Thursday, September 07, 2006

Economic impact of a hog barn

Got the latest Iowa Farm Bureau Spokesman in the mail today. Inside was an editorial by Aaron Putze of the CSIF about the benefits to a community of the opening of a new 2400 head hog barn.

One thing that struck me odd - Putze quoted the University of Missouri Extension as having quantified the economic impact a barn of such size would have. UME believes it will return $122,000 in GROSS revenues per year.

Now, to the uniformed, that sounds like, well, OK. However, if you are an agrinerd (such as your gentle blogger), you find the numbers don't match.

In a 2400 finishing building (as we suspect this is), we should see the building inventory turn over 2.7 times per year, not including death loss. So, in one year, 6480 pigs should have been moved through the building. At $122K/year gross revenue, that makes $18.83/head.

So, either one of two things; either UME and Aaron Putze doesn't know how to calculate, because an average pig should sell for around $125/head, making a gross revenue of $810,000 for the building, or , OR the gross revenue is the custom labor payment per pig provided to the owners of the building by the owners of the pigs being custom fed.

If Putze really wanted to show the economic benefit of a 2400 hd building, he'd talk about it in terms of the barn owners also owning the pigs. However, since in order to get a loan for such a building in the first place, a person is probably not going to get to own the hogs, but rather be a custom feeder for someone else. Therefore, the major revenues end up being taken by someone else, not the actual farmer (who is now a custom operator).

What difference does this make? When farmers raised their pigs from farrow to finish, they retained more value of their production. Today, when the farmer has been reduced to a cog in the production system, he is "allowed" a custom feeding fee, even though he owns the buildings (costing upwards of $500K each). The real profits are retained by the integrators (people who shuffle pigs from here to there).

1 Comments:

Blogger Steve Devney said...

Do you happen to know where the original article is available that you quote here?

Thanks

5:20 PM, December 26, 2013  

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