Editor’s note: This is Part II of a five-part solutions journalism series exploring the future of farming in north central Ohio. Part I was published on Jan. 31.
Much of north central Ohio is farmland, but the number of farms is declining.
Farmland is being consolidated across the United States, leaving its future in fewer hands and the price per acre on the rise.
In Ohio, the price per acre for farm real estate rose by $6,600, or 3.9%, from 2020 to 2021. Cropland value in Ohio rose by $6,800 per acre, or 5.3%, for the same period.
Rising agricultural land values make it more difficult for beginning farmers to obtain land when they do not have family land to inherit. Simultaneously, older farmers without familial successors face challenges finding a next-of-kin to continue farming the land, as opposed to selling to developers for housing or solar farms.
Linking beginning farmers and retiring farmers has proven to be successful for north central Ohio farmers short-term, but a more streamlined process is needed to make that success sustainable and replicable.
Short-term
While Knox County grain farmer Ed Piar works land passed down by generations before him, he also farms land rented from neighbors, who he formed relationships with while growing up on his family’s land.
“As my neighbors retired and had nobody to take over their farms, I rented them and increased my acres,” Piar said.
Some operations include more rented than owned land. In Ashland County, father/daughter duo Marty and Brooke Wesner own 800 of the acres they farm, but rent another 1,200.
On the other end of the gamut, Larry Hall, who served Knox County 4-H for 26 years as an OSU extension educator, is the one to seek out renters.
“I’ve rented my land out to various farmers over the years, so they pay me a cash rent and then they raised whatever crop they want to raise,” Hall explained.
There is a balancing act between those wanting more land to farm and those seeking assistance to raise crops — or someone to take over entirely.
Mount Vernon-based insurance agent John Ball has seen renting become common among his farm customers. Ball has maintained roughly the same customer base throughout his 14-year career with Kari Ball Insurance Agency, which means many are now contemplating retirement.
Ball has increasingly been extending liability for his customers to rented land, as large as 30 different locations for one farm account with only a handful of those locations being under the ownership of the farmer.
“If they come to the point that they’re going into what we call retirement on a farm — they still own the land, they find a neighbor that is either younger than them or that’s still active — then they’ll do a cash rent out to them and they’ll rent their property to that neighbor and that’ll suffice until that neighbor retires,” Ball said.
“They’re looking. They’re actively looking. We’ve got a lot of farmers that not only farm their ground that they own, but they’ll rent ground off of neighboring farmers, or aging neighboring farmers, and that still keeps it agricultural.”
Ball is a farmer himself, with land in Danville. He’s been buying up land in recent years to ensure it remains designated for agriculture use. However, an individual effort to keep pace with competing interests is not necessarily sustainable in terms of personal finances, Ball said.
“You just hope some young farmer comes along and keeps doing it,” Ball said.
At the same time, those in the younger generation who want to keep farm operations alive are not seeing a clear path forward. Henry Bacsi, a 2018 graduate of Ashland City Schools, worked on his family’s farm growing up — a modest 5-acre operation, he said, with hay and a few animals.
But the cost of running the farm became too much, and they had to sell.
While Bacsi hopes to run his own operation one day, he has no doubt finding land and having the financial means to acquire it will be a challenge.
Formalizing large-scale succession
Tax credit legislation has helped beginning farmers acquire land and retiring farmers transfer their land in other states, and Ohio could be next.
“There are not only barriers to entering agriculture, but there are also barriers to exiting it,” said Ohio Farm Bureau Federation director of state policy Jenna Reese.
House Bill 95, the Ohio Beginning Farmer Tax Credit program, would allow landowners/producers to receive an income tax credit when they sell and/or rent their land or agriculture-related assets (machinery, livestock, etc.) to a beginning producer.
A tax credit reduces a final tax bill dollar-for-dollar.
The farm bureau had a part in creating the bill, which is also sponsored by local representatives Darrell Kick (R) and Rick Carfagna (R). The bill passed in the House and had its second hearing in the Senate ways and means committee.
Farmers across Ohio have spoken to the challenges they’ve faced breaking into the profession, including District 20 trustee Nathan Brown, who submitted written testimony to the Senate.
“The agriculture industry is extremely difficult to break into if you or your family does not have a background in farming,” wrote Brown, a first-generation farmer. “High amounts of capital are needed to invest in land, equipment, labor, crops or livestock, financial management plans, and compliance with regulations just to get started.
“New farmland is not readily available, so there is restricted access to the ground required, adding yet another barrier to individuals who are looking to start a career in farming.”
It is unclear when another hearing will occur, but Reese said the bill is a priority issue Farm Bureau members will be talking about with legislators at the Capitol on Feb. 16 for “Ag Day,” an advocacy event with about 300 farmer members planning to attend.
“It’s incredibly fulfilling work to be part of feeding the world, but I just can’t even imagine how you would start to get into that if you don’t have a background,” Reese said. “It is incredibly difficult
“But hopefully with this program, especially if you have a scenario where the next generation is not interested, we can link up people who are first-generation farmers with established farmers and continue their operation.”
The tax credit is a pilot program and would sunset after five years, Reese said. If passed, the program would take at least a couple of years to get up and running.
The proposed tax credit is similar to existing programs in Iowa and Minnesota, which have seen success connecting beginning farmers with established farmers to ensure farmland succession.
In 2007, Iowa’s Beginning Farmer Tax Credit program began providing a tax credit for agricultural asset owners to lease their land, equipment and/or buildings to beginning farmers. Steve Ferguson, the Beginning Farmer Tax Credit program specialist for the Agricultural Development Division of the Iowa Finance Authority, said land leasing has trended up overall since the program took effect.
“The first couple of years they only had about a couple hundred,” Ferguson said about applications. “This last year (2021), we did over 1,300.”
