Nielands find way into ag with contracts as costs increase

AMVC growers Nieland family iowa

posted on Monday, March 23, 2020 in Central Region News

Aaron and Alyce Nieland were looking to diversify their farming operations, so nearly eight years ago, they secured a contract and built their first 2,400-head hog finisher.

A year later, they built another, then two more were constructed off-site from 2014 to 2015.

“Alyce was working for a local co-op and heard there were contractors who were wanting people to raise pigs for them,” Aaron says. “She saw how everything cash-flowed and suggested we do it.”

The couple feeds pigs for Audubon-Manning Veterinary Clinic (AMVC). Pigs are about 21 days of age when they are moved to the facilities in Sac and Carroll counties.

Each of the contracts is for 10 years, Aaron says. Alyce orders feed and medical necessities, and the two of them handle daily chores.

They also farm with Aaron’s parents, and this year will cash rent their ground and handle farming operations.

“Dad is retiring, but he will still be out there helping us,” Aaron says, adding his father will also help with the hogs when needed.

Alyce’s parents had been feeding hogs for AMVC for many years. She was also an intern with the clinic.

“They are tremendous to work with,” she says. “We’re happy to be working with them.”

Contract finishing has long been an avenue to help younger producers get started in farming, says Kelvin Leibold, Extension farm management specialist with Iowa State University in Iowa Falls.

He says the process is still very effective, but says costs have increased to the point that most contracts are now 12 years, rather than the traditional 10 years.

“You have some who are getting paid the same rate as they did 10 years ago, but building costs are 30% higher,” Leibold says. “That’s why you are seeing the 12-year contracts.”

He says for most, the first three years of costs are interest payments, which is tax deductible. Over the next five to seven years, growers will be paying down the principal on the loan.

Leibold says many of the large hog operations are also more inclined to own the buildings than they were years ago.

“The contracts sometimes have a clause that if the site comes up for sale, the contractor has the first option to buy it,” he says.

Leibold says on the plus side, building quality is higher than it was years ago. This should result in less maintenance and better building longevity.

“Those buildings could last 30 to 40 years,” he says. “If you need to, you can go in and put new slats down.”

Leibold says contractors continue to renew their contract with growers, but adds finding contracts and financing is not as easy as it was several year ago.

“For young producers, it’s difficult for some of them to make it cash flow,” he says.

The Nielands plan to continue the arrangement with AMVC into the future. They have also talked about putting up two additional finishers in the coming years. Part of that is with their children in mind. Aisha is 7, Will is 5 and Ellie is 2.

“We are fifth-generation farmers, and we want to be able to offer our children the chance to farm if that’s what they want,” Alyce says. “Aisha loves the pigs, and Will loves the tractors. If this is what they want to do, we want to be able to give them that opportunity.”

Story credit: Iowa Farmer Today 3/20, Jeff DeYoung, photo credit. 


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