The Rural Voice, 1998-06, Page 42wFr
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38 THE RURAL VOICE
stock or the feeding program, both of
which are out of the hands of the guy
running the barn. You have to be
careful that you're agreeing to
incentives that you have some
control over, Smith says. One of the
regular clauses is a mortality bonus
for good management or penalty for
problems. In this area, however, the
contract should spell out who pays
the vet bills.
How long should the contract be
for? Farrowers and growers have a
Targe investment in their facility and
a debt Toad to service so they want a
Tong -term contract of at (east three to
five years, he says. One of the recent
contracts was to a 10 -year period
with a 10 -year option.
But as well as getting Mw the
contract a producer needs to
look at the termination
procedures of the contract. Many hog
finishers were unhappy during the
recent Maple Leaf Foods strike when
the company invoked a "force
majeure" clause that excused the
company from its obligation to buy
and process the hogs.
Farmers need to know what the
termination period is, Smith says. In
some cases the contract can be
terminated on a few days notice, or it
may take months or years. "It's a big
process unwinding one of these
things (loops)," Smith says. "I've
seen a number of these that started
out well and broke down."
The majority of contracts are new
enough that they really haven't been
tested yet. The low hog prices may
stretch the resources of some loops.
That's why it's important to know
the people you're getting into
business with, Smith says. "How
deep are those pockets to get through
the down cycles? If the ownership
has a cash-flow problem you want to
be sure you are going to get paid."
Even with contractors sacrificing
potential profits for more security,
there may be valid reasons for a
producer to accept a contract, Smith
says. "It can be a good way to
enhance some of the value of your
farm." Depending on the size of the
facility and the equipment involved,
the labour factor may not be too large
and the barn can be managed on a
part-time basis.
Just get the terms in writing and
make sure you understand them, he
says.0
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The Axis -Air Blender
• Uniform temperature • Corrosion Resistant
Easy maintenance • Uniform air pattern
With An AVC -5 Computerized Controller
• Integrated heater control • Programmable tempera-
ture reduction • High and low temperature alarms
Call Axis Products See us at the
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ii 1 -800 -833 -AXIS (2947) Stratford tfor Fairgrounds
Axis services Axis Air or Martin Air products
Axis Products Ltd., Brodhagen Ont. NOK 1130 Fax (519) 345-2575
38 THE RURAL VOICE
stock or the feeding program, both of
which are out of the hands of the guy
running the barn. You have to be
careful that you're agreeing to
incentives that you have some
control over, Smith says. One of the
regular clauses is a mortality bonus
for good management or penalty for
problems. In this area, however, the
contract should spell out who pays
the vet bills.
How long should the contract be
for? Farrowers and growers have a
Targe investment in their facility and
a debt Toad to service so they want a
Tong -term contract of at (east three to
five years, he says. One of the recent
contracts was to a 10 -year period
with a 10 -year option.
But as well as getting Mw the
contract a producer needs to
look at the termination
procedures of the contract. Many hog
finishers were unhappy during the
recent Maple Leaf Foods strike when
the company invoked a "force
majeure" clause that excused the
company from its obligation to buy
and process the hogs.
Farmers need to know what the
termination period is, Smith says. In
some cases the contract can be
terminated on a few days notice, or it
may take months or years. "It's a big
process unwinding one of these
things (loops)," Smith says. "I've
seen a number of these that started
out well and broke down."
The majority of contracts are new
enough that they really haven't been
tested yet. The low hog prices may
stretch the resources of some loops.
That's why it's important to know
the people you're getting into
business with, Smith says. "How
deep are those pockets to get through
the down cycles? If the ownership
has a cash-flow problem you want to
be sure you are going to get paid."
Even with contractors sacrificing
potential profits for more security,
there may be valid reasons for a
producer to accept a contract, Smith
says. "It can be a good way to
enhance some of the value of your
farm." Depending on the size of the
facility and the equipment involved,
the labour factor may not be too large
and the barn can be managed on a
part-time basis.
Just get the terms in writing and
make sure you understand them, he
says.0