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Articles from 1998 In May


CLOSED DOWN: Environmental Pressures Silence 1,200-Sow Operation

Earl Parnell's tenure in the hog business was cut short. Even at the age of 74, he had plans to update his farrow-to-finish operation much as he had done over the past 30 years. The growth of his operation near Parkton, NC, likely mirrors that of many others across the country. It reads like this:

* Entered the hog business in 1966 with 220 sows;

* Expanded to 450 sows in 1973;

* Expanded to 800 sows in the late '70s;

* Expanded to 1,200 sows in the early 1980s and built last of five lagoons.

* New 42-crate farrowing facility built in the early '90s, added a couple of finishing barns.

But in the mid-'90s Parnell's pork production story took an abrupt turn. Today, the entire 1,200 sow, farrow-to-finish operation is engulfed in an eerie silence. Earl Parnell's hog operation sits empty.

In some respects, Parnell became the victim of his own success. The evolution and growth of his hog operation spawned five lagoons connected by a hodge-podge of underground pipes to handle the multiplying gallons of manure that naturally accompanies such growth.

"Lagoons weren't the problem. Handling what's in the lagoons is what's the problem," Parnell states matter of factly.

Parnell's lawyer, Clark Wright of the Ward and Smith legal firm in New Bern, NC, agrees. "You can be doing everything that is state-of-the-art at the time, then 20 years later learn that there was some environmental impact associated with it."

In Parnell's case, the state-of-the-art technology included pumping from the lagoons onto 150-acre "spray fields" nearby. No one paid much attention to the periodic irrigation procedure - until a few years ago.

Water quality issues began surfacing in Robinson County in the early '90s where Parnell's operation is located. About that time, North Carolina Governor Jim Hunt ordered local health departments and state regulators to provide free well tests to anyone concerned about potential contamination.

And, in the early '90s, a small residential development began to emerge just north of the Parnell operation. Two-acre homesites were plotted off, trailer homes were pulled into place, each with its own well and septic system. In this area of North Carolina, you don't have to dig too deep to hit water - 20-30 ft. is usually sufficient.

When a number of Parnell's new neighbors had their wells tested, elevated nitrate levels (17 ppm) were found. Ten parts per million is the maximum allowed for human consumption.

"There can be a number of potential (nitrate) sources in this situation - commercial fertilizer, lawn fertilizer, a poorly designed well, leachate from a septic system, dead animals, even a small, unmarked cemetery can cause that kind of reading," reminds attorney Wright.

But, of course, animal waste leaching into the groundwater is another source. Neighbors were pointing decisively south - toward Earl Parnell's hog operation.

The state's Division of Water Quality (DWQ) was notified.

When water quality is involved, the burden to prove your innocence is pretty much yours, notes Wright.

"For better or worse, the almost universal trend with environmental statutes is one of strict liability for impact associated with past activity, regardless of any intent of whether you tried to do good or not," he adds.

A statute associated with groundwater is strict and straightforward, explains Wright. "Every state requires that the owner or operator of a facility that pollutes groundwater, must clean it up. And, not clean it up just a little, but clean it up to drinking water health standard levels."

Pork producers aren't the first to face such scrutiny, Wright says. Similar concerns were leveled at gas service station operators several years ago. Many mom-and-pop gas stations were put out of business because steel storage tanks, state-of-the-art at one time, began leaking. The cleanup task was immense - and expensive.

It happened, again, to dry cleaning businesses where highly toxic-cleaning chemicals had contaminated some properties. Again, private, oftentimes family, businesses were shut down.

Some hog units could face a similar fate.

"The key issue here is the nitrates," Wright continues. "The standard is 10 mg/liter. It's a legitimate, health-based standard. Nitrates interfere with the body's ability to metabolize oxygen, so drinking high-nitrate concentration water is potentially a health problem for very old and very young people."

In 1993, North Carolina began turning up the regulatory heat on hog operations. Regulators focused on some hog farm issues and began ratcheting-up the regulations. The state's permitting regulations were amended, taking aim at any facility that manages liquid waste and either discharges into a river or the so-called non-discharge systems that land applies the waste. Hog farms fall in the later category.

The 2H.200 rule, as it is known, required all new hog farms to abide by the latest NRCS standards, which included clay lining in lagoons, specified storage capacity, and crop acreage limitations based on agronomic uptake rates.

"In essence, it required that you manage the nutrients, contain them, and land-apply them in an appropriate manner," Wright explains. All existing hog farms were required to come into compliance with the rule by Dec. 31, 1997. Existing, non-lined lagoons were grandfathered in, so long as there was no evidence of leakage.

Lagoons weren't the problem at Parnell's. "That's what makes Earl's situations so difficult, both for him and the regulators," Wright continues. "Based on what is now a fairly large amount of subsurface well sampling and test data, it appears that the lagoons are not his primary problem. The primary problem is just chronic, long-term application on fields that are composed of such sandy soil that a typical uptake by the plants has not been enough to eliminate leaching into the groundwater aquifer."

Perhaps confounding the problem, the lagoons were designed smaller, required more frequent pumping and at a greater application rate than today's standards would allow.

"That's important because Mr. Parnell's case is a fairly high-profile case," Wright says. "Some might argue that this means the status quo of waste management doesn't work. I don't think that's true or fair." Although somewhat dated, Wright believes Parnell's operation could have been brought up to current standards.

