An exclusive interview with Prestage Farms' patriarch centers on the value of diversification, business philosophy and — most of all — family.
Pull up a chair for a visit with Bill Prestage, the largest independent pork and turkey producer in the country. Not one to mince words, this Southern gentleman with Northern roots will field any question you toss him. Sometimes, he'll even save you the trouble of asking by simply posing the question himself.
For example, here's how he sees Prestage Farms' position in the industry.
“Are we the best producers? No.
“Are we competitive? Hell yes. Very competitive! We're well aware of what the better producers in the country are doing,” he assures, noting they use Agrimetrics recordkeeping reports as a reference.
“Do we sell our hogs for more money than anybody in the country? No sir.
“Are there guys in the Midwest getting more money for their hogs than I am? You damn right there are!
“Do hog farms smell? Yes, sometimes they do.
“Do they smell all of the time? No.
“If you live out in the country are you going to have that? Sometimes you are; the smell of livestock production is part of the charm of living in the country.”
Sitting in the boardroom of the family-owned corporation's headquarters near Clinton, NC, a conversation with Prestage includes family history, business philosophy and ramps up to his thoughts about the future of the U.S. pork industry.
Make no mistake, the senior Prestage is proud to say Prestage Farms is an independent, family-owned-and-operated enterprise. He and his wife, Marsha, began modestly and built a pork and turkey production business that now includes their three sons, John, Scott and Ron.
Ron, a veterinarian and the oldest son, runs the South Carolina turkey operations and is in charge of pork production in Mississippi and Alabama. “He's very much a hands-on type of guy,” says his father.
In the middle, Scott is responsible for the corporation's turkey operations in North Carolina, which include the turkey breeders and hatchery. Approximately 300,000 turkey poults are placed on farms in the Carolinas every week.
The youngest son, John, has developed the company's nutrition program and is involved in the management of the business across all four states. “He is one of the best livestock men I have ever seen,” adds Prestage.
In all, Prestage Farms produces more than 800 million lb. of pork and poultry annually, split almost evenly between the two enterprises. Their turkey production ranks them as one of the five largest live turkey producers in the U.S., while the pork production enterprise ranks fourth overall.
Born and raised in Michigan, Prestage began his North Carolina livestock career as a regional sales manager with Central Soya in 1960. He left the company in 1967 when he and Marsha bought a 50% share of the expanding Carroll's Foods Inc.
“We built the first, specially designed farrowing facility for 1,000 sows because we felt we could hire better people, give them better working conditions and better benefits,” he explains.
Built in the early '70s, they started from scratch and built the entire facility before the first hog was put in. “It was pretty as a damn picture,” Prestage remembers. “We learned a lot of lessons, but really, the concept was right.”
A decade of growth for the Carroll-Prestage partnership paused in 1983 at the death of a senior member of the Carroll family. Changes were inevitable, so a buy-sell process began with Prestage offering the Carrolls the option. The Carrolls opted to buy, and the parting was amicable.
Prestage and his wife moved on to form Prestage Farms shortly after their divestiture from Carroll's Foods, reinvesting in turkeys and hogs.
In 17 years, Prestage Farms' pork production has grown from 500 sows producing 600,000 lb. of pork in 1983 to 475 million lb. from 123,000 sows in 2000. Seventy-five percent of the sow herd is managed in company-owned facilities. Prestage Farms employs more than 1,000 people and contracts with 500 farm families to raise hogs and turkeys. Their North Carolina pork production is sold exclusively to Smithfield Foods, most weighing between 240-250 lb.
In 1991, the Mississippi pork division was added with 200 employees, 40 farm families contract finishing in Mississippi and Alabama. All finishing hogs are sent to Bryan Foods.
In 1994, a limited liability company was formed in South Carolina to produce live turkeys for Louis Rich. And, in 2000, Prestage Foods was founded when a turkey processing plant was purchased near St. Pauls, NC. Undergoing extensive remodeling, the plant is scheduled to go on line early next year.
