Time to Expand Your Operation?

Capture3By: Hal Schmidt

Farming is a business, and part of any business is analyzing when and if you should expand your operation.  This is a question that is constantly circling in the back of farmers minds – to buy that piece of land or not, to expand your herd or wait until markets are better.  I’m not writing this article to try to tell you what to do.  Every business has their own story!  But hopefully this will give you some points to think about during your decision making process.

Of course, you need to decide in what area of your business you want to grow.  What’s your business plan?  Do you want to own the entire operation from start to finish?  Or do you want to specialize in one area of operation?  Most producers that take ownership in a Pipestone Management sow barns have chosen to specialize in the growing and finishing side of pork production. Some producers build finishing barns and wait for an opportunity to buy into a sow farm after they have paid off some of the debt on the finishing barns. The goal and design of the Pipestone Management was for the opportunity for individuals and family farms to retain their independence.

The easy signifier to see an opportunity for growth is capital.  Do you have the capital to invest in expansion or complete your plan of ownership? Depending on what that investment is, how soon will you see return? Or how long will there be a profit to pay for the added cost of production. In the hog business, we talk about cycles. About all we can predict is that they will continue to occur and probably will be more extreme.  I consider myself a financial conservative – in other words, I like to plan for the worst.  Do not bet the farm on a one time expansion or believe that the market is good forever. Make your plan and invest in your business. Do not spend all the profits outside of your business and expect the business to survive. Every business man or woman has a different risk level – make sure you evaluate these risks and determine what level of risk you are comfortable with.

The second aspect is labor.  Maybe you have a son or daughter who is moving back to the family farm and you have another family to support.  An advantage of expanding in hogs as opposed to crops is that the labor (and income) is year round.  Seasonal help is getting harder and harder to come by, but a full-time job will entice more family members to work at the business of pork production.  Regardless if you hire inside the family or not, make sure that whoever you hire has a passion for the business!  Do they want to farm because they have a passion for animals, a passion for growing crops, or maybe both?  The key takeaway here is that you should expand in the hog business because you have a passion for the hog business and caring for the pigs.

The third area that is allowing more and more producers to expand is technology.  Although it can be a pain in the butt, all in all technology makes our lives easier.  We no longer have to carry pails back and forth spilling half the corn on the way– we can feed our pigs with the push of a button!  This means that a single producer can manage more livestock than ever before.  If technology has freed up some labor time in your operation, then it may be time to consider expanding.

Every operation is different.  Maybe you see expansion in the near future, or maybe it’s a ways down the road.  Hopefully this article sparked some thoughts about your operations future and can provide a starting point for your business making decisions.  Every operation has a different story to tell.  Pick up the pen and start writing!

For questions, contact Hal at hschmidt@pipevet.com.