Outlining considerations for contract production

Once you’ve thought through the idea of raising hogs on contract, the next steps involve selecting a site, starting the permitting process and preparing for construction.

 

“If you have contractor choices within your area, compare the economics,” says Colin Johnson, Iowa State University Extension swine specialist. “Cash flows will all look similar; contract payments will be within $1 or $2. But the type of barn required will vary the construction and utility costs.”

 

Construction costs also will differ some by region and materials, which have increased 2 percent to 3 percent from last year. To build a wean-to-finish barn in the eastern Corn Belt figure about $300 per pig space for a turnkey site; in the western Corn Belt plan on $320 per pig space.

 

Pig suppliers can help zero in on construction costs, as well as the expected operating costs for barns built to their specifications. Most will provide an operating cash-flow forecast for the early years and later years, accounting for repairs as the building ages.

 

“Before the project gets too far down the road, a lender will want to see projections for the barn, a detailed list of costs, the building blueprint, a site survey and the property title or abstract,” says Kent Bang, vice president and swine team leader, AgStar Financial Services. The grower also will need a credit application and 3 years of financial statements or tax returns. “We need to know it’s a viable project before anyone spends too much time or money,” he adds.

 

Select the Site

Site selection starts with the state, county or township regulations that outline requirements for production size, setback distances, building codes, public notifications, manure-management plans and environmental impact.

 

Depending on the number and size of buildings, the production site will need 2 to 5 acres. It’s wise to have a professional surveyor survey the site to confirm the actual space. If purchasing land for the site, work with an attorney or realtor to monitor the transaction.

 

Individual preference also influences site selection. For example, Caleb and Tarcie Corzine, growers near Assumption, Illinois, built a 2,400- head, wean-to-finish building on their home site. “I’m within 3 minutes of my barn,” Caleb says. “If there’s a power outage or emergency, I’m right here.” The fields for manure application are close by, further adding to the convenience.

 

However, it may not be feasible to add another building to an existing site, or it may be best to place the pigs, and manure, close to the cropland. There is another advantage to placing the contract building away from the home site — resale value. “You need to enter into contracting as a long-term arrangement, but no one knows what the future will bring and a site away from a farmstead can be easier to sell,” Johnson says.

 

A more remote site will increase utility costs such as access to electricity, water and natural gas. Johnson has seen electric-service costs double from one side of the road to the other. Costs for things like building a driveway can add up quickly. Corzine points out that his biggest surprise was the cost of various materials and how all the little things add up.

 

Consider road access, maintenance and traffic surrounding the site. You’ll want easy access for feed trucks and hog trailers, but remember that your site will increase traffic and road wear. “Talk to road commissioners and county boards early on,” advises Nic Anderson, with the Illinois Livestock Development Group. “Discuss traffic patterns and when trucks might be on the road. This step is too often overlooked.”

 

Make biosecurity considerations part of site selection. Swine density within the area and prevailing wind direction can influence herd health as well as odor issues.

 

Prepare for Permitting

Although the exact rules may differ by state, county or township, the overall process is the same. Contact the appropriate agricultural zoning office for your state to get the exact regulations. Put simply, “you have to meet the criteria in the rules no matter what,” Anderson says. “On the plus side, it helps the process go smoothly because everyone knows what’s expected.”

 

This is the place to reach out for help. Many states, farm associations and integrators have consultants like Anderson who don’t cost anything but can provide answers and guidance. As you get deeper into the permitting and construction stages, you may need paid specialists for certain steps, such as manure mapping.

 

The permitting timeline will differ slightly between a new facility and an existing one. Plans to expand an existing site move faster (i.e., 60 days) because permitting issues, such as setbacks, have already been addressed.

 

For a new facility to get the green light in Illinois, Anderson says it takes 30 days to verify the notice of intent to build, 30 days for the building plans to be reviewed and 30 days for public comment. “So, 90 days is a good rule, but in Illinois everything goes through the state,” he adds. “Some states or regions might move faster.”

 

In Minnesota, it takes 6 weeks up to 12 weeks to complete the permitting process for a new site. “However, as projects get larger it takes longer. I’ve seen it take 6 months,” Bang says.

