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An Issue of Trust

September 13, 2010
By: Jim Dickrell, Dairy Today Editor
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Julie (far left) and Greg Moes (far right) with son-in-law Matt, daughter Janet and brand-new sixth-generation Amelia Jo.  
 
 

 

Bonus Content:

Farm Journal Legacy Project

Every morning at 4, Jim and Greg Moes meet in their office at their dairy’s new milking center to plan the day’s activities. It’s quieter then, before feed wagons and skid steers and milk trucks roar through the operation.

The brothers were both born in 1953, only 11 months apart. While they can be strong-willed and opinionated with outsiders, they’re in near perfect unison on their goals for their families, employees and business.

They’re so close that they can—and usually do—finish each other’s sentences. "We need to get a transition plan in place; we need an endgate for us," Jim says. "And we need to plan for the next generation," Greg adds.

Their situation is an ideal case study for the Farm Journal Legacy Project. The project, sponsored by Pioneer Hi-Bred, is working with three farm families that are transitioning their operations.

The Moes’ case is complicated by the fact that they manage three separate business entities:
 

 

  • MoDak Dairy, a 1,400-cow operation, milks three times a day and raises all replacements.

 

  • MoDak Feeds manages some 3,000 acres of cropland for the dairy operation.

 

  • MoDak Trucking provides trucking services for the dairy and, up until the MoDak dairy expansion in 2008, provided total mixed rations to neighboring dairies.


Jim and Greg have nine siblings—six sisters and three brothers—all of whom are heirs to part of the operation’s land base. None are active in the business. And all but one live within an hour of the Moes’ century-plus farm on the outskirts of tiny Kranzburg, S.D., a dozen miles east of Watertown.

The family is close-knit and gets together for holidays. At Thanksgiving, they each sit in the same spot around the table as they did when they were kids. But as Jim and Greg start the work of passing the farm to the next generation, things are getting complicated. And they fear the transition could blow up the family, the operation, or maybe both.

"We grow all of our forages, so we have a little better control on our feed costs," Greg says. "But that’s why we need the land base kept together to grow feed and get rid of the manure," Jim immediately adds.

Here’s why transition planning is so complicated for Jim and Greg. Their mother, Eileen, owns several quarters of the land they operate.

Another huge chunk of land is in a family trust, with other siblings named as heirs to specific quarters.

The problem is that the acres in the trust have different values because of varying soil type and because some is cropland, some is in pasture. Jim and Greg fear that when their mother passes on, this could cause trouble. There have already been rumblings from some siblings that they want their money as soon as possible.

Buying their siblings out in one fell swoop would be a challenge for Jim and Greg. Financing that, along with their $10 million dairy facility, would stretch cash flow to the breaking point. Even now, with dairy prices hovering near break-even, the operation is in survival mode. "Every $1/cwt. swing in milk price equals $320,000/year in cash flow," Greg says.

Their estate planners’ only suggestion was to buy life insurance. But each year, as Eileen, Jim and Greg age, the premiums become more cost-prohibitive.

The land issue aside, Jim and Greg want to set up a transition plan that allows the fifth generation of Moes to take ownership. They have several longtime employees that they want to bring into ownership as well.

Lack of a clear transition plan was the reason, at least in part, that Jim’s daughter Nichol and her husband, Eric, left the operation a year ago. They had come back two years before that to help manage the new dairy, which has grown from a few hundred cows to its current 1,400. Jim also has two sons who have worked on and off at the dairy. Neither are currently involved.

Greg and his wife, Julie, who serves as chief bookkeeper and paymaster, have three children. Their youngest son, Scott, came back to the farm three years ago to work as herd manager. His older brother, Jake, came back last year to manage the double-20 parlor (expandable to a double-30). Greg and Julie’s oldest child, Janet, lives in North Carolina with her husband, Matt, and their baby daughter.

And then there’s Lee Tol, the son of Jim’s wife, Cathy, by another marriage. Lee, a trained mechanic, has worked with Jim on the cropping side of the operation for two years.

The long-term employees that will be part of the transition plan are Jeremiah Pederson (six years), who manages Mo-Dak Trucking; Joe Turbes (23 years), the Moes’ main cattle feeder; and Blaine TeKrony (20 years), who is the assistant crop manager and works with Jim.

"Our employees built this operation alongside us, and they deserve a share in ownership," Jim says. "Without them, we would not have grown as we have," Greg adds.

The Moes’ situation is typical of multigeneration farms trying to create a succession plan. "The Moes have tried to engage in the succession planning process," says Kevin Spafford, Farm Journal’s succession planning expert. "But the effort loses steam due to the complexity of the
endeavor, the lack of competent professional assistance and confusion caused by not using a defined process."

Their situation is a bit atypical as well. "There’s a lack of communication about succession, no clearly defined objectives and only a vague idea of how the next generation should get involved," Spafford says.

"In my workshops, people are often surprised that we don’t discuss trusts, wills, the estate tax and buy-sell agreements," he says. "Instead, we talk about communication, family dynamics, leadership development and creating a bigger opportunity.

"These soft issues are much more difficult to learn, but without confronting the emotional stuff, we won’t achieve lasting change."

Let the work begin.


ABOUT THE FARM JOURNAL LEGACY PROJECT

One after another, readers have reached out to say "thank you" since we launched the Farm Journal Legacy Project in 2008. That’s because the self-reliant qualities that make farmers the strong backbone of our food supply also make it difficult for them to turn over the management reins to the next generation.

The Farm Journal Legacy Project is a catalyst for the process to begin and is devoted to cultivating multigenerational success. A key part of that is providing producers with the tools to simplify the complex and daunting process of succession planning.

A grant from Pioneer Hi-Bred, a DuPont business, will make planning easier for farmers as agriculture takes on the largest transfer of wealth in history.

Even though 80% of farms plan to transfer control to the next generation, only 20% are fully confident in their succession plan. The startling distance between those numbers is at the heart of what motivates Farm Journal and Pioneer to take bold steps to close the gap. The Pioneer grant helps make the following efforts possible:

  • Extensive editorial coverage of succession planning throughout Farm Journal Media—in Farm Journal, Top Producer and Dairy Today magazines, on the "AgDay" and "U.S. Farm Report" TV shows and on www.AgWeb.com.

 

 

  • A monthly "Leave a Legacy" TV show on the "AgDay" national network.

 

  • Hands-on workshops led by Kevin Spafford, Farm Journal succession planning expert.

 

  • A Legacy Project workbook to help guide and organize your analysis, planning and succession steps.

 


—Charlene Finck, Editor, Farm Journal

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FEATURED IN: Dairy Today - September 2010

 
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