Through Iowa’s Tax Credit program, the landowner is the only one getting the tax credit. But Iowa also has a beginner farmer loan program, which helps new farmers acquire agriculture property by providing loans at reduced interest rates.
Iowa’s applications are processed on a first-come first-serve basis. Ferguson said the program has faced some financial hurdles since its creation, specifically in 2018 when the Iowa legislature reduced the program’s allocation from $12 million to $6 million, so they could not take new applications.
Minnesota’s beginning farmer tax credit program also accepts applications on a first-come first-serve basis. But because it has a larger funding allocation — at about $15 million for 2022 — program director Matt McDevitt said his state does not see the impetus Ferguson sees to get applications in early.
If Ohio’s program becomes law, McDevitt suggests those who run the program leave ample time and resources to deal with inevitable last-minute changes.
“People love to piecemeal things, and one of the challenges is that everyone loves to wait until the last minute so we literally get almost half our applications in the last month,” McDevitt said.
Minnesota’s program is partly modeled after Iowa’s, McDevitt said. However, Minnesota’s program more closely resembles what Ohio’s could look like because it provides tax credits for both the rent and sale of farm land or farm assets.
Minnesota’s tax credit became law in 2017, and after the first year, the program has consistently averaged about 1,100 beginning farmers and landowners who file applications, McDevitt said.
The beginning farmer gets access and the older or more established farmer gets a tax break — but sometimes the beginner farmer can also benefit from the tax break themselves.
“In many cases, too, the landowner may somewhat share the credit, if you will,” McDevitt explained. “If they know how much it is, then they might give them that off rent or take a little bit off the sale.
“So, we’ll leave and see some of our sales and say, ‘Hey, here’s the sale price but here’s the sales price if we get the tax credit,’ and it might be $5,000 or $10,000 less.”
While McDevitt said Minnesota’s program is being widely used by farmers, how the law is set up has resulted in some cumbersome work on the program staff side.
“For instance, ours initially also had the same credit landowners were getting also going to the beginning farmers,” McDevitt said. “So there were all these other provisions for the beginning farmers to supply all this information.
“But then they took the beginning farmer credit part out and left all those provisions in, so we’re sitting here collecting all this information for no reason at all. But we have to, because it’s the law.”
Both McDevitt from Minnesota and Ferguson from Iowa have made it a priority to inform community members of the program, including farmers and bankers.
Ferguson does informational workshops at community colleges and with agriculture students across Iowa. Similarly, McDevitt said he relies on educators across the state from the farm business management program to introduce the tax credit to young people interested in agriculture, as well as the Minnesota Farmers Union and Department of Revenue.
Ferguson’s advice to potential program leaders in Ohio is to focus on building awareness above all else.
“Once the governor signs it, ramp up a very organized, simple series of workshops around the state informing all the bankers and community colleges and all your schools that have ag students, and get out and about and market the heck out of it,” he said. “Because if you don’t get it ramped up, the legislature’s going to say well, this was a waste of our money, and they’ll shut it down.”
McDevitt emphasized that creating the infrastructure, such as an online portal for applications, to support the program is key.
Farmers, beginning and near retirement, come back year after year in places such as Iowa and Minnesota until their eligibility runs out, the program directors said.
“I get positive feedback all the time,” McDevitt said. “Like, ‘Oh, man, I would have never gotten this land, whether it be buy or rent, if it wasn’t for the program.’ ”
Ohio’s proposed program, Iowa’s program and Minnesota’s program each have distinct eligibility requirements and provide varying tax credits:
Ohio’s proposed program
Eligibility: Intends to farm in Ohio, or has been farming in Ohio for less than 10 years; has a household net worth of less than $800,000 (This limit applies to 2021 and will be adjusted for inflation in future years); provides the majority of the day-to-day labor and management of the farm, has adequate farming experience or demonstrates adequate knowledge about farming; submits projected earnings statements and demonstrates a profit potential; demonstrates that farming will be a significant source of the individual’s income
– Participates in a financial management program approved by the Department of Agriculture
Iowa
Eligibility: Must be a resident of Iowa and 18 years of age; have net worth no more than $686,000; no restriction on off-farm income; have sufficient education, training or experience for the anticipated farm operations; have access to adequate working capital, equipment and other items that are necessary to operate a farm; be the owner/operator
– Farmers must lease for a minimum of two years but no more than five. The tax credit varies between cash rent and crop share leases. The tax credit for cash rent leases equals 5% of the cash rent. For crop share leases, the tax credit is 15%.
Minnesota
Eligibility: Minnesota resident who is seeking entry, or has entered into farming within the last 10 years; has a net worth that does not exceed the limit provided under section 41B.03, subdivision 3, paragraph a, clause 2 (Currently this limit is $862,000); a farmer who will provide the majority of the labor and management of the farm that is located in Minnesota; is not directly related to the owner of the agricultural asset (This includes parents, grandparents, brothers,sisters,spouses, children, and grandchildren. Legal adoption shall be considered in full effect); has adequate experience and knowledge of the type of farming for which they seek assistance from the Rural Finance Authority; can provide positive projected earnings statements
– The beginning farmer may need to participate in an approved financial management program
– Credit to the agricultural asset owner: 5% of the lesser of the sale price or fair market value of the agricultural asset up to a maximum of $32,000; 10% of the gross rental income in each of the 1st, 2nd, and 3rd years of the rental agreement, up to a maximum of $7,000 per year; 15% of the cash equivalent of the gross rental income in each of the 1st, 2nd, and 3rd years of a share rent agreement, up to a maximum of $10,000 per year
Next: While future legislation may help first-generation farmers break into the industry by acquiring land, retention requires more than a point of entry.
