Passing the Torch of Farm Ownership

3/23/2013 7:00 AM

Patti Orton

Northwestern Pa. Correspondent

CLYMER, N.Y. — Call it farm succession, generational transfer or business transition, shifting farm ownership into the hands of younger blood is both arduous and essential. In the case of Cabhi Farms, LLC in Clymer, N.Y., the White family is navigating their way through a “sandwich” succession plan, as the oldest generation eases out, the middle generation runs the show and the tertiary generation looks promising.

Cabhi Farms, named after their proximity to Cabbage Hill Road, is a progressive dairy nestled in the undulating hills of Western New York. It is a 200-head operation of registered Holsteins. The farm raises their own heifers, totaling 190 of all ages. The rolling herd average is 28,500 pounds of milk with 1,145 pounds of fat and 868 pounds of protein. Their average somatic cell count for the year is 165,000.

John White, 74, started farming more than 60 years ago. For the past 25 years, he has been in formal partnership with one of his three sons, David, who’s in his 50s. Over time, the limited liability company strategically and gradually shifts shares and obligations from John to David, and to David’s brother and newest business partner, Doug. But the farm’s lineage doesn’t stop there. David’s son, Greg, in his 30s, is an ambitious full-time employee, who brings previous experience from the dairy supply business. Doug’s son, Matthew, 9, is coming up the ranks, too.

John, David and Doug share what works and what doesn’t about setting the farm up for success in the future, while keeping it in the family.

Challenges and Issues

Changing farm ownership cannot happen overnight without severe financial repercussions. John White’s initial succession plan was to gift over the farm and/or assets to his three sons (one son is not directly involved) by maximizing the IRS’s annual gift limit. He reasoned the remaining value would be their inheritance. When he began looking into it, “I learned that was going to cost me a lot of money,” White said. He began looking at alternatives.

Putting the time aside to develop a well-done succession plan has its ups and downs. The downside is the process can take years to complete. And while John isn’t looking to fully retire, he hints that he would have liked to have been freed of the management decisions some time ago. On the upside, because of their succession planning, John and wife, Loujean, will have health insurance and a home to live in for the rest of their lives.

One issue is inherent in the age differences of the family members. David shares an observation about the change in vacation priorities across the three generations: “My dad never talks about a vacation. I, on the other hand, would like a little time off. My son, Greg, wants more time off than me.”

Doug illuminates another trial of the times: “There are more pulls on the family’s time than there used to be.” The layers of engaged generations at Cabhi Farms seems to be a successful antidote to these new demands, injecting great family flexibility and operational coverage.

Keys to <\n>Success

How is this family able to work together so cohesively transcending different personalities and experience levels? “Faith is a huge part,” answers Doug. The White family’s faith pours forth in the way they acknowledge each other, and approach problems. There is palpable acceptance for one another from the oldest to the youngest. Their reverence for God placates any earthly conundrums — including complicated, strung out farm succession planning.

Another critical trait is patience. In this case, the family is so good at it they label it a “White gene.” David describes patience as good listening skills and the ability to bite one’s tongue. “Don’t always say the first thing on your mind. Hold your tongue and think about it. Pray about it,” he advises. Senior partner, John White adds, “There’s no swearing. There’s no arguing. We’re working with family. We might get disappointed sometimes, but we don’t argue.”

The three dairymen unanimously agree one very important key is strong spousal support. John, David and Doug credit their wives, Loujean, Brenda and Lisa, respectively, with the farm’s success and endurance. Baling hay, feeding calves, and filling in to milk are some examples of the essential support lent by their wives.

Farm Credit consultants, Gary Snider and Randy Risjan, who specialize in farm succession planning have helped Cabhi Farms through the process, and talked John out of his original inheritance idea. David points out it is beneficial to bring a consultant on board early on, adding, “A long time relationship with a trusted consultant means they know the history of the family.”

Why Is Farm Transition <\n>Planning Important?

As first vice-president of the Dairylea Cooperative board of directors, David White is exposed to the big picture of farm transitioning. He contrasts farm values of yesteryear to today’s values. Grasping the significance of this multiplier is a preview to future farm values. But the farm may not be there if there is no thought given to the future.

“The ag world has woken up. The light bulb has gone on,” he says. “We’ve seen disasters of what happens if there’s no plan. It is critical to maintain the agricultural infrastructure. We need to keep this in place.”

To farmers who are considering an ownership transfer, David advises, “Start talking about it before you need a plan. The process needs to be in place before people start wondering. Don’t wait until the last minute, because that will invite difficulties like hefty taxes and attorney fees.” It is these kinds of difficulties that arise from putting off succession planning. David cautions, “That will bring stress between business partners and to the family. Getting the groundwork laid is really important.”

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