But, simply closing the unit down did not solve the problem. The fact remained that a sizable nitrate plume remained under the farm - particularly under the spray fields - and Parnell was responsible to clean it up.

Before Wright was brought in, complaints had already been filed by the state. In essence, it said: "You violated the law, and, under the law you are required to clean it up," Wright explains.

Realizing that the state's primary focus was protecting the public health, Parnell took attorney Wright's advice, offering to cover the cost of connecting any neighbors with wells testing higher-than-acceptable nitrate levels to the adjoining county water system.

"The hope is, by addressing the state's number one priority, a very valid concern, that they will show some flexibility in the cleanup process," Wright notes. His goal was to give Parnell some additional time and flexibility by first addressing all of the "potential drinking water receptor sites" within the plume's path.

In addition, they filed a corrective action plan (CAP) with the state's groundwater program outlining their strategy.

The first step, of course, is to eliminate any further contamination - accomplished by closing down the farm. Next, the several million gallons remaining in the five lagoons will be managed by land-applying it on area fields at very low rates over the course of about two years.

Wright explains: "We've done some modeling that gives us an indicator as to how the plume will react. Then, Earl's going to have to invest a significant amount of money in monitoring wells, then sampling them on a regular basis to document the results over time."

A key part of their strategy is to allow nature to take its course in terms of breaking down the nitrates existing in the plume. Breakdown time is open to debate but it's sure to be a number of years. Nitrates do not break down very fast in the absence of oxygen and they also require an organic source. Therefore, soil type is a factor.

Given the components for breakdown, nitrates yield basically harmless chemicals like carbon dioxide, nitrogen gas and water - all primary constituents in the atmosphere. And, Wright reminds. "One of the difficulties is there is no (nitrate) cleanup technology that I know of."

Another unique feature of nitrate contamination is it is usually at extremely low levels. "The standard is 10 mg./liter for a reason, but even at 50 or 100 (mg./liter), that's still a very low concentration in terms of cleaning it up or trying to do anything with it," Wright explains. "The Parnell Farms' case is a good example of a literal, logistical impossibility because the well data suggests that the area is fairly large and the local aquifer has, who knows for what geological reason, tended to also move a little bit. So, over time, the high concentrations are further down and, in some instances, migrating further away from the farm. That makes it even harder to deal with in terms of a cleanup."

Fairness The temptation for a pork producer might be to ask: "Am I being unfairly singled out?"

It's possible. But, it's not an acceptable argument, says Wright. Just because someone else is creating a bigger problem but remains undetected does not provide you with a legal, or a moral, defense for not taking action to correct an identified problem.

Wright summarizes his pragmatic, legal opinion this way: "The data documents that a problem exists and it's migrating off-site. Because of that, he needs to do whatever he can to minimize any off-site damage and work in a positive way with regulators to do the best that can be done, within reason, to clean it up."

In Parnell's case, because the plume is large and dilute, the ability to undertake actual cleanup will be tough. Luckily, the availability of an alternate drinking water supply makes the situation more workable.

Rather than fight the state's suit, under Wright's guidance, Parnell entered into a preliminary consent order agreeing to take certain interim steps like preparing the corrective action plans (CAP), taking more samples and proposing a cleanup solution.

The state has signed-off on 90-95% of the proposal, says Wright, but the remaining 5-10% will be tougher and more expensive. To date, Parnell estimates he's spent $250,000 on legal advice, engineers and some special equipment. Roughly 125 permanent and temporary test wells have been drilled. The court order proposes 10 additional permanent test wells, 30-60 ft. deep.

Unanswered questions that remain for Parnell, include: How much well monitoring will he be required to do and for how long? How long will he be responsible for providing water to neighbors?

"These are very important long-term decisions," emphasizes Wright. "If we can reach agreement on those, we'll try to enter a final judgment in the case and that will end it, in a legal sense. But, it won't end it in a practical sense because he will still have to monitor the wells to see what's happening as the years go by. If they go as modeled, then the concentration levels will begin to drop and the plume will reach a status quo."

Closing Remarks "Earl Parnell's story is a tragic one," Wright agrees. "There's no way it can have a good ending. There's no way for Earl Parnell to feel good about the outcome. He's clearly a fella who has not tried to cut corners or dodge the issue - it just wasn't on the radar screen."

Where does that leave other pork producers with outdated, mismatched or just plain old production facilities? Wright says consider the plight of the gas station operators and dry cleaning merchants who have been targeted in the past. In those cases, it's played out like this: "If they (the regulators) have discovered significant problems, environmentally, you can count on consolidation, the demise of the individually owned family business, and the rise of the sort of integrated chain of nationally or regionally owned entities, because they are able to deal with the increased cost of regulation and spread them (over more operations) than the individuals can."

That's not to say individuals cannot survive, says Wright. But in the case of environmental regulation, there's strength in numbers. That strength can come through cooperative production alliances and industry organizations with a unified message.

"There's no way around it. When you get a new regulation, it's going to have this kind of effect on people like Earl (Parnell)," Wright says sadly.

North Carolina

North Carolina's heady growth of the last decade has slowed to a crawl. The state skyrocketed from marketing 4 million hogs a year in 1987 to nearly 14 million in 1997, according to Pork Board data. Now, experts in the state do not expect major growth to occur, especially in hog finishing.

