for taking over farms within the family selling or buyin buy g Ownership is limited positive impacts administrative instruments as pre p requisites

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1 Switzerland is a very densely populated country with a very performing economy that shapes a difficult economic environment for agriculture. Its part of the population is only three percent and its part of the economy under one percent, but it gives its special appearance the cultural landscape that covers forty percent of Switzerland. The agricultural area is small (0.04 ha arable land/person). Its just enough to produce 50 % of the food for the country and it is threatened by the needs of construction, infrastructure and leisure facilities. To use this resource in a sustainable way is the contribution Switzerland can make to feed the world. Switzerland has a long tradition for the governance of tenure of agricultural land. Farmers ownership is a goal of the Swiss constitution and legislation. It has always been and is still one of the means for maintaining an agriculture based on family farms. According to the constitution (art. 104), the Swiss Confederation shall ensure, that agriculture, through sustainable, market-oriented production, provides a substantial contribution to the reliable supply of the population, to the safeguarding of natural resources and the maintenance of the cultural landscape and to the decentralized settlement of the country. The state has to arrange measures, so that agriculture can fulfill its multifunctional tasks. Among other competences, it can adopt provisions for consolidating rural holdings. Land based family farms with the operator owning the land are considered to be the best suited for fulfilling the multifunctional tasks at the same time. 1

2 The example of Jürg Messerli*, his farm and his family will help the understanding of the system and its outcomes. On the picture we see Jürg s parents Ernst (1944) and Ursula (1946) with another grand child, Jürg Messerli himself (1973) and his spouse Sarah (1974), their children Noah (2005) and Mika (2001). The family is standing in the pasture of the beef cows with the farm buildings to the left in the background. In the following, the rules for taking over farms within the family and for selling or buying them are explained. ed. They enable e farmers to become e owners and prevent others to do so. Ownership is limited by these rules and also by certain duties linked with it. The rules as a whole have crucial positive impacts on the stability and sustainability of agriculture as well as on the stability of the rural society. The implementation of such rules requires adequate administrative instruments as prerequisites. *Messerli is a diminutive form of the German word Messer knife in English. If Messerli was a native American, his name would be Little knife. 2

3 In Switzerland the transfer of ownership of agricultural land is ruled by a special law, in French Loi fédérale sur le droit foncier rural du 4 octobre 1991 (LDFR, RS ). It enables the take over of a farm: Within the family. As a whole (all land and buildings including the dwelling house). At the rental value. Under the condition that the person is willing and able to operate it. If the owner dies, a heir who is willing and able to run run the farm can take it over out of the heritage at the rental value. The owner can not take him away this right by testamentary disposition. If the owner sells the farm, descendants, brothers and sisters and their children can exercise a preemption right. This means, that one of them can acquire the farm at the rental value instead of the other buyer with no regard of the contracted prize under the condition, that she or he is willing and able to run the farm personally. The interest for the rental value can be paid by the agricultural returns after allowing the farmer and his family a decent lifestyle. It is estimated according to legal rules. Most families anticipate i t the effect of these regulations. The older generation sells the farm to the younger one at the rental value. So did the Messerlis. 3

4 The ownership of operators is also enhanced if a farm is sold out of the family. This can happen if within the family nobody want to take it over. Only persons who are willing and able to run it can buy a farm. This principle is implemented by a procedure of authorization. Who wants to buy agricultural land needs the permission of the cantonal* authority competent in the matter. The permission is refused if the authority comes to the conclusion, that the buyer is not willing or not able to operate the farm personally. The authority refuses the authorization also, if the prize is excessive. It shall not exceed the prize for similar farms in the average of the last five years with a surplus of 5-15 percent according to the cantonal rule. Still, allowed prizes are most of the time 3-10 times the rental value, depending on the region. There are only few farms sold. It is unlikely that Jürg Messerli sells his farm to another. That could only happen, if it would become clear, that none of the children is interested in agriculture. At the end of his career as a farmer, he would then lease or sell the land to other farmers. So they could grow. The legal rules strictly respect gender equality. However only a very small tough growing part of farmers are women in Switzerland. Even today in most cases a son will take over the farm and become owner. However the couples mostly operate the farm in partnership and take important decisions together. So do the Messerlis. *Canton's are the 26 historic political and administrative regions of Switzerland. 4

5 The ownership a farmer can acquire is not absolute. First it is confined by the rules of the special law on the transfer of ownership of agricultural land just described. The owner can not deprive his descendent who is willing and able to run the farm. If there is none and if he wants to sell the farm, the buyer has to be a farmer. If the owner wants to lease the farm, the contract has to last for at least nine years and can be extended by the judge another three to six years. The rent allows an interest corresponding to the rental value. The field of application of the special law on the transfer of ownership of agricultural land cowers only the surface outside the building area. On this land, only agricultural use and only buildings allocated to it are allowed. The agricultural use of the farm is limited by the legislation on environmental and on animal protection. The offense of these rules is punished. At the same time, the respect of these restrictions is also a condition for direct payments (cross compliance). The reform of the agricultural policy since 1992 with the decoupling of prize and income as well as the introduction of cross compliance and manifold ecological incentives did not definitively solve all ecological problems, but it made Swiss agriculture a great deal greener (FOAG: Swiss agriculture on the move, The New Agriculture Act, Ten years on, Bern 2009; h/d i /00018/00498/i d h l?l Jürg Messerli, being a farmer, is not disturbed by the restrictions of ownership and fulfills all conditions of cross compliance. 5

6 Ownership gives the best security to farmers and stimulates them to accept a long term orientation in their thinking and actin. The thought of giving over the farm to one of the descendants is a strong incentive for maintaining soil fertility and for a sustainable behavior in general. For this reason, the succession rule has already been taken over in the Swiss Civil Code of However, in Switzerland and in other developed countries, this effect is not sufficient any more, mainly because of low prizes for production means compared with product prices. Instead, an other positive effect of rural ownership gained in importance. If any body could acquire farmland, speculation would heavily increase. Construction companies and developers would probably buy land nearby villages and agglomerations an then influence on the community to vote for zoning it as construction area. The waste of land because of weak spatial planning would be even worse. Farmers ownership contributes also to political stability. It produces a large distribution of ownership. Owners are people with ground under their feet, interested in a stable community and ready to take engagements for it. Jürg Messerli is the perfect candidate for any political engagement. 6

7 Agriculture needs machines. For implementing rules, legal and administrative instruments are needed. First, the field of application has to be cleared by spatial planning. In Switzerland, communities take democratic decisions on the limits of the construction area. Unfortunately, too big areas were realest in the past. The cantons as superior authorities did not always intervene with the necessary consequence. Then, reliable and credible authorities are needed. In Switzerland, their decisions can be put into question trough several instances up to the federal court. Tax regulations are also very important. In Switzerland, the taxes on fortune and on estate for agricultural land are based on the rental value. It shapes the general idea of the value agricultural land can have for a farmer. Without this solution it would be difficult to keep up the transfer of farms at the rental value within the families. The special law on the transfer of ownership of agricultural land is sometimes criticized. Some would like to abolish it. Their action is decisively weakened by the publication of internationally approved Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security. 7

8 My friend Jürg Messerli (little knife), his family, his cows and myself thank you for your attention. 8