The words “pork producer cooperative” are a part of everyday language in today’s pork industry. The goals, business structures and long-term strategies of the many evolving entities are as unique and varied as the people involved.
You’re familiar with the national cooperative Pork America, but the options only begin there. Producers are organizing by state, region, herd genetics and common production practices.
Whether the goal is to capture additional profits or to secure a market, one common thread that surfaces is the recognition that the product you produce has value. These producers are taking marketing matters into their own hands and looking to capture more of that value.
Here, Pork editors offer you a snapshot look at some of the cooperatives now under development.
Preserving Identity and Value
“Producers need a way to become organized into a group that can produce hogs for a specific market,” says Dave Starner, who runs a 820-sow, farrow-to-finish operation with his brother Mark, near Hoffman, Minn. He believes the Minnesota Certified Pork cooperative will be that entity – at least for some pork producers within the Gopher State.
Minnesota Certified Pork is the brainchild of Starner, and Thomas Blaha, veterinary and food safety specialist at the University of Minnesota. The groundwork was set last July when 12 producers, representing five farms, signed on to register the co-op with the state of Minnesota.
The Minnesota Department of Agriculture has endorsed the cooperative and the certification program that has evolved from it. Also, the state’s Agricultural Utilization and Research Institute has provided some guidance and funding. AURI is funded by the Minnesota Legislature to promote value-added ventures for the state’s agricultural commodities. MNCEP has received $112,000 in state grants for strategic planning and market development.
A key part of the plan is the certified production standards that Jerry Shurson, director of the University of Minnesota Swine Center, is helping develop. The MNCEP Quality Handbook will be a way of life for participating members. It addresses four areas, spelling out on-farm protocols in great detail.
1. Best production procedures: This involves such things as biosecurity and daily procedures for each production stage.
2. Pre-harvest food safety: Addresses things like prudent use of antibiotics, Salmonella control, and foreign body avoidance procedures (broken needles).
3. Environmental stewardship: Rules for manure storage and spreading, odor reduction, environmental accident contingency plans and the like.
4. Animal welfare: Rules for humane handling and care, animal movement and activity requirements, humane euthanasia procedures and more.
Along with the handbook, producers will be required to work through regular checklists and document operational procedures. Internal on-farm audits will occur monthly. “Third-party certification of the audited quality procedures will be directed by Minnesota Certified. MINCERT is an agency that we are developing in cooperation with the Minnesota Department of Agriculture and the University of Minnesota,” says Blaha.
All this ties back to verifying that co-op members follow procedures that guarantee a specific product for a specific market. “The idea behind this is to move away from a commodity product and toward identity preservation on the farm,” says Starner. “This has value to some consumers. It may not be a physical value, but rather an intangible value like Minnesota grown or pasture raised.”
Depending on the market or product requirements, some parts of the handbook will be revised. For example, a bird-control program simply can’t apply to pasture-raised pigs. “Participating producers will be able to select which program and standards they will meet and which products they will produce,” he adds.
The target market is not just Minnesota. Talks are underway with various players in the pork chain, including packers and retailers from New York, Colorado and Idaho. Some are interested in products for U.S. consumers, others are looking for products to export. MNCEP has an Oct. 15 target to have a marketing agreement completed with one or more entities to supply product.
Meanwhile, a pilot project is underway involving 11 farms and 10,000 sows. “We’re implementing the handbook’s production standards and auditing procedures on these farms to find out what changes we need,” says Starner.
Purchasing shares is the likely route to MNCEP membership, which is scheduled to open up this fall. Starner has a list of nearly 250 producers who are interested in hearing more about MNCEP. The co-op does not have plans for a packing plant; instead, it will serve as a coordinating body between producers and other segments of the pork chain.
“The greatest challenge will be for the marketplace to pay us a premium for these efforts,” says Starner. “This is a new concept but there are consumers looking for these kinds of intangible values.”
For more information about MNCEP, contact Starner at (320) 986-2607, or Blaha at (612) 625-8290.
Producers Work Toward Farm-Forward Integration
With mergers and consolidation setting the trend in the pork industry, a group of Illinois producers have turned their attention toward capturing a bigger share of the pork-chain profits. American Premium Foods is a new generation, closed cooperative in Illinois. Organizers plan to build a new packing plant and market its products under a private label – Meadowbrook Farms.
“We wanted to be able to create a system that correlates the price consumers pay for pork to the price we receive for our hogs,” says David Reis, a pork producer and chairman of the finance and site selection committee for American Premium Foods. “Producers already own 80 percent of the pork chain with our operations. Now we can pick up the other 20 percent with packing and processing.”
The cooperative’s goal is to kill 2,000 hogs a day running a single shift – 10,000 hogs per week. “We’ll set the shares according to how many hogs a producer will sell per week,” says Reis.
For instance, each shackle space will cost $480. Therefore, if a producer commits to sell 40 hogs per week, it will cost him $19,200 to join the co-op. Also, those 40 hogs will give the producer 40 shares of American Premium Foods’ stock.