"First, a 2-year moratorium is in effect until March 1999, so that makes rapid expansion unlikely in the near future," reports Kelly Zering, North Carolina State University economist. "Second, we produced 18.2 million pigs last year and packing capacity in the region is 13-14 million. So without packing capacity, it is difficult to justify new finishing floors."

Instead, new growth may come from sow herds with weaned and feeder pigs sent out of the state for finishing. "I think there are still a few opportunities to build new sow farms," Zering says.

In fact, the breeding herd continues to grow. Breeding animals increased 50,000 head in the first quarter of 1998, according to USDA's Hogs & Pigs report.

"If there was to be some additional packing capacity on the East Coast, we might see some finishing farms to finish some pigs now being shipped out of the state," Zering adds. "We exported close to 3 million weaned and feeder pigs last year. We will likely exceed that this year.

"I think there is a pretty good chance of a packing plant being built in the southeast in the next few years," he suggests. "But with all the political turmoil we've had, it makes it difficult to predict when and where.

"The hog industry contributed $1.9 billion in revenues to farmers in eastern North Carolina last year," Zering adds. "So we're really taking a lot of interest in how to sustain this industry."

972 Municipal Spills Meanwhile, the North Carolina pork industry is savoring a reprieve from being the environmental whipping boy. Media and public attention is slowly turning to municipal discretions.

Since the beginning of the year, municipalities in North Carolina experienced more than 972 spills, for a total of 73 million gal. of mostly untreated human sewage, notes Walter Cherry, executive director of the North Carolina Pork Council, Inc. Hog farms reported only 18 spills in the same period of time.

In addition, state inspections, now required twice a year of all hog operations, have turned up few problems. "If we look at deficiencies that could actually have an impact on water quality, most run less than 2% (of inspections)," Cherry reports.

Out of 5,839 inspections in 1997, just 1.59% had any discharge from any part of the operation. And only 0.33% reached surface waters. Another 2.43% showed evidence of any past discharge.

"Our producers are trying to do a good job," Cherry says. "The educational program our state mandated has created a heightened awareness. It has done a good job of letting people know what is expected, what they should do when, how and where."

North Carolina producers applying manure to land must attend a 10-hour course and pass a test. Then they must take six hours of continuing education over three years. This makes it one of the strictest educational requirements in the country.

The state legislature conducts its session this summer. So nothing has happened in the way of legislation. Cherry also does not expect much to happen after last year's bill with the moratorium.

Just in case, the North Carolina pork producers are prepared with a state voluntary checkoff to use in lobbying efforts. In existence five years, the checkoff will go from 3 cents/market hog to 4 cents on July 1.

Cherry explains the checkoff money is used for lobbying expenses, public policy and regulatory activities. The council also uses the money for a legal defense fund in precedent-setting lawsuits. None of these efforts can be funded with the national checkoff.

The voluntary checkoff has raised about $450,000/year and will increase to $590,000/year with 1-cent increase. A refund to producers is available. However, only two producers are requesting a refund, Cherry notes. And he says the larger producers are the ones supporting this program.

Nebraska

"As of April 1998, we have a legislative atmosphere in Nebraska that is more conducive to pork production than what a lot of people had been expecting," says Bob Ruggles, executive director, Nebraska Pork Producers Association (NPPA).

But, Ruggles cautions, the work is not yet done and the jury is still out on the biggest question of all. "How badly do people want a pork industry in Nebraska?" Ruggles asks.

Nebraska's one-house legislature signed the Livestock Waste Management Act into law during the 1998 Legislative session. Fortunately for Nebraska's pork producers, Ruggles says a coalition of agricultural groups was invited to work together to modify some of the act's provisions before passage.

"The bill originally had a lot of problems and areas that didn't make sense," Ruggles relates. "In its original form, this piece of legislation would have been very expensive for our small and medium-sized producers."

When the bill takes effect on June 1, owners of confined livestock feeding operations in Nebraska must request an inspection from the Nebraska Department of Environmental Quality (NDEQ).

"This requirement has actually been in place since the 1970s, but many people were not aware of it," Ruggles says. Producers have an amnesty period until Jan. 1, 1999, to request an inspection free-of-charge. After the amnesty period, producers who have not had inspections are out of compliance with the law.

If NDEQ determines producers need a permit, there are four categories of farm based on size and animal units. The permit fees run from $300 to $5,000, and are good for the life of the operation.

Promotion Needed "Agriculture as a whole is really taking a hit in this state at the same time that one in four Nebraskans are employed in agriculture," Ruggles says. "We at NPPA feel we have an image-building job to do, and we are in the beginning stages of trying to address that."

The NPPA has joined forces with representatives from a wide range of Nebraska industries to form a coalition to protect Nebraska's livestock and agricultural industries. It is called the Coalition for Livestock, the Environment and Agriculture in Nebraska (CLEAN).

Nebraska's hog numbers have been going down on a year-to-year basis since 1992. Ruggles says 1998 has brought both more interest in the pork industry and more new unit construction. "We have a number of small to medium-size producers adding to their operations, changing their facilities, or upgrading and incorporating new technologies such as multi-site operations," he explains.

About two-thirds of Nebraska's 93 counties are not zoned. The amount of control those counties have over hog unit construction is limited. Nebraska still has a constitutional amendment in place called I-300. This amendment limits non-family farm pork production.

