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succession planning

Ask an Expert: Wealth & Retirement Strategy

in 2020/Ask an Expert/Current Issue/Fall 2020/Marketing/Organic Community/Tools & Techniques

Planning In Your Thirties and Beyond

Karen Fenske

Developing a well-balanced financial strategy at each stage of life promotes peace of mind.  The wealth and retirement planning strategies outlined below are relevant for young farmers, whether you will own property or not. The need for supplemental income component has historically been a reality for many producers, and most likely will continue.

Planning for the future means looking at what you can do now, as well as what you’ll need later, and designing a “bridge” to get you there. As a Financial Coach, I help you work through a planning process to determine what your needs are now, and in the future, and what you’ll have to put in place to meet those needs.

Setting Your Goals

  • First, it’s important to define your goals and priorities. Some areas to explore include:
  • Manage your cash flow: Track your income & spending. With all the apps available today, this can be easy.
  • Build an emergency fund: Know your expenses and “pay yourself first” by automatically putting money into a reserve account that is at arm’s length.
  • Protect your family in case of deaths, disability or critical illness: Insurance is an important risk management component for all family sizes. If one of the adults becomes ill or passes away the family left behind can be cared for financially. In your thirties insurance is fairly cheap and quick to obtain.
  • Make space for travel, vacations, and leisure activities, (travel to see family, skiing, dirt biking, camping, etc.): What, when & how much? If you plan ahead, the tendency to splurge or put it on credit will be reduced. You can manage your expectations and maintain control.
  • Plan for major purchases, such as vehicles, real estate, livestock, etc: What, when & how much? If you plan then you may not splurge and end up in “bad debt”. You can manage your expectations and maintain control.
  • Own your own business: Create a business plan, even a vague one that will highlight income potential and costs.
  • Learn to invest wisely, staying ahead of the cost of living & reducing taxes: You may say I can’t save anything to invest for the future and I always say, “We can find $50 or $100 a month!” to get the habit started. Typically, the saving/investment tool depends on your tax bracket. It often makes sense to save in a TFSA investment where you gain a return on your deposit and the compound earnings grow for your retirement. If you are above a certain income level an RRSP helps reduce your current income tax payable. RRSPs are a “tax deferral program” so a tax refund may be triggered now, but when you go to pull it out later (in retirement) you will pay the tax. Reinvest the refund into the RRSP or TFSA.
  • Plan for your child’s education: If you have children, put aside money into an RESP. You can contribute as little as $25 a month, and the government will also contribute. The investment earns a return and the whole account grows. The funds may be used for trade, college, and university programs. Grandparents can arrange these too. It may not be a lot, but it will help!
  • Stay employable: Continuous learning is part of our culture. We never know when our source of income might change. What skills, courses, and experience will you need?
  • Ensure your money lasts through retirement: Learn about your Retirement Equation: Old Age Security, Canada Pension Plan, etc. Add to your retirement equation via “Supplemental Income.”
  • Preserve your estate: Ensure your loved ones are your beneficiaries in your will, etc.
  • Give to charity: This can satisfy personal values and reduce taxes.
  • Own your farm: What, when & how much?  All of the other pieces can be implemented whether this goal is realized or not. This is a whole other topic which will include succession and estate planning.

Review Reality and Add Peace of Mind

Once you’ve got a sense of your dream, it’s important to review reality—and add peace of mind. To do this, first you need to paint a picture. Review your current situation by pulling together all your financial documents, including bank accounts, insurance, debt, credit card statements, etc. I typically enter all the data into my financial planning software to create a whole financial picture and keep track. Explore your expenses: What does it cost to live? What do you need? Can things be changed, cut out, modified, delayed, achieved in steps, etc.? Also, explore your income sources.

As a farmer, this will likely include both your farm revenue and any supplemental income sources. What can you do off-farm to receive a paycheck, such as working part-time as a teacher, welder, nurse, instructor, snow removal tech, clerk, etc. This kind of employment will also add to your Canada Pension Plan (CPP) amount which pays out as early as 60 years old, and adds to your Employment Insurance (EI), which will help with medical leaves and periods of unemployment. You can arrange to contribute to EI even if you are self-employed. If you find employment with a hospital, school district, regional district, etc.  You may even be entitled to a pension at some point. All these pieces together with your Old Age Security at 65 and your retirement equation may surprise you. I typically provide the potential future value which helps clarify need and strategies.

