A student of the pork industry, with an economic bent.
The Masters of the Pork Industry are a special, hand-picked group of pork industry visionaries.
Their personal stories and business philosophies provide insight into their respective segments of the U.S. pork industry.
They are professionals, entrepreneurs and industry leaders; their visions for this dynamic industry will inspire young and old.
Each shares the life experiences, bumps and bruises and inspirations that have carried them forward in pursuit of excellence.
The anti-nuclear energy sentiments in the early '70s diverted this would-be nuclear engineer to an agricultural economist career — and the U.S. pork industry was the beneficiary.
Raised on a small, diversified farm near El Dorado Springs, MO, Ron Plain says the farm was reminiscent of the sing-along song describing Old McDonald's Farm. “With a moo-moo here, and an oink-oink there; we had quite a few beef cattle, some hogs, a few chickens, one milk cow, and we raised corn, wheat, soybeans, grain sorghum, oats, barley, hay and fescue seed,” he remembers.
Plain's boyhood plan was to become a farmer, but by the time he reached high school, those plans were derailed by several factors, including a bad case of hay fever, the thought that “there has to be an easier way to make a living,” and the fact that the farm wasn't big enough to support another family.
He excelled in high school — named valedictorian of the graduating class — and was especially adept in math and science. “If you were good at math and science, high school counselors nudged you toward engineering,” he explains.
Taking that advice, he enrolled at the University of Missouri-Rolla with a focus on nuclear engineering. But it soon became clear that this career path and job prospects were quite dismal, as environmentalists “basically put the kibosh on building any more nuclear power plants,” he says.
Rethinking his career choice, Plain decided he really wanted to do something related to agriculture, so drawing on the positive experiences he'd had in the Future Farmers of America (FFA), he transferred to the University of Missouri's Columbia campus and focused on agricultural education.
Graduating in May 1974, he accepted a vocational agriculture teaching position at Odessa, MO, where he shared vo-ag teaching responsibilities with Don Nikodim, who has become a lifelong friend and mentor, credited with cultivating Plain's love of hogs.
“I really enjoyed the three years I spent as an ag teacher, but each year seemed to repeat the last; I decided it wasn't something I wanted to still be doing when I was 50 years old,” Plain explains.
While teaching in Odessa, Plain began taking courses for a master's degree in ag education, which he earned in 1976. A year later, he enrolled in graduate school at Oklahoma State University, pursuing a Ph.D. in agricultural economics. In the ensuing four years, he met his wife, Cuba, who received a bachelor-of-science degree in agricultural economics at the same time that he received his doctorate degree (May 1981).
He chose to focus on hog marketing primarily because his major advisor, Joe Williams, focused his research on pigs. Plain's dissertation helped set him on a career path that would inevitably position him to become a widely recognized agricultural economist, specializing in hog and cattle marketing.
For the Ph.D. dissertation, he studied whether or not a farm could adjust the number of hogs raised in response to price forecasting in order to increase profits. “In other words, could you use a forecast of high profits to increase pig numbers, and a forecast of negative profits to decrease pig numbers, to be more profitable than the guy who held production at a constant level?” he explains.
He found that, yes, you can do better if the price forecast is accurate enough. But there's a caveat: “Your price forecast must be more accurate than the futures market,” he says. “And, if I've got a price forecast more accurate than the futures market, I don't need hogs — I can speculate in Chicago (at the Chicago Mercantile Exchange) or from a condo in Hawaii,” he jests.
However, if your price forecasting is not better than the futures market and you operate at 110% and 80% of capacity — trying to adjust to predictions — the result is inefficiencies that will “swamp you,” Plain says.
“My conclusion was that a producer should operate the hog operation for maximum efficiency — regardless of the price forecasts — unless he thinks he has a price forecast better than the futures market, and then he ought to be speculating on the side. Operate for maximum efficiency, not for anticipated price changes,” he emphasizes.
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Career Ag Economist
With Ph.D. in hand and his new bride at his side, Plain returned to his alma mater as assistant professor and Extension economist in July 1981.
“LeRoy Rottmann had retired and he did pigs and taxes, an odd combination, but that's the position I was hired to fill,” he remembers. From his office in Mumford Hall, just a few doors down was the renowned livestock marketing specialist, Glenn Grimes, a turn of fate that soon grew into a lifelong friendship and mentoring opportunity.
Grimes decided to retire in the mid-'80s, leaving the livestock marketing specialist position vacant; but budgets were tight, so the position was held open. One day, Plain approached the department chair with a creative proposal — switch him over to fill the livestock marketing slot and leave the pigs-and-taxes position vacant. He agreed, and Plain has held the position since. Wisely, the university also accepted a proposal from Grimes to work one-quarter time, which often amounts to nearly 20 hours/week.
As a livestock marketing specialist, Plain is primarily responsible for monitoring livestock markets, developing price forecasts and providing cattle and hog producers with information and strategies to enhance their revenue capabilities. He describes himself as “an economist who is a capitalist at heart,” and he admits to a preference for the pork industry.