Ruggles says I-300 is interpreted on a case-by-case basis. Anyone who is interested in ca non-family venture, for example, should contact the attorney general of Nebraska to interpret the law specific to their situation.

There was a precedent-setting case in Lexington, NE, recently where a group of producers working together in a cooperative arrangement were found to be in violation of I-300.

South Dakota

The South Dakota Pork Producers Council (SDPPC) is working as hard as it can to prevent a "going, going, gone" situation in the state's pork industry.

The urgency speaks for itself in the downward sloping line on the above graph. Dakota Pork, Huron, SD, one of two South Dakota packing plants, closed its doors in 1997.

South Dakotans will be making a big decision about the state's swine industry during the November 1998 elections. A ballot initiative, "Amendment E," would amend the state's constitution. Under the amendment, unrelated family farmers could no longer engage in farming as part of a corporation or syndicate. Contract feeding of livestockfor corporate entities, as well as other now-legal business structures such as limited liability companies would be banned, says Tom Farnsworth, SDPPC executive secretary. Amendment E is modeled in part after Nebraska's Initiative 300 law.

"After a careful study of the amendment, the SDPPC delegate body voted 40 to 11 to oppose it," he says. "We are joined in this position by other state associations. Collectively, we oppose Amendment E because it would restrict business options and opportunities in value-added agriculture at a time when farmers and ranchers need as much flexibility as possible to survive."

Two bills passed during the 1998 legislative session complement an already strong set of environmental regulations, Farnsworth says.

The first bill imposes legal responsibility and tort liability for environmental damages caused by negligence either by the person who owns the hogs, or the person contracting to take care of the pigs.

The second bill creates an environmental livestock waste clean-up fund within the Department of Environment and Natural Resources. The bill applies to all livestock, and was started with $750,000 from the state. Monies collected via fines from the party responsible for manure spills will go back into the fund.

Two defeated bills would have imposed moratoriums on new or expanded livestock feeding operations.

Local control decides the direction of swine expansion in the state. A wide variety of conditions currently exist, depending on the county, and in some cases, the township.

Although hog numbers are still low in South Dakota, the industry is marshaling its forces and starting to re-build.

Regular bus tours take students, lenders and producers to see available pork production options, from hoop barns to wean-to-finish facilities.

"We are trying to make people aware of the new technologies available in the industry," says Roland VanDerWerff, SDPPC director of producer education.

Illinois

The Illinois Pork Producers Association (IPPA) knew it was going to be a tough year when Illinois Lt. Gov. Bob Kustra said unregulated mega-hog factories were the state's number one environmental threat.

Kustra told attendees to a January media luncheon at the Chicagoland Fishing, Hunting, Tackle and Outdoors Show, "Since I'm leaving office after 20 years, I no longer have to worry about the political impact of what I say. They've (the hog farming operations) already destroyed tourism in North Carolina. Now, as they seek to expand around the country they are coming here in droves. They tried to get into Wisconsin, but couldn't. But our laws are not nearly as restrictive, and so they are coming here."

Kustra is now leaving office to accept an out-of-state job.

At presstime, IPPA members were still trudging a well-worn path between their farms and the Illinois Capitol in Springfield. Two bills were pending that could have drastic implications for the state's beleaguered pork industry.

Contrary to Kustra's comments, when you take a closer look at the numbers, the state's pork industry has actually been experiencing a drastic decline. Hogs marketed in Illinois have slipped from 10 million in 1992 to 7.4 million in 1997, according to National Pork Board figures.

"I'm optimistic that we can have a sustainable pork industry in Illinois," says Rick Dean, a farrow-to-finish producer from LeRoy, IL, and president of the Illinois Pork Producers Association. Illinois agricultural groups have pulled together to both introduce sensible agricultural bills. One bill the agricultural groups backed called for mandatory manure management plans and required pork production facilities to be built to construction standards.

The bill was later amended by opponents to define "livestock facility" as including the fields on which manure is spread. This would have devastating consequences if fields could be used to determine setbacks, Dean relates.

"We continue to search for solutions that Illinois pork producers can live with, but when we sit down at the table to try to work out compromises with our detractors, it is evident our detractors are not interested in solutions or closure," Dean says. "In the meantime, individual family pork producers are hesitant to grow their businesses because of the uneasiness about what is going on in the legislature."

The Illinois Environmental Protection Agency has been giving increased scrutiny to odor associated with swine operations. Dean says this is especially frightening because of the current lack of sound scientific methods to monitor odor. A precedent-setting odor pollution case against a young couple producing pork in Illinois is now being battled out in the state's courts. The way this case is handled could impact the way all of America's pork producers operate, warns Dean.

The IPPA used non-checkoff funds to hire a public relations and issues management agency this year. According to Christine LaPaille, MWW/Agenda, Chicago, IL, the agency has worked to help Illinois pork producers get the positive messages about the industry in the public arena.

The agency helped organize a media campaign making the public aware of the IPPA's "Contract with Illinois." Provisions of the pork producers' contract with the state included promises that Illinois producers would continue to work diligently to utilize environmentally responsible methods of production and deliver safe pork products of the highest quality to the consumer.

Producers also promised to continue to contribute to the economy of the state by providing jobs and to safeguard public health and the environment.Illinois

The Illinois Pork Producers Association (IPPA) knew it was going to be a tough year when Illinois Lt. Gov. Bob Kustra said unregulated mega-hog factories were the state's number one environmental threat.

