Oregon is in the midst of a land crisis that could affect the state's second-largest industry if it continues, according to a new report from two of the state's largest universities.

Three factors are colliding to jeopardize two-thirds, or 10.5 million acres, of Oregon's family-owned farmland: Farmers are aging, with the average age now near 60. Beginning growers can't afford the skyrocketing land prices to replace the older generation. Left unchecked, those trends are opening the way for investment firms and out-of-state companies scoop up tracts from retiring farmers.

"For our state's long term environmental welfare, having owner-operators close to the land and able to steward it is also an important value to Oregonians," said hazelnut farmer Nellie McAdams, who works on farm preservation for the Rogue Farm Corps. The farmer training group worked with Oregon State and Portland State universities on the report.

McAdams says that state and federal agencies need to act now, because the turnover has already started and will only worsen in the next decade. "It's not like the crisis is coming, we're in the middle of it. And we're just trying to report about that and incite action now."

Already feeling the pinch

Farming and ranching families have been battling this trend for at least a decade now.

Diane Daggett's son was supposed to be the fifth generation to take over the family ranch nestled in the Wallowa Mountains, 75 miles from the nearest freeway. Since her great-great-grandfather arrived on the second wagon train into Wallowa County, the ranch had changed hands through an informal family agreement: Whichever child stays on the ranch to work inherits it.

Daggett was that child, and her oldest son was the next in line. She spent 20 years building up the herd, converting the operation to grass-fed beef. Her father always assured her that they had time to sign formal papers, but they never did.

When he died, the land was legally her step-mother's, who decided to sell.

"It takes away your identity, the loss of that," Daggett said. "When you're so connected to the land, it feels like it's part of you and you're part of it. It was not a decisions that was ours and it was made for us and it was brutal."

Her 21-year-old son helped her show the new owner around the property and burst into tears when the wealthy new owner revealed she bought it as another home for her husband as a birthday present. After the Daggetts removed the last of their herd, they never went back to the property, which is now gated and locked.

She's been living in town since then, and her son splits his cows between several pastures. He leases the land, which increases his management costs. He needs more bulls, and spends more time and money on the road moving himself and his animals around.

During the real estate boom in 2007 these stories were common in ranching country. "Sometimes a lot of people will say in this industry, if you don't inherit or marry it, you can't have it," Daggett said.

If she or her father had insisted on formalizing their succession agreement, it could have been avoided. With bigger money on the horizon, family farm advocates are pushing aging farmers and ranchers to create these plans earlier, to keep land like the Daggetts' in production and earning money for the state and local economy.

Landscape shifting

One acre of farmland with buildings on it cost $1,882 in 2012, the last year the U.S. Census of Agriculture was taken. A decade before, it was $1,534. The price is only increasing as farm and forest land is seen as safe and solid investments.

According to the report, 25 to 40 percent of farmland sales in Washington, Benton, Clackamas and Polk counties went to firms that specialize in investment, development, finance and property management. Five to 10 percent of sales were to out-of-state addresses.

Oregon's proposed second-largest dairy, which will replace the iconic Boardman tree farm along Interstate 84, will be owned by a California agriculture company. The largest dairy, Threemile Canyon Dairy, is owned by a North Dakota company. The general manager was recently appointed to the Oregon Board of Agriculture, inciting protest from small farm advocates.

Friends of Family Farmers policy director Ivan Maluski said at the time that it was a sign that large, out-of-state agriculture corporations were gaining a foothold in Oregon's mostly small, family-farm economy.

The concern is the same for many in Oregon agriculture. When big-money corporations move in, it drives up the price for farmers who are looking to start their own operation, but don't have the capital to compete.

"Many farmers are leasing land as soon as it becomes available," said Jim Johnson, land use specialist with the Oregon Department of Agriculture. "There isn't much land available for young and newer farmers to buy. Add the capital needed to develop the infrastructure associated with that land -- farm implements, irrigation equipment, etc. -- it's a major investment up front."

Rogue Farm Corps is among many organizations in the state trying to help connect experienced young farmers with retiring farmers to help facilitate the transfer of land. The Oregonian/OregonLive wrote about the Headwaters Farm Incubator program, which helps new farmers scale up in a supportive environment.

But money remains an issue. "Farm land is a better investment than the S&P 500 -- investment firms are starting to recognize that," McAdams said. Certainly, some of these companies will keep the land in production and hire local employees or sell locally, McAdams said, but, that can't be assumed.

"They do have a profit motivation and are trying to benefit their shareholders. So if they do get a better return by selling their land to developers, that's probably what they will do."

Read the report

Loss of local economy

Many states rely on agriculture as an economic driver, but Oregon is rare in that the motor is more than 35,000 smaller, family-owned farms. If the fears of small-farm advocates come to pass, the next 20 years could turn the state into an agricultural economy that looks more like California or the Midwest.

The rub is that Oregon also eats about 20 percent of the food it produces, and provides many of the jobs and income in rural parts of the state. That could remain the same if farms are owned by large, out-of-state corporations, but McAdams and others worry that those corporate executives will disinvest in local economies.

The report suggests federal and state policies that would reinforce work already done by nonprofits and other groups, such as encouraging more succession planning and more effort connecting new farmers with people planning to sell their farms and ranches. But the big recommendations come in the form of tax incentives and restructuring the restrictions on land zoned only for farm and forest use.

The Oregon Board of Agriculture doesn't set policies, but member and Klamath County farmer Tracey Liskey said in a press release that it is the state's business to make sure agriculture remains accessible to young farmers and ranchers.

"Right now, that's a challenge. I know a lot of existing farmers are just barely hanging on," Liskey said. "It's hard for many to make it today with expenses four to five times higher than income."

Environmental and land use groups are also helping put layers of protection on farmland before it is sold or passed down in a family so that it can only be used for growing or ranching under a new owner.

"Being able to enjoy fresh produce and connect with your grower is a fundamental value of a lot of Oregonians, and we need to have farm stewards that have a lot of investments in their property," McAdams said. "We see it as a statewide economic driver, but also a keystone to rural communities. Not only economically, but also socially."

-- Molly Harbarger

mharbarger@oregonian.com

503-294-5923

@MollyHarbarger