Producer question: My neighbor has approached me about constructing hoop barns to contract finish pigs for me. Are they a good option and how do I establish a reasonable contract rate?
Brumm’s response: Hoop structures for grow/finish hogs have increased in popularity in the Midwest since the early 1990’s. This can be attributed to:
- Relative cost per pig space compared to new confinement facilities.
- Minimal environmental permitting required in most states.
- Ability to convert the structure to other uses if the pork enterprise is modified or closed out.
Interest in using hoop structures for contract finishing arrangements has grown in the past few years. Neighbors who might have had no interest in contract finishing pigs in confinement facilities are contacting pork producers and expressing a desire to contract finish pigs in hoop facilities.
Producers with 100 to 200 sows have been most interested in contract finishing in hoops. Typically, producers of this size batch farrow, weaning 200 to 400 pigs at a time. That’s not enough pigs to fill 600- to 1,000-head
confinement finishers in a timely manner. However, hoops generally hold 180 to 200 pigs per hoop. In this situation, each group of weaned pigs would require one to two hoops to run in an all-in/all-out manner.
As mentioned, neighbors often are interested in contract finishing arrangements in hoop facilities. An initial investment for a hoop is 25 percent to 33 percent of that required for a confinement finishing facility. In addition, these neighbors are often attracted to the alternative uses for a hoop structure if the contract situation doesn’t work out. These alternative uses include things like machinery storage, dry grain storage, hay storage and calving sheds. Because of their portable structural components, it also is possible to disassemble a hoop structure and sell it at a consignment auction. Thus, the neighbors see much less financial risk in investing in one or more hoop structures to contract finish pigs vs. investing in single-use confinement facilities.
The permit process associated with new confinement facilities in many states also has made the hoop facility more attractive to many potential contract finishers. In many states, regulatory approval of hoop structures by appropriate environmental agencies is much less restrictive and faster than equivalent approval of a fully slatted confinement facility.
At the same time, the neighbor (and a few employees or friends) can construct the hoop finisher. It can be erected and made ready for pigs by four men working four days or so. In contrast, a confinement finisher requires months of contracted construction.
While contract hoop finishers have many attractive features, they are not without drawbacks. Pigs in hoops generally have worse feed conversion than pigs in confinement finishing facilities. A good estimate for the upper Midwest is 0.2 more pounds of feed per pound of gain annually for finishing pigs in a hoop structure.
Those pigs also tend to have more backfat at slaughter than confinement-reared pigs. This is related to the overall improvement in feed intake compared to confinement facilities. As a rule of thumb, plan for pigs raised in hoops to have 0.1 inch more last-rib backfat compared to confinement-reared pigs.
Properly managed, hoops require large amounts of bedding. Again, in the upper Midwest, plan on 1 pound of bedding residue per pound of animal weight gain on a yearly basis. While corn stalks are a common bedding material, soybean stubble, straw, sawdust and other products have all been used successfully.
Harvest, storage and land application of the accumulated manure and soiled residue need careful planning. Generally, I advise owners of pigs to furnish the bedding material as part of their contract. This helps ensure there’s no skimping.
Hoops are a dirt-based finishing system. While the goal is to suspend all of the manure in the bedding pack, pigs will root down to the dirt. Thus, after two to three groups of pigs, you need to plan for a parasite control program, especially roundworm control.
Having said all of this, we can now go about establishing a reasonable contract rate. One common method to establish the fee is to compare income and expenses vs. a typical confinement contract situation. In the upper Midwest, there are many confinement finishing facilities contracted for $36 per pig space
annually. At 2.7 groups of pigs per year, this is $13.33 per pig.
From this $13.33, the pig owner must deduct the added costs of parasite control, poorer feed conversion and bedding residue provisions. In addition, if the pigs are slightly fatter at slaughter you also need to account for this reduced value.
If the typical pig gains 200 pounds while in the hoop finisher and has 0.2 pounds of feed per pound of gain worse feed conversion it adds up to 40 pounds of feed. At $140 per ton, this added feed expense equals $2.80 per pig. If bedding, harvest and transportation costs are $10 per 1,200-pound residue bale, 200 pounds of residue is worth $1.67.
The hog’s reduced value due to increased backfat is more difficult to assess since this depends on which packer and value matrix is used. I’ll assume here that each 0.1-inch increase in backfat reduces the value 60 cents per hundredweight or $1.50 per pig.
So, when comparing contract fees for hoop finishers vs. confinement finishers priced at $36 per pig space per year, a negotiation starting point would be $7.36 per pig ($13.33 per pig – $2.80 – $1.67 – $1.50) or $19.87 ($7.36 x 2.7) per space per year if the pig owner furnishes the bedding.
However, fees paid are often slightly more than this due to such issues as convenience. Producers weaning 200 to 400 pigs per farrowing group may not have $36-per-space contract finishing options available to them.
Mike Brumm is a University of Nebraska extension swine specialist in Concord, Neb.