An extensive service organization has been developed to manage the animals on the company-owned and contract farms. In North Carolina, nine representatives are responsible for the sow sites — each overseeing about 10,000 sows. Five representatives oversee the nursery sites, each handling 32 to 35, 1,600-head nurseries. A dozen field representatives supervise the finishing sites — each assigned 30 million to 35 million lb. of production. Alabama and Mississippi production are managed separately.
Four feed mill locations manufacture all of Prestage Farms' feed needs — roughly 23,000 tons of pork and poultry feed weekly.
Restarting from Scratch
Looking back, Prestage recalls their 1983 start-up. “My family took the money we had from the Carroll's sell and reinvested in the hog and turkey business.”
The Prestages considered launching their new pork production enterprise in the Midwest, but they saw “the Southeast was really pork deficit.”
Drawing on their good reputation in the area and their considerable experience in chickens and turkeys, they opted to set up shop in Sampson County, NC.
At the outset, recognizing the value of diversification, Prestage stuck with the turkey-hog combination that had proven successful for Carroll's Foods.
“I think that strategy proved to be very smart in 1998 when we sold hogs for 9 to 10 cents per pound,” he explains. “Turkeys were great that year. We couldn't make enough money on turkeys to offset the losses on hogs, but it kept us pretty much intact. We came through the whole process with a lower amount of debt than when the hog debacle started.”
Moratorium Created '98 Mess
Prestage believes the North Carolina building moratorium was somewhat responsible for the '98 hog glut.
“When producers in North Carolina knew the moratorium was coming, they had about a year and a half to get permits, pour concrete and build buildings like there was no tomorrow. The guys in the Midwest thought if they can do it to North Carolina producers, they can do it to us — so they expanded, too. We had the most massive expansion of pork production in the U.S. ever — all because of that damn moratorium,” he stresses.
“We were not spending a lot of money (during the building moratorium), which helped us be more stable during the '98 hog price fall,” Prestage adds.
The building moratorium remains in effect, although facilities can be remodeled or torn down and replaced, as long as the waste management requirement isn't increased and no new lagoons are built.
Prestage supports the remodel-and-refurbish philosophy. “There's nothing more economical than producing a product out of a depreciated facility,” he points out. “That's why we put a lot of money back into our facilities every year — tearing out floors, putting in new crates, better heating systems, etcetera.”
More on Packers
Prestage disagrees with those in the industry who think the packers are “the bad guys.” As he puts it: “The black hat (bad) guy is the guy who takes my money. The white hat guy is the guy who gives me money. Smithfield (Foods) gives me a heck of a lot of money, and that puts the white hat on them.”
But, there are no sweet deals, he says. The multi-year contract with Smithfield Foods does not have a built-in base price. “We actually got 9 cents a pound for pigs sold to Smithfield in 1998,” he says. “We also sold pigs to Bryan Foods at that time. With the weight discounts, we had a load of hogs that we actually owed them money on — and that's the damn truth,” he states.
Prestage has a place on Smithfield Foods' board of directors, and he states flatly: “I know what the profitability of the processing business has been. It's not been a very lucrative business.”
Extending the discussion to market demand and shackle space, Prestage cautions producers that building new packing plants may not be the answer. On that point, he and Smithfield Foods' CEO Joe Luter agree — new, producer-owned packing is not likely to solve any problems and may very well make the situation worse by encouraging expansion.
“If you cut the supply of pork, the price will go up,” he observes. “Guys like me, guys like other independents, control the supply. That's not controlled by the packing plant.
“Did the packers take advantage of the situation in 1998? Sure they did,” he answers. “They weren't lily white on the deal, but we put ourselves in that situation; it's Economics 101. We produced more supply than was needed, and the processor was in a position to take advantage of that.”
