hog barn construction loan

Farms often invest in new livestock facilities for an additional source of revenue, to better utilize farm resources and to reduce fertilizer costs for row crop production. Typical financing for hog barns involves a construction loan and then permanent financing for a 10- to 15-year term.

The thought of expansion during the coronavirus is not something many are considering, but for Cactus Family Farms, it’s the only way forward.

Cactus Family Farms, the hog division of Amarillo, Texas-based Cactus Feeders, has been expanding its contract hog operation for the last six years. Over that time, the company bought several hog operations in Iowa and other parts of the U.S.

Even during a lull in the market and a downturn in the ag economy, Cactus is focused on its long term goal of feeding a hungry world, said Rod Leman, director of business development for Cactus Family Farms.

“Despite those challenges, we’re trying to execute a growth strategy that has a good long term goal in mind,” he said.

Over the next few months, Leman and Cactus are focusing on expanding to eastern Nebraska and western Iowa by bringing 40 new wean to finish hog barns under their umbrella. Finished hogs are shipped directly to the WholeStone processing facility in Fremont, Nebraska.

The 100% employee-owned company has begun expanding into Nebraska due to the saturation of contract pig farms in Iowa. Contract hog feeding has been done in Iowa for nearly three decades, which has made it “more and more challenging” to grow in the state, Leman said.

With Nebraska seen as a growth market, and many grain farmers looking to diversify the family farm for future generations, Leman said that Cactus can help work with new farmers on the best ways to expand smartly, even at a time that’s been especially difficult for pig farmers.

“In livestock, there is always some challenge around the corner, and this slowdown is just another one of those challenges,” he said.

One of the challenges in the current market is processing the hogs that come through as shutdowns at major facilities like Smithfield in Sioux Falls, South Dakota has caused rapid shifts in where producers can bring their pigs. Leman said while there is concern about processing, Cactus has been secure thus far from COVID-19 concerns.

Contract feeding has been growing steadily over the 21st century in the Midwest. With hog barns popping up as a way to diversify operations and U.S. consumers eating more pork over the last half-decade as a result of a return to “home-style” meals, Leman said Cactus firmly believes the Midwest will continue to be one of the best places to produce pork in the world.

Contract feeding, or at least the model Cactus likes to use, works with grain farmers. Leman said they like working with farmers looking to diversify with a hog operation that can both provide a stable income for 30 years and give back hog manure as a way to fertilize their crop.

“It’s really a win-win,” he said. “The contractor doesn’t take any of the hog market risks, which is always the most volatile risk.”

Cactus owns the pigs while the farmer takes the financial interest of the building. On average, Leman said the barns are paid off in 12-15 years and hold their value for the duration of the desired 30-year lifespan of the building.

“We try to go above and beyond what is legal to try to do what’s right for the neighborhoods and communities that our contract growers (are in) and we will be doing business in for 30 years,” he said. “We need to take a long term view of the communities we are in.”

Ultimately, Leman said the team at Cactus is there to help inexperienced farmers put diversify back on the family operation.

“We love to work with people who have never done this before, our employees, because they’re owners, are going to take a very hands-on approach to help people succeed with the project,” he said.

Leman is based in Fort Dodge, Iowa, and has been working with the Cactus team almost since the inception of the hog division. While there are no talks yet of expanding into South Dakota, Leman said South Dakota isn’t being ignored but the company needs more time to figure out logistics.

Reach Reporter Jager Robinson at 605-335-7300, email jager.robinson@lee.net or follow on Twitter @Jager_Robinson.