Co-operation works
state-of-the-art pork processing plant that will be wholly owned by
hog producers. Is this the best way that small pork processors can
compete against the likes of Smithfield and Tyson?
US-based farm co-operative Meadowbrook Farms is set to open a state-of-the-art pork processing plant that will be wholly owned by hog producers. Construction of the $25 million facility, which began in august 2002, is due for completion this month, though equipment testing may not be finished until the middle of December.
The new pork-processing plant in Illinois will process and pack up to 3,000 animals per day. The facility features a two-shift, 6,000-head/day capacity and 17 acres of the 40-acre plot has been reserved for future expansion. There are plans to build a heat processing facility to produce further-processed ham and bacon products.
Each carcass will be individually tracked through the plant and payments will be based on the wholesale value of the primal cuts. Profits from additional processing will be paid to producers according to their percentage ownership in the plant, according to industry reports. Meadowbrook chief executive officer Jim Burke said that the facility will meet European Union (EU) standards, and that the pork will be marketed under the Meadowbrook Farms label.
However, production from the plant will be a drop in the ocean; co-operative members say that only it is capable of producing only 0.8 per cent of total US pork production when the plant is fully up and running. It will therefore be unable to compete with industry giants such as Smithfield and Tyson.
Nonetheless, the Meadowbrook co-operative, which involves 200 farmers from Illinois, Indiana, Kentucky, Missouri and Wisconsin, is an interesting arrangement. It is made up solely of independent pork producers and is a closed cooperative. Once producers have committed to the project, they have an obligation to bring a certain number of hogs to the plant, based on how many dollars they put into the project.
This means that for every share purchased for $900, producers can ship 50 hogs to the plant per year. Producers can buy as many shares as they want, and the average investment comes out to about $60,000 per operation.
In addition, the closed cooperative is a non-profit venture. The co-op itself, the plant and even the live hogs are all regarded as cost centres. Proceeds from the sale of pork products will go first to pay plant and co-op costs. Once those costs are subtracted, the remainder will be paid out to the producer members, based on the returns from sale of their meat.
