This month I’m delighted to welcome as guest blogger HBG team member Heather Willis (who took this picture from her “back yard”)! A skilled ranch hand herself, Heather is our resident expert on all things farming and ranching, and in this article she shares her knowledge on researching major gift prospects who bought the farm.
Have you come across prospects every now and then who own a farm or ranch? Valuing these assets can vary widely depending on what part of the country they are located. Often we are left with more questions than answers as to how to use the information to estimate wealth.
Having lived in the West most of my life, currently in Montana, I am gaining an understanding of which ‘types’ of farmers and ranchers are the better prospects. There are so many variables to consider that I think it might be more helpful to look at farmers and ranchers in terms of characteristics, like a modeling project, in which you evaluate which ones indicate more wealth than others.
When looking at the profession in general, you will probably get an initial impression that farmers and ranchers do not tend to be major gift prospects. Land rich, cash poor, right?
For the majority, that is probably true. According to the latest agriculture census, the United States has 2.1 million family owned farms and ranches. Eighty-eight percent of all farms were small family farms, with less than $350,000 in gross cash farm income, and of them only 16 percent depended upon the farm for the majority of their household income.
I have experienced farmers as being very philanthropic people, donating time, money, or in kind gifts. So every farmer and rancher is a prospective donor in some way or another, but who stands out more than the others?
Let’s take a look at what I think are viable characteristics that may suggest higher and more significant philanthropic potential from a farmer or rancher.
- They’re over 60 years of age: The average age of farmers and ranchers has been steadily increasing for the past thirty years and is now nearly 60 years old. This means that the next generation is leaving the farm for better economic opportunity and there is no one left to take over the operation. There is also a declining trend in new, young, non-family farmers entering the profession. Because of these trends, older farmers may have a big decision to make, to sell the farm or not. The tax burden is significant and many look for ways to sell more affordably.Nonprofits can take advantage of this while helping the prospect lessen the burden of having to sell their property. There are many opportunities for a fundraiser to approach these prospects who face this situation, not only to lessen the financial burden, but also give them retirement income for years to come. Finding the age of your prospect is fairly easy.Sources: Using resources such as Lexis Nexis, voter registrations, or possibly social media sites such as Facebook and LinkedIn can be helpful.
- They have income from another source: This may be somewhat obvious but it’s easy to forget that the majority of farmers earn income from a secondary source. Sixty one percent worked off the farm at least some days, and 40 percent worked off the farm for 200 or more days. Of course, certain professions indicate a higher capacity, so keep in mind where the secondary income is coming from.If the majority of your prospect’s wealth is from a different source – inheritance, professional career on Wall Street, or they’re an executive in a large private or public company – then they may be more likely to be able to make a major gift. Finding the actual income can be difficult of course, so finding their profession and estimating income may be your only option.Sources: LinkedIn, company websites, proxies, political contributions, and social media can be used to find professions.
- Their primary residence is NOT on the ranch: In the U.S., the farm is the place of residence for three fourths of principal operators. However, major gift prospects will tend to purchase a farm/ranch with their ‘extra’ money for tax purposes, land conservation interests, vacation/recreation destinations, or even for social status. These folks will usually have a primary residence near their main source of income, not on the farm or ranch. (Which technically makes them a landowner, not a farmer or rancher, but we’ll leave them in for the sake of research!). A well-known example of this would be Ted Turner.Sources: When determining primary residences, look for things such as out-of-state mailing addresses on the ranch or farm property.
- The size and location of the ranch: Obviously landholding size in the U.S. is an indicator of wealth. Land prices are extremely high in the majority of the country and continue to rise. The average price per acre of a ranch depends on many factors, for example:-Is there water present for irrigation, livestock, and recreation? If so, you can expect a higher price per acre.-What is the landscape – treed and mountainous, river bottom, or fertile soil with farm ground?The United States farm real estate value, which is a measurement of the value of all land and buildings on farms, averaged $3,020 per acre for 2015. This is up 2.4 percent from 2014 values.Regional changes in the average value of farm properties ranged from a 6.1 percent increase in the Southern Plains region to 0.3 percent decrease in the Corn Belt region, with the highest at $6,350 per acre. The Mountain region had the lowest farm real estate value at $1,100 per acre.Location is also important when it comes to farm revenue. The top five states for crop sales are California, Iowa, Illinois and Minnesota. For livestock sales Texas, Iowa, California and Nebraska are at the top. The average value per farm across the U.S. is $1.1 million.
Sources: You can get the size of the farm or ranch from property records and sometimes in news articles or websites that the business might have. If you would like to search by state and county to get an average size of farm, income per farm, and what commodity is typically grown, use this USDA resource. Use Google Earth to look at the location and topography of the farm or ranch.
- Commodities produced and sold: There are many different commodities in agriculture. What does the farm or ranch grow and sell?The top five commodities have traditionally been cattle and calves, poultry and eggs, corn, soybeans, and milk. Beef cattle farming and ranching is the largest farm sector in value of sales and number of farms. Poultry and eggs has been declining in the past few years.But it’s not just crops or livestock that can produce revenue: Just over 33,000 farms offered agritourism and recreational services such as farm or winery tours, hayrides, hunting, fishing, and other such activities, a significantly growing source of income for farms and ranches.Sources: Using the EWG’s Farm Subsidy database you can get a general idea of the commodities the farm raises, as well as any payments they received for the year. The USDA ag census is another good source to search by state and county to find what is typically grown in a specific region. You can also search local news or Google by creating a search string with the farm or ranch name, or possibly just the owner’s name, and other terms such as “livestock sale” or “hay for sale,” for example.Some farms and ranches that specialize in organic products, recreational opportunities, or registered livestock may have their own websites to promote their products or sell directly to the public. You can gain a great deal of insight from these websites. If you find the number of cattle raised/sold, or tonnage of hay produced for example, you can then use any commodity market site such as AgWeb or Ag Market News to give you the latest information on the current pricing.
- Other characteristics: A study conducted by Iowa State University uncovered some other characteristics that were shown to be statistically significant indicators of philanthropic activity including the number of local organizations the farmer belongs to; self-rated level of collaboration to solve community problems; the farm’s gross income; household income; percent of household income from farming; and education level.
So even though farmers and ranchers may be a smaller subset of the prospects we research, there are still hidden gems that we shouldn’t ignore. Hopefully identifying some of these characteristics the next time you research a farmer or rancher will help you determine whether they are a major gift prospect or not.