If working off-farm is not an option, or costs more than you would earn, consider an on-farm opportunity such as doing bookkeeping for others, machine repair, website development, snow removal, breeding dogs or cats, etc. Ensure you are contributing to CPP for your retirement, and maybe EI, too.

Something to keep in mind with these “supplemental income” options is work-life balance. Look at your whole equation. Every situation is going to be a little bit different. Your resources, skills, capacity, energy level, likes, needs, etc. will impact what is optimum for you. It’s easy to stretch yourselves too thin and end up disheartened, cranky, depressed, or divorced because there hasn’t been enough time or energy. Money is important but so is enjoying life and living it together.

It’s also important to look at your on-farm income. Whether you’re running your own farm or working for another farmer will change the picture. If you’re self-employed, your cost of production should account for your time so that you’re paying yourself a wage that supports your lifestyle—and future goals. As an employee, your job title and description determine your role, and can be helpful in figuring out how you’ll be compensated. For example, an Operations Manager and farm hand will have different levels of responsibility, and thus compensation. If you’re working on a farm as part of a succession planning process, whether on the family farm or not, discussions around compensation can get trickier. Using a third-party coach to facilitate this discussion as part of the succession planning process may be helpful. As an employee the owner will contribute to EI & CPP—this isn’t as complicated as it sounds! QuickBooks is cheap and you can get it all done.

Understanding your income and expenses helps you know how much you will have to live on. You can then budget spending and short term and retirement savings, and create a “doable” budget just for you. Build a “zero-based” budget including income from all sources and living expenses, such as gas, groceries, clothing, insurance, and short term and retirement savings. Every situation is different so meet your family’s needs and don’t compare to others.

Evaluate, Adjust, and Enjoy!

Financial planning is an ever-evolving process, and doesn’t stop once you’ve got your budget in place. Evaluate on a monthly basis, at minimum, where your money is going. There are apps and bank programs to help keep track. You can adjust the budget for surprise costs, add extra to your savings, or pay off debt faster.

It is good practice, once or twice a year, to ask your family, “What great things did we do,” “What was new, different or better?”, “Did we have enough or too little?”, “Do we need to make changes & how?”, “What do we want to do this year and next?”

Cast a big picture of realistic potential income and how your family is going to spend it: who needs a bike, clothes, tools, what kind of trips, etc. You can start an envelope for the goal or assign a piece of your savings accounts or TFSA to that goal.

Each of you has your own unique money story that impacts how you save and spend. Choose transparency instead of denial, courage to ask for your needs to be met, respect that you are in this together, and above all, use sound financial planning to help you enjoy life!


Sustainable agriculture is Karen Fenske’s vocation. After providing strategic planning in BC agriculture, and working for COABC & BC4H, Karen transitioned into the financial planning industry to assist with succession and estate planning. Through her business, Fenske Financial Coaching, she facilitates the transition process and provides relevant, useful advice on a fee-for-service basis.

Featured image: Credit Michaela Parks.

Organic Stories: West Enderby Farm

in 2020/Crop Production/Grow Organic/Marketing/Organic Community/Organic Standards/Organic Stories/Past Issues/Winter 2020

From Carrots to COR

Darcy Smith

Carrots: “hard to grow, but easy to sell,” says Paddy Doherty, who farms at West Enderby Farm with his partner Elaine Spearling. When late November rolls around and most vegetable farmers are finally kicking up their feet for a few moments of rest, Paddy and Elaine’s farm is still a hub of activity. “It’s like having a dairy cow, you never get a break,” jokes Paddy. “You start selling in July and go until April. Farmers are on vacation and we’re still packing carrots three, four days a week.”

“Carrots are very intensive. When you’re not weeding, you’re harvesting or irrigating, no downtime.” But they’re worth it.

