Old Assets: Retain, Replace or Remodel? By Justin Roelofs CFO, PIPESTONE

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Facilities play a large role in the health of your pigs and profitability of your pig business. As assets age, it’s important to evaluate your best facility strategy moving forward: retain, replace or remodel.

Below are some considerations to take into account when making your decision.

If your answer was “no” for the questions above, your best strategy may be to retain your asset. If there were 2 or more you said “yes” to, you many need to consider replacing or remodeling.

Replacing Assets

A new facility will cost between $2,600-$2,800 per sow space. This high-level cost analysis includes an all-in cost, including land expenses, engineering costs and all attributes’ producers are looking for today. These attributes include air filtration, pen gestation, and an older wean age. Although more expensive, nominally, farms with these attributes tend to have a better cost of production simply due to higher levels of throughput and the benefit of an older wean age can allow for an additional $3-4 in wean pig value. Additional benefit may also be garnered from premiums related to pen gestation or market access afforded by a pen gestated sow herd.

In some instances a new facility is the best option, however, if you have the appropriately located older facility it can still hold value.

Remodeling Assets

If you have a smaller unit, on the edge of the corn belt, you may want to consider expansion of the asset to capture additional value associated with the scale of the farm while adding attributes to improve production. On the opposite side, if you have the same farm in a pig dense location, you may not want to add more sow capacity nor may it warrant continued operation as a sow farm long term. However, this does not mean the barn should be shut down. There may be an opportunity to retrofit the sow farm into a finishing barn for only $100-150 an equivalent finishing space, depending on the barn.

For finishing barns, location matters. This is especially true in distance from a feed source, distance from where you can utilize nutrients on land and distance from family. This may be a location that is not attractive for a sow farm, but it is for a finishing barn. We encourage you to look at older sow facilities differently and consider a different path to garner long term value for your operation.

Every barn is different, especially when looking at the age of the facility or the design. In addition, older facilities have many attributes that may need remodeling. By re-purposing a facility, you now have an opportunity to update those attributes and increase production on-farm.

There are multiple considerations and options when it comes to managing old assets. The end goal is to position your farm to be competitive long-term in the pig industry. For questions or consultation, reach out to Pipestone Management at (507) 825-7032.