Farm fortunes rising, but is your succession plan ready?

When a farm’s income heads in the right direction, there’s usually no shortage of things to spend the money on. Debt reduction, yard upgrades, or perhaps even a little room to invest in something on the wish list. 

It can also be a good time to think a little further ahead. 

For farming families across New Zealand, succession planning is one of those jobs that can easily get pushed down the list. There’s always something more immediate to deal with. But when the farm is in a stronger financial position, there can be more options around how the business moves from one generation to the next. 

Good times create options 

The current conditions across much of the agricultural sector are creating a useful opportunity for those conversations. Dairy farmers have recently benefited from a sizeable Fonterra payout, while beef, sheep and wool markets have also improved. For many farm businesses, incomes are heading in a more positive direction. 

That makes planning more appealing than it can be when cash is tight. According to the Ministry for Primary Industries, agricultural export revenue is expected to rise 6%, supported by strong dairy and red meat prices, high production volumes, solid horticulture results and a favourable NZD/USD exchange rate. 

For farmers, stronger cash flow can mean having choices that may be harder to consider when money is tight. That could mean paying down debt, making capital improvements, changing shareholdings, paying out a retiring partner or looking at investments away from the farm. 

The key is looking at the whole picture and considering how the available funds best support the longer-term direction of the business and family. 

Start with where the farm is heading 

Before getting into the detail, it helps to have a conversation about the bigger picture. What happens when the next generation is ready to come in? Is the intention to keep the farm in the family? Could selling be the right option? Is there an opportunity to build investments away from the farm? 

There isn’t one right answer, and plans can look very different from one family to the next. Having some clarity around the long-term direction is an important starting point. Once the family knows where it wants to go, it becomes easier to work out what needs to happen next. 

The earlier those conversations happen, the more time there is to work through different possibilities without having to make decisions in a hurry. 

Things don't always go to plan 

Good commodity prices and healthy farm incomes can make the future feel more predictable. But anyone who has spent enough time on a farm knows how quickly things can change. 

An accident or unexpected event can mean someone needs to step away from the business earlier than planned. That can turn a conversation that seemed a few years away into something that needs to be dealt with immediately. 

According to WorkSafe New Zealand, agriculture employs about 5% of the workforce but accounts for around 25% of work-related fatalities and serious injuries. That is one reason succession planning is worth discussing well before retirement is on the horizon. 

A succession plan doesn’t have to map out every detail from day one. It can simply give everyone a starting point and a shared understanding of what might happen if circumstances change. Regular conversations also give family members more opportunity to understand each other’s expectations and get involved in shaping the future of the business. 

The conversation is already happening 

The recent Fonterra payout has prompted more dairy farmers to think about what comes next, particularly after several good years and opportunities to reduce debt. For some, that might mean bringing the next generation into the business. For others, it could mean selling the farm, building investments away from the farm, or creating a pathway for one generation to step back. 

Those decisions often come with some important questions. Are there children interested in farming? Is the farm likely to stay in the family? Is retirement approaching? Would off-farm investments provide greater financial security? 

They aren't necessarily easy questions to answer. 

For families, succession can bring together different expectations about the future, money, ownership and who wants to be involved in the business. One child may want to farm, while another has no interest in it. Parents may want to retire, while the next generation isn't quite ready to take over. 

Starting the conversation early gives everyone a chance to work out what is realistic, rather than trying to solve everything at the point when a decision must be made. 

There’s more to it than the family 

Once the conversation gets underway, the practical side of succession can become complicated. Banks, lawyers, accountants, business partners and multiple generations of the family may all have a role to play. There can also be tax considerations around ownership, inheritances, and the transfer of assets. 

Succession arrangements are often multiparty, with different people bringing different priorities to the table. Part of the role of an advisor is helping balance potentially competing interests and making sure the financial and tax implications are considered alongside the family’s broader plans. 

Getting the right people involved early can make it easier to understand what is possible and where potential complications might sit. 

Keep the conversation going 

Succession isn't necessarily something that gets ticked off after one meeting. Plans change. Children change their minds. Businesses grow or contract. Debt gets paid down. Property values move. Retirement plans evolve. That means the conversation can be just as important as the final plan. 

Succession planning is an ongoing process rather than a one-off exercise. Starting earlier gives families more time to consider their options, adjust the plan and deal with unexpected changes. It may feel uncomfortable bringing up money, ownership and retirement around the kitchen table. But putting those issues on the table early gives everyone more time to understand what the others are thinking. 

It also helps avoid making major decisions under pressure. Most rural businesses, and particularly farms, represent significant assets. Having to find or restructure millions of dollars quickly can add unnecessary pressure at an already stressful time. 

A strong year on the farm can therefore be about more than the bottom line. It can provide some breathing room to think about debt, investment and what the next generation might look like. For farming families, having those conversations while there are still plenty of options available can make the eventual transition a lot easier to navigate.

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