“The pork industry is driven by market forces — expanding when they are making money, contracting when losing money. Unlike crops and dairy, the pork industry operates without government support programs and, unlike the cattle business, most pork people really expect to make a living raising hogs — and they act that way,” he says. “It's a dynamic industry; things change quickly in pork production, which is a big challenge for pork producers, but it's fascinating for an industry analyst.”
Changes and Challenges
Plain sees some nebulous months ahead, with a few opportunities for profit during the summer months.
“We're going to produce 4% fewer hogs this year than last,” he predicts. “But, we'll end up with basically the same average price as we had last year because of weaker pork exports and weak domestic demand. We figure the economy will start to pick up, the domestic demand will be stronger and we will have better exports in 2010,” he adds.
Plain is quick to remind producers that packers slaughtered 116 million hogs in 2008 — a record — and hogs moved through plants on a timely basis.
“If you look at the price ratios of the hogs-to-cutout values, they stayed in a normal relationship, so we had plenty of packing capacity to handle 116 million hogs. This year, we will slaughter 111-112 million hogs and probably 108-109 million in 2010, so we've got surplus kill capacity and likely will have for a while. But pressure is going to mount quickly on packers to shut down some plant, somewhere,” he cautions.
Discussions about plant closings and the trials and tribulations of operating pork packing plants inevitably turn to the recent closing of the producer-owned Meadowbrook Foods plant at Rantoul, IL.
“Meadowbrook opened following the hog market collapse in '98, when producers felt the packers were an evil empire that had taken advantage of them. Their attitude was, ‘we're not going to let that happen again because we're going to own our own packing plant next time,’” he relates. “There's this sort of feeling that the (packer) margins are good and there's some easy money there — but that's not the case. If you look at the performance of packing companies, you soon realize that you don't get rich in the packing business, as a general rule.
“You think as a hog producer, you understand producing pork, but packing isn't remotely the same business. A packing plant is a factory. You have lots of employees and you have enormous turnover; 100% turnover is the standard in pork processing plants, so if you employ 1,000 people in your plant, you can expect to hire 1,000 people per year,” he explains.
Another common expectation of producers investing in packing plants is that as owners they will get preferential treatment. Their focus is on how that plant is going to treat them and their delivery of hogs. They often expect more from the packing plant than it's financially able to deliver. They want what they own to treat them better than the Tysons, the Smithfields or the Excels of the world. The plant tries to meet those expectations, but there's not enough profit margin to allow them to do that,” he says.
“Often, part of the motivation is that they are ticked off at other packers, so they start up a plant by themselves vs. building an alliance with an existing packer. That means you've got to develop the expertise as you go — and that's costly.
“Another real challenge that any start-up plant faces is the product they produce and where they are going to sell it. Every grocery store has pork in the meat case and every restaurant already has a supplier, so you've got to displace a supplier that the customer is probably happy with,” he continues.
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“Finally, everybody thinks in terms of selling loins, hams and bellies, but a lot of the margin in the packing business depends on the ability to sell blood, snouts, pig ears, pig's feet, etc. Much of that goes overseas. Now, it's one thing for Smithfield's Joe Luter to have an office in Hong Kong to deal with these byproducts, but it's a totally different thing for a small, start-up packing plant to have an office there. Big companies can capture those values because they can go anywhere in the world and build a relationship. When you're killing 100,000 hogs a day, a foreign presence is a lot easier than if you're only killing 3,000 a day,” he says.
Triumph Foods, which opened a new plant in St. Joseph, MO, in early 2006, hired an experienced hand at designing and operating a packing plant. Rick Hoffman, former president of Seaboard Foods, had run their hog operations for years. Triumph Foods didn't go into the venture with an anti-packer attitude, and they signed a contract with Seaboard to sell their product, Plain explains.
“The Triumph plant is very similar in size and operation as the Seaboard plant in Guymon, OK. Rick Hoffman built them both,” Plain notes. “On the marketing side, they began with an established group of people and their job was to double their market share.”
“If you look at the data, on average, pig weights have gone up a pound a year for 50 years,” Plain explains. “I contend that's the rate of genetic progress. We've been selecting for faster growing, bigger framed, leaner hogs.
“When corn prices went up last year, weights came down from the year before. But the genetic progress continued. This year, with corn a little cheaper, weights are up because we're playing catch-up. The genetics are there to make them bigger, and so we are running 2 lb. heavier than a year ago.”
It's purely economics. “The reality is, we keep pushing weights up because of two things — cost on the farm and cost at the packing plant,” he continues. “Looking at the packing plants first — if you want to run a hog kill plant, the cost to kill is ‘per head.’ You run a 170-lb. carcass or a 200-lb. carcass past that guy, it costs the same. You're paying him the same and the job's the same, but more pork comes out of the 200-lb. carcass, which means cost per pound is lower. So, if the pigs don't get too fat and the quality in that carcass doesn't deteriorate — which is the genetic progress constraint — we will someday make a 250-lb. carcass and a 330-lb. live hog,” he predicts.