Turkey vs. Pork Processing
With his recent purchase of the turkey processing facility, the question that begs an answer is: Why not buy into pork processing, too? Just up the road sits the Lundy Packing Co. plant that was offered for sale last year. At first blush, the 6,000-head/day-slaughter capacity seemed like a good fit because it closely matches Prestage Farms' daily production in North Carolina.
“We considered it, but the match wasn't right,” Prestage explains. “We felt the plant would need considerable capital investment in renovations and marketing development. When you consider the total processor picture, and when you recognize that you are not in that niche, you have to make wise decisions. If we had bought the plant, Joe Luter (Smithfield Foods) is not going to roll over and play dead. He'd have been a damn tough competitor, I promise you that.”
Prestage believes Premium Standard Farms' purchase of the Lundy plant is a better fit. “They have the market, processing and distribution know-how that I didn't have. Turkey processing is a much better fit for us.”
Hogs are Hard
“There is no product any harder in agriculture to produce than a pound of pork,” Prestage states flatly.
Turkeys are easier. “We're totally integrated in the turkey business. We collect all of the toms at once, spin down and dilute the semen, send in the breeding crew to inseminate all of the hens in a flock at one time. Turkeys are managed on a whole-flock basis during grow-out, and we market whole houses at once. It's a whole different business,” Prestage says.
Such automation is tougher with hogs because pigs must often be handled individually. Still, it remains a Prestage Farms' priority.
“There is no product any harder in agriculture to produce than a pound of pork.”
— Bill Prestage
“We hand breed a sow; we hand treat a sick pig; we hand castrate half the pigs. That's the way it is through the whole pig's cycle,” he continues. “It takes pigmanship to walk into a finishing parlor and spot the pig that is not doing well and treat that individual pig. It is difficult to find employees with pigmanship skills. Many facets of our pork production are automated, but we still have to have good farm workers.”
Beyond the adoption of artificial insemination and early weaning practices, Prestage Farms is looking at automatic sow feeding during lactation — for example, greater efficiencies in heat detection without teaser boars.
“The start-up of our Mississippi division took advantage of years of pig production experience in North Carolina.” At the outset, they gained an efficiency advantage by standardizing sow unit size at 2,400 sows, then matching them with nurseries and finishers to handle production levels. In North Carolina, sow units come in all shapes and sizes — 620, 1,200, 1,800, 2,000 and 2,400 sows — making it more difficult to manage pig flow and automation.
Midwest vs. Southeast
Prestage believes pork producers in various parts of the country have to play to their strengths. “You've got to do the things that you can do best,” he says simply.
“A family farm that grows their own grain, raises their own livestock, and that can walk through their own buildings everyday — that guy can stay in this business for a long time,” he contends. “What I have got to do is buy cheaper. I've got to have volume to help cover those costs and make a little bit on more pounds.”
Prestage empathizes with small producers because he finds himself in “somewhat the same pickle,” he says. “We're a big farmer, but we're also an independent pork producer. We're not a public corporation; we don't get any money from anywhere else. It's just good old hard work and good business management. There are no Santa Clauses. Nobody's going to bail out Prestage Farms if we're not good, least-cost producers. If we don't give the packer what he wants, when he wants it at a competitive price, we have no future.”
Prestage Farms' Future
The elder Prestage believes his three sons are committed to pork production, and he encourages them to adopt the business methods that work best for them.
“I tell the boys — don't ever make the mistake of saying: ‘I want to do business the way the old man did business.’ That is not possible. You have got to do business in the environment that you've got today. Do what you have to do, at that time, to be competitive.”
Reflecting, again, on the 1998 hog price debacle, he says: “Selling hogs for 9 cents a pound — it was kind of a hard business to love at that time. But, tough times like that makes you better because it makes you look at things that you can do better.
“If you're going to have a family business, and that's what you want, you've got to be committed to that business, and you've got to take the good and bad. I know our family is committed; we have had opportunities to sell this business, but we have never entertained that idea. Today, Prestage Farms is run by my sons and the fine people we have working for us. At my age, I don't need any more headaches.”