A group of Kansas and Colorado producers may be ahead of their peers in the push to get more value from hogs. Their marketing pool achieves what other pork producers are looking for - a consistently better price at the farm level.
The producers in the Suther Feeds' marketing pool concentrate on raising pigs. They let their feed company worry about packer bids and marketing contracts.
The pool marketed 60,000 head to Hormel Foods' Fremont, NE, plant in 1999. This spring, the producers renewed their annual contract with Hormel.
Ron Roth estimates he receives $2/cwt. more than if he marketed his hogs independently. The 200-sow seedstock producer near Green, KS, sold 1,800 market hogs through the pool in 1999.
Roth notes that the 10-year-old pool achieves some of what producers are searching for in the new national and regional pork cooperatives.
"Basically, we are doing the same things as the co-ops, in terms of getting a better price at the producer level," he says.
How It Works The pool is a free service offered to producers by Suther Feeds, based in Frankfort, KS. Participants are scattered across Kansas and eastern Colorado.
There are no prerequisites to participate. Producers are free to choose genetics, management and facilities. Therefore, the production systems vary from full confinement to open lots. The hogs range from 48% to 56% lean. The pool members are not even required to use Suther's feed products exclusively.
Every February, Tim Suther, vice president of the feed company and the administrator of the pool, approaches packers for their contract bids.
At a meeting, Suther presents the bid information to the producers. The group votes on the packer contract for the next 12 months. Each producer's vote is weighted based on the number of hogs sold through the pool.
This year, five packers bid (John Morrell, Hormel, IBP, Excel and Sioux-Preme Pack). The contract accepted is a formula-price contract based on a weighted average of Western Corn Belt hog prices.
The pool works on a weekly schedule. Producers must call the office by Thursday with the number of hogs they wish to market the following week. Suther calls the packer and coordinates the truckloads and delivery days. The producers are then notified with the date and time of collections.
The seven collection points are Frankfort, Emporia, Abilene, Clay Center, Chanute and Wakeeney, KS, and Fort Morgan, CO. On-farm loading is offered for lots of more than 50 head.
The producers receive a combined monthly report including kill sheets and analysis of numbers, weight, backfat, price and premium earned. The report allows producers to see how their hogs compare within the pool. That way, they can identify the success of genetics and management techniques used by fellow producers, Suther says.
"The report allows producers to talk back and forth on issues and work together," he says. "The pool allows the producers to work on production issues and not worry about marketing."
That arrangement works well for Roth, a seedstock producer. He doesn't enjoy negotiating with packers and appreciates using more time to work with his hog, cattle and crop operations. He counts that time saved in the price received for hogs.
Why It Works The pool started as a simple transportation pool, delivering 4,000 head the first year. With 60,000 head sold through the pool last year, they expect numbers to grow by about 2,000-4,000 head each year.
The distance to the nearest packer may be a key to the pool's success, according to Stan Grecian, a 350-sow seedstock producer near Palco, KS. He marketed 5,500 head through the pool last year. His farm is 300 miles from the nearest packing plant. "We've been able to do this in Kansas, but it doesn't seem to be happening in other states. I don't understand why," he says. "My seedstock customers in other states could benefit from a group like this."
A positive group mentality and support from the feed company may be what keeps the pool going, Grecian says. He noted the pool did not lose any of the 40 producers in 1999. However, several producers changed from farrowing to buying SEW pigs.
"Everyone in this group is a survivor," he says. "There is strength in numbers."
Grecian knows that his survival as a seedstock producer depends on the pool. His breeding stock customers need a market for their hogs, and he directs them to the Suther pool.
The same business motivation spurs on the feed company. Suther is picking up feed customers because of the pool, according to Joe Funke, Suther's swine technical specialist.
"The way we get paid is we keep the feed business," he says. "If the producer loses his market, we lose the customer."
Jeff Dohrman, a Bushton, KS, producer, is proving that the marketing pool opens new business for the feed company.
Dohrman converted from a farrow-to-finish production to a wean-to-finish operation. The farrowing barn is now a nursery, and three hoop barns were added to three existing hoop barns. He now markets 90 head of hogs/week through the pool. The feed will come from Suther. The company helped Dohrman find a supplier for the SEW pigs.
"Hopefully, we are moving to a higher quality animal more quickly because they have good genetics," he says. "Plus, the difference in price with premiums is $2 to $3/cwt. over what we could get at the local sale barn or by marketing alone."
Rod Lentell, a 240-sow farrow-to-finish producer from Wiggins, CO, expects to sell 3,500-3,800 market hogs through the Suther pool this year. He isa member of a 25-producer marketing group that joined the pool in September 1999.
After their California packer quit bidding on their hogs, the group sold to a small packer in Longmont, CO. A fire at that packing plant left the producers without any marketing options.
The pool offers the Colorado producers more money for their hogs along with market access they needed, he says.
Contract Decisions When it comes to voting on the contract, Grecian casts his ballot where he knows the group will get the best opportunity.
"It all boils down to money; I can make more money with this packer than with anyone else," he says.
Roth noted that Hormel keeps producers well informed on changes in pricing structure. But, don't think the group will settle on one packer for a long period of time. This is the group's second year with Hormel. The two years prior, the hogs went to the John Morrell plant at Sioux Falls, SD.
"If you look at the history of our pool, we have worked with five or six packers," Roth says.
Funke stresses that developing a relationship with Hormel may help producers benefit from the company's branded products. The addition of the AutoFOM grading system also will help producers get paid on the real composition and value of their hogs.
"The producers will get some value added without having to own their own plant," Funke says.
The AutoFOM is operational at Hormel's Austin plant, according to Ray Bjornson, director of pork procurement and provision for Hormel. The company will install the system in all of its three plants, but the schedule has not been determined.
The system gives three advantages, Bjornson says. The first advantage is using the AutoFOM as a measure to pay accurately for the hogs. The second is the system's information gathering ability, which helps producers identify and raise better hogs. The information also will allow the plant to process the animals more efficiently, thus getting more value.
"The value opportunities are in how we make that pig better and how we use the pigs," Bjornson adds.