Adding more acres isn’t an option for many family farms looking to bring back a son or daughter.
For Friend, Nebraska farmer Paul Segner, partnering with The Maschhoffs means a lot more than raising hogs. It’s an opportunity for his sons to come back to the family farm.
Farming a little more than 1,200 acres, Segner was faced with an age-old problem. His oldest son, Jared, was finishing up at Southeast Community College in Beatrice, Nebraska. He was ready to come home to farm with dad. Unfortunately, farmland in the area is going for $10,000 to $12,000 an acre.
“For a young farmer just starting out, you can’t just go out and buy farm ground at those prices,” Paul notes. “You can’t cash flow it.”
Paul had the foresight to see this potential problem 10 years ago when he started mapping out a succession plan, in the event that his three sons wanted to come back to the family farm. Jared is the oldest, followed by David and Darren. Looking to add income without biting off a chunk of pricey cropland, Paul began to look at the possibility of contract raising hogs.
Paul built his first 1,250-head finishing barn in 2006. In 2008, he built another 1,250-head finishing barn. With Jared graduating in 2015, they started the process of finding him a partner for a finishing contract.
“We did some looking around and found The Maschhoffs,” Paul says. “For someone just starting out, this makes a lot of sense. You have hard numbers you can take to the bank.”
And, take it to the bank is just what Jared did. He secured a loan for a new 2,400-head finishing barn with the contract he was able to sign with The Maschhoffs. In 12 years, Paul says the barn will be paid for thanks to the contract, and Jared will be debt-free (on the hog assets anyway).
“You can take a contract from The Maschhoffs and build a hog barn,” Paul explains. “That agreement stands on its own and makes all the payments. In 12 years, you own a solid asset with a lot of life left in it. You can’t do that with farmland.”
As an added bonus, Jared struck a deal with a neighbor to custom-apply the manure from the finishing barn. Not only is he able to make a little extra money on the side, it also opens the door for a young farmer looking to rent additional acres.
Alan Stephens, Senior Business Development Manager with The Maschhoffs, says the Segners’ situation is quite familiar.
Previously, young farmers returning to the family business were more than happy to divest the livestock operations. Now, with land values driven sky high by lofty corn prices, which have since fallen, a lot of multi-generational farm operations are looking at partnering with a hog supplier as a great way to add another source of revenue to the business. And, The Maschhoffs offers what is in many ways an industry-leading partnership opportunity.
When Stephens began cultivating potential partners in Nebraska, he says a lot of farmers were leery of contract feeding. Many remembered stories of hog companies going belly-up in the wake of low hog prices and pricey corn.
“Unfortunately, five years into a 10 year contract, the company would come in and say they could no longer afford to honor the contract,” Stephens says. “They would cut the payment and the farmer’s only recourse was to take it or leave it.”
That’s something The Maschhoffs has never done in all the years the family-owned company has been partnering with farmers, Stephens says. For new facilities, The Maschhoffs offers a 12-year contract that pays a set amount each month for the entire contract – regardless of market swings.
“Lenders like the idea that the initial contract with The Maschhoffs is structured to ensure the hog building is paid off at its conclusion,” Stephens says. “The way we approach the partnership provides the farmer with more of the benefits and less of the risks traditionally associated with raising pigs.”
Still, a lot of young farmers have reservations about getting “back into” hogs. For those whose only exposure to hog farming dates back 20 or 30 years, the best thing is visiting a modern finishing barn, Stephens says.
“The innovative technology, equipment and design that we’ve implemented provides a more comfortable and easier-to-manage environment for the pigs and the caretaker” Stephens says.
For the Segners, this all made a lot of sense. Paul has since signed with The Maschhoffs for his two 1,250-head buildings. And, as the other two sons come back, he expects hogs will be an important part of their growth strategy.
For those thinking of expanding into hogs, Paul has a word of advice – check out an open house. The experience will give potential family farm partners the opportunity to get an inside look at the technology. And they can start to gauge the local community’s response. With their most recent barn, Paul and Jared invited the community to take a first-hand look at the technology and attention to detail that goes into caring for the animals. The Maschhoffs team was also on hand to answer questions.
“That goes a long way,” Paul says. “It gives the community a chance to really see how hard we’re working to care for these animals.”