For the second consecutive year, Growmark, the Illinois-based co-operative, will be paying performance dividends to its Ontario members.When Growmark took over the hemorrhaging United Co-operatives of Ontario (UCO) two years ago, Ontario members hadn't seen dividends since 1979.
Based on estimated year-end figures, released at its annual meeting in Chicago last month, Growmark is expecting banner profits for the fiscal year ending Aug. 31. Net income for the year is expected to rise to US$66 million based on US$1.24-billion total sales, not including petroleum.
For fiscal 1994-95, the company posted a US$43.3 million profit based on sales of US$1.12 billion.
Last year, Ontario member co-ops received C$2.5 million in cash and stock dividends, paid on a percentage of profits based on sales over an 8.5-month period. Growmark vice-president of finance Vern McGinnis says the company's board of directors will determine Ontario dividends at its October board meeting.
During Ontario's first 12-month fiscal period, McGinnis says Ontario sales topped US$140 million, or about 11 per cent of the company's total sales. Net profit results for Ontario operations were unavailable. McGinnis says Ontario co-ops can expect to be paid the same percentage of total dividends, or about US$5.8 million.
Overall, Growmark supply member co-operatives will receive US$52 million of the US$54.5 million total dividend. Grain member co-operatives will be paid US$2.5 million in patronage refunds. U.S. members will be paid 55 per cent in cash and 45 per cent in stock. Ontario members will be receive 35 per cent cash and 65 per cent stock.
Ontario members get less cash due to Ontario's buyout agreement with UCO. Over the first five years of the Growmark deal, Ontario members are required to reinvest 20 per cent of patronage dividends in the company.
McGinnis says year-to-year comparisons for Ontario are difficult due to lack of history. In general, he says the company's performance can be attributed to record sales for some fertilizers, record chemical sales and increased seed sales. McGinnis also notes that while feed tonnage produced dropped, sales dollars increased. -BT
Food giant makes bid for more pigs
By JOHN M. MUGGERIDGE
Canada's largest food company is prepared to give Ontario pork producers an extra $4.25 a pig. But as the spider says in E.B. White's children's classic Charlotte's Web: "That's some pig." Late last month, Toronto-based Maple Leaf Foods unveiled its long-awaited pork contracting program. In a bid to double the weekly run at its Burlington plant from 30,000 to 60,000 hogs, Maple Leaf is offering Ontario producers a comprehensive contracting program, with producer incentives of up to $4.25 a pig, interest-free loans of up to $100,000 for producers looking to expand, and a carefully customized pig, from the hair roots to the loin eye.It's called the Signature Pork Program, involving a wide array of carcass grading grid and forward contracting options, all aimed at getting the so-called "Signature Pig" through the gates in Burlington.
"It has been proven time and time again that consistency in an industry is worth its weight in gold," Maple Leaf Foods president Michael McCain told producers and industry officials packed into a Shur-Gain meeting hall. "Let's all be different and lose, or let's be consistent and win."
With Maple Leaf exporting more than 40 per cent of its production, and exploding demand in Asia, there's "plenty of room to grow the business," he said.
The company, which posted an $11-million profit in its last quarter, has invested $15 million in the Burlington plant, "a down payment on the future health of the Ontario pork industry," McCain said.
"We believe that together we can build a stronger team. Team Ontario versus Team West versus Team Iowa versus Team North Carolina.
"This is the most comprehensive quality pork production program ever launched. The result is you win, we win, the industry wins."
Contracts in the Signature program run from one to seven years, and formulae are based on the previous week's Indiana/Illinois "high direct average live hog price," said Maple Leaf Pork vice-president Don Davidson.
Three grid options are available, ranging from the current Ontario grid, to a "high-performance" grid, with index up to 114 in a narrow 80 to 94.9-kg carcass range. Producers earn a $1.50-a-hog premium for all contracted hogs which score a loin eye depth of 60 to 70 mm at the probe site.
For farmers wanting to take the full plunge, there's the Signature Plus program, which offers quality premiums of up to $4.25 a pig. Producers who sign up for five years or more can get up to $100,000 interest-free loans for expansion of at least 100 sows, at $40 per additional sow, up to a maximum of 2,500 sows. Farmers also get free deadstock removal, and on-farm consultations.
