Prairie Farmers Co-op Producer-owned Livestock Processing and Marketing

Project Overview

FNC96-156
Project Type: Farmer/Rancher
Funds awarded in 1996: $10,000.00
Projected End Date: 12/31/1998
Region: North Central
State: Minnesota
Project Coordinator:

Annual Reports

Commodities

  • Animals: swine

Practices

  • Farm Business Management: cooperatives, budgets/cost and returns, marketing management, feasibility study, agricultural finance, market study, risk management, value added
  • Sustainable Communities: new business opportunities

    Summary:

    PROJECT BACKGROUND
    The Co-op is a group of Southwest Minnesota family farm pork producers. This group became quite concerned over the last several years about the increased rate of consolidation and expansion of the hog industry in Minnesota and the United States. There is enormous pressure for individual production units to either dramatically expand or to exit the industry. As independent and small producers, we are experiencing increasing difficulty in finding fair markets for our livestock.

    A steering committee of concerned pork producers was formed in the winter of 1995 to investigate the options available to these producers. Questions these farmers needed to answer included; will there be access to the market for my farm’s production, and will there continue to be an opportunity for our children to participate in the pork industry?

    The group became incorporated on February 27, 1996, and began to investigate the feasibility of buying or building their own processing facility and marketing pork directly to the wholesale market. Prairie Farmers Cooperative is composed of livestock producers of which all are diversified operators with grain enterprises.

    PROJECT DESCRIPTION AND RESULTS
    The goals of this project were to assess the feasibility of a producer owned pork processing cooperative. The Co-op began searching for an acceptable facility to purchase or lease in the summer of 1996 and identified a plant in New London, MN which was on the market. Currently, the plant has the capacity to kill, cut and process approximately 75 hogs/day. This plant was primarily supplying the owner’s (Reichel family) grocery store operations in Mora and Isanti, MN.

    The Co-op had several meat processing experts and an architect go through the plant and provide advice on how to maximize efficiency of the plant and increase capacity to 625 hogs/week at a minimal cost of renovations to existing structure and added equipment.

    In the winter of 1996, the Co-op hired a marketing consultant to complete a strategic marketing plan and assessment. The study concluded there is a strong interest by retailers in purchasing pork from a Minnesota cooperative. If a supplier of pork provides a superior, fresh product and outstanding service, then price sensitivity becomes less of an issue.

    After very favorable results from the marketing assessment, the Co-op then arranged to meet with several Twin Cities retailers and distributors to discuss the project. The relationships the Co-op has established are extremely positive. We have received letters of support/intent for the project from several Twin Cities stores. The Co-op intends to provide the highest quality product available in the industry through superior genetics, superior service, and shelf life. Marketing efforts will be ongoing to supply the industry and consumer with the optimal product line to meet their needs.

    The Co-op is in the process of formalizing a working relationship with the marketing division of the National Pork Producers Council (NCCP) for the expertise in product positioning, packaging and labeling.

    This marketing data proved to be important to us as we put together our business plan and financial package. The Co-op received a grant form the MN department of Agriculture to further assist in the completion of the project.

    There are many competitive advantages of this project. Prairie Farmers Cooperative realizes they are entering a highly competitive industry that is dominated by a few very large players. With this in mind the Co-op has identified some advantages their smaller size gives them and has designed a marketing program to maximize these advantages.

    One of these advantages is access to very high quality hogs from similar genetic backgrounds. Most of the members have already adopted similar extremely high quality genetic programs in their herds. The Co-op has conducted cutout trials on member’s hogs and the yield and quality was significantly above industry averages. These high quality hogs, coupled with an innovative transfer price system that only pays for the yield of salable product and the free flow of information among members will result in a consistent supply of quality hogs and products.

    Prairie Farmers Cooperative mission is to maximize the quality of their product by producing the highest quality in the industry and then controlling this quality all the way from “conception to consumer”.

    Assistance:
    Private assistance was provided by: Members of Prairie Farmers Cooperative, Strategic Performance Group, Ag Evolutions Inc.

    Public assistance was provided by: SARE, MN Department of Agriculture, MN Soil Conservation Service, US Fish and Wildlife Service, MN Department of Natural Resources, Agricultural Utilization Research Institute, Kandiyohi Co. Economic Development Partnership, MN DTED, and United Power Association.

    OUTREACH
    The legal counsel for the Co-op has completed the necessary documentation to begin the equity drive to interested producers. The Co-op plans to hold several informational meetings throughout the 5-10 county area to orient producers to the project specifics, results of marketing studies, and opportunities for involvement.

    Total membership for the cooperative will be approximately 30-40 producers.

    Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture or SARE.