Cooperative Advances Packing Plant Venture

Of the 33 pork producer packing plant endeavors the Agriculture Department was involved with in 1998, Meadowbrook Farms Cooperative is virtually the only one left standing today.

Of the 33 pork producer packing plant endeavors the Agriculture Department was involved with in 1998, Meadowbrook Farms Cooperative is virtually the only one left standing today.

The 200-member Meadowbrook Farms Cooperative is rapidly moving forward with plans to open a 3,000-head, single-shift packing and specialty pork processing facility in the fall of 2003 at Rantoul, IL.

Site work began last August and concrete footings were nearing completion in late December. The plant is being built on a 40-acre tract of land in the Rantoul Industrial Park on the outskirts of the eastern Illinois city of 13,000, says Jim Burke, co-op president and CEO.

As construction of the $28 million plant proceeds, staff will work on product development and identify markets to be served. The sky is the limit, as long as buyers are willing to pay the price needed to produce the products, he stresses.

New Producer Venture

Burke emphasizes this project, solely made up of independent pork producers, is totally different from all the other livestock cooperative ventures.

For starters, Meadowbrook Farms is a closed cooperative. Members range from 200-50,000 head sold annually. 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, points out Burke.

The formula provides 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. The average investment comes out to about $60,000 per operation. In all, producers raised $12.8 million for the project.

Many producers had to take out loans in order to meet that financial commitment, says Burke. The co-op was fortunate in that the Illinois Farm Development Authority started a program that allowed those producers to have their loans guaranteed at their banks. The banks used the stock in the cooperative as collateral.

In addition, the state of Illinois kicked in $1.7 million in startup funds, bringing the total investment in the project to over $14 million.

The city of Rantoul put together a multi-million-dollar incentives package to close the deal. That includes tax breaks and help in purchasing the land. The city also capped water and sewer rates for five years and provided consistent rates over a 35-year period, stresses Burke. The plant will employ 200 workers.

The closed cooperative is a non-profit venture, he notes. The co-op itself, the plant and even the live hogs are all regarded as cost centers.

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.

Most Modern Plant

Co-op members will be bringing hogs to the most modern pork packing plant in the Western Hemisphere, using automation in the slaughtering process to improve performance and work conditions, and advanced technology such as blast chilling to improve product quality, boasts Burke. Planned into the design will be the ability to advance to a two-shift, 6,000-head/day capacity. Seventeen of the 40-acre plot is reserved for future expansion, to feature a heat processing facility to produce further-processed ham and bacon products.

Representing only 0.8% of total U.S. pork production when the fresh pork plant is up and running, Meadowbrook won't be trying to compete with the Smithfields of the world in the business of commodity pork production.

And producers won't be making the day-to-day decisions of running a packing plant. In about 90 days, Burke expects to have completed hiring of professional administrative, plant and sales staffs.

Producing Specialty Products

The co-op's goal is to develop and serve a variety of specialty, case-ready, value-added pork and export market opportunities.

The co-op has received two, $500,000 USDA grants to help the co-op staff and producer board of directors develop a line of value-added products.

“Our business model is a very highly specified focus on sorting product to certain specifications, starting with a top-quality product and putting a great deal of time and effort into serving customer needs,” says Burke.

Organic, antibiotic-free, trichinae-free and providing products for ethnic communities are but a few niche markets that could be served, observes Burke.

“We have also got some restaurants interested in looking at certain high-quality type products, as well as chefs calling about providing them certain specialty pork cuts,” he notes.

Being able to develop products for specialty markets provides a market avenue that pork producers could never tap into before as commodity producers selling to large packing plants, he observes. Producers will get back all pertinent information from the plant to help them raise hogs to meet specific markets.

A screening process, to randomly sample co-op member hogs for quality, has been going on for over a year now. And, consulting veterinarians have examined herds to ensure animals meet health certification standards for some niche markets.

From those tests, a few producers learned that their hogs didn't measure up, and they have opted out of the co-op, declares Burke.

“It will be a 100% market-driven system,” he says. “It will be totally based on the quality of the hogs members produce, and how well the products of those hogs meet the needs of the markets they serve.”

The Meadowbrook co-op includes members from Illinois, Indiana, Iowa and Wisconsin. In time, the co-op model may expand and build plants to serve independent pork producers in other areas, Burke envisions.