A new organization has sprung up recently – they call themselves the Agrarian Trust.
Their mission? To tell the stories of agricultural land – specifically, how this land is changing hands. They are collecting stories of successful and difficult transitions to share with a wide audience of current landowners and beginning farmers. This organization of lawyers, farmers, professors, activists, and writers are offing the opportunity for discourse surrounding current land access issues and new ways to structure land moving from one generation to the next.
We are one of those stories.
Your steadfast farmers hope that sharing these intimate details of struggles, finances, structures, successes, and hard work will encourage others to find a way to follow their passion. We also hope that stories like ours will encourage those with capital to invest or land to transition to continue their own wishful journeys to find their perfect matches of beginning farmers. Although there are some “fairytale” components in the tale of our path to farm ownership, we know that clear communication, specific goals, and a “good fit” are all very important to successful transitions.
You can learn more about the Agrarian Trust here: http://agrariantrust.org/about/
Or, you can see the original article here: http://agrariantrust.org/land%20access/blue-ox-organics/
But, if you just want a quick peek, I’ve quoted the article below:
BLUE OX ORGANICS
Location: near Wheeler, WI
by: Brooke Werley
October 10, 2013
From the twin cities of Minneapolis and St. Paul, Minnesota, head east into Wisconsin for just over an hour to find the land Caleb and Lauren Langworthy lovingly farm and call their own.
The couple runs Blue Ox Organics. They began farming on rented land, with a year-to-year lease agreement. “We pretty quickly into that lease realized that we wouldn’t be able to invest what we needed into the soil,” Caleb explained. He and Lauren were looking to grow vegetables sustainably, and couldn’t justify the investment to build up the soil with no long-term security in the land.
So, the duo started looking for a more long-term lease. Their two major markets were Just Local Food and Menemonie Market, both co-ops in Wisconsin. They had built up a relationship with these two markets and were looking to stay within the region. “We maybe talked to a couple dozen landowners about a long-term lease, but everything came with a catch,” Lauren shared. She explained that a lot of the land in their area went to corn farmers and it was difficult to break in and get land tenure.
One of their buyers, Bob Andruszkiewicz at Just Local Food, ended up helping the pair connect with some investors. “He ended up being a real champion for us,” Caleb remembered. Lauren added, “When we would be in the store delivering food he would pull us over to customers and make us blush and talk us up very wonderfully.”
Bob, along with a local farmer, led Caleb and Lauren to two private investors that were interested in using their purchasing power to help small-scale local agriculture. “They were looking for something that fit their ideals to put their money into,” explained Caleb. The Langworthys began talking with the potential investors about what they wanted to do and everyone involved decided that they were well matched.
The couple came up with an extensive business plan to present to the investors, given direction from the Land Stewardship Project. The investors were satisfied and ready to commit to the pair. A handshake agreement led to a switch from looking for leased land to a search for land to purchase. The understanding was that the investors would purchase the land and the farmers would either lease or mortgage that land.
They began to search again looking at another couple dozen properties. Many were out of their price range because of lucrative mining and hunting in the area, or were homesteads that had fallen into disrepair and were more of a liability than an asset. Of the many properties they visited, they only brought the investors in on 4 of them. Much of the legwork and time commitment was on the shoulders of the farmers. This allowed them to make decisions based on their own needs and ideas, as well as making the process easier for the investors.
Lauren and Caleb would rework the business plan for each piece of land, adjusting it to the unique aspects of every property. When they finally found a situation that suited both the farmers and the investors, the investors purchased it outright. “They used their purchasing power to take (the property) off the market,” said Lauren. The owners wanted to close by the end of the year. This would have been a nearly impossible time frame if they had gone through a bank. The cash purchase also had the added benefit of a better price per acre.
After the closing, everyone decided that it would be best for the farmers to purchase the land. Caleb and Lauren were able to purchase the land and satisfy the investors by splitting the mortgage on the 153-acre farm and homestead. The private investors hold just over half the value of the farm in their mortgage. A second mortgage to cover remainder was obtained through a Farm Services Agency (FSA) ”Joint Financing Farm Ownership Loan” agreement. In this respect, the risk of the investment is split.
The investors have the first lien on the property. The second lien belongs to the FSA. This way, if something goes wrong, the investors will be able to recoup their initial investment. If the value remains steady, the FSA will also be able to see their investment returned. If for some reason the property value depreciates, the private investors will still receive their portion of the mortgage if the property is sold, and the FSA will receive the rest.”
As extra assistance to the farmers, the dual mortgages come with some additional help.
The mortgage with the FSA is interest-free for the first year, then had a graduated interest scale, until year 5 when the Langworthys will be paying the full interest. The private investors will sit on their investment for the first 5 years, at which point the mortgage will begin to be paid. The interest from the first five years are added to the principle.
The FSA agent who handled the Blue Ox mortgage, Sheri Houtakker, had neard of split mortgages but this was the first time she had been able to use the shared-risk method. “She was excited to partner with us. It was really exciting. Everyone involved kind of felt like they were fulfilling their mission,” Lauren recalled.
Both Caleb and Lauren thank the Land Stewardship Project’s Farm Beginnings Program for helping them “speak business.” The financial side of farming is one they felt was often left out of farm internships. “I had a lot of experience working on farms and I was ready to jump into running my own business,” said Caleb, “(The LSP program) really helped give me confidence in creating a fiscally sound farm business.” Being comfortable with the business side, the couple says, put them on a level playing field when negotiating with investors.
Learn what Caleb and Lauren are up to at the Blue Ox website.
We respect the wishes of private investors, like those who helped the Blue Ox farmers, to remain anonymous. If you are interested in investing in sustainable farming, Contact Us at the Agrarian Trust Project.