Kustra told attendees to a January media luncheon at the Chicagoland Fishing, Hunting, Tackle and Outdoors Show, "Since I'm leaving office after 20 years, I no longer have to worry about the political impact of what I say. They've (the hog farming operations) already destroyed tourism in North Carolina. Now, as they seek to expand around the country they are coming here in droves. They tried to get into Wisconsin, but couldn't. But our laws are not nearly as restrictive, and so they are coming here."

Kustra is now leaving office to accept an out-of-state job.

At presstime, IPPA members were still trudging a well-worn path between their farms and the Illinois Capitol in Springfield. Two bills were pending that could have drastic implications for the state's beleaguered pork industry.

Contrary to Kustra's comments, when you take a closer look at the numbers, the state's pork industry has actually been experiencing a drastic decline. Hogs marketed in Illinois have slipped from 10 million in 1992 to 7.4 million in 1997, according to National Pork Board figures.

"I'm optimistic that we can have a sustainable pork industry in Illinois," says Rick Dean, a farrow-to-finish producer from LeRoy, IL, and president of the Illinois Pork Producers Association.

Illinois agricultural groups have pulled together to both introduce sensible agricultural bills. One bill the agricultural groups backed called for mandatory manure management plans and required pork production facilities to be built to construction standards.

The bill was later amended by opponents to define "livestock facility" as including the fields on which manure is spread. This would have devastating consequences if fields could be used to determine setbacks, Dean relates.

"We continue to search for solutions that Illinois pork producers can live with, but when we sit down at the table to try to work out compromises with our detractors, it is evident our detractors are not interested in solutions or closure," Dean says. "In the meantime, individual family pork producers are hesitant to grow their businesses because of the uneasiness about what is going on in the legislature."

The Illinois Environmental Protection Agency has been giving increased scrutiny to odor associated with swine operations. Dean says this is especially frightening because of the current lack of sound scientific methods to monitor odor. A precedent-setting odor pollution case against a young couple producing pork in Illinois is now being battled out in the state's courts. The way this case is handled could impact the way all of America's pork producers operate, warns Dean.

The IPPA used non-checkoff funds to hire a public relations and issues management agency this year. According to Christine LaPaille, MWW/Agenda, Chicago, IL, the agency has worked to help Illinois pork producers get the positive messages about the industry in the public arena.

The agency helped organize a media campaign making the public aware of the IPPA's "Contract with Illinois." Provisions of the porkproducers' contract with the state included promises that Illinois producers would continue to work diligently to utilize environmentally responsible methods of production and deliver safe pork products of the highest quality to the consumer.

Producers also promised to continue to contribute to the economy of the state by providing jobs and to safeguard public health and the environment.

Pennsylvania

After four years of talks, Pennsylvania's Nutrient Management Act became effective last fall. It requires concentrated animal operations (CAO) to develop and implement an approved nutrient management plan. A CAO is an operation with more than 2,000 lb. of livestock or poultry per acre of land for manure application. CAO have one year to develop a plan and three years to implement the plan.

"It is a nitrogen-based, manure management plan," explains Ken Kephart, associate professor of animal science at Pennsylvania State University and extension swine specialist.

The state's Department of Environmental Protection (DEP) developed an interim policy for confined animal feeding operations (CAFO) in January. CAFOs are divided into two categories: 300-1,000 a.u. and >1,000 a.u.

Basically the two size groups must have a nutrient management plan, erosion and sediment control plan for each site with manure storage facilities. Those facilities must be permitted before construction and operation.

A long-term policy for CAFOs is being developed by a diverse working group, says Kephart, and will most likely place increased regulatory attention on large livestock operations in the state.

Regarding the hog economy, the breeding herd is stable and marketings have remained healthy over the years.

Sam Elkin, Marion Center, PA, producer and member of the National Pork Producers Council Federation Council, says the hog economy isn't so healthy now. Corn costs 50 cents more/bu. in Pennsylvania than in the Midwest, adding $5/head to the cost of production.

Hutterites - A Growing Force

Colonies produce about 40% of South Dakota's hogs.

Vicious straight-line winds had devastating effects on Oak Lane Hutterite Colony's farming operation on June 20, 1997. The storm unleashed its wrath in the dead of night, destroying the colony's grain handling facilities and a large shed full of machinery. Every colony building sustained major damage, and 1,600 acres of soybeans and 800 acres of corn were wiped out.

When asked how he could possibly make sense out of this distressing situation, Oak Lane's business manager, John Wipf, replied, "I don't like to put a question mark where the good Lord has put a period."

An early morning call for help was put out to other area colonies. By 9 that very morning, generators had restored power to the site and 325 additional men had arrived from other colonies to help with cleanup. This spirit of cooperation, combined with a strong religious faith in both good times and bad, has helped South Dakota's Hutterite colonies survive and thrive while blending deeply rooted religious beliefs with 21st century technology.

There are 51 Hutterite colonies in South Dakota. All but two produce pigs. John estimates the average colony has at least a 600-sow herd. The colonies work together to secure the best markets.

It's been estimated that 40% of the hogs produced in South Dakota are produced by the state's Hutterite colonies. The Hutterites are frequently described as being among the early-adopters of new technology while living according to strict religious rules and traditions handed down since the sixteenth century.

