Succession Down Under: problem or opportunity?

Of all the issues they face, succession is the one that keeps many farmers awake at night. And in Australia more so than elsewhere, says Edwin van Raalte, Group Executive Rabobank Australia & New Zealand. He explains why there’s nevertheless every reason for hope.

Why is succession a particularly pressing issue in Australia?

Edwin van Raalte: “Given that the average age of Australian farmers is currently 58, the succession problem is urgent for many. The typical farm family consists of Mum and Dad and three grown-up children, of whom one intends to take over the farm. Meanwhile, farms are very large by global standards. For example, where a big dairy farm in the Netherlands has 300 cows, in Australia it may have up to 10,000. The assets may be worth anything from AUD 10 to 100 million (USD 7.5 to 75 million or EUR 6.4 to 64 million) and are usually partly mortgaged.”

So these are midcap businesses?

“Indeed, but without corporate structuring or shareholders. With most of the capital tied up in land, successors need to pay out the parents and siblings. And they need financial leeway to grow their business. That means taking on a heavy burden of debt. And with so much money at stake, they need skills to run the business.”

“Making farm succession work is central to food security”

- Edwin van Raalte, Rabobank

What skills are most important?

“Large-scale farms depend on advanced technology, so successors can no longer learn the trade by tagging along with their Dad. They have to seriously study agriculture and business economics. They need to be up to speed on legislation, red tape and green tape. Safety. Supply chain issues like traceability. Not to mention marketing.”

That’s a pretty daunting list!

“But even here, it’s not the economics but the emotional side of the issue that gives people sleepless nights. For the older generation, which has put decades of energy and passion into the farms, handing over is the hardest part. As for the younger generation, who, at the age of 30, wouldn’t feel overwhelmed at taking over a multimillion dollar business? And – given the distances on this continent – building a life hundreds of miles from the city?”

It sounds like a big issue for one family to deal with.

“Making farm succession work is a shared responsibility, because it’s central to food security. Government has a role to play and so do banks. That’s why, ever since we opened for business in Australia, Rabobank has been guiding its customers through that journey. Not only with financial solutions.

“We organize independent counselling, offer masterclasses, help arrange internships, and more. We also run an online platform called GlobalFarmers.com where farmers can find the latest insights and connect with peers. The new generation of farmers – or maybe we should call them rural entrepreneurs – is totally digital, so they need a different kind of network than their parents. It’s our way of bridging the generation gap.”

“The new generation is stepping into a healthy, growing business”

- Edwin van Raalte, Rabobank

What advice would you give to Australian farmers on succession?

“You don’t want to be taken by surprise, for example because the head of the family has fallen ill or passed away unexpectedly. Succession is a lengthy process and the last thing you need is time pressure. If you still can, start early. The first thing to do is sit down as a family and speak honestly about what each of you really wants. A counsellor can help here. Only after the emotional part is settled, can you move on to discuss a business plan, training needs, and finance with the bank.”

What kind of future is the new generation facing?

“With the solutions now available, succession actually presents an opportunity. First of all because today’s consumers have a growing passion for food and farming – just look at the endless array of TV shows and vlogs on these subjects. This is giving farmers an image boost. And secondly, agriculture needs to double its output to feed the world’s growing population, so the outlook for the sector is good. All in all, the new generation is stepping into a healthy, growing business.”

In a recent interview, Ruud Huirne, Rabobank Director Food & Agri Netherlands, discussed succession issues in the Netherlands. Listen to the Dutch podcast now or read the synopsis in English.