Date of this Version
Farm and Ranch Management, September 8, 2020.
This article was first published in Nebraska Pork Talk.
Also available at https://farm.unl.edu/financial-health-grain-operations-after-adding-hog-barn.
There is strong local and national interest in adding hog barns to existing row crop operations. Declining on farm income over the past several years has accelerated this interest. Grain operations cite diversifying farm income, adding another family to the farm operation, and/or replace commercial fertilizer expense as the primary reasons for adding a hog barn.
While there is industry demand to increase hog contract growing, these agreements can possess significant benefits and risks to producers. This is the second of a four part series which will discuss some financial and legal implications of adding a hog barn to an existing grain operation. In this second part, I discuss how the financial health of grain operations potentially changed after adding a hog barn. These financial metrics are compared against operations that only raise grain and operations that only raise hogs. Various financial metrics typically used by lenders, accountants, and other professionals to assess the financial health of agricultural operations are used to make comparisons.
Grain and grain and hog operations did not significantly affect the operations liquidity, profitability, efficiency, and repayment capacity. While there were slight differences, none of these differences were large enough to modify the risk profile of the operation. Likewise, for most key financial metrics there was a similar amount of certainty in values. Greater uncertainty would imply that the values change dramatically