In return, they agree to raise their pigs according to precise company specifications right down to the design of the barn doorway: buy Shur-Gain feed or premix for on-farm feed; design their barn to precise "cookie-cutter barn" blueprints built by designated contractors; follow the Hazard Analysis Critical Control Point food quality control system; follow Pig Champ record keeping; practice split-sex feeding; and raise animals under strict health guidelines on three sites.
To help even out pig flow, contracted producers would form production "pods", each with single genetic sources. Shur-Gain marketing manager Bruce Christie said size isn't an issue, but ideal pod size for a potload per day is 2,500 sows. Several producers could form alliances, he said.
As demanding as the program is, Shur-Gain president John Hensel said it could put a minimum $4 a pig in producers' pockets, thanks to management practices such as multi-site production and multi-phase diets.
The Signature Pig itself, depicted in a couple of Babe-like drawings unveiled by Christie, ideally would weigh 109 kg, reach market in 150 days, have a 2.6 feed conversion, be vaccinated against major diseases, and be removed from feed 10 hours before reaching the plant.
The carcass would have no bruises, be worm-free, test free of the stress gene, have no dark hair roots, and score 3.0 to 4.0 on the Agriculture Canada quality colour score. The ideal carcass would weigh 87.5 kg, yield minimum 60-per-cent lean, and have 16 ribs.
"Producers have asked us repeatedly, 'What do you want in a pig?' We think we have answered that," said Michael McCain. As for naming which genetics best suited the Signature Pig, McCain was coy. "We won't say one will....We will specify which genotypes we believe will deliver the Signature Pig." Five barn contractors will be named, however, and designs published, he said: "It's the full meal deal: five contractors, and here's the prices."
Christie said a new finishing barn could cost in the range of $200,000. Ron MacDonald, engineering consultant for the program, said an entire "turnkey" operation built from scratch for 2,500 sows marketing 1,000 pigs a week, could cost up to $11.6 million.
To help even out some of the wild price swings of late, the new program also offers four forward pricing options based on the Chicago Mercantile Exchange: fixed pricing, minimum pricing, "window" pricing (minimum-maximum); and "flatted forward" pricing, one guaranteed price for producers 12 months in advance.
Prairie packers put pressure on boards
Few pork farmers disagree that a free market ensures the most efficient returns on capital, management and labour, but what is meant by a free market? Some Prairie meat packers contend their operations must not be hampered by marketing boards; so do some provincial governments.Premier Gary Filmon's Manitoba government has ended its single-desk hog selling, despite 70 per cent of pig farmers looking for the status quo. There are reports this move was made following pressure from the Winnipeg-based Schneider Inc. plant which plans a $40-million expansion. Buyers insisted on direct delivery contracts between themselves and individual producers.
Effectively, this meant taking all marketing powers from the provincial board. Government policy now calls for doubling hog output from two million to four million between now and the year 2000. Its economists felt the board's selling program, where pigs were sold only to the highest bidder, was a major road block. And in Alberta, Agriculture Minister Walter Paszkowski suggests the Klein government should follow the same route, even without a producer vote.
Alberta pork board chairman Roger Charbonneau pre-empted Paszkowski's thinking by sponsoring a producer straw vote. A solid majority favoured retaining their Alberta Pork Producers Development Corporation as the sole selling agency.
Neither the Manitoba nor Alberta situations really involve marketing efficiencies. Jim Morris, CEO of the producer-owned SPI Marketing Group in Saskatchewan, says money is the main issue. Meat packers, now under a continent-wide squeeze, seek better margins. He adds this means producers taking less for their animals.
He says that Western packers wish to eliminate producer-run boards, "leaving them to deal with individual producers." Some politicians, on the other hand, feel that if they destroy the producer marketing system, "it will cause someone to come along and build or expand a packing plant...and a few producers are na•ve enough to believe the world is waiting for them."
Morris may be right or wrong but few doubt that a lot of money is at stake. Richard Wright, an executive with the Saskatchewan-based Quadra Management group that owns no hogs but has 10 per cent of Saskatchewan's hogs wrapped up on contract, thinks his corporation loses at least $5 a hog when pigs are sold through the SPI marketing board.