“On the farm side, when the pigs are weaned, we've got $35-40/pig invested. That's a fixed cost from there on. If we put another 250 lb. on a pig, live weight basis, then we're spreading that $35-40 fixed cost across 250 lb. of gain. If we put 270 lb. on him after weaning, we're spreading that fixed cost over 270 lb. of gain. So, the economics at the farm level says, if feed conversion doesn't get too bad, or the packer doesn't discount them for being too big, then I can spread my fixed costs over more pounds and lower the per-pound cost of producing pigs off that farm,” he adds.
Technology is Tantamount
The watershed for delivery of Extension information and strategic marketing information has been electronic delivery and the Internet, Plain emphasizes.
“The Internet is a fantastic tool and a big change in what I do. Our ability to get more information to more people, on a timely basis, is fantastic,” he exclaims. “I used to wait for the numbers to arrive from USDA in the mail. All of my charts were quarterly. Any more, I update our charts weekly because it's easy to grab the numbers electronically.
“We do a weekly hog and cattle summary that is sent out electronically every Friday afternoon. If we mailed it like we used to, the best we could hope for would be for producers to get it on Monday; now, everybody can see it by 3 o' clock on Friday — and it's free! Somebody is paying for the Internet, but it's not me,” he says.
Future in Production
If a young person were to ask Plain's advice about pursuing a hog-raising career, he would first pose this question: “What's your goal? Are you trying to build a legacy that will outlast you, or, are you trying to build a family business that will pass on through the generations?
“If you're trying to impress somebody, minimize your land ownership and use lots of debt,” he suggests. “You're probably going to go broke and somebody else will end up owning it, but you may well build something big and impressive that will outlast you.
“If, on the other hand, you want to make a living and build something to last — diversify — and get control of the land. Don't just build hog barns,” he advises.
“The risk of being a corn and hog farmer, for example, is much, much lower than just being a hog farmer. Keep your debt load down so that you and your family can own it. If you do that, then you can build something that will provide a good living for you and the opportunity for a good living for your kids and grandkids, if they want to raise hogs, too.”
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The challenge, of course, is greater when starting from scratch. “In that case, my recommendation would be to try to get a job raising hogs for a large integrator. Let them train you while they pay you, and while you save money. Then, with a plan, buy some land to start raising your own hogs. If you're lucky, you will find a spouse with a job in town that provides health benefits for you and your family. That will allow you to reinvest your earnings in the business,” he explains.
A minimum size to support a family is about 500 sows, farrow-to-finish, Plain figures, and that's more than anyone can do without hired labor. “One of the problems with small farms is that every farm has $10/hour work and $100/hour work. Driving the tractor, sorting the hogs, loading the truck, cleaning barns between groups is $10/hour work; putting together a marketing plan, negotiating a loan with a banker, deciding which genetics to buy, that's $100/hour work.
“On a small farm, the same guy is doing the $10-an-hour work as the $100-an-hour work. When he's doing the $10 an hour work, he's not really making enough money to support his family, and he doesn't get to do enough of the $100-an-hour work to get good at it,” he adds.
Mentors and Mentoring
Plain is quick to recognize the huge benefits of Glenn Grimes' counsel over the years. “One of the really, really great things in my life is that Glenn didn't fully retire, and the fact that I've had access to him for the last 25 years,” he says fondly. “He's a remarkable individual and his knowledge is amazing. Thanks to his mentoring, I've had few, serious career obstacles.”
Plain also cites advice received from Kim Anderson, grain marketing specialist at Oklahoma State University, who advised: “Narrow your focus on what it is you cover to a point where you're good enough at it to generate a positive reputation.”
That advice was taken to heart and effectively put into practice, as Plain's resume testifies. Since joining the University of Missouri, he has authored over 470 publications and made over 2,000 presentations to farm audiences. During that tenure, he has received 16 awards of excellence, including the Governor's Award for Quality and Productivity, and has been named outstanding state Extension specialist five times.
One of the most meaningful recognitions was the Honorary American Farmer degree presented by the National FFA Association in 2006. Plain says supervising the Missouri farm management contest for 27 years has been most fulfilling.
He also is especially proud to have launched the Missouri Agricultural Leadership of Tomorrow (ALOT) program, now in its 13th class. “Every once in a while, you're at the right place at the right time,” he admits. “The Kellogg Foundation was funding the programs, the dean wanted to do it and I was an assistant professor at the time, so I got the opportunity to help launch it.”
Two of Plain's favorite things are traveling to new places and talking to pork producers.
“My Dad's attitude was — you can travel anywhere in the world you want to, as long as you're home at night to do chores,” he says. “When I graduated with my B.S. degree, I'd never been more than 30 miles outside of Missouri.”
To date, he has travelled to 18 foreign countries and counts the days spent giving presentations to pork producers as the best.
“Hog farmers are generally sharp, well-informed people who ask good questions and are business-minded. My favorite days at work are when I get to go talk to a bunch of hog producers about what's going on, where we are headed, and what are the challenges that lie ahead. It's a great job,” he emphasizes.