The Journey Begins

July 5, 2011 09:51 AM
The Journey Begins

Land held in trust complicates family’s transition planning.

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

The brothers were 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 usually finish each other’s sentences. "We need to get a transition plan in place; we need an endgate for us," Jim says. "We need to plan for the next generation," Greg adds.

The Moeses’ 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 other dairies.

Jim and Greg have nine siblings, all of whom are heirs to part of the operation’s land base. None are active in the business. All but one live within an hour of the Moeses’ century-plus farm in Goodwin, S.D.

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. 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 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. They are currently tackling this challenge and exploring options to retain their much-needed land base.

Welcoming the next generation. The land issue aside, Jim and Greg want to set up a transition plan that allows the fifth generation 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 in 2009. They had come back two years before that to help manage the 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 daughter.

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

The long-term employees that will be part of the transition plan are Jeremiah Pederson, who manages MoDak Trucking; Joe Turbes, the Moeses’ main cattle feeder; and Blaine TeKrony, 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.

The Moeses’ situation is typical of multigeneration farms trying to create a succession plan—and this isn’t their first time to engage in the process.

"In the past, their efforts have lost steam due to the complexity of the endeavor, the lack of competent professional assistance and confusion caused by not using a step-by-step process," says Kevin Spafford, Farm Journal succession planning expert. "To complicate matters, there has also been a lack of communication about succession and only a vague idea of how the next generation should get involved."

Soft issues. "In my workshops, people are 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.

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

The Moes Family
Goodwin, S.D.

Legacy Pioneer BadgeThe Moes family has been milking cows in South Dakota since 1884. The fourth generation, Jim and Greg, joined the operation in the early 1970s. Today, the operation includes three separate business entities: MoDak Dairy, MoDak Feeds and MoDak Trucking.

Dairy Today has been following Jim and Greg’s journey, which also includes nine siblings—all of whom are heirs to part of the family’s land base but none of whom are active in the business. Their mother, Eileen, owns several quarters of the land the Moeses operate. Another huge chunk of land is in a family trust, with other siblings named as heirs to specific quarters.

All of the land is on short-term annual leases, which provides little stability for the Moeses’ large feed needs. In addition, the buy-sell agreements between Greg and Jim are even shorter-term, which makes transition almost impossible if one of the brothers leaves or dies.

Read more about the Moes family.

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