Purchasing A Poultry Farm
Looking to purchase a poultry farm?
There are many things to consider before you decide. Not every farm is a good fit for every buyer. Gathering as much information as possible will help with your decision making process. Here are five tips to help guide you:
- Start with online searches. Even if you plan to purchase a farm nearby, looking at poultry farms for sale statewide can be helpful. Notice how much farms are being listed for versus their annual income. Also, look at the year the poultry houses were built, acreage, and extra features such as residential dwelling, barns, sheds, etc.
Do any of the farms require updates to equipment or buildings? Updates can affect the value of the farm as well as determine whether or not the project will cash flow. Sometimes, a large amount of acreage or other ‘extras’ are hard to pay for with poultry income alone. Try to look at recently sold farms also. A little research on the front end will help when it comes time to make an offer or choose the right size farm that’s feasible for your situation.
- Ask the locals. Live in an area with existing poultry farms? Ask around and you can learn a lot about farm values, cost to build, cost of updates, expenses, along with how integrators and lenders interact with poultry farmers. Talk to level-headed people who have experience and knowledge about the poultry industry in your area.
Visit a friend or neighbor’s farm to get an explanation of what to look for when purchasing yours. Note the condition of roofs, trusses, equipment, etc. Learn about current updates and retrofit requirements by integrators and how they are customarily performed. Always practice applicable biosecurity procedures when visiting farms.
- Consider the age of the poultry houses. Both lenders and integrators are concerned with the age of the operation. Contact lenders to learn the maximum number of years they will finance a specific farm. Ask the integrator how much longer they estimate keeping a contract on the farm. Is the poultry company requiring updates? Will these extend the life of the the poultry houses? Is it difficult to obtain insurance due to the age of the houses?
While obeying biosecurity measures, make more than one visit to a potential farm and consider the condition of each piece of the operation. Write down, research, and discuss any concerns with the realtor, seller and/or poultry company representative.
- Study the cash flow of the farm. Cash flow is all income coming in and all expenses going out, along with considerations for any loan payments. Ask lenders for projected cash flow and ask questions for a better understanding of what those numbers mean. Study the seller’s annual income/expenses and compare it to the poultry integrator’s estimates. Question any differences.
Some types of poultry operations have more gross income than others but also have more expenses. Keep in mind that lenders will analyze the farm cash flow, but they will also examine a separate cash flow with your current debts, living expenses, and other income included.
- Take a look at the location. This really works better for people who aren’t tied to a specific state or part of a state when searching for a poultry farm. Is there more than one poultry integrator in the area? Is the farm close to the poultry integrator’s facilities? Construction and update costs can vary state to state and even within one state. The same goes for operating expenses. Some areas have more costly electricity, gas, property taxes, and farm insurance. Additionally, consider if there is room for expansion. Is the poultry integrator interested in future expansion?
With so many things to consider, finding a poultry farm to purchase can take time and perserverance. Although the information above is not an all-inclusive list, it will give you a good start. Keep a small notebook during the process and write down any questions/findings along the way. You may want to consider hiring a trusted expert in the poultry field if needed for consultation. Your decision to enter the poultry business can be made much easier once you’ve done your research and gathered information from those who know the industry best.
Beth Gardner has 25 years of banking experience. Located in Enterprise, Alabama, she can be reached at [email protected] or by calling 1-866-347-9944. First Financial Ag Finance is an Equal Housing Lender