In 2011, Paddy and Elaine founded West Enderby Farm in 2011 on a 40-acre former dairy farm. They knew they wanted to pursue a wholesale business model. “We didn’t want to move up to the North Okanagan and immediately start competing with our friends at the Armstrong Farmers’ Market,” Paddy says. “So, we decided to grow a crop to sell to local grocery stores and wholesalers.” And there are never enough carrots to go around.

Hilling carrots at West Enderby Farm.

Plus, back when Paddy was involved in the early days of COABC, he remembers a wholesaler saying, “It’s great that you have broccoli for a month in the summer, but really, winter is our busy season. That’s when people want to buy vegetables and spend more time cooking.” An idea was planted, and decades later, when the pair wanted to relocate to the Okanagan and start farming again, it would bear fruit.

At the time, they didn’t know anyone who sold directly to grocery stores in any volume. It’s always difficult to break into the wholesale market: “you need volume to be able to even talk to them,” Paddy says, but over the last decade, the rise of local and organic food has shifted the marketplace. With consumer demand for local food, retailers are “much more open to the idea of buying from farmers, even though there’s a lot of hassle involved for them,” having to deal with a lot of little farms.

How did West Enderby Farm get a foot in the door, or, rather, a carrot on the shelf? “We needed a decent looking bag, some marketing, a barcode, but mostly we needed to be able to service them for at least six months with sufficient stock,” Paddy says. Today, Paddy and Elaine grow 50-80 tonnes of certified organic carrots a year, along with a handful of other crops, including cauliflower and beets, for the wholesale market.

Details of the carrot harvesting and sorting process.

On the farm, Elaine does the crop planning, soil analysis, and lots of field work, to name just a few. Paddy keeps the machines running and looks after organic inspections. They hire three or four workers over the growing season. Elaine also orders all their seed, and they’re very particular about quality. A current favourite is Bolero, because it “gets sweeter the longer it’s in storage, grows well and consistently, makes a nice shaped carrot, and has good germination and vigour,” says Paddy. But they’re always on the lookout for new varieties. The downside to Bolero is its brittleness, leading to breakage in machine harvesting and packaging. “Commercially, nobody would grow Bolero if they were any bigger than us.”

Paddy and Elaine both have deep roots in agriculture and BC’s organic community. Elaine has a degree in agricultural botany, and taught organic farming for many years at UBC Farm and in the UK. Today, she sits on the steering committee of the North Okanagan Land to Table Network when she’s not out in the field. Paddy is the President of Pacific Agricultural Society (PACS), a member of the National Organic Value Chain Roundtable, sits on the COABC board, and is a part of the Okanagan Regional Adaptation Working Group for the Climate Action Initiative.

Look back 30 years and Paddy and Elaine were raising sheep in Quesnel, and watching regional certification bodies pop up around the province, with “differing standards, and differing ideals and procedures,” Paddy remembers. “It was quite interesting. The government approached us, and there was a group of aligned certification bodies that came together, that was the initial nucleus of COABC.”

Elaine sorting carrots.

Paddy was volunteering with the Cariboo Organic Producers Association (COPA), and tapped into the provincial movement. “I was always an environmentalist, it’s the way I was raised,” he says. “Organic farming is my way of doing what I believe in as my mode of production.”

At the time, there was new legislation in BC that would allow the development of a provincial regulation around organic. Not everyone was on board with a mandatory label, so they moved forward with a voluntary program in 1992, the BC Certified Organic Program (BCCOP). [Editor’s note: the Organic Certification Regulation passed in 2018, making certification mandatory for use of the word organic.]

About helping build the BCCOP, Paddy says, “I guess I enjoyed it, getting people together and getting agreements, and had a talent for it, so I kept going.” As he puts it, “I just hung around and kept on showing up and learning. We were inventing new things, the Ministry of Agriculture helped a lot but we had to invent a lot of it.” Then came the development of Pacific Agricultural Certification Society (PACS). “I learned a lot in that process, starting a commercial CB from scratch and writing a quality manual for that,” he says.

Further details of the carrot harvesting and sorting process.

