The management team at The Maschhoffs, Inc. believes that information technology will drive future production in their 51,000-sow system and keep them competitive.
Ken Maschhoff, chief executive officer at The Maschhoffs, Inc. and his management team know they aren't unique in the pork industry with their own feedmills, boar studs, gilt development farms and trucking business.
And they honestly feel that their solid production numbers, for example, 24 pigs/sow/year and an average daily gain of 1.65 from farrow to finish in 2003, are probably only average figures among the two dozen or so largest pork production companies in the industry.
But Ken and his team have designed a blueprint for success built on managing costs, continuing to drive production throughput and investing in information technology. That message comes through in the new company logo: “The Maschhoffs: progressive farming — family style.”
The Maschhoffs rank in the top five of family owned, independent pork production enterprises in the U.S., producing a million hogs a year, marketed mostly at Excel of Beardstown, IL, and at Excel's Ottumwa, IA, plant.
They've achieved that ranking through some strong growth spurts and wise investments. In 1998, Ken and brother Dave owned an 8,000-sow operation and worked with a few contract growers in the area. Today, the two brothers and their expanded team of two dozen professional staff oversee a vast operation from their new headquarters complex near Carlyle, IL.
That operation consists of about 51,000 sows, evenly divided into two big pods in western and south central Illinois. A team of contract growers, or “production partners”, as Julie Maschhoff, director of public relations, insists they be called, has grown to about 125 members scattered throughout Illinois and parts of Iowa, Indiana and Kentucky.
As of 2002, well over half of the sow farms were company-owned, says Ken, with the rest contracted. A new, 10,000-sow pod was built in 2002, the last bit of planned construction. Additional growth will be through acquisitions.
In 2003, The Maschhoffs purchased about 45,000 finishing spaces from Heartland Pork Enterprises of Alden, IA (See separate story in this issue), and about 23,000 finishing spaces from Triple Edge Pork, Chandlerville, IL.
“This year, to make ourselves more efficient, we have been converting all those purchased, conventional finishing spaces to wean-to-finish (W-F), which will make our finishing system nearly 100% W-F,” explains Ken.
Unique Production Network
Virtually the company's entire production partner network raises pigs in double-wide W-F barns patterned after the Maschhoff's design.
The basic design is a 2,400-head building consisting of two attached, 1,200-head units under one roof, but operating totally independent with separate ventilation controllers, separate pits and load-out chutes. A solid concrete wall divides the 80-ft. wide, 240-ft. long buildings. The latest and largest W-F barn is a 100 × 300-ft. structure built to hold 7,600 head of pigs and maximize the heating and ventilation components, says Ken.
Producers interested in joining the production partner network are closely screened and encouraged to contact any production partner in the system to ask about the production contracts. (See sidebar, page 38, on the experiences of two Illinois growers.)
The Maschhoffs require growers to have a 10-year manure easement with neighbors.
“In a sense, this process is like setting up a franchise where our management company provides the technology; our production companies provide the inputs, including the animals; and yet the day-to-day operation is still dependent on the good sense and the work ethic that each farmer brings to the table. That has made it successful for us,” says Julie.
There are many other ways that growers benefit within the network, says Ken. “We have always had our own construction company within our system. So when we go out and contract with producers for these cookie-cutter buildings, we know exactly what they cost. We've gone to the construction companies and told them this is how much you can build them for, and given them the specifications for, and every piece of equipment down to the feeders and the rubber mats for the little pigs. And, in turn, they are given all of the business for building these units. This effectively drives down the price of the building, yet still allows the builder to make his profit margin since he is buying all the inputs on a volume discount basis.”
The Maschhoff's 10 field representatives train new growers, help with barn fills and deal with problems that often may impact a number of barns simultaneously. Field staff provide constant feedback on production activities, stresses Ken.
Production contracts are 10 years for new facilities, with shorter terms for existing facilities.
Last year, The Maschhoffs retrofitted existing barns to start a $2-million research farm near Carlyle, IL, a major investment in information technology, says Bradley Wolter, director of production technology and supervisor of the research farm.
The goal is to collect research data in an environment that closely mirrors the other W-F units in the grower system. The two, 100-ft.-wide by 300-ft.-long structures at the site each hold 3,600 hogs.
This provides for an ideal on-farm research setting, says Wolter, yet it is still very much a commercial farm that pays for itself. The farm features 120 individual research pens controlled by a computerized feed delivery system “that allows us to capture how much feed is delivered to any one pen each day, so we can measure feed intake of a given pen of pigs,” he notes. The computer instructs the mixer-weigher to formulate up to 16 different diets to be fed on any particular day. The mixer has a load cell that reports back to the computer each batch of feed that is sent to the feeders.