Oak Lane Colony, Alexandria, SD, owns an 830-sow farrow-to-finish operation which helps support 86 colony members. Wipf graciously agreed to give National Hog Farmer readers a glimpse at the colony's successful swine enterprise.

Toby Wipf, John's brother, has been Oak Lane's swine manager for three years. Although he wasn't expecting a photographer to be touring the swine buildings on the day National Hog Farmer visited, the buildings were still spotless. Six men work fulltime in the swine operation. The colony is expanding to 1,000 sows this year.

The colony is a network gilt multiplier for Babcock Swine. All sows are bred via artificial insemination (AI). Semen is collected from the colony's boar stud, located on a separate site. The colony uses a closed herd rotational breeding program.

"We've always had a good working relationship with Oak Lane Colony. They do a good job of managing their hog operation," says Jim McPeak, President, Babcock Swine, Rochester, MN. "The whole colony management team is excellent. Quite frequently Oak Lane Colony is called upon to help another colony that is facing management or financial challenges."

Oak Lane grows the crops needed to feed the hogs (1,700 acres of corn and 1,700 acres of soybeans), a dairy herd and 70,000 turkeys annually. All feed is milled on-site.

The colony uses both a lagoon and an A.O. Smith Slurrystore for manure. A manure pit additive called Shac is used to lower ammonia and odor. The manure is knifed into the colony's crop land.

Starting Out The Oak Lane Colony site was purchased from a local farmer, complete with a 300-sow, farrow-to-finish operation in 1979. The colony was officially established in 1986, branching off from nearby Rockport Colony. When a Hutterite colony reaches a set maximum population size, land is purchased and a new colony is formed.

A crated gestation building was the first addition, built in 1988, with hot water under the floor as an added feature. The building is currently being expanded (using colony construction workers) to accommodate the growing sow herd. Additional gestation stalls are being added, along with pen space for 45 gilts.

In 1989, new farrowing and nursery facilities were added. And, in 1991, a confinement finisher was built.

The farrowing unit features 10 rooms with 10 crates each. There are heat mats in each farrowing crate for pigs. The colony is averaging 22 pigs/sow/year.

Sows are washed and disinfected before entering farrowing crates. Pigs are weaned at 17 days of age, sorted by sex and size, and moved to one of seven nursery wards with 20 pens/room. A sophisticated computer system automatically lowers the temperatures of the rooms as the pigs age. The temperature gradually lowers from 90 degrees to 70 degrees F during a 35-day period.

The control room also houses alarms that can be run automatically or manually in case of power and ventilation system failure. There is both a main and secondary alarm system.

A boiler room houses three boilers used to heat the operation. A stand-by generator is available for emergencies.

Pigs are moved to the finishers at 50 lb. and are put in pens of approximately 17 pigs/pen.

New off-site finishing buildings were completed in March 1998.

Financing for colony expansion projects comes from Farm Credit Services.

Breeding Stock Screening The colony produces all their own gilts. Replacement animals and breeding stock are selected using ultrasound scanning information and a computer indexing program. A Pig-Log machine is used to take ninth and last rib backfat readings while the pig is on the scale.

Percent lean, loineye depth, age to 240 lb. and backfat depth information are downloaded into the colony computers. The information is sent on to Babcock, where gilts are indexed and ranked. The top 15-20% of gilts are selected for breeding stock using the index.

During 1997, the colony averaged 54% lean, .73 in. backfat and a 2.11 in. loineye depth.

Marketing Pigs are marketed between 240-250 lb. Oak Lane Colony sells one to two semi truckloads of market hogs (192/load) weekly.

An enclosed load-out area attached to the finishing unit, large enough to accommodate a semi truck, was designed and built by colony members. This area is 90 ft. long with a 14-ft. ceiling and a 22-ft. long hydraulic chute capable of loading two tiers on a semi truck. Neither pigs nor laborers are exposed to the elements while loading.

The 49 South Dakota Hutterite colonies that produce hogs formed a marketing group called Prairie Land Pork to handle marketing arrangements. Two consultants are paid a fee (per hundred-weight) to make sure the hogs are matched with the best packer program. The consultants also analyze carcass data and provide monthly reports to the colonies.

"With the help of the Prairie Land Pork group we can make informed decisions about things like changing lysine levels to improve carcass yields," Toby says.

Staying Involved The colonies take an active part in South Dakota's pork industry. John is on the South Dakota Pork Producers Council educational committee. The Oak Lane Colony swine personnel are PQA-Level III certified.

The colonies worked together during the state's legislative session to make sure proposed legislation does not negatively impact colony farming interests. Colonies are still classified as a family farm operation in South Dakota.

"Once in awhile you see a farm that has all the cutting edge technologies with management that knows how to use them to get the most economic benefit, Babcock's McPeak says. "Oak Lane Colony knows how to use those technologies while remaining cost-effective."

"We take care of our people from the cradle to the grave," says John Wipf, farm manager and member of the Oak Lane Hutterite Colony, Alexandria, SD. "People get whatever they need physically, mentally and spiritually."

Colony members at Oak Lane eat together in a common dining hall. They work together, dress similarly, and all families live in the same style duplex homes. The Hutterite way of life includes a ready acceptance of cutting edge agricultural technologies, while maintaining social and lifestyle rules strictly rooted in Biblical tradition and teachings.

