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Where are we now? Where in the cycle is the current market? What should we expect?
Wow! What kind of ride has this poultry market seen over the last few years?
Where have we been? Tremendous growth through new construction...
Poultry companies offered incentives for new construction to encourage farm owners to build new poultry houses and take advantage of newer technology and boy did it work! The Eastern Shore saw tremendous growth in the poultry segment and it seemed like everyone wanted to purchase land for poultry farms.
Tremendous growth produced oversupply...
Many times in business, and particularly real estate, the very thing (or cycle) that you desire is what causes the next phase in the economy which isn't necessarily quite so desirable. Along with the substantial growth that the incentives brought, came higher land prices, higher construction prices, higher equipment prices, and what started out as pent up demand and huge success in a particular niche, ended up causing so much growth that eventually the demand for poultry houses began to soften and integrators, (ie, Perdue Farms, Mountaire, Tyson, Amick, etc.) began to become more strict with their requirements for upgrades, they began having longer layout times, and some even began ramp up their contract cancellations for under-performing growers. These cycles are normal in any business environment but they also have very sad consequences for some in the process and some will find ways to expand and benefit. In times like these, there will be some that decide to retire, some that unfortunately loose their farms, some will struggle along and some will see this market as an opportunity to become more efficient, to look for innovations that can cause them to stand out, and some will even expand since prices have softened a bit.
Where are we now, and where do we go from here?
Currently, there are different pockets in the market and depending on what side you are on, you might have a different opinion on what type of market we are in. As in any business, if you buy a business (or in this case the farm) for the right price, and are able to keep your costs in line and can compete well in the industry you have the opportunity to be very successful. However, there is no way around it, increased construction of new poultry houses has put pressure on existing farmers to make some costly upgrades and it has cause a financial burden for some and in turn has hurt a number of poultry farmers and has even impacted the prices of some farms. With regard to the purchase and sale of poultry farms, there are currently some farms that are coming on the market that have been taken back by banks. Most are smaller older farms but there have even been some relatively new farms that have been impacted as well. The integrators still seem to have enough farms under contract to supply their needs so it is still difficult to obtain new contracts on existing farms so that creates obstacles to selling and or purchasing a farm that currently is not under contract. When farms change hands, in most instances, substantial upgrades are required. There is no question that there are some obstacles to those looking to sell and even those looking to purchase certain types of poultry farms in this market. However, the quote that comes to mind in this type of environment is a saying that I always remember from the famous investor, Warren Buffett, " be fearful when others are greedy and be greedy when others are fearful". It reminds us that some of the best opportunities come when the market is having some turmoil (whether that be a segment of the real estate market, the stock market, etc., etc.) It also reminds us that we have to keep things in perspective and that no good, bad, or even average market lasts for ever. Things are always changing. Being bold when others are fearful is a very difficult thing to do! It is the nature of society to want to conform. However, greatness in many cases comes when someone is willing to look for opportunities where everyone else sees problems. In my opinion, for people considering the purchase of a poultry farm, it is certainly a time to be cautious but it is always wise to be cautious when you make a large purchase. However, it isn't a time to be afraid. It is a time to assess your situation and to assess the opportunities. If you find that the risk is not worth the reward, don't make the move. However, people have been growing poultry for many years in this area and it has created a lot of wealth in this area for many folks and my guess is that there will be people raising poultry for many years to come. With that said, the key is figuring out is whether farming is the right thing for you and if so, what is the right price to pay and what is the right farm for you? With that said, my suggestion would be to be open and look for opportunities! Be patient and yet prepared! If you are creative and more industrious than most, think about what you might be able to do with some of the existing houses that may go out of production in the next few years. If you are a top grower currently, consider whether you would like to purchase a farm when the right one comes on the market and be prepared! The overall real estate market on the Eastern Shore is as strong as it has been in years but the Poultry segment has taken some hard hits over the last few years. No one can predict what will happen in the future but we do know that in life and business, everything has it's cycles and no cycle lasts forever. For those that are brave enough and creative enough to think of new ways to to look at things, there will always be opportunities. Who will be the one that comes up with the innovative ideas of tomorrow? Who will be bold while others are fearful? Who will buy land while corn and soybean prices have fallen with the thought that the sun will shine again? When is the right time to make these moves? How long is too long to wait? These are all questions that have to be decided by the individual and the answer is different for each person and each situation. One thing we can count on is that the market will not stay the same, at times it will fall but it will also rise again. Some will fear and some will be bold! My suggestion is to be cautious but not afraid. Be bold but not careless and continue to look for opportunities! They are always around us!