Winter
2016
grainswest.com
35
The question now was how to bring more land into the
operation. The deal Harvey and Mildred worked out was
that when any of their sons bought land, it would be rented
back through the joint venture. Essentially, this created a rent-
cropping scenario where the person who bought new land
would receive 35 per cent of its crop value, while Pederson
HBTR received 65 per cent, which, in accordance with the
joint-venture arrangement, would then be split 40-20-20-20.
For example, if Terry bought land and rented it to the joint
venture, he’d receive 35 per cent of the crop value as the
landowner, and an additional 13 per cent (20 per cent of 65 per
cent) as his share of Pederson HBTR, for a total of 48 per cent of
the crop value off his piece of land.
When Harvey bought land, however, he did not lease it
to the joint venture, but included it in the farm’s overall land
base, simply sharing the crop value through the 40-20-20-20
agreement. “Any new land I buy, I don’t charge rent on,” he
said. “It’s just part of the farm.”
Even Harvey has a little difficulty explaining this decision.
Mainly, he does it because he believes it’s the right thing to
do. With 40 per cent of overall crop value coming to him,
he doesn’t feel the need to take additional income in rent,
particularly as it would, technically speaking, be coming out of
his sons’ pockets. “I didn’t want to end up with a better income
than they did,” he said, explaining the importance to him that
everyone has a similar income level.
For Harvey, it’s also about building a stronger business. “I
wanted an incentive for them to want to buy land,” he said. “Any
land they own, they get 48 per cent, so that’s quite an incentive.”
It’s not only an incentive to buy land and expand the
business, he added, but also to take pride in their land and
look after it. It means that everyone shares in the value of the
crop, regardless of whose land it’s planted on. They also
share in the pain or gain if a particular field gets hailed out,
for example, or produces a bumper crop. Through it all, each
individual family owns their own land free and clear.
Today, the Pedersons crop 5,300 acres under this
arrangement and it’s working very well.
“Because of our shared assets, we’re a viable operation,” said
Terry. “Economies of scale have probably been the biggest
benefit to the business.”
Good loves how the Pederson family has managed their
business so that one farm can support four families without
having to buy four sets of everything. “The business subsidizes
individual land ownership,” he said. “They have separated the
business from the land wealth and, in doing so, have created
individual wealth for everyone.”
Good’s point is that land has to be dealt with, but sorting out
the actual business structure of succession should come first—
how all parties are going to receive income (salary for labour,
management fees, return on equity, redemption of equity), how
non-farming children are going to be recognized and how the
THREE GENERATIONS OF PEDERSONS:
From left to right: Harvey, Brian, Terry, Rick and Brandon.
