The family farm and the modern global family

By Charles Lowenhaupt

At a recent European family office conference, a member of the audience asked me what would be the best investment for a family of wealth. I responded that if she meant a truly long-term investment with a 50- to 100-year horizon, I would rely on the advice of a wise old American friend of mine. The best investment, he said, would be farm real estate in a common-law jurisdiction with a good recording system, such as the U.S., Canada or Australia.

One year after that conference, I met with an adviser to three wealthy Beijing families. I asked him what his clients were buying as investments, and he replied that their attention was focused on finding good farmland or timberland in the Southeastern U.S. “We believe that is the best long-term investment,” he said.

Throughout the world, many families of substantial private wealth have owned farms or timber real estate for generations. Other wealthy families are now buying farms. In fact, the family farm can have more than purely financial benefits. It can help build and preserve family legacy (as identity) in a number of ways. But making the family farm serve its purposes is getting more complicated than ever for the modern global family.

A long time horizon

Well-selected and well-run farmland can be an excellent investment for the long term. A multi-generational family can look beyond the quarterly performance and even beyond the five-year, long-term perspective of corporate finance.

As a financial investment, though, farmland rarely provides substantial current income. For this reason, its owners should be without debt and should recognize that its value will come with capital appreciation. There will be little current economic income for living, and there can be years when earnings are minimal on account of climatic events or commodity prices. However, there have been many landed families over the generations, and those families have held great value in their land.

As many wealthy individuals have come to understand, the family farm is much more than a purely financial investment. If managed strategically, farm ownership can help a family build legacy and maintain harmony, two challenges every family faces.

A family farm can come to represent a family’s place geographically, historically and in a community. The farm itself can generate comfort and represent sentimental value for many generations, while also being the geographic marker of the family. Consider the medieval estate, with the noble family surrounded by serfs and tenants. It is geographically fixed, it has a history within its boundaries and it represents status and role in a community. The family members gathering at the farm are respecting history, rooted in a particular place and having a presence in the community.

Building family legacy

The family farm can be seen as a refuge from the grime and dangers of the city. It is a retreat in times of trouble. It is a place of wholesome living and minimal distractions. On the farm, family members and their children can spend summers and weekends together, being outdoors and close to nature.

A farm represents production of food, and much of a family’s identity is involved in food. The family grows up around a dining room table and dinner is often a family ritual. Holidays, reunions and other celebrations include an abundance of food and rich interaction that creates the fabric of a family. The family farm can highlight the family’s relationship to its world.

The farm is also a place to reinforce old-fashioned values reflecting the importance of family, concern for community and engagement in productive activity. A farm is still a place of hard work and strong relationships with neighbors and the community. The family farm is a place where a child can learn the life lessons that parents and grandparents hope to instill in the next generation.

The notion of stewardship, that we have responsibilities to future generations, is inherent in the family farm. Cicero observes in De Senectute that old farmers plant trees as well as annual crops. Although they may sow the seeds of the annual crops, they will never live to see the full growth of the trees. When asked why, the old farmer replies: “For the immortal gods, who have willed not only that I should receive these blessings from my ancestors, but also that I should hand them on to posterity.”

The well-run farm embodies legacy that can be passed on to future generations, whether planted in trees or managed so as to stay fertile and productive over many years. It can be a legacy to be preserved and enhanced.

The challenge for the modern global family

The capacity of the family farm to embody legacy and to sustain harmony is challenged for the modern global family. Climate change can threaten the long-term investment quality of a farm if areas once lush and fertile become arid. The transition from farm to dustbowl threatens many areas of the world, even in common-law countries with good recording systems. Economic pressures to produce crops can result in denigration of the land, so that the old farmer is not planting for future generations.

Even as climate and economic developments threaten the economics of farming, the modern global family has difficulty owning and using a family farm. The family itself may be based in Beijing or Singapore, where there are no “backyard” family farms with common law and recording stability and the family faces the many difficulties of managing remotely located property. The modern family is likely to be scattered around the world, so that there is no opportunity to gather on the farm. Multi-jurisdictional families have difficulty finding a place to gather for any purpose and instead build a kind of “virtual” place rather than geographic space. Multi-culturalism can make the family farm that breeds hogs anathema to the in-law who is an Orthodox Jew or a Muslim.

It may be difficult for the family farm to serve as a refuge for all family members when they are scattered throughout the globe. Equally challenging for the modern family are the plague of pollution and the consequences of poverty and political upheaval. These scourges can touch even the most remote farms. Parts of the rural U.S. have all the turmoil of cities as the rural population loses the advantages of wealth and education. The farm’s “healthy environment” may be inaccessible or gone for the modern family.

Technology and the farm

For the modern global family farm, agricultural technology can play an important role. Technology is being developed to allow sustainable farming to increase productivity without denigrating the environment. Indeed, one of the goals of new agricultural technology is feeding a global community without destroying the environment. Drought- and disease-resistant crops are being developed so that food itself can feed a hungry world. Agricultural-based fuels may ultimately replace fossil fuel, and timber may be harvested to ensure a replenishing inventory of mature trees in a forest.

It’s important for a family farm to utilize the technology not only to ensure sustainability and productivity, but also to ensure the farm itself can be a good long-term investment. Investing in the development of that technology, which can be implemented globally, can expand the family’s sense of place into a world community both geographically and historically. Consider how a family-owned company like Cargill can establish a family in the global -community.

Developing good technology can feed the world. Investing in agricultural technology that promotes sustainable farming can help eliminate hunger and improve the planet. This type of “impact” investing allows the family to make a difference in the world. A family’s legacy can truly be improved by applying modern technology to the farm and by investing in ways that improve farms everywhere.

Given the turmoil in the world today, it is time to redefine the family farm for the modern global family. If it is to be a physical place, it must be a model farm that operates with the latest available technology. If it is to be a vision, it must be as an investment in technology that helps feed the world and keep it clean. In fact, a wise family will realize that the farm is an opportunity to set the standard for sustainable and efficient farm management and encourage others to follow.

Charles Lowenhaupt is chairman and CEO of Lowenhaupt Global Advisors, a firm that helps families of substantial wealth build, preserve and control their assets (lowenhauptglobaladvisors.com). He is also managing member of Lowenhaupt Global Advisors’ affiliated firm, Lowenhaupt & Chasnoff LLC, established by Lowenhaupt’s grandfather in 1908.

 

 

 

 


 

 

 

 

Copyright 2013 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permssion from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

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January/February 2014

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