At a national level, in response to an edict from the EU requiring a national regulation to ship organic products to Europe, “fruit growers in BC were very concerned about their access to EU markets.” Paddy led the development of a project to get an organic regulation together in Canada to ensure access to EU markets.

From there, Paddy when on to work with IFOAM, where he “met some really cool people, and traveled, and made relationships that are important to me today,” and with ISEAL as the standards manager, working in the global sustainability standards community. “There’s so much more beyond organic, there’s the Forest Stewardship Council, the Marine Stewardship Council, and a hole pile you haven’t heard of—all trying to save the world in different ways, using this system of consumer pull, and voluntary standards systems.”

Today, Paddy is busy working on the latest standards review, and leading a project to attempt to solve the problem of a brand name inputs list, as a project of the Organic Value Chain Roundtable. The Roundtable is “a place where leaders of the organic industry can come together to solve problems,” explains Paddy, and it’s been instrumental in bringing together a Canada’s disparate organic movement, from coast to coast, and up and down the value chain, from retailers, to producers, and everyone in between. “It didn’t turn us into one organization, but it definitely helped us focus our energy.”

Bins of washed carrots

“Organic may only be 2% of the market,” Paddy says, but “we have come leaps and bounds.” A small market share belies the outsize impact that organic farming has had on agriculture as a whole. “I do see change, change in production and in the market, towards more sustainable production. What we’ve done with our very strict standard is challenged other types of production to meet our bar.”

“As soon as you put organic carrots on the shelf, it shows consumers that they have a choice, and then the non-organic farmers are faced with, ‘How can I differentiate myself?’ It just changes the dynamic. It encourages a move towards more environmentally friendly production.”

Back on the farm, Paddy and Elaine are thinking about what’s next. They’re looking for someone to take over the carrot business, Paddy says, “but I wouldn’t mind growing cauliflower, that does well, we could grow cauliflower in the summer and take the winters off.”

West Enderby Farm’s view of the cliffs

Darcy Smith is the editor of the BC Organic Grower, and a big fan of organic farmers. She also manages the BC Land Matching Program delivered by Young Agrarians.

All photos: West Enderby Farm

 

Organic Stories: HAY! There’s a Fire!

in 2019/Climate Change/Crop Production/Land Stewardship/Organic Stories/Summer 2019/Tools & Techniques

Meagan Curtis

During the first decades of the 20th century in rural Vancouver Island, horses were used for farm work and personal transportation. It seemed everyone had a horse of some kind. Horses co-harvested the hay and grain that would feed and warm them through a cold rainy winter after these crops were cut by scythe, raked into wind rows, and left for days to cure. The numerous hay fields surrounding us are remnants of this past work—two centuries of clearing and harvesting.

Although sometimes used for pasture, a hay field is a not a rangeland. It is not a fire-adapted grassland like a tallgrass or shortgrass prairie composed of native plants. These fields of forage were created with non-native plants—plants that are maintained, managed, seeded, cut, irrigated, and fertilized. These fields were essential to how people fed themselves and the livestock that were typically present on farms in the past. In 1871, an average farm in Canada had four pigs, seven head of cattle, and 33 acres of cropland. There were three times more horses on farms then compared to 2016. This meant that much less livestock feed and soil fertility came from off-farm sources.

Many smaller acreages of previously hayed or grazed fields are no longer harvested. Their grasses choke out any possible forest encroachment. Fir, hemlock, spruce, cedar, and understory brackens and ferns cannot re-occupy the spaces. As forest fires are projected to become more frequent and severe in Western Canada and the United States, unless maintained these fields are looking more and more like a patchwork of fire risk across the landscape. An ignited field can spread to barns and houses. Underutilized hay fields have become a question of emergency preparedness and fire safety.

