Poultry has been a huge part of my life for over 27 years and I've worked hard to create strategies for my farm and others, for instance how to minimize mortality, maximize productivity and of course increase profits across the board. (I'm a family man, so I have to find ways of making this work while also having time for my wife and kids.) One of the key factors I always share with farmers when I'm helping them is the need to invest in great farm help.
Modern poultry farms are small self-contained businesses that are designed to generate a positive cash flow from the start, and with the current market conditions, they're very appealing both to start and maintain. So there's substantial incentive to start a new farm for an investment in and of itself or to keep an operating farm running after the farm has been paid off. In both of these situations, hiring a farm management team to take care of all the farm operations can be a very good investment indeed.
Debt Free Farms
Traditionally farmers spend 15 to 20 years working in and on their farms to provide a life for their families, a life that few families get to experience. There's no clock to punch when you own and operate your farm, and obviously, that can be a double-edged sword so to speak.
While it's a true joy to be available for your spouse and children when they need you, to see the kids in the mornings and get them off to school and be there when they get home as well, and even in those less frequent times to be around when someone needs a hand or isn't feeling well, but there are drawbacks to this scenario too. There aren't any weekends on a farm which cares for animals; they need caring for seven days a week and while the time of day doesn’t always matter it is necessary to care for them daily. There are only a few vacation opportunities during the year when raising poultry and you need to time them perfectly. Different types of poultry have slightly different grow-out cycles, but in my case, there are about four times every year when we're between flocks (one set of birds has been caught but the next hasn’t arrived yet). To maximize farm profits you want to keep these windows as small as possible and there's always a heck of a lot to do to get ready for the next set of chicks.
After 20 or more years of hard (but notable) work and sacrifice, when the kids are gone, it might be time to step back and enjoy yourself, but here's the thing, you don’t need to sell the farm and move into a townhouse to make it all happen. The revenue being generated by a fully functioning poultry farm with little to no debt is more than enough to hire a farm management company to oversee the day-to-day operations. Typically the management company will cost you less than your mortgage payment was, and it will allow you to continue to live on your farm and work as much or as little as you wish. You'll also no longer be tied to the flock schedule so (once comfortable) you're at liberty to travel whenever suits you whether it's to that far off country you've been dreaming of seeing, visiting family or simply avoiding the most frigid of winter months in pursuit of warmer climates.
Investing in a Poultry Farm
Current market conditions have made starting a new poultry farm - especially on a large scale, very profitable, and this fact has caught the attention of many investment firms.
Fairly recent changes to the size of new poultry houses have more than doubled the amount of square footage, without increasing the cost to start or operate the farms proportionately. In essence, new houses have a lower upfront cost per square foot making the amount of farm revenue going to service the loan lower than ever before. Operating costs in these new larger houses; power consumption, fuel, equipment, and labor costs are all lower than they are in traditionally sized houses. These two changes leave more excess capital from the operations than has historically been possible and investment firms have taken notice in a big way.
Some capital rich investment firms in major cities including New York are taking advantage of this unprecedented opportunity. The purchase of farms by investment firms also gives their investors the ability to diversify their portfolios, and this puts hard assets on the company’s books. These farms are very different from traditional family run farms, as the investment firm can allocate whatever resources necessary - even at a moment's notice, to best operate the farm and as such they're far more able to take advantage of the opportunities of scale.
Of course, it’s not in the best interest of New York bankers to even attempt to operate a poultry farm, but with all the (previously unavailable) excess profit it’s easy for them to hire an experienced Poultry Farm Management Company to tend to the farm and maximize profits in the months and years to come.
What Do Farm Management Relationships Look Like?
To my knowledge, there's no standard way to establish the relationship between a farm owner and a farm management company. Each situation is unique, and any agreement can easily be adjusted to best suit the needs of both parties. Here I'm going to start talking shop, and describe a few aspects of the relationship that should be decided upfront to prevent any issues down the line.
Payment for Service
The farm management company's payment is usually a percentage of the flock settlement, and because the payment is performance based, this makes the manager highly motivated to perform well and ensures the owner has an active interest in reinvesting in upgrades to improve efficiency and overall performance as well.
In most situations, they will split the settlement 40% manager - 60% owner, but this varies depending on some of the other items below.
Supplies and Minor Parts
These are often covered by the management company, but they may be covered by the farm owner.
More Expensive Parts
These are usually covered by the farm owner (as it's their farm), however, sometimes they're covered by the management company with approval of the farm owner and are billed back to the owner at settlement time.
Clean out of the Litter
This aspect will often depend on whether the farm owner uses the clean out litter as a fertilizer for cropland. To date, I've only agreed to clean out when it was agreed I'd get to keep the litter, however as I don't have a use for the litter myself I will invariably make a deal with a broker to clean out in exchange for the litter. Essentially, if the owner wants to keep the litter then the owner generally cleans out or hires someone to clean out for them.
Once again, these are usually covered by the farm owner, however sometimes they're covered by the management company with approval of the farm owner and are billed back to the owner at settlement time.
Upgrades to Improve Performance
These are the owner's responsibility.
This is the farm owner’s responsibility. However, if power consumption is offset by the integrator in the summer, then the farm owner would need to be reimbursed for that portion of the settlement.
This is the owner’s responsibility. Interestingly, though, a person I've had working on one of the farms I manage has been paid on the side by the owner to do this work, apart from the poultry care.
In summary, this can be an extremely beneficial relationship for all parties involved and of course, it's always best to work out as many of the details as possible - and get all salient points in writing, before engaging the services of a farm management company. The arrangement doesn’t have to be a contract drawn up by an attorney, but should be in writing, ideally in plain English (so it's easily understood) and signed by both parties.
You have nothing to lose by exploring this possibility for your farm, and sharing this information with your neighboring farmers who may also have the desire to experience a new level of freedom on their farms.