Podcast: Helping farmers make a success of succession

Every week, Harm Edens of BNR radio interviews internal and external experts on how a bank is aiming to build a better world. This week he speaks to Ruud Huirne, Rabobank’s Director Food & Agri Netherlands, about who takes over the family farm.

Listen to the podcast now (in Dutch) or read on for our synopsis in English.

Rabobank’s has over 50,000 customers in food and agribusiness. Half of them are family farm owners aged over 55 and facing the problem of succession. It’s sore issue, as Ruud Huirne, the bank’s Director Food & Agri Netherlands, knows from personal experience. So what is Rabobank doing to support them?

“I grew up on a mixed farm in the Dutch province of Gelderland. I’d always expected to follow in my father’s footsteps eventually, though we never discussed it openly. One day I came home to learn my younger brother was going to take over the farm. I hadn’t even been asked! My parents simply assumed I had other ambitions.

Emotions

“My story is a case in point when it comes to succession on family farms. It’s riddled with emotions, and families have difficulty talking openly about it. The older generation, which built up the farm, has trouble letting go. The younger generation, meanwhile, has doubts about stepping in their parents’ shoes. Many wonder if this is really what they want to be doing for the next 40 years. They perceive pressure from their parents, and have qualms about broaching the subject. So the decision on succession gets put off, year after year.

“We support farmers looking for a successor in three ways: with financial solutions, knowledge and a network. Financially, succession can be pretty complex. The bottom line has to add up. If a farmer has other children besides the successor, they may want to cash in their share in the farm. The successor will likely need a loan to pay them off. Keeping up in today’s markets also means being ambitious: investing in expansion and innovation, and perhaps partnering with other farms. We can provide the financing and structuring needed to realize those ambitions.

“With our long experience in supporting farmers, Rabobank has valuable expertise to offer on business models, innovations and other relevant issues. Moreover, we help and encourage our customers around the world to share knowledge and experiences with each other.

“Taking over the family farm must be a positive choice”

- Ruud Huirne, Rabobank

Total conviction

“But ultimately it’s still the people that make the difference – and rightly so. Taking over a family farm must be a positive choice, made with total conviction. There needs to be a plan, a vision, as well as a willingness to develop and to make personal sacrifices. Not to mention undivided support from one’s parents and one’s partner.

“We provide families with coaching to help them communicate more openly with each other on the succession issue and the emotions surrounding it. Would-be successors are offered assessments to discover their strengths and weaknesses. For reasons of confidentiality, we have outsourced this service to an external party. All we’re interested in, is whether successors have made a considered decision.

“We form our own opinion of the successors’ potential when they come to us to pitch their business plan. Do they demonstrate passion, or is the answer to every difficult question ‘ask my accountant’? Once we’re on board, the bank runs the same risks as they do, after all. But if we do decide to finance them, we take a back seat, not the driver’s seat.

“Farm takeovers and partnerships don’t stop at national borders”

- Ruud Huirne, Rabobank

Economies of scale

“As I said, though, the majority of today’s farms will not continue in their present form for lack of a successor. The number of farms has been steadily declining since World War II, but agricultural output has risen. Farms are taken over by others, who then enjoy economies of scale and can more easily recoup investments in innovation. Takeovers and partnerships don’t stop at national borders, either.

“We’re increasingly seeing hybrid structures, where farmers transfer their farms to a larger entity and receive shares in return. The shareholders can be active, each focusing on what they do best. Or they can be passive. A good example is Novifarm, which won last year’s Dutch Entrepreneur of the Year award.

A role for government

“That said, there will always be a place for smaller farms. They play a key role in local food production and the vitality of rural communities. Some farmers are turning to niche concepts like organic, climate-neutral, urban and care farming. Governments have an interest in supporting such initiatives, to preserve the countryside and rural lifestyle in the face of agricultural upscaling.

“Keeping family farms going is definitely on the government’s agenda. I hope their role will go beyond granting subsidies, which after all don’t have a lasting effect. A better idea would be to invest in boosting young farmers’ entrepreneurial skills, so they make better and more considered business decisions. Governments can play a role organizing scholarships and internships abroad. And they can support and connect farmers who want to move to sparsely populated regions.

Nothing to sniff at

“As for my family’s farm, my brother sold it after 10 years. My parents still live next door, so I peek over the hedge when I visit them. I’ve overcome my disappointment, but if I ever got the chance to take it over, I wouldn’t sniff at it. After all these years, the smell of manure still doesn’t put me off.”

Rabobank’s ‘Banking for Food’ podcasts are available in Dutch via various podcast apps for iPhone and Android, SoundCloud and Stitcher (26 min).