Wildfires near Cawston in 2018 at night. Credit: Sara Dent (@saradentfarmlove)

On average, one to two million tonnes of hay and silage are cut each year, according to the B.C. Ministry of Agriculture. The 2011 Census of Agriculture found that 64% of B.C.’s total cropland was hay. At the same time, hay production totals are becoming increasingly variable as drought and unpredictable weather patterns continue. The BC Forage Council reported in 2011 that record precipitation during the growing season and a reduction in livestock demand produced an estimated hay surplus of 122,566 tonnes in the Bulkley-Nechako region. This surplus contrasts conditions in 2006, when widespread drought and reduced livestock numbers resulted in hay shortages throughout the Central Interior, and the reality for some last year, when hay production plummeted in parts of BC and Alberta and buyers faced a price increase from $80 to $200 a ton.

With this cost, some may be convinced to get rid of farm animals. If this occurs, a decrease in demand may result in the increased likelihood that more fields sit fallow. Oscillating years of surpluses and shortages bring uncertainty and could result in a decreased willingness to participate in haying as a sure stream of income.

When a shortage arises, alternative supply possibilities within the region are not numerous and importing hay carries its own set of risks: the introduction of invasive species, the inability to secure a sufficient volume to match herd size, and/or an inability to source appropriate quality. Farmers can use some tools to help ensure sufficient hay production and reduce fire risk on their own farms. These include:

  • rotational grazing
  • utilizing different types of grass
  • water storage and conservation
  • mowing perimeters, field edges, and near farm buildings in the spring
  • avoiding mowing in late summer when conditions are dry and there is risk of sparking

These suggestions are appropriate for those still engaged in haying, but irrelevant to those whose fields stay untouched. Encouraging the haying of abandoned fields, or at least their perimeters, is one idea that Farmer’s Institutes and others have begun discussing within their communities.

This patchwork of abandoned fields is also symptomatic of a larger problem we face: the lack of working viable diverse small farms and the ongoing loss of a generation of farmers with more haying experience and equipment then the next generation can afford. Buying the equipment necessary for haying acres of land is estimated to cost $60,000 used and $130,000 new. As the average age of farmers increases and their farms are sold for millions, these fields are markers of our ever-declining food security. In the 1950s, Vancouver Island was estimated to produce 85% of its own food. Today we sit between 5-10%. Fields that have not been hayed for many years are rarely in good shape. Their gaps and bumps damage machines and the resulting feed may be of low quality. The economics of haying these fields are questionable, but so is the decision to leave them untouched and not confront why they are unused. As many pieces of haying equipment are retired with the generation that bought them, it appears time to discuss the future of our fields.

Thanks to DeLisa Lewis, Jerry Emblem, and the BC Ministry of Agriculture for their insights.


Meagan Curtis is a member of the BC Eco Seed Coop in Port Alberni, on Instagram @mtjoanfarm. Inspired by EF Schumacher, her farm has three goals: health, beauty, and permanence—productivity is attained as a by-product.

Feature photo: Hay bale with bird. Credit: Fir0002/Flagstaffotos

Sources
bcforagecouncil.ca/wp-content/uploads/2018/05/Forage-Ex port-Report-Summary2.pdf
globalnews.ca/news/4389942/feed-prices-for-cattle-climb-as-pas ture-and-hay-fields-fall-short-in-hot-dry-weather
msn.com/en-ca/news/canada/dry-conditions-have-some-farmers-making-hay-others-facing-a-hay-shortage/ar-BBlNxuP
globalnews.ca/news/4389942/feed-prices-for-cattle-climb-as-pas ture-and-hay-fields-fall-short-in-hot-dry-weather

Passing on the Farm

in 2016/Fall 2016/Organic Community
Claremont Ranch Organics transition planning

Bob McCoubrey

A Succession Planning Story

After more than 35 years of growing tree fruits and vegetables on our small farm in Lake Country, it was time to think about retirement. Our joints were telling us to ease up on the physical work and our son and daughter had moved on to other towns and careers.

The idea of selling the property was a bit scary, as we had become attached to the land and the houses. The main house was just a year or two shy of its 100th birthday, and the “guest house” was one my father had built for a previous owner when my parents first moved to the area to take up farming, back in the late 1940’s. Both houses had heritage value for us.

The land had supported our family well over our time on the farm. Sharon and I had transitioned the land to certified organic status beginning in 1989, and we didn’t want to see new owners abandoning what we had achieved by going back to conventional farming methods. We were reluctant to list the property with a realtor, taking a chance on the intentions that new owners might have.

