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Published in Food/Agribusiness
Owners of the family-owned Swisslane Dairy Farms Inc. in Alto have navigated a succession plan through boom and bust cycles.  Owners of the family-owned Swisslane Dairy Farms Inc. in Alto have navigated a succession plan through boom and bust cycles. COURTESY PHOTO

Succession planning on family farms comes with high stakes for future land use

BY Sunday, September 12, 2021 05:20pm

Anna Link and the rest of her family at Swisslane Dairy Farms Inc. encounter plenty of tough jobs on their 2,000-cattle farm in Alto.

But, when it comes to operating the family business, the toughest task of all is designing and implementing a sound plan to hand down the long-running farm through generations of family members.

“That’s actually the hardest thing for our farm,” said Link, who serves as junior partner for Swisslane. “It’s probably the biggest risk and the thing that’s been hindering us from growth. It is the No. 1 concern for us.”

Swisslane’s family dynamic is common among Michigan farms, while the outcome of such succession-plan dilemmas is poised to have a dramatic effect on the state’s agriculture industry as a whole.

All in the family

Swisslane — which produces 20,000 gallons of milk each day while operating a small farm stand and providing dairy discovery classes for young children — has persevered through five generations of family. Fredrick Oesch founded Swisslane in the early 1900s after moving to Michigan from Switzerland.

While the farm has remained in the family for more than 100 years, there were times of discord that reflect similar dilemmas for family farms across Michigan.

In the 1980s, Link’s father and two uncles took control of the farm for a long stretch of time.

While succession went relatively smoothly up to that point, Link pointed to 2007 when the family dynamic started to muddy the waters of the business.

“We had just a bunch of family drama,” Link said. “The farm was still being run like when it was just my grandpa and his sons. But, now it was other sons and cousins and it just got really chaotic for a while with not a lot of structure. We had no plan. It got very complicated.”

Link and her family sought succession planning resources at the time to learn more about what a formal plan could do for their farm. In 2012, the family put a pen to paper on a succession plan, which coincidentally led into some of the dairy industry’s best years and boom times for the farm.

However, succession planning can only go so far and is complicated by unknown factors such as market downturns.

“It’s important to remember that this is a living document. This isn’t set in stone — nothing is,” Link said. “That’s what you just need to know. Going into business there is risk. You have to say, ‘This is the plan, we’re going to try our best to do it.’ But you always know you’re going to have to pivot at some point if something happens.”

That’s what Swisslane did when it hit what Link called “essentially rock bottom” in 2018. The farm encountered more difficult family dynamics and a lackluster dairy market, and struggled to keep up with the demands of the succession plan.

“For the way the industry was structured in 2010 and 2012, it seemed reasonable. But in order for us to pay off senior partners, we probably needed like 25 percent growth. It wasn’t sustainable,” Link said.

That led to the family selling off a large chunk of land in 2019, which Link said gutted some family members. However, the family revisited its succession plan and expects to finalize it this year. Link said business has now stabilized and she is optimistic about the future.

Talk it out

While family farms share parallels to family-owned businesses in other industries, the capital-intensive nature of farming can be complicated, according to Jon LaPorte, a Cass County-based educator with Michigan State University Extension who specializes in farm business management.

Succession planning becomes a juggling act of four different components: Transitioning all of the assets, making sure the business stays viable, bringing the incoming generation into the decision-making process, and maintaining family harmony.

“With most estate planning, you’re talking about converting almost everything to cash and sharing that equally,” LaPorte said. “Families (that farm) invest a lot of equity into capital assets. You have to figure out how to transfer, not just the cash, but also the asset to a certain individual and make sure it’s done in an equitable and balanced approach.”

As simple as it might sound, communication is often the secret to sound estate planning for family farms. The lack of a succession plan — or a new generation to take the reins — can lead to farms being lost to either larger companies or to developers at top dollar.

“A lot of large-sized farms will continue to grow and expand and kind of gobble up those smaller farms or those that don’t have a second generation to go to,” LaPorte said. “That’s a concern. … We don’t want to see the day and age where there are only a handful of farmers for the whole state.”

Despite the high stakes, most farmers have not embraced these conversations, according to Michelle Anthes, a managing partner at Grand Rapids-based law firm McShane & Bowie PLC.

As an attorney who deals extensively with farming and agricultural clients, Anthes estimated that 70 percent of the clients her firm sees do not have a succession plan in place.

“Farmers don’t want to think about this,” Anthes recently told MiBiz. “They want to farm. Usually what happens is someone dies and the kids are fighting over what to do with the land. That’s usually what gets them in front of me — they don’t have a plan, and I have to figure out how to mediate that.”

Lacking a plan often leads to land transitioning out of agricultural use.  In fact, Ottawa County alone lost 8 percent of its farmland between 2012 and 2017. The county has responded by adopting programs like its Farmland Protection Program and MiFarmLink.org, a new website that connects farmers with important resources for succession planning.

“We need farmers — we need to preserve them,” Anthes said. “We try to come up with creative ways that we can do that so they’re not enticed by the developers out there trying to pay ridiculous prices for that property that no farmer can pay.” 

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