This, to Wight, is a loss of $65,000 a year on hogs now handled by his new company. But when it takes off, the money involved will be much greater. His figure may not be out of line. When the Ontario pork board was first launched, University of Guelph economists, though originally opposed to agency marketing, conceded the system put at least another $4 a hog in producer pockets.
Until early this year, a number of small but vocal Ontario farmers sought major changes to their marketing system. However, following management changes at the board, dissatisfaction subsided. Tough bargaining with meat packers brought about near-world prices as a result of electronic auction selling. - JP
Low-cost barn building
By JOHN PHILLIPS
Last February, noted U.S. barn builder John Zimmerman startled a Brantford barn-building seminar when he said Ontario building costs could be slashed if farmers didn't look for customized buildings. Around $135 per pig space should be the target when new nursery barns are built.Despite some head-shaking, Zimmerman, whose Pennsylvania-based Tri-County Confinement Systems Inc. erects buildings for the Smithfield and other cost-conscious food corporations, got strong support from Ontario government agricultural engineer Harry Huffman but with some reservations: oranges must be compared with oranges.
Zimmerman's visit went beyond the barn seminar. He took side trips to study prospects for expansion into Canada. By year's end, Ayrquip Ltd. of Ayr, noted for its competitiveness when it comes to hog barn equipment, will have the first Tri-County barn under construction.
The Brant county company, owned by Bob and Barb Gillies, has expanded rapidly over the past seven years. They contend their business has made deep market penetrations, with feed systems, bins, ventilation and penning configurations.
Almost from the outset they bought equipment from manufacturers rather than wholesalers and importers. A crucial factor was an insistence on testing everything in their own NPD 100-sow farrow-to-finish enterprise. If a manufacturer's claims failed to meet their needs, the items were not listed despite most attractive prices and plump discounts.
"Our pigs became the R & D [research and development] centre," Bob says. He and Barb worked closely with Quebec's Brome Agri-sales of Dunham when adding feed and ventilation equipment to their range and Norsol of St. Hyacinthe for control systems. Barb adds they were not looking for top-of-the-line models but a reputation based on performance, quality, price and value.
This philosophy tied in well with Tri-County's market thrust. Both Zimmer-man and the Gillies feel pork producers do not need a barn that lasts 20 and more years. "Why sink a lot of money into a barn designed for 20 to 25 years and more?" Bob asks. He explains that with a fast-changing hog industry, most buildings are outdated within 10 to 15 years.
A Tri-County franchise makes a good fit. Apart from a lower cost, standardized cookie-cutter building Zimmerman's success recipe - there is the opportunity to supply all the fixtures, whether PVC weaner flooring, ventilation, penning, electronic feeding or many other items.
The Gillies believe Ontario's pork production costs are still too high when compared with those in some states of the U.S. "We aim to give producers a production edge," Barb says. But agricultural engineer Huffman told the Brantford meeting that, in some cases, sheer size - economy of scale - gave some American producers a competitive edge.
Perth county builder Fred Groenestege, one of Canada's largest and who faces head-on Gillies competition, warned that regional climates may play havoc with construction costs. Comparisons are hard to make. Both Minnesota and Ontario producers share temperature extremes, and seek poured concrete and controlled-environment units. There is also an $11,000 difference between natural and fan-ventilated systems.
Again, with Ontario's high labour rates, pork producers seek a barn where manual work is kept to a minimum. Many farm families still believe barns should have a 50-year life, so this thinking must change before less costly barns become a fixture on today's hog operation, he said.
The arrival of Tri-County sets an interesting scenario where many ideas come into play. Zimmerman believes a $2,500-per-sow building cost can be more than halved to $1,050. This sort of figure would place a crimp in the growth of outdoor pig production, a fairly recent trend triggered by high building costs. He also thinks a 2,000-head finishing barn can be built for $180 a hog space.
Whatever the outcome, the Gillies' venture will generate a lot of heated discussions in swine circles. They have a tough row to hoe but the prospects of success must excite the imagination of those in pig farming for the long haul.
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