Historically many farmers have borrowed heavily from banks to purchase the original farm. In most instances, the debt has been repaid by way of a table mortgage. When they have moved to a larger farm, or purchased a run-off or a neighbours property, they have borrowed more money from the bank. Sound familiar?

Subsequently, over the years, farmers have built up a large asset. Often when retirement age is approaching, they borrow again against the farm for a retirement block.

In doing so some basic investment rules are breached. No fund manager today invests totally in Mortgages, Fixed interest cash deposits, shares or land. Farmers get trapped by their fundamental need for land which is valuable when returns are high but drops in value when returns are low. To enable a son or daughter to take over the farm the following methods have been employed:

• Gifting by one or many means, effectively giving away many thousands of dollars to one family member.


• The next generation farmer borrows heavily. Often it is not possible to buy all farm titles with some being leased and bought later.


• Parents provdie vendor finance at a generous rate well below what they could receive elsewhere which depletes their retirement income.


• The next generation farmer often has to buy the shares off his/her non-farming brothers and sisters. Often, land may need to be sold if further finance cannot be arranged.

Just when parents have relieved themselves of borrowings from the bank, the next generation starts the vicious cycle all over again. Over three generation, the farm is not paid for three times but around nine or te