Tony Howard received an unwelcome surprise when he received his recent Indiana property tax assessments.
“They went up astronomically,” says Howard, a contract hog farmer in Logansport, Ind. “On our hog barns alone, they went up 126%. Everything went up – the grain bins, the tool sheds.”
He told AgriTalk’s Chip Flory they aren’t the only ones from what he’s been hearing from other farmers. This massive spike in property tax assessments threatens the thin margins of fixed-income contract growing.
“We’re on a fixed income, and that’s definitely going to hurt the bottom line,” says Howard, who farms about 3,500 acres of row crops with his two brothers. In addition to contract hog production, they also operate a small cow-calf herd.
Rising Construction Costs and Interest Rates
While there is a desire to bring the next generation into the business, the “moving target” of construction costs makes new investments risky. The cost of building a new barn is increasing faster than the time it takes to secure financing and permits.
“My youngest son was actually thinking about building a new barn,” Howard says. “We got a quote and felt they gave us a fair offer. The problem was the price of the barn continued to increase. He started looking back in April, but by December when his loan was approved, the barn price increased by $60,000. He decided to put it on hold.”
Now, with the recent property tax assessment increase, Howard is glad his son made that decision.
“He’s still interested in another barn, and maybe down the road someday he will build,” Howard says. “But we’re waiting to see how things shake out.”
Dustin Ripberger, a contract grower and row crop farmer from Lewisville, Ind., says he’s experienced some impact from increased property tax assessments, but not the same level as Howard.
Ripberger says one of the biggest challenges he faces right now is time management. He contemplated starting a second quad hog building, but the numbers “didn’t make sense” and exposed him to more risk.
“I would be working twice as hard to make basically the same money I am now with one building because the cost increase to build one today versus what I built my first one at,” Ripberger says. “It’s crazy.”
The Path Forward
“What needs to change to encourage you to go ahead and make the investment in that barn?” Flory asked.”
“Interest rates,” Howard says. “We would like to continue to grow. I have two sons, the youngest one wants to come back to the farm, and a barn would be a good way to do it. We’re happy with what we’ve done here, but it’s just the prices right now trying to make things work.”
In addition to adding another barn someday if possible, they’d like to pick up some more ground if the opportunity presents itself.
Manure as a Key Asset
With fertilizer prices remaining volatile, the value of hog manure has shifted from a byproduct to a critical component of row-crop profitability.
“With the fertilizer prices where they are right now, the manure has been a big savings and help,” Howard adds.
More producers are bringing manure application in-house to capture more value and offset commercial fertilizer costs. Last winter, Ripberger bought a manure tank.
“We’ve been paying a custom applicator to do it for over 10 years,” Ripberger says. “The guys we hired did an excellent job, but it came to the point where the manure was almost not a positive. It’s exciting that making that investment to do that job ourselves makes manure more like an asset.”
Operational Efficiency and Technology
Howard and Ripberger are using technology and infrastructure investments to mitigate rising input costs, such as energy and heating. Smart investments in solar and bulk storage are helping to stabilize variable expenses.
“We put solar panels in, so that helps reduce our energy consumption by about half,” Howard says. “Probably the biggest thing we did to help financially was put in a 30,000-gal. LP tank. We can buy transport loads of LP. We can buy them in the summertime when the price is typically lower, and we get a better price because of the volume.”
Ripberger built his barn in 2018, so he has a newer control system he can access with his phone.
“Anywhere I have internet access, I can check on the barn,” he says. “That saves me time and ultimately money in the end.”
Learn more during AgriTalk’s farmer forum here.
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