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Opening up future options
Like much of the work on a farm, transition planning is never done. Things are constantly changing. And whether it's because of new business opportunities, changing management strategies, or maturing children, a farm transition plan must change as well. That's the challenge faced by Donnie and Tammy Lawson as they try to create opportunities for their son, Clayton, and daughter, Kay Leigh, to return to Prairie Creek Cattle Company, their Thorntown, Indiana, operation.
“We don't want to force the kids to return to the farm. But we want to be able to create opportunities for them if that's what they want,” says Donnie. “We want the farm to be one of the options as their professional choices unfold after college.”
While Kay Leigh, who has been working on an agriculture degree at Purdue, hasn't made that choice yet, she already works daily at the operation. That path may have been charted eight years ago with a choice she made as a high school freshman. “As part of our FFA class, we were required to do a Supervised Agricultural Experience project. I worked with Dad to start a retail freezer-beef business that provides high-quality, locally raised beef to area customers."
Son Clayton's is a senior at Purdue majoring in agricultural economics. But a commitment to the U.S. Army ROTC will require four years of active duty and four years of reserve duty after graduation.
“His intentions are to come back to the farm. But you never know what other opportunities he might encounter as he sees the world. As we formulate a farm transition plan, we don't want to lock him into returning, but we also don't want to shut him out,” says Tammy.
Lawson Farms, Inc.
The Lawsons have been part of a larger operation, Lawson Farms, Inc., that originated with Donnie's parents more than 40 years ago. Today, this subchapter S corporation is owned by Donnie, his brother, Danny, and their families. Another entity, Lawson Farms, LLC, is the operating company, owned soley by the two brothers, which includes the cropping operation, the cattle operation, and several smaller business ventures.
“With children coming back — or potentially coming back — in both families, we would each like to take a more independent direction. We do, however, want to continue coordinating resources plus sharing labor and machinery,” says Donnie.
“Thus far, we're finding that there is limited ability for the family business to maneuver within a subchapter S corporation, and there are potentially huge tax consequences to removing assets from that type of entity,” he adds.
“We're not trying to shirk our responsibility by avoiding taxes. But we want both family businesses to be able to survive and grow. We've been told that it can be done, so we're continuing to work on a plan that will peel our two operations apart financially,” says Tammy.
“We knew that estate plans become outdated and that our challenges would be associated with aging corporate tools. Our experience demonstrates that farm business planning is complicated and requires professional help,” says Tammy. “Agriculture has truly become a business, and it seems we need a team, including lawyers and accountants as well as nutritionists and GPS mapping experts, in order to survive.”
Cattle and hay
What the Lawsons are more comfortable with is raising cattle and hay. While they all work together, Tammy typically handles calving, Donnie tackles feedlot rations and chores, and Kay Leigh works closely with the brood cows and breeding plans. They feed about 500 head per year. Some of those come from their own herd of 150 Simmental and Angus brood cows; the rest are custom placements.
Cattle feeding coming back
“Cattle feeding is coming back to Indiana. The number on feed is up 15% since 2004,” says Donnie. “There are several reasons, including that there are more and more sources of low-cost feed ingredients that reduce ration costs but not animal performance. Wet distillers' grains from the increasing number of ethanol plants is a good example. And we're very aggressive at locating corn screenings from elevators and processors to replace more expensive whole corn.
Luring a beef processing industry
“Cattle feeding moved out West decades ago because that's where the cheap corn was. Corn's not cheap anywhere now,” Donnie continues. “With several processors nearby, we have the advantage of more sources for by-products. Next, we need to lure a beef processing industry to make the shift more complete.”
“Most of the good land here is in corn and soybeans, so our pastures are limited to the poorer ground and rougher patches along creek beds. We work with fewer and fewer acres, while trying to maximize the beef — all while being conscience of environmental stewardship. Indiana has a renewed future in producing beef,” says Donnie, who is also a 24-year veteran of Thorntown's volunteer fire department.
This Indiana family sees a bright future for beef.