James Satterlee, Sociology Department, South Dakota State University, has done extensive research into South Dakota's Hutterite colony structure. He says South Dakota's Hutterite communities range in size from 50 to 150 persons. Satterlee says worldly possessions and amusements are considered against colony religious rules. "Dance, theater, cards, smoking, motion pictures, television and radio are generally off-limits," he relates.

Hutterite History The Hutterian Brethren religious group originated in 1528 in Austria and Moravia. The group originated as part of the Sixteenth Century Protestant Reformation.

According to Hutterite historians and South Dakota State University researchers, founders of the Hutterian Brethren believed in adult baptism and separation of church and state.

Hutterites interpret the New Testament of the Bible literally and the principle of "community of goods" is a main foundation of their way of life. The Hutterite faith insists on complete sharing of worldly possessions. Hutterites have relocated many times throughout history rather than abandon their beliefs.

Hutterite colonies in the U.S. started when Hutterites migrated from three villages in the Ukraine in 1874 and started the Bon Homme Colony near Tabor, SD. Rockport Colony, the "mother colony" from which Oak Lane Colony was formed, branched off from the original Bon Homme Colony. According to Satterlee, there were 368 Hutterite colonies in the world in 1993. "The largest number of colonies (252) is in Canada, followed by the U.S. (113)," Satterlee explains.

The majority of the U.S. Hutterite colonies are in South Dakota, followed by Montana, North Dakota, Minnesota and Washington. Colonies are mainly agricultural.

Colony Life Colony families are provided household items and receive an allowance for discretionary spending. The colony provides housing and furniture for everyone.

Children attend a kindergarten from age 3 to age 5 to learn socialization skills according to the Hutterite faith. At age 5, children begin "German" school. They study the Bible, learn hymns and the German language, all from a colony member designated as the German teacher. At age 6, children start attending an English school taught on the colony grounds.

Children are educated through the 8th grade at Oak Lane. At age 15, youth enter a transitional stage between childhood and adulthood. They are not yet attached to specific departments.

When the young people request baptism, they are deemed ready for marriage. At this point, the young men are also assigned more specialized roles in the colony departments.

Every married colony male votes on who is going to work in a particular job. Wipf says if a person is interested in a specific position, they usually will be placed there. That is, if that person is a man. Women don't get assigned production agriculture jobs.

Satterlee explains the formal organization of most colonies includes an elected Council of Elders determining all aspects of the sacred and secular life of the community members.

"The Council of Elders is usually made up of five to seven baptized, married males," Satterlee explains. "The minister, assistant minister, and business manager are automatically Council members. The remaining membership is elected for life by the voting members of the congregation (are baptized and married males)."

Satterlee points out the Council of Elders makes all basic decisions, which then are brought before the congregation for approval. "The colony minister serves as the actual day-to-day head and spokesman for the Council and community," Satterlee says. "The business manager, also elected by the voting members, is delegated responsibility for economic aspects of the colony. He assigns jobs and duties, purchases goods and services for the colony, and oversees the economic well-being of the community."

Department heads have specific economic responsibilities. These department heads report to the farm boss. Satterlee says women may serve as head chef, head seamstress and sometimes head gardener.

Wipf, as the business manager, is part of the executive committee of Oak Lane Colony, along with the minister (who is the president). The executive committee meets every morning (except Sunday) at 7:30 a.m. to discuss colony business and work assignments. Colony members have to be at work at 8 a.m.

"Everyone in this colony has to pull their end," John Wipf says. "If everyone pulls their end, it is fairly easy for everyone."

Robert Wipf is the assistant swine manager at Oak Lane. Summing his lifestyle, he says, "I get paid nothing, but I get everything I need."

Minnesota

A moratorium on animal feedlots was the talk of the Minnesota legislative session. But when state lawmakers wrapped up their session in late April, they opted instead for an environmental study.

The Generic Environmental Impact Statement (GEIS) will be a 2- to 3-year comprehensive study of the environmental, economic and social impacts of the livestock industry, says David Preisler, executive director of the Minnesota Pork Producers Association (MPPA). It may cost $2.7 million.

"It's hoped that the GEIS can give us an inventory of what we've got out there in actual numbers of feedlots, and then we can start dealing with them in terms of where there are problems with feedlots," expresses Duane Bakke, Lanesboro, MN, MPPA legislative committee chair.

The legislative action comes on the heels of a slight slowing of growth in Minnesota. Like most states in '98, hog growth has slowed, says Preisler.

However, the March Hogs & Pigs Report showed that Minnesota's breeding herd rose 3%. Marketings are up 11% over the same period in 1997.

During the past decade, Minnesota has exhibited a steady growth in hog numbers. This is contrary to the trend in many other Midwestern states which suffered declines in hog numbers. The hog economy remains solid for the near future.

Lagoon Ban But Minnesota producers continue to face increasingly strict environmental rules. The state legislature also enacted a two-year moratorium on construction of new, open-air, earthen or flexible-membrane-lined lagoons for hog operations, reports Preisler.

In regards to manure application rates, the state requires that commercial manure applicators be licensed after March 1, 2000. The Minnesota Department of Agriculture also must report to the state legislature by January 1999 on the need for livestock producers who apply their own manure to be licensed.

In March, MPPA President Jim Quackenbush of Chokio, MN, lamented the plight of older livestock facilities. A total of $1 million was then allocated by the state to upgrade facilities under 1,000 animal units (a.u.).

