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By Adam Diamond, NODPA Contributing Writer
The Stoller Family
Stollers Organic Dairy, run by Scott and Charlene Stoller and four of their grown children, is a 160-cow dairy in Sterling, Ohio, in the Northeast part of the state about 50 miles south of Cleveland. The Stollers own 490 acres of farmland and rent another 350, of which 67 are in organic transition. They have a mostly Holstein herd, with some red and white Holsteins, and a smidgen of Brown Swiss genetics.
As the sons take over management of the farm, they are switching to AI from what had been an exclusive use of bulls for breeding, and have increased the use of technology to optimize breeding efficiency, cow health, milk quality and forage quality. Four years ago, they got rid of the stanchion barn and built a double 16 parabone milking parlor that allows for the testing of cows every time they enter the parlor—for being in heat, how much they eat, level of movement, and components in their milk. Just like cows, humans take some time to adjust. According to Scott, “when we switched to a parabone parlor the old cows and old farmer didn’t do as well. The new cows and new farmers did fine.” The older generation of Stollers has at times resisted some of the innovative practices advocated by the younger generation, but ultimately have come around.
The Stollers bought Scott’s grandfather’s farm in 1996, located across the road from the farm he grew up on, which is now farmed by his brother. They became certified organic in 2001, and started shipping to Organic Valley two years later. The story of how the Stoller farm went organic is quite poignant, and helps explain how they came to adopt their unique business structure. It is a story of questioning of farming paradigms, intense personal trauma, and peer support. Out of this questioning and trauma has emerged an openness to innovation, and a strong commitment to intergenerational farm partnership and continuity.
A catalyzing event in this story is a dreadful farm accident. In 1997, Scott Stoller lost his right arm in a hay baler, and was very sick from the painkillers and other medicine he had to take during his long recovery. Scott relayed how he took stock with this near-death experience, “I thought about how I want to be remembered. After being so sick, I wondered what I did with the cows. Chemicals are not all good. The gal that I married didn’t grow up as a farmer; she would ask questions like ‘why give routine antibiotics to cows?’ that I didn’t have a good answer to. I thought—why do it then? She was a strong promoter of ‘do it the way God made it.’” Just as Charlene’s background influenced her perspective on farming practices, so did Scott’s experience of growing up on a conventional dairy farm. As he put it, “When you grow up and do it with your dad you feel it’s right, even if it’s not. My boys have no idea how to do it besides organic. If you grow up one way, it takes a while to relearn.”
But relearn is what Scott did, with the accident and his wife’s questioning compounded by a bad experience hiring a custom chemical sprayer around the same time. The person he hired used the wrong formulation and it led to stunted corn everywhere he sprayed; it was only nice where he missed. “It was just the ticket that turned me off,” Scott said. After the botched custom spraying job, he had one more field to plant and his organic neighbor offered to plant and cultivate organic corn here. This field of organic corn did much better than the sprayed/stunted corn, and this year—1998—was the last year he intentionally used chemicals on his fields. At this point he started to farm organically, although it took a while to find an organic milk market as there were no organic shippers in the area. The Stoller farm started shipping in late 2003 with Organic Valley.
It is important to note, however, that while the accident, his wife’s questioning, and the bad spraying were the immediate catalysts for the Stollers going organic, in some ways he was already primed and open to the possibility of organic production by earlier childhood experiences, the latter of which speaks to the importance of having easy access to organic extension and educational programming. When Scott was young, his dad would not let him play in the insecticide dust, and Scott wondered at the time, “why are we doing this if I couldn’t play near it.” Later, in high school, Scott had an agriculture instructor who brought in an organic farmer who emphasized all the positive aspects of organic farming, and how working with the soil and rotating crops would lead to improved soil health and good crops. This farmer showed how organic was a viable option, and he was not bashing conventional farming, “he was pro-organic.”
In the wake of the accident, and Scott’s epiphany about chemical farming, he also decided he needed to plan for the future—for his family, for his farm, and this meant changing the business structure of the farm. He set up an LLC for the farm business while the farmland went into a Trust, so that if something happens to Scott and Charlene their children can rent it from the Trust. Currently, Scott and Charlene control the Trust and receive annual rental payments from the farm business for its use of the land for raising cows and producing milk. To set up his children as future part owners of the LLC, they are paid for chores starting at the age of 6 or 7. As they get older and gain more responsibility, they make more money. The Stoller’s adult children are now so adept at farm tasks and management that, “they could handle the farm without me,” Scott said. This process of giving young children responsibility for chores, with a gradual escalation in responsibility and pay follows the experience Scott had as a child. He follows his father’s maxim “Let ‘em do before their able. They’ll do it when they’re able.”
When each child reaches 18, they have the opportunity to buy a 5% share of the LLC—the farm business, separate from the land. Once they achieve ownership stake, they are paid a 12% annual dividend on the value of their ownership stake in the LLC. They are also paid a wage, and this wage varies among Scott and his sons, with his 18-year-old son actually getting a higher wage than Scott, while Scott and Charlene earn a substantial amount of income from land rent paid by Stollers Organic Dairy, LLC. While not an absolute requirement, the adult sons who are partners in the LLC farm business are expected to use the dividend payments for future house or land purchases, not consumer items. Whenever a son has an opportunity to buy into the farm business, he takes advantage of this opportunity, using, in part, funds accumulated through saving the dividends paid on his ownership stake in the LLC. No one in the younger generation has ever had to borrow money to pay for their share of the farm business LLC, which removes a major financial barrier to farm viability and intergenerational farm continuity.
