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It’s hard for new farmers to buy land. Missouri and other states are trying to help out

Joe Lau, a farmer in northwestern Missouri, inspects his field of soybean crops.
Hector Alejandro Arzate
/
Harvest Public Media
Joe Lau rents a few hundred acres throughout northwestern Missouri, where he grows soybeans and corn. But he said it was difficult to find land at first.

Access to land is one of the biggest challenges that beginning farmers face. A new program in Missouri joins a nationwide effort to help.

Half an hour from downtown Kansas City, Joe Lau runs his fingers over the leaves of his young soybean crops. He has 24 acres worth of it in this field that should be ready to harvest in about a month and a half.

Lau is a first generation farmer. He decided to try his hand at running his own farming operation around 12 years ago.

Today he rents a few hundred acres throughout northwestern Missouri, where he grows soybeans and corn. But he said it was difficult to find land at first.

“When I got started, I can't tell you how many times I would get turned down by somebody when I'd approached them about renting a farm,” Lau said.

A new tax deduction program in Missouri aims to incentivize older farm owners to pass land to beginners. The new policy allows qualifying owners to deduct the income from renting or selling their land to beginning farmers from their state-adjusted gross income.

The program is part of a growing effort across the Midwest and Great Plains to help new farmers get started as they’re up against high land and equipment prices.

About 1 million of the 3.4 million farmers in the U.S. are beginning farmers, or those who have been farming for 10 years or less, according to the latest census from the U.S. Department of Agriculture. And one of the biggest challenges this growing group faces is access to land, said Denice Ferguson, a field specialist in agricultural business and policy for the University of Missouri Extension.

“There's a really low supply of farmland,” Ferguson said. “Land values are off the charts. Farmland, if it's anywhere near an urban area, it competes with development and a lot of times that just almost prices that land out of the realm for a beginning farmer.”

Meanwhile, the average age of farmers across the country has grown to about 58 years old. Lau said many farmers are concerned about the transition of land.

“When you have so many people owning ground at the age of 70 years old, how's the other person supposed to be able to come in and seamlessly transition?” Lau said. “And that's always the biggest problem, is moving from one generation to the next.”

Encouraging transitions

Several states, including Illinois, Kansas, Nebraska and Iowa, have their own incentive programs to encourage the land transition to younger farmers. Those efforts include loans for beginning farmers – a program that Missouri has as well – and tax credits. But Missouri’s new program is one of the first to offer tax deductions.

Under the new program, Missouri farm owners who enter qualifying rent, lease, or crop-share agreements with beginning farmers can deduct the amount of annual income the owner receives under that agreement up to $25,000 per tax year.

For qualifying land sales, an owner can subtract from their state adjusted gross income the first $2 million of the sale’s capital gains. For capital gains above that amount, the percentage that’s deductible falls incrementally.

Lau no longer qualifies for this beginning farmer program, but his ears perked up when he heard of the rollout. He thinks that older farmers might be more willing to work with less established farmers if they can take advantage of tax breaks.

“To get away without paying capital gains on the first $2 million,” Lau said. “That's impressive.”

Though it’s still in its early days, Ferguson said this program could be a game-changer – especially if similar deduction programs were to popup in nearby states like Kansas, Iowa and Nebraska, too.

“The whole idea is a win-win between both the beginning farmer and the landowner,” Ferguson said.

The need is there, said Kristine Tidgren, a professor at Iowa State University and the director for its Center for Agricultural Law and Taxation. Missouri is not alone when it comes to the challenges that beginning farmers face, even with access to loan programs, she said.

“Because you're a beginning farmer, you might not be able to pay as much as someone who's outbidding you because they're an established farmer,” Tidgren said. “And maybe to get access to that land, they can afford to pay a little bit more than even perhaps a beginning farmer's lender will allow them to secure.”

Iowa offers both beginning farmer loans and tax credits for farmers who lease to new producers. But Tidgren said Missouri’s new deduction is a welcome addition in the nationwide effort to help beginning farmers on the whole.

“We need them to come in and fill in, because our current farmers aren't going to be able to continue to farm forever,” Tidgren said.

Similarly, David Howard of the National Young Farmers Coalition said that these kinds of policies are a step forward, especially when it comes to increasing access for underrepresented groups in farming.

“This is an important policy area and one that I'm happy to see states thinking about and trying to see what will work,” Howard said. “With land access, I think we really do need federal policies that sort of sets the tone and makes space and makes investments for all the work that needs to happen.”

Moving forward, Lau said he hopes this new program will motivate landowners to work with beginners, and that it will help steward the future of farming.

“I would just encourage those people with those resources, the landowners, to consider a young beginning farmer when they go to rent,” he said. “Even if it wasn't just for the tax benefits, just the fact to get a little bit of new blood into farming.”

This story was produced in partnership with Harvest Public Media, a collaboration of public media newsrooms in the Midwest. It reports on food systems, agriculture and rural issues.

I cover environmental and agriculture issues for Harvest Public Media. I’m based at KCUR, the NPR station in Kansas City. Please send story ideas, tips, or just say hello at hectorarzate@kcur.org. You can follow me on Twitter/X @hectoraarzate.