The barn is equipped with a pen scale to weigh pigs collectively, and another scale to weigh finishing hogs individually. The farm also features a wet lab for collecting blood and other tissues.
The first test of the barn proved the benefits of adding up to 10% fat to the diet. A second test, completed in early April, weighed pigs at weaning and again at finishing to look at the level of within-pen variation in growth.
By performing realistic on-farm production research, the system can capture those nickels and dimes that fall through the cracks in many operations, but can add up to dollars/pig in a large production system, says Ken.
The results of the last production turn in the research center have already reaped benefits, states Wolter. “We have been able to generate a new set of benchmarks, applicable to our system, that allows our production partners to measure their farms' performance.”
Wolter is also in charge of nutritional programs. To keep feed costs in check, up to 10% distiller's dried grains with solubles is currently being used as a substitute for corn and soybean meal in the diet; meat and bone meal was used to replace some soybean meal before supplies dried up.
All contract and company-owned finishing farms are all-in, all-out (AIAO) by site, split-sex-fed and follow a 12-step, phase feeding program.
Two big mills, one at Carlyle and the second at Pittsfield, IL, service 75 to 80% of the nutritional needs of the system and are critical to driving costs by substituting protein sources, but also altering micro-ingredients as needed, says Ken. The computerized mills formulate and deliver feed weekly to contract W-F sites. In other areas, private mills supply feed for growers.
Buying corn and soybean meal is an Achilles Heel, because nearby river and rail terminals boost grain prices, notes Wolter. Plus, company mills aren't set up to produce large enough quantities of pelleted feed, limiting ingredient options.
Contract growers present another challenge. “I believe there is a huge training component to managing costs, particularly when you think of larger systems,” says Wolter. “There is a disconnect with contract growers because feed costs are not something they are concerned with. We discussed this with our field representatives and even they didn't realize that feed costs are up 24%!”
To control rising feed costs, growers must:
Check feeder settings daily;
Monitor feed budgets to make sure that the right feed was delivered and that the more expensive diets don't get fed too long;
Check that feed micron size is not too large. When this happens, pigs eat a lot more feed but convert feed much less efficiently; and
Ensure that when pigs go to market, feeders are left empty.
Hogs enter W-F units at about 17 days of age. Slaughter weights have been dropped 4-5 lb. to the mid-270s to improve efficiency, says Steve Quick, director of production operations.
Load-outs are also being adjusted, because packers want less weight variation and fewer ultra-heavy hogs within groups, he says. Barns are now being topped out to take out the biggest 10%, then one cut is usually made before the barn is dumped, he says.
James Lowe, DVM, director of health and production technology and sow operations, reports that the Maschhoff system has endured some health challenges the past few years, but is on the rebound — and the future is bright because about 75% of the sow herd system is negative or naïve for porcine reproductive and respiratory syndrome (PRRS). He admits much of that has to do with the low hog density of the two major sow pods in Illinois. Contract production sites are widely segregated, reducing PRRS spread.
Swine influenza virus swept through many of Maschhoffs' production units this past year. Lowe has just now identified a non-classical H1N1 strain that appears to be the culprit. But instead of starting a vaccination program, he is collaborating in a diagnostic and epidemiological research project with the University of Minnesota and a pharmaceutical firm to establish the best approach to handling SIV.
Lowe says that Mycoplasmal pneumonia is a chronic disease within the Maschhoff system. Control measures are being implemented to improve growth and feed conversions.
Keys to the system's low-disease load are AIAO pig flows in production sites and tight biosecurity. Separate trailers are designated for weaned pigs and market hogs and are cleaned, disinfected and dried between groups.
Pig flows are commingled from sow farms to fill production partners' barns, says Lowe. However, if a group of pigs appear to be sick, they are uncoupled from the rest of the group, even if it means a production site will take longer to fill. Keeping the majority of the pigs healthy is still the most cost-effective management, he says.
“We've tried to develop a system that is capable of maintaining long-term health and uses the best science to make our animal health decisions. Our policy is do the diagnostics and understand the epidemiology of disease transmission so we know where, and where not, to intervene in the system,” Lowe asserts.
The Maschhoffs is a closed-herd system, only bringing in boars to the boar stud, producing replacement females internally. Utilizing a closed herd to increase the level of biosecurity, plus good site selection, equals the foundation for successful, long-term health management, he notes.
Achieving more production out of those females is the key to maximizing pounds of pork out the door, and profitability, notes Lowe.
