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Farmers’ Early Retirement Aid Secures the Future of Family Farming

The exit decisions of elderly farmers are shaping the structural development of agriculture. In Finland the most important determinants that drive farmers to retire include the farmer’s and his or her spouse’s age, the number and age of potential successors, the size of the farm, its location and main produce, and the level of income available after retirement.

According to Minna Väre, Research Scientist at Agrifood Research Finland, who is currently working on her doctoral dissertation on the determinants of farmer retirement and farm succession, Finnish farms tend to be family businesses where the farmer’s goal is to eventually pass the farm on to the next generation.

– The early retirement aid is needed just to make succession a realistic possibility as well as to secure the future of farming. Around 50 percent of successions rely on the retirement aid. This is why the terms of the scheme as well as the benefits of the pension must be sufficiently tempting.

Succession More Likely on Large Farms

For her dissertation, Minna Väre applied statistical analyses to Agrifood Research Finland’s archives of returning holdings as well as six years’ worth of data from over 1,000 farms included in the records of the Finnish Farmers’ Social Insurance Institution. Her research material is unique in its extensiveness throughout the world.

The likelihood of succession increases with the farmer’s age and the size of the farm. The farmers’ early retirement aid, on the other hand, becomes less tempting as farmers approach the upper age limit of the scheme. The likelihood is smaller in northern Finland and on animal farms.

Väre investigated the length of time that farmers continued to work after reaching the age limit for qualifying for the aid. The results indicate that succession precedes the close down the farm. Farming couples take early retirement together, but one spouse drawing another kind of pension did not influence the other’s decision to exit farming.

Operating Environment in Agriculture Affects the Number of Successions

According to Väre, external income does not have a significant impact on the continuity of family farming in the long term. External income does, however, influence the timing of close down the farm and the input of farmers who stay in business.

Other determinants that affect the materialisation of successions include economic policy, producer prices and agricultural subsidies. – Since Finland joined the EU and producer prices dropped, the number of successions fell significantly, Väre explains.

The farmers’ early retirement aid is a pension awarded to farmers who exit farming. Retiring farmers exit farming either by selling or renting their farm to another farmer, or by means of succession. The scheme aims to improve farm structures and encourage successions. The year 2007 marks the beginning of a new programming period for the scheme.

Minna Väre was born in Nummi-Pusula, Finland, and graduated as a Master of Science in Agricultural Economics in 1997. She has been employed by the Economic Research unit of Agrifood Research Finland for ten years.

Minna Väre’s doctoral dissertation, “Determinants of farmer retirement and farm succession in Finland” will be reviewed on Friday 16 February 2007 at 12 noon at the Faculty of Agriculture and Forestry of the University of Helsinki. Väre will be defending her dissertation in Auditorium XII of the main building of the University of Helsinki, at 34 Unioninkatu. Her opponent will be Reija Lilja, Docent and Research Director at the Finnish Labour Institute for Economic Research, and Matti Ylätalo, Professor at the University of Helsinki, will be acting as her custos. The Dissertation falls within the field of Agricultural Economics. It will be published in the journal of Agrifood Research Reports.

Ulla Jauhiainen | alfa
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