We didn’t want to see new owners abandoning what we had achieved by going back to conventional farming methods”

Our Okanagan location meant we could benefit from the overheated real estate market. Land prices were high. However, that meant many of the people who might share our values and plans for the land might not be able to afford the in ated prices. After a lifetime of living here, close to family and friends, we wanted to stay in the area, which would mean buying in that same overheated real estate market, leaving us unwilling to sell for a discounted price to encourage like-minded buyers.

As we struggled with what to do, we were fortunate to meet Molly Bannerman and Matt Thurston. Recent graduates in agriculture from the University of Guelph, and fresh from a year of WWOOFing and touring in the United Kingdom, they were about to get married and were thinking of settling down on an organic farm. It seemed like a perfect match. They both found good jobs related to farming, and we began a three to four year “dance” to see if we could put a deal together.

There was a period when they leased the farm and lived in the small house, followed by a few years with us running the farm again, while they moved in to town, only to come back to rent an acre to grow some vegetables. It became clear that we all wanted to make it work for Matt and Molly to acquire the farm.

The farm had all of the basic equipment needed to grow the crops we had been producing, and we had recently built a cold storage facility, which would make it easier for the Thurstons to grow, store, and sell their crops while continuing to work off farm. The biggest challenge was to find a way to finance the sale in a way that the cash flow could handle the debt servicing requirements.

The key turned out to be rethinking how we would invest for the future.”

A paradigm shift needed to happen in our minds about how to manage our needs and our assets. I had always thought we would sell the farm, buy a retirement property, invest the remainder of the proceeds, and live happily ever after. The key turned out to be rethinking how we would invest for the future.

Financial advisors told us to avoid high risk investments as we moved into retirement in an effort to keep our assets safe. That would mean lower but stable returns from nancial products such as term deposits. We wouldn’t be making a lot of money, but we could see that we would have all we needed to enjoy life.

As we looked for a solution, we recalled the help given to us by the seller, when we bought the farm back in 1973. After scraping together a down payment and borrowing the maximum available to us on a first mortgage from Farm Credit Canada, we still needed to find 20% of the purchase price. The seller took a second mortgage on the property, with payments of only the interest for a number of years to keep our cash flow requirements low while we got ourselves established.

The real estate market had changed in the 38 years since we started farming. Interest rates were much lower, but the principal amounts were significantly higher. The financing solution we needed would have to put even more importance on keeping the cash flow required to service the debt as low as possible. In the final agreement, we took 30% of the sale price in cash, financed through a first mortgage by the Thurstons. The remaining 70% was financed through a second mortgage that we hold, with payments of only the interest, at a rate slightly higher than what low risk investments would pay us, but lower than what a second mortgage would cost on the open market. After four years, half of the second mortgage was to be paid out, leaving 35% of the sale price in the second mortgage for the full 10-year term.

All we had to do was to decide to invest in the future of organic farming by trusting and investing in the next generation of organic farmers.”

Some would suggest that we were putting ourselves in a much higher risk position than we would experience by investing in penny stocks on the Vancouver Stock Market; however, we had come to know and trust the Thurstons, and thought the risk was acceptable. Our lawyer did his job well, pointing out all of the things that could go wrong, and suggesting contract wording that would protect everyone’s interests. But, being an organic farmer himself, he understood our desire to believe in our new partners in farming.

So in 2011, we moved our belongings to a quiet property where we enjoy a bit of gardening and watching the weather on the lake. The financing arrangement met all of our needs. We never looked back and have not regretted any of our decisions.

Five years into the agreement, the Thurstons are ahead of schedule with their payments, and the farm is thriving. The transitions — into retirement for us and into farming for Matt and Molly, have been smooth and painless. All we had to do was to decide to invest in the future of organic farming by trusting and investing in the next generation of organic farmers.


Bob McCoubrey is a retired organic orchardist in the Okanagan’s Lake Country. With his wife Sharon, he farmed eight acres for 38 years before turning his efforts to mentorship, writing, volunteering, and community building.

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