FINISHING ISO-WEAN/FEEDER HOG PROGRAM
Producers Livestock Credit Corporation
Omaha, Nebraska
800-950-7522
RETAINED OWNERSHIP
This is an inventory financing program where Producers Livestock Credit Corporation (PLCC) will finance the farmer’s iso-weaned/weaned pigs or purchased pigs at market value or purchase price. PLCC may also advance up to 70% of the finished hog value under certain conditions. The farmer should have the barn space, management ability and the ability to provide for the care and the feeding of the pig/hog until sold. As the hogs are sold, PLCC will advance to the farmer and his lender the equity of the hogs sold providing the remaining value of the hogs on the contract has not declined to the point where there is no equity left in the remaining hogs. If the farmer needs assistance in the feed cost, PLCC may advance up to 70% of the value of the finished hog as long as there are hedges in place or a packer contract. For example if an iso-wean feeder pig cost $35 and the finished hog is hedged at $0.60 carcass wt and the finished wt is 265lbs, PLCC could advance up to 70% of the sale price which would be $82.32 (265lb x.74% = 196lbs x $0.60 = $117.60 x 70% = $82.32). Since the original cost was $35 less the maximum available of $82.32 PLCC could advance up to $47.32 for feed. Half of this would be advanced when the pig reaches 120 lbs and the final advance would be when the pig weighs 220lbs. However, the death loss will affect the original cost of the pig. PLCC would also require monthly inventories by barn to be sent to the PLCC office.
INVESTOR PROGRAM
This is an inventory financing program whereby a group of individuals will form a partnership, LLC or Corp for the purpose of finishing iso-wean/feeder pigs.
PLCC will finance 100% of the cost of the pig and up to 70% of the value of the finished market hog as long as the borrowing base supports it (see borrowing base report), the hogs are price protected (hedges or packer contract) and 30% of the finishing cost is in our payment plus account prior to the purchasing of any pigs (currently paying 5.75% interest compounded quarterly). None of the pigs may be commingled with pigs financed by another financial institution. PLCC will not be involved if there is split financing. All of the investors must be credit worthy by PLCC judgment as each investor will be responsible only for his percentage of the debt. The investors must have an individual/company who will pay all of the bills (except cost of the pigs) and PLCC will reimburse them once a month once an invoice is received. For example if the cost to finish the iso-wean to 265lbs is $100, PLCC will require $30 to be deposited in PLCC’s payment plus account before any pigs are purchased and these proceeds will be used as collateral for our loan. These payment plus funds cannot be withdrawn and will be used only to keep the PLCC loan at 70% of collateral value. As the pigs are sold and the equity builds in the payment plus account, the investors may be able to withdraw some funds.
If the investor’s wants to fill 5 – 1200 head barns (6000 pigs) with iso-wean pigs at a cost of $35 per pig, he/they will need to deposit in our payment plus account $180,000 as this represents 30% of the cost ($100) to finish the 6000 pigs. As the pigs are purchased (assumed they are all purchased at the same time) PLCC would pay the invoice for the cost of the pigs or $210,000. It would be optional to use some of the payment plus funds to reduce the loan to $147,000 or leave the $63,000 in the payment plus ($63,000 represents 30% of the cost of the iso-wean). As monthly bills are submitted for the feed and other miscellaneous cost, PLCC will once again advance 100% of the bill up to 70% of value of the finished hog. Once PLCC is at the 70% level then funds from the payment plus account will be used to keep the PLCC loan at 70% of the value of the finished market hog. If at anytime during the finishing period the loan amount exceeds more than 70% of the collateral more funds will be withdrawn from the payment plus or the investors will need to pay the loan down to 70% of the collateral value if the payment plus funds have all been withdrawn. Inventories along with the borrowing base will be completed every month and submitted to PLCC office.
HOW TO GET STARTED
Each farmer or investor must complete an application; provide 3 years of financial statements and a copy of the organizational papers of the corporation, LLC or partnership entity. PLCC will complete a credit bureau report and lien search on each farmer/investor and if a lender has a lien filed on any of applicants we will have the lender sign a release/subordination. Once approved PLCC will file a UCC in every county where the pigs are located and when the pigs are sold the proceeds will be sent to Producers Livestock office for processing, in addition the farmer/investor will sign a feeder contract. At the end of every month PLCC will send out an accounting statement to a designated person. If the pigs are feed at a barn owned by someone other than the farmer/investor, the owner of that barn will need to sign a waiver and release.
INTEREST RATES will be based on the strength of the individuals of the partnership/corporation/LLC and the interest rate will be variable.
To discuss these programs or make a loan application, call us at:
800-950-7522
800-950-7522