 

Each state has designated facility-size breaks where the permitting requirements change. It could be 1,000, 1,200, 2,400 or even 4,000 pig spaces. They’re all different and largely driven by setback distances from neighbors to accommodate manure, odor and environmental impact issues. You will need to submit a manure/nutrient management plan, which spells out manure handling and application, as well as runoff and watershed specifications. If manure won’t be applied to your land, manure easements are needed as proof that there’s a qualified site for the manure. Be prepared to explain the project to neighbors and the public. Anderson suggests drawing up a map of neighbors and visiting one on one.

 

Anderson’s advice for the permitting process: “Plan early; don’t rush it. If you have a question, ask it sooner versus later, because once things officially start moving, they move really fast.”

 

Dig into Construction

Once the permit is approved and the land is prepared, construction is the next step. You need to have your homework done. “I was surprised how fast the barn can go up once the site is ready,” Corzine recalls. “It took 1 week to get the building shell up and the metal work done.”

 

Plan for various inspections along the way, and in 3 months, the barn will be ready for pigs.

 

As for the building itself, pig suppliers have their own preferred design and management style. There’s not much wiggle room in terms of the building’s dimensions and layout, as well as the ventilation and feed-delivery systems. Most integrators also will have a list of preferred builders. But, look at the builder like any other general contractor — evaluate his experience and look at his work.

 

As a building owner, you will have some choices — mostly in equipment such as feeders, gating, waterers and possibly flooring. There’s usually flexibility to adjust the office and load-out areas. You will be responsible for upgrade costs, but this is your building and the lifespan is 25 to 30 years, so quality is important. It also will minimize repairs and maintenance.

 

“Watch the bottom line but don’t cut corners,” Johnson says. “Be sure to build something that’s going to last.”

 

Construction-cost overruns are not uncommon, but it’s important to discuss upfront who’s responsible for overruns beyond your upgrades, Bang points out.

 

Here are some other building issues to consider:

• Barn positioning on the site must accommodate unloading and loading pigs, feed trucks, manure removal and snow removal. Provide enough gravel space for the trucks to turn around and access the facility. Also, manure removal by a drag line, tanker or semi could all have different access requirements.

• Remote barn monitoring to check air quality, as well as the feed and heating systems is worth considering if it isn’t part of the pig supplier’s package.

• Consider building-access monitoring and alarms, especially if it’s on a remote site.

• An LED or fluorescent-lighting system can provide energy savings, but prices and longevity can vary. So shop around.

• Solar panels are a growing trend to reduce utility costs, and tax incentives can add to the benefits.

• Landscaping and site maintenance can increase costs, but there are public relations benefits.

• Consider whether the feed, water and heating systems are versatile enough to work for wean-to-finish and feeder-to-finish systems.

 

“Make sure the building location is right for you, because you can’t change it once it’s up,” Corzine says. “Take time for planning, permitting and financing — you want it all to go smoothly.”

 

Frank’s Note

Whether you’re considering building a barn to raise pigs on contract or to finish out your own, thorough planning and early scheduling are important steps to keeping the project moving. Granted, you can’t start building before the permits are approved, but you can start talking to builders, subcontractors and equipment suppliers to be ready once you get the green light.

 

At Farmweld, we have a library of barn layouts for review and can help evaluate the options. For contract growers, we can help identify what’s important to you and talk through your goals. Over the years, we’ve worked with a range of pig suppliers, reviewed their building specs and even helped with design ideas. Although pig suppliers designate specific building designs, some provide a few options, depending on the facility size and the grower’s labor limitations.

 

Gating is a common area where customizing the layout can make daily chores more efficient. For example, adding swing gates to assist with sorting or vaccinating pigs can make it easier for one person to do the job. We can help determine the right pen layout, gating, feeders and waterers for your facility.

 

Because lead times for equipment can vary, depending on the time of the year and other construction underway, it’s wise to determine the building specifications and select equipment early so that you’re on the manufacturer’s schedule. The same goes for builders; don’t wait until you have the permit in hand to line up a builder.

 

Our everyday goal at Farmweld is to make sure our customers’ needs and expectations are met. If you need design guidance or have questions about facility construction or equipment, don’t hesitate to call us at 1-800-EAT-PORK (328-7675) or use the contact form or LiveChat on our website.

 

Frank Brummer, President, Farmweld, Inc.

 

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