Build an Alliance with Livestock Producers
Moe Rusell, who provides risk management tips for corn, soybean and livestock producers, says this year there is a drastic difference between the tone of meetings he’s conducted with soybean and corn producers verses that of the livestock producers. The following information comes from Russel’s article, “Build an Alliance,” in the February issue of Corn and Soybean Digest.
Generally, corn and soybean producers had a great 2009; a number of clients netted a $200+/acre profit. On the other hand, livestock producers have had their working capital, overall equity and financial stability severely hurt.
Grain producers need to remember the biggest corn user in America is the livestock industry. With every difficulty there is an opportunity, and I see potential for corn and soybean growers who have had great income the past two years to look for opportunities to develop alliances or partnerships with livestock producers who have suffered losses.
In many cases, livestock producers still have very viable businesses, says Russell, and you may both be able to benefit by developing a business arrangement. However, first be sure to ask yourself if the person you’re considering is trustworthy. If so, move forward. If not, stop right there.
How does the arrangement work?
If a hog producer has owned hogs and fed them in his own buildings, he could contract-feed for a grain farmer who would own the pigs and provide the feed. To compensate the hog owner for his facility, time and work, the grain producer would pay an agreed-upon contract fee, much like hog integrators do. A grain producer could buy the feeder pig, lock in corn and soybean meal prices and forward sell the finished hog and lock in a nice profit. This could be a short- or long-term arrangement between two parties, and a win-win for both.
Click here to read the full article.