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n. Illinois | Financed a lot of hog barns over the years. Would only amortize them over 7 years at the start and it worked. Generated solid cash flow after the 7 years. Lots of guys would then leverage the extra cash flow and build another one. At the end had to stretch amortizations to 10 years to make cash flow work.
The real issue going forward is just look at what happened to the guys in the SE that have Chicken barns. They have become slaves to the guy who owns the chickens, also lots of empty vacant chicken barns that no longer fit the current production system Sort of like a 500 hd. hog barns that no one wants to fill.
As long as exports of pork grows (we export 1 out of every 4 hd.) then the demand for barn space will grow but if it ever falters the pig companies will have the guys with the barn over a barrel. They will purge everyone that isn't meeting their production goals and cut the price they pay on the rest and there is nothing you can do because your still making payments for the next 5-10 years.
I know of some operations that were finishing out 50,000 hd. per year but could see the hand writing on the wall and then decide that they are two small and found ways to exit the industry while they could. | |
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Anyone priced a hog barn recently?
