at an early stage are crucial steps. However, according to Rabobank and the farmers who contributed to ‘The Future of Farming’, more needs to be done to enable the next generation of farmers.
"We need to improve the economics of farming. Farmers will have to reach out to other players in the chain and look for ways to work together, to join forces, to share and gain knowledge and to innovate. In the long term, this will benefit all players in the chain and result in more efficient food production. On an individual level, we see that the best performing and viable farms have, in 70% of the cases, a potential successor in place. So in line with expectations, a sound economic business will enable a smooth succession. Additionally the image of the agricultural sector needs some polishing to make farming a more respectable and desirable occupation. We need to reconnect producers with consumers, possibly using the potential of online and social media to tell the farmers’ beautiful and inspiring stories and to make people aware that farmers feed the world."
Bart IJntema, Senior VP F&A Development at Rabobank International