As of early May, the co-op had about 60 producers who have committed to 50 percent of the available shackle space. The majority of these are small and mid-sized producers throughout southern and central Illinois.
A major challenge for the group was securing financing for the plant. Reis says that most lenders require 50 percent or more owner equity on this type of project. “For us, that meant $8 million,” he notes. The group went to various state agencies and associations for assistance. In mid-April they got word that the co-op would receive a $1.7-million grant from the state of Illinois, which solidifies the co-op’s financial structure.
Now that the financial package is almost complete, Reis says they plan to move forward and sell out the remaining shackle spaces by summer’s end. The committee is narrowing down site options for the plant and hope to make a final decision by mid-June. They are looking at late summer 2001 before hogs are delivered.
Once the plant is operational, the co-op will work with American Heritage Farms to manage it and market the pork products. The management company is test marketing some pork products under the Meadowbrook label with a small, regional retail chain. The bacon was the top seller during a five-week test period.
When critics challenge the co-op's plans, Reis tells them, “our plant doesn't create more pork, it just changes who has the product to sell.”
For more information on American Premium Foods, contact (618) 222-1188.
Adding Value From Farm to Fork
A new state pork cooperative, Iowa Premium Pork, is poised to give 1,400 Iowa pork producers the opportunity to find new avenues to market their hogs and profit from the entire pork chain.
“Our main objective is to add value to our products in some way as we enter IPP’s second phase,” says Rex Hoppes, project coordinator. “One of the ways we feel we can do that for producers is to control a part of the pork chain and be able to attain end-user dollars.”
For now, the co-op's main focus is to build its ability to pool market hogs. A big part of that is Iowa Premium Pork's joint venture with Producers Livestock Marketing Association, Omaha, Neb., to provide a variety of risk management services to the co-op's producer members. Hoppes notes this agreement spawns from a producer survey that revealed a need for risk management information.
PLMA will provide the co-op with five types of services during this initial development phase: Market hog pooling; information sharing; fee-based hedging programs; fee-based commodity programs and credit services.
The idea of the co-op began in December 1998 with a task force of 15 pork producers and two allied industry representatives. The group researched other valueadded agricultural groups and are modeling Iowa Premium Pork after U.S. Premium Beef and the Danish pork cooperative system.
The ideas became reality when the co-op began its membership drive at the Iowa Pork Congress this past January and ended up with 1,400 producer members by March 31. Hoppes notes the members have diversified operations, including those with existing contracts to some producers that market as few as 200 hogs annually.
To participate in co-op activities, producers must be a member. For IPP membership producers had to meet the following criteria: the operation must be in Iowa; he must own the hogs and bear the financial risk of ownership; and he must be a member of the Iowa Pork Producers Association.
Each IPP member paid a one-time membership fee of $300, with $50 going to purchase a share of common stock and the other $250 as investment capital. One share of stock gives each member one vote.
Membership brings the right, but not the obligation, to participate in co-op activities. “If the programs we offer don't fit your operation, you don't have to participate,” explains Hoppes.
While the pooled marketing phase is underway, board members will begin focusing on identifying and implementing specific value-added ventures. More details should be available later this year. For more information about Iowa Premium Pork, call (877) 572-7675.
Premium Quality is One Answer
Developing a premium pork product is one way Everett Forkner of Richards, Mo., plans to develop a market for himself and his genetic customers.
Forkner saw an opportunity with his line of genetics, which has performed well in pork quality tests. He also has a large enough customer base to supply the pork product. He decided to link the two further through the pork chain to produce a consistent, premium product.
The place to start was to develop a branded product supplied by producers who use his genetics. Recognizing that genetics play a large but not exclusive role in developing a premium product, Forkner also established management, handling, nutrition and herd health parameters for producers supplying to his label – Truline Premium Pork.
Those who make the grade ship hogs to Sioux-Preme Pack in Iowa, currently the only packer killing hogs for the Truline program. This means Midwest producers have the economic advantage, but Forkner says opportunities for producers in other areas could arise with Truline Premium Pork.
From there, the pork must still meet specific color, percent lean and other quality traits for the product line. “We set down some guidelines, but ultimately the consumer will set the standard,” says Forkner.
To meet the challenge of marketing Truline Premium Pork, Forkner has hired Clayton Ag Marketing of Jefferson City, Mo. But, he insists that if the quality product is provided, the rest will eventually work out.
“I’m not caught up in believing that we have to sell our own brand, so much as we have to sell the concept,” says Forkner. “Developing your own label takes time and we’re still in our infancy with this project.”
This project is not exactly structured like a cooperative, but it does provide the opportunity for producers to capture value further along the pork chain. Rather than buy shares in the company, Forkner passes the premiums received from the packer directly back to the producer. Forkner says the goal is to increase the price producers receive by at least $5 per head. So far, the premium has been averaging about $7 per head.
Truline has about a 10,000-sow commercial base available to supply pork. Forkner says he’d like to eventually double that.
“I truly believe that in the future you will either produce commodity pork driven by numbers or produce premium pork driven by quality,” says Forkner. “We can carve a niche for a premium product, because we have a genetic base for superior quality.”