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Many ag producer families, caught in the dual squeeze of a lifetime of lousy prices and inheritance taxes, are facing the possibility of having to give up all or part of the family placea heck of a reward for years, if not generations of hard work and sacrifice.
The first and best option is, of course, selling to a neighbor or another producer, so the land stays in production. But these days it seems only movie stars and homebuilders have the cash. Movie stars want a playpen, not working land, while homebuilders do that development thing.
Is there another option? Yesbut not the conservation easements (CE) being promoted by land trusts and government entities.
I recently attended a conservation festival lecture on conservation easements given by a high school classmate of mine who had a go at farming after college. Bottom line is land isnt worth much for farming or timbering or ranching, but worth boodles as recreation areas or homesitesand it will stay so until producers get paid what they are worth.
It seems like a no-brainer for farmers to sell out. Ag is a buyers markettheres too much production, customers think meat comes from Safeway and wolves are coolnever mind the weather. Costs and revenues ag producers pay and get are controlled by others, a situation which, over the long run, is a guaranteed loser. So the brain says: Sell for what you can get.
Trouble is, ag producers put their hearts into what they do. The heart answers: Look at those beautiful, sleek cattle and run your hands through that tall grain! Smell the rain! The rich dirt! Sell the family place? Not if I have a choice, by God!
So into this battle between the brain and the heart comes the nice, clean-cut land conservancy agent, who says: Sell us your development rights and you can stay here and keep producing. So the producer signs on the dotted line, gets a cash payment and a tax break, and everyones happy, right? Wrong. The best that could happen is that the inevitable (the family losing the home place) has merely been delayed, not prevented.
The fundamental problem of high costs and low prices still exists, leading to the question of what happens after 30 more years of the same, when the operating trust is spent down and the family is broke again. Dont imagine that the land trust lawyers will give those rights back and take a tax writeofftrusts are already tax-exempt.
What if, by some miracle, the next generation did well and the CE payment funds are still there?
Sorry, say the trust attorneys, the CE was an irrevocable interest in the property. Even if we wanted to sell it back to you, at six percent compounded daily, our interest in the development rights is now 80 gazillion dollars. We feel your pain, however, so if you donate us clear title, well tell the IRS to give you a nice writeoff. After all, were a nonprofit.
In short, the family is goneone generation later, rather than right now. And, with you finally gone, will the trust operate the farm and pay taxes on it? Is the trust as loyal to your land and your family as you were? Nah.
Recently a message came over the e-mail about an upcoming land auction by The Nature Conservancy (TNC) in Fulton County, southern Illinois, an excellent opportunity to add acreage to your present farm operation, pick up recreational or investment property, even (gasp!) Excellent building sites for a home or development.
A bit of background research revealed that when Consolidated Coal quit coal mining in southern Illinois in the mid-80s, TNC got its lands and Consolidated got a $20 million write-off. The Conservancy unloaded 5,300 acres during June 2001 for $10 million, the most important parcel being 1,960 acres sold to the state of Illinois Open Land Trust Program for $3.6 million. With mission accomplished, TNC wants to drop the rest, approximately 2,500 acres. Of course, title will be subject to all easements, covenants, leases, and restrictions of record. This will include any and all easements, including those created for this sale.
The auction is cashfrom the highest bidder, with no preference given to farm tenants: Full possession will be available at closing, subject to the tenants rights in the 2002 crop lease.
In short, TNC isnt interested in recruiting farm folks to keep working those lands. It wants high rollers and public agencies to pay full market value cashfor land it got for free, some of which will always be restricted and/or controlled by TNC for its own purposes. TNC now has what it wanted in Fulton County, and theyre outta therewith cash proceeds for acquiring control of other lands on the cheap, through donations and purchases of discounted conservation easements.
I dont find it amazing that TNC and other trusts always try to get full value for their holdings, while doing everything they can to make sure others dont. Even nonprofits understand profit. What I do find amazing is that ag producers fall for the sales pitch of land trusts.
The best thing for the land and for family agriculture in the long run is not to sign conservation easements, but to demand and to receive full value for your land. Then you can buy moresay from a producer further out who is ready to retire, maybe with an investment pool left over for those rainy days, droughts, and good stock market deals.
If land trusts arent willing to pay you full market value and take title to the landwell then, they didnt really want it, did they?
Dave Skinner lives in Whitefish, Mont. Hes worked harvest in Montanas golden triangle, prefers cows to The Nature Conservancys trucks, and will do whatever it takes to hold on to the ranch in North Dakota that was his grandfathers legacy.
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