"In our opinion, there is too much time spent talking about new permits and not enough time talking about what is already out there, especially older facilities," stresses Preisler. "It has nothing to do with size and everything to do with age."

Older feedlots were often sited near rivers or creeks for drainage. Now we know runoff problems can result, he says, and those situations need to be corrected.

The state Pollution Control Agency ((PCA) is required to issue either individual or general National Pollutant Discharge Elimination System (NPDES) feedlot permits based on size of facility and date of application, says Preisler.

The PCA must issue individual NPDES permits for newly constructed or expanded operations of 2,000 or more a.u. if received after bill enactment. Individual NPDES permits will also be issued after Jan. 1, 1999 for new or expanded facilities with 1,000 to 2,000 a.u.

An individual or general NPDES permit can be issued to existing feedlots with 1,000 a.u. or more.

Counties can permit facilities that are less than 1,000 a.u. There are already 48 counties that have adopted that authority. The state authorized $400,000 to improve county feedlot programs.

An environmental review rule that treats separate sites as one operation was mandated to be reviewed and rewritten, explains Preisler. This rule has been a hardship for producers wanting to work together.

It's a new interpretation on an existing rule," says Bakke. "People are in favor of it because they want to keep everybody small. What they don't realize is it does just the opposite. Because if they are going to be viewed as together anyway, they might as well build the facilities all together on one site," he observes.

Going Public Raises Money

If an investor can put money in Hong Kong apartments, why can't he or she invest in an American hog farm?

The reason: hog farms haven't gone public. But someday they may, because investor money can be an alternative way to finance a business.

To show you how a company goes public, we talked with Ag Services of America, Inc. who did go public. Ag Services was the brainchild of three "farm boys" when it was started in late 1985. In 1987, their first full year, they had 88 customers and just over $3 million in revenue. By 1997, they served more than 1,250 farmers with revenues of $186 million.

In a nutshell, Ag Services, at Cedar Falls, IA, is one-stop shopping for crop farmers, says Gaylen Miller, chairman of the board. "We supply their crop inputs and finance them."

The original three "farm boys" who started Ag Services are still in key positions at the company. They are Miller, Henry Jungling, and Kevin Schipper.

So how could a small, start-up company experience such phenomenal growth in just 12 years? They obviously had a great idea. But another reason is they moved away from traditional sources of borrowing to put together the capital they needed. They went public and sold stock in their company.

"Nearly everything we sell, we finance," explains Miller. "We also provide cash advances for the farmer to pay for cash rent, fuel, repairs, irrigation costs and, in some cases, living expenses. We're their supplier and their banker.

"We simply could not have borrowed the funds needed from traditional sources to enable the business to cash flow at the growth rate we were experiencing," he adds. "We needed equity capital to secure the line of credit we needed to support our rapid growth."

Could you, a hog producer, sell stock in your business to raise capital to expand? Possibly. But there are some stiff tests to meet. It took Ag Services about 6-7 months from inception of the idea to go public to when their letters appeared on the stock market listings.

"Our first step was to make the right contacts," Miller says. "We were fortunate to have met and worked with an investment banker who was 'close' to Wall Street. He put us in contact with the right people and the contacts continued to grow." That was in 1991.

"The next step was to determine if we were even a candidate for a public offering," he says. "You can't just look at what you have accomplished in the past. More important is what the opportunities are for future growth.

"One of the responsibilities we now have is not only to serve the customer and provide him with good products and service but to also provide the maximum return for our shareholders who invested their capital," he adds.

A huge question was how they would use shareholder-invested capital to grow the business so it would become a more profitable business and, therefore, make sense to a potential investor to put money in your business?

The underwriter did his research and determined that Ag Services would be a candidate to go public. Then the hard work started.

"A team came in and scrutinized the business and financial statements to ensure everything was in order," Miller explains. "They also looked closely at our management team.

"Once we passed those scrutiny tests, it was a matter of selling our program, our concept and our ideas. We went on what they called a road show where we made numerous presentations to various investor groups."

Most of that was in larger cities, mainly the East Coast. "You never know how well it will be received," Miller says. "In our case, fortunately, it was well received and the IPO (initial public offering) was completed with a listing on the NASDAQ (National Association of Securities Dealers Automatic Quotations)."

In December 1996, the company moved to the New York Stock Exchange (NYSE) under the symbol ASV.

Ag Services stock originally sold for $8.25 per share. A 2 for 1 split gives that stock a basis of $4.12 per share and the stock was recently selling at about $18 per share, he says. That's an average annual growth of more than 27% per year, compounded, over the last six years.

Ag Services has done well for its shareholders. Plus, the original owners have been able to realize their dreams at a level they couldn't have otherwise. It has been personally and financially profitable for them.

A crop producer buys and finances seed, fertilizer and chemicals from Ag Services while receiving credit for cash rent, fuel, repairs and other operating needs.

With their new AgriFlex Credit Program, Ag Services now offers intermediate financing to some farmers who qualify."We're offering loans amortized over 3 to 7 years," Gaylen Miller says. "It can be for such things as facilities, land, machinery and equipment."

Since Ag Services doesn't take deposits from customers, the company isn't regulated like a bank. Therefore, they aren't restricted by per farm lending limits like banks are.

Ag Services has experienced tremendous growth over the last 10 years. But with only 0.8% of the farm supply market, they expect more growth.