Deciding to embark on a contract production opportunity can be a big decision. This specialized sector of the swine business can provide many advantages for farmers. A panel of integrators – Matt Henry from The Maschhoffs, Nick Briggs from TriOak Foods, Jim Hinckley from JBS USA and Phil Borgic from Borgic Farms shared with the Illinois Pork Expo the advantages of contract swine production and exactly why their companies choose to create partnerships with fellow pork producers.
Henry says a good reason to enter into a contract production agreement is an avenue to enter the swine business or a way to diversify the family farm while minimizing risk with the integrator retaining ownership of the pigs. The amount of capital and the limited cash flow makes it difficult to bring the next generation back to the farm. Contract finishing provides a revenue-based opportunity to bring a son or daughter into an operation.
Beneficial to all parties
Overall, contract production allows all parties involved to spread risk while achieving a higher level of profit per pig. While contract production agreement details can vary across companies, the standard principles remain the same. The contractor provides the pigs and the grower provides the building, labor and certain record-keeping functions.
Henry shares what a typical production agreement with The Maschhoffs involves.
- The Maschhoffs provides what goes in and on the pig – feed, vaccines, needles, syringes, marking sprays and all transportation.
- The grower provides the facilities, utilities and all the labor to care for and manage the pigs.
- The Maschhoffs also provides environmental consulting, turnkey permitting, environmental data, geographic information system mapping and annual environmental assessments.
For JBS, Hinckley shares that a grower is expected to build the barn to the company’s specifications. He says the goal is to help growers to build a barn that is going to last beyond the time period of the contract, typically 12 years, so the grower has a facility that lasts.
Production partnership provides a grower with a solid partner that fully understands the business of raising healthy pigs for safe, quality pork. For example, The Maschhoffs furnishes environmental assessments and consulting and also supply a well-educated staff that can train growers and their employees.
Likewise, for a contractor the production partnership can also provide a family farm operation to expand without building new barns or hiring more employees. Borgic, Illinois pork producer, says his family sow farm – Borgic Farms – slowly moved into the contract finishing agreement when he found good-quality grower partners in 2009 that align his business mission and goals.
Borgic says dedication and the drive to take care of the pigs every day is an essential characteristic of a great growing partner. He adds “Pigs are the easy part. We put our emphasis on people.”
For Borgic, it doesn’t matter if the person is an employee at the sow farm or a grower, they must be committed to excellence and willingness to continue to strive and grow personally. Furthermore, he takes pride in helping others to enter into the swine business and build a legacy.
Borgic says if a person is looking to enter into a production partnership it is fair for the grower to search for the ideal business partner. For Borgic Farms, a grower can find a partner who has an open door policy for two-way communication but let the growers do their job. His company also shares closeout, sort losses and other production information with all partners. Lastly, he assists all beginning growers with environment assessments, standard operation procedures and information on siting and permitting.
“Sometimes, it is just about holding their hand and telling them what to expect,” Borgic concludes.
Any production partnership should be built on trust and a high degree of comfort with the contract relationship.
Briggs from TriOak Foods says across the integrators the contract agreements and experience are very similar because all are working with the same rules, regulations, market fundamentals and working toward the same goals. He says, “When selecting a partner, it all comes down to people and who you feel comfortable working with. The thing is you probably are not going to make a bad decision with who you are going to work with because everyone left in the industry are good people.”
He adds that if you are considering entering the swine business for the first time, it is important to recognize it is hard work – 365 days, 24 hours a day. As a grower, you are agreeing to perform specific tasks in a precise manner at a specified time. Since most management decisions will be made by the contractor, it is necessary to acknowledge that the relationship is similar to an employee-employer situation and you have to be comfortable with that arrangement.
If you are not ready for the level of commitment, then the swine business and production partnership is not for you.