The particulars of this business structure have changed over the years, as several of his sons have become adults and helped adapt the structure to best suit the farm’s needs. At first, the original intent was for the farm to have free rent and Scott to earn money through a wage, this has now been reversed to ensure he will still have an income stream if he cannot work. On occasion, Scott has used the money from the sale of shares in the farm LLC to buy additional land, which in turn is rented back to the Stollers Organic Dairy LLC.
All of the owners of the LLC weigh in on whether it makes sense for one of them to take outside work for extra income. All non-emergency equipment purchases must be approved at the annual business meeting. Regarding outside work, several sons have specialized skills that are quite marketable outside the farm and could induce them to abandon their farm chores in order to earn extra personal income. However, the owners of the LLC decide collectively whether it makes sense for one son to do a welding project or another to do electrical work. “If it’s profitable we all support it,” Scott said. The income from this extra work goes straight to the LLC on the thinking that, “someone is doing that fella’s chores while he’s doing the outside work.” This policy “keeps people from wanting to do side jobs and not doing chores….It helps make everyone managers and not be so selfish.” Charlene added that their accountant advised them to not do side jobs that would fill up one partner’s personal bank account.
At the annual meetings, each partner comes up with their wish list of items they believe should be funded in the upcoming year. At the meeting, they hash it out with each other and figure out what the farm can afford; what it needs; and plan accordingly, with 1- and 5-year plans for equipment, and 1- and 5-year plans for buildings. Of course, if there is an emergency and a critical piece of equipment breaks, exceptions will be made to the plans, but in general this planning process serves to eliminate impulse equipment purchases. The wives help keep the LLC’s spending in check as well, particularly since the wives handle the finances, and serve as a check on their husbands who may get excited about a piece of equipment they see for sale; the wives will say, “It’s not in the budget.”
Charlene and the wives of the three married sons who are partners in the LLC handle the farm’s books and do a lot of chores, including most evening milking, but they do not earn a wage. Each husband/wife team is treated as a unit for the purposes of the LLC. Officially, only the husbands vote, one vote per owner, but essentially each husband-wife team shares one vote; they need to agree on decisions taken at the annual business meeting of the LLC. Most decisions made at the business meeting are unanimous, as otherwise it would be hard to operate smoothly as a tight knit, family-run business. Scott explained, “If there’s contention…reasonable people equally informed will come up with a similar decision. If decision differs, we need to talk about what you know that I don’t. Otherwise it’s unreasonable.” Scott feels that the process is working well and all the owners get a lot of work done, including sometimes agreeing to cover someone’s chores when they go to a disaster zone far away to do volunteer work. The partners also cover for each other for absences due to meetings (Scott is on the Board of Directors of Organic Valley), vacations and other personal reasons. As Charlene explained, “the boys cover for each other and there is little to no contention about this…no charts of schedules govern this process…. Being a slave to the farm is no good.”
Looking toward the next generation, the LLC has a plan for Scott and Charlene’s grandchildren to become owners at a future date. Scott and Charlene’s children will each have the opportunity to buy up to a 15% share in the LLC, until all kids have had a chance to buy a stake. After that threshold has been reached, they can choose to increase their stake in the LLC as the opportunity arises. However, at the same time the kids (now adults) will potentially have to sell some of their shares in the future to a grandchild who wants to join the family business, with the proviso that any family investor has to also work on the farm. The Stollers do not want owners as simply investors. As Scott put it, “there are other ways to make a living…it’s a lifestyle not just a job…. We don’t want outside voting for the sake of one’s own pocketbook instead of what’s good for the farm.” Just as Scott, in his capacity as a board member of Organic Valley, has to leave his personal circumstances aside and do what’s best for the entire cooperative’s membership, so too do farm owners need to do, “what’s best for the farm as a whole.”
KIDS BUYING IN BASICALLY DEBT-FREE
This innovative business structure is designed to maximize teamwork among the family owners; promote sound business management; ensure successful transition for the farm and its farm owners, whether or not they decide to keep farming on the Stoller homestead; and lifetime security for Scott and Charlene. The latter is especially important given that Scott (age 49) lost his right arm in a farming accident almost twenty years ago, and wants to have a stable source of income if he is no longer able to work, while at the same time making it feasible for his children to take over the farm without burdening them with a heavy debt load. Scott explained that he talked to others about their farm business structures, saw what worked and what didn’t, and then drew up the plan with the help of a lawyer based on his view of what the future holds. In his retelling, smoothing intergenerational transfer was a key motivation. “I…asked myself, am I going to live forever? No. Am I going to take it with me? No. Do I want someone to farm and have a similar lifestyle? Yes.” The whole schema minimizes the need for operating debt and facilitates kids buying into the farm little by little with cash. Sometimes the LLC has short-term debt, for example construction projects. Sometimes the owners will even loan personal savings to the LLC to fund a purchase, but this is not long-term debt.
Fiscal prudence minimizes risk exposure and makes it easier for the younger generation to assume ownership of the farm, or strike out on their own and buy another farm. Farm business structures such as the one created by Stollers Organic Dairy could play a key role in keeping farms in the family, keeping families on farms, and stabilizing agrarian communities.
Scott and Charlene Stoller, Stollers Organic Dairy, Sterling, Ohio, can be reached at 330-988-2990 or by email: email@example.com