One increasingly popular way to do that is by boosting weaning age, he says. Half the sow farms in the system now wean pigs at 17 days of age, which is moved up about two days.
Lowe says there's no value in reducing sow numbers to increase weaning age, because that reduces throughput. The answer is adding farrowing crates. The Maschhoff system is gradually adding crates to convert all production to the later weaning age.
The Maschhoffs get a lot of calls about becoming a production partner. There is currently a waiting list, but Ken says they are not adding growers now. “Expansion in Illinois has become particularly unattractive. Besides dealing with strict environmental regulations and siting requirements, we are currently fighting a legislative proposal that would place a 6.25% sales tax on all feed, seed, chemical and fertilizer inputs. If enacted into law, it would raise our cost of production in Illinois by nearly 4%, making buildings less valuable here.”
Production Partners Pleased
Two Illinois growers agree that The Maschhoffs' contract production program has provided the extra financial support needed to balance their diversified farming operations.
Larry Hasheider farms 1,700 acres with three brothers on a hog/dairy/beef operation near Okawville, IL.
Larry and Wayne Hasheider manage the hog operation, which began in 1968. In 1999, the pair built two, 2,400-head and two, 3,000-head, double-wide wean-to-finish (W-F) barns to raise pigs for The Maschhoffs.
Larry says The Maschhoffs were right on track going the W-F route. Pigs arrive healthy and finish efficiently. Larry and Wayne built their units to last well beyond the 10-year contracts and to provide a better working environment. They used a premium-grade concrete mix for the flooring, and Kemlite white panel boards for the walls instead of plywood.
And they installed five large, 60 ft. wide by 20-ft. deep pens with gates on one side of the barns to ease shipping over the 3-ft.-wide center alleys. Pigs are moved in large groups of approximately 100 through the series of pens, out of the buildings and onto trucks without walking up an incline (except for double-decker trailers).
The large pens and lack of inclined surfaces keep stress low for hogs and workers, remarks Larry. One group of 6,000 head loaded out without a single dead hog on the trucks.
The manure easements have also proven to be a positive factor in the contract. Larry and Wayne apply hog manure using a dragline hose injection system to an adjacent neighbor's 40-acre plot. He tests the manure before and after application for nutrient levels. He figures the arrangement nets both the Hasheiders and their neighbor about $40/acre.
Brothers Chad, Craig and Darrin Rattermann of Bartelso, IL, have found the nutrient value of the hog manure to be an unexpected benefit to their W-F contract. The brothers farm about 1,000 acres.
Their family was one of The Maschhoffs' early W-F contract producers back in 1997, with a single 80×240-ft., double-wide barn. A second 80×240-ft., double-wide barn was added in 1998. A third, 100-ft.×300-ft., double-wide barn was built last fall and features the big-pen design to reduce load-out stress.
Chad reports the W-F pigs they receive are amazingly healthy, with 5% or less in deads and culls.
The W-F contract has nicely complemented their grain farm income and enabled the young brothers to stay on the farm, despite the untimely death of their father in 1999 at age 48.
“We luckily sold our own 100-sow, farrow-to-finish operation a few years before the '98 crash. There would have been no way that we could have gotten back into hogs without this contract agreement,” he stresses.
Public Relations Effort Launched
When The Mashhoffs hosted an open house for their shiny new 20,000-sq.-ft. office complex last fall, they had no idea that the turnout would be such a ringing success: Nearly 2,000 people attended the public and media sessions.
The two-story brick building just outside Carlyle, IL, serves as company headquarters. But it also serves as a place for the family-owned hog enterprise to tout their public relations image, says Julie Maschhoff, director of public relations.
One lobby wall is adorned with a pictorial timeline depicting print media coverage of their family's achievements in pork production through the years.
Current achievements are showcased in a 15-minute film presentation available on CD, produced by an Illinois public relations firm. “It touches on the importance of keeping agriculture in rural communities, and the positive impact our particular farm has in the surrounding community, as well as in the state of Illinois,” says Julie.
The film is shown in the office's 140-seat conference center, which hosts a variety of agricultural and community groups, state leaders and employees and contract growers.
A few key points include:
The Maschhoffs produce 4.5 million tons of pork a week.
Over 500 people work directly or indirectly in the company.
Over 1,500 people depend on The Maschhoffs for their primary source of income.
A 10-page pamphlet highlights company growth, positive economic benefits on rural communities and positive environmental impact of the Maschhoff operation.
The Maschhoffs also publish a quarterly company newsletter and have just started publishing a quarterly employee newsletter.
“All of these things have been developed in the last year to help us back up our story,” explains Julie.
The company also recently launched its own Web site, www.TheMaschhoffs.com.