Pork farmers do it their way

Prairie farmers cooperative builds a pork processing plant in Dawson,Minn.

By Cindy Green

When investing in ethanol was first proposed to state officials and bankers, many balked and questioned whether farmer-owned plants could compete with huge agribusiness processors.

A group of Minnesota pork producers have often met the same skepticism over building their own processing facility. How could a family farmer hot dog compete with an Oscar Meyer wiener?

Nonetheless, Prairie Farmers Cooperative’s 73 members broke ground in November for a 30,000 square foot plant in Dawson, Minn. that will process 250 hogs a day. Prairie Farmers will not only produce fresh chops and bacon, but an array of gourmet products including marinated roasts, slow-smoked hams, pre-cooked barbecued pork and specialty sausages made with proprietary recipes.

The farmers are taking control of their own economic future because they can’t afford not to, says Dennis Timmerman, a Boyd, Minn. farmer who produces 2,000 hogs a year -- not enough to get a contract with a major processor. Timmerman says he helped organize the cooperative because “it appeared to me that farming, especially livestock farming, would end up under the control of the large meat packing corporations -- and a smaller family farmer would not have a market for his production.”

Wresting profits from the packers

“We’re selling more pork than we ever have, customers are paying more than they ever have, and yet producers are getting depression era prices for their pigs,” says Brad Mitteness, Prairie Farmers’ business consultant. “Pork production has been unprofitable for over two years, yet pork packing has been making record profits. The gap gets wider and wider every year.”

“Most packers say their goal is to be vertically integrated and lock in their supplies -- either by owning production or long-term contracts.” A farmer-owned processing and marketing cooperative, Mitteness says, “is the last chance for the independent producer to take control back.”

Prairie Farmers Cooperative doesn’t intend to go head to head with large companies. From interviews with dozens of meat buyers and sellers and hundreds of grocers and customers, Prairie Farmers knows there’s a consumer group willing to pay a little more for their pork, especially if its drug-free, which is marked up as much as 300 percent.

“Our market research shows large groups concerned with where their food is coming from, environmental issues, rural communities -- we want to reach those people,” Mitteness says. “We’re gearing up a substantial amount to be antibiotic free. Natural foods is the fastest growing retail sector -- it’s exploding, and it’s one the large packers will have a hard time filling.”

Organic or natural production is more challenging, Mitteness says, and “big packers don’t want to go to a guy marketing 1,000 pigs a year -- they want 100,000 or 200,000 a year.

“That concentration does not lend itself to drug-free production. When big producers invest millions and millions of borrowed dollars in high-tech production facilities, they need to wring every bit of production out of their hogs. They get trapped in a cycle of having to get bigger and bigger and push harder and harder. And we think they’re getting further away from what the consumers want -- at least what they’re telling us they want.”

Staying alive

To brainstorm ways to stay alive in a dismal industry, Dennis Timmerman and 46 other livestock farmers met at a Granite Falls, Minn. restaurant four years ago to “kick around ideas.” They knew Twin City people were buying meat from rural butcher shops, saying “it was better than they could buy off the grocer shelves. We spent the evening figuring out how to capitalize on that,” Timmerman says.

The farmers formed a steering committee that considered contracting with a custom processor and starting a retail store. After deciding that wouldn’t be profitable, the Small Business Development Center in Marshall, Minn. helped them analyze the potential for buying a processing plant in New London. A marketing study, funded in part by AURI, surveyed 197 stores within 100 miles of New London; 57 percent were interested.

With a viable business plan, Prairie Farmers received financing and a purchase agreement. But when the plant had to be expanded and hooked up to the municipal sewer system, the city denied a permit.

“We had to start all over and develop a new business plan and a new plant design,” Timmerman said. The new facility would be considerably larger, and they had to convince state and federal economic development agencies to arrange financing to supplement the members’ investment. Costs of the facility, start-up operating funds and equipment total almost $6 million.

In July of 1998, after considering several plant sites, they chose Dawson, which had the “best infrastructure and was able to handle our waste stream.”

A major boost of confidence and support came from the Minnesota Department of Agriculture, Timmerman says, adding that the department’s marketing and co-op development staff “really went out of their way to help us.” AURI also provided technical review and assistance.

“This project goes against conventional wisdom -- that you have to do 30,000 head a day and just ram them through with low cost production, low cost labor, a low cost facility -- and worry about the environmental and social consequences later,” Mitteness says.

Overall, the banking community has also been very supportive, Timmerman says. “They realize their customers have to do something. My banker says he has supported other value-added projects and they’ve been good for his customers.”

Last summer, Prairie Farmers sold out its shares in three months; 73 farmers purchased the right and obligation to deliver an average of 970 hogs each to the co-op. Timmerman says if Prairie Farmers is successful, livestock producers everywhere will have a model for taking control of their markets.

“We’re hoping that farmer members can profitably operate their farms and remain in the rural areas. That’s our intention.”