LETTER FROM IOWA
Direct marketing well-raised hogs takes special finesse
Fair partnering with marketers would allow farmers to farm.

By Tom Frantzen, Alta Vista Iowa
Practical Farmers of Iowa

UPDATE
Here's an update from Tom on what has transpired since he first wrote this story: "While Fresh Air Pork no longer markets independently, we continue to meet as a farmer-to-farmer support network of suppliers for Niman Ranch sustainably and humanely raised pork. To expand my own marketing mix, I decided to go the route of working directly with a professional marketer. It's a dance in which you have to:

  • Pick your partner carefully.
  • Learn to move in step so nobody gets stepped on.
  • Listen to the music for cues on what's coming.
  • It takes work to make it flow."

Editor's NOTE
Tom and Irene Frantzen are long-time innovators in crop and livestock production, and now in marketing their carefully raised hogs. Tom and his hogs are much happier with deep straw and without steel cages on concrete - but capturing full value through selling them to the region's value-conscious stores and food service buyers proved to be an unsustainable marketing option for an innovative, hard-working farmer-based co-op that really believed it could work. In this piece, Tom reflects on what went wrong. For a more formal evaluation of similar failure with a pastured beef coop in Kansas, see Grass-fed producer co-op shares some hard lessons learned.

 

 

 

 

"Is there a place for direct marketing? I think so. But both the location and the right kind of individual must be found."


Hog friendly farming: These little Frantzen piggies went to markets. Was value added?



When asked about the best actions to take on the battlefield the great Napoleon told his officers to "do the best you can with what you have and where you are." This very general advice is what this leader preferred to use, as it relied on considerations for the local conditions.

"We made professional approaches to the food service managers here. We donated and cooked meals for the advisory councils that advise the food service. We were well received, and when the required product specifications were detailed we met them. But, in spite of repeated attempts, we never sold one ounce of pork to a single institution."

Agriculture today certainly resembles a battle, and a rapidly changing one too. How do we farmers decide on the best course of action in such times? Who can we listen to for sound advice? How do we know that our actions will help create a stable and sustainable future for our farms? Market prices are very low in all commodities. Will direct marketing shore up this weak spot in our defenses? Many agricultural entrepreneurs see direct marketing as the solution. Does this apply everywhere? Or is that advice in conflict with the way that Napoleon handled situations? What roles do local conditions play in this decision?

In the 28 years that I have farmed, our marketing has evolved from all conventional (they set the price) to mostly alternative markets where we have a major role in price establishment. Our beef calves and our cull sows are still sold on a conventional pricing system. In general we are satisfied with this progress.

During the last 5 years our hog and soybean marketing has changed to suit our needs. Cash market hogs are our principal means of income. The last "traditionally" priced hog left our farm in early 1998. We escaped the crisis that occurred later that year in the hog market this way. We now sell the majority of our market hogs to the CROPP Organic Valley market. The organic hogs were first produced for these sales in June of 1999. The Organic Valley Pork Pool is a true farmer-owned and governed cooperative development. Members have to invest a set percentage of their annual sales to capitalize this business. We also sell a small percentage of our monthly hog production to the Niman Ranch Pork Company. Niman is a nationwide marketer of antibiotic-free and humanely raised meats. The Niman Ranch program uses a producer check-off to secure funds for their capital needs.

As these markets developed a small group of hog farmers in the Alta Vista, Iowa, area decided to form a cooperative to assist in the production, marketing and sales of alternatively produced hogs. This group is called Fresh Air Pork, and I am a member. The principal activity is to coordinate the production and shipping of market hogs for the Niman Ranch program. The local cooperative elevator offered to play a key role in coordinating this marketing program. This offer included an office and enough staff assistance to help get this fledging project off the ground. The word "fresh" in FRESH AIR PORK is actually an acronym that stands for Family Raised Environmentally Sound Hogs.

Fresh Air Pork decided to enter the direct marketing meat business in January of 1999. Several individuals from the University of Northern Iowa who worked in the marketing educational programs there assisted us in this development. We targeted local sales, health food stores, and institutional buying. Our first hogs were butchered in March of 1999, and we were soon busy calling on accounts.

Fresh Air Pork came from hogs that met the Niman Ranch program criteria. The principle claims are that they are raised with no antibiotic use, meet the Animal Welfare Institute housing and handling guidelines, and pass the well developed Niman Ranch flavor testing. We butchered in a local state inspected locker. In time we had to use two lockers for processing due to the complicated task of meeting the customers' needs. We received a grant from the State of Iowa to assist our business. Experienced direct meat marketers came to advise us. I volunteered time and travel expense to call on potential customers.

"Here we could not sell the high value pork and lost the margins that those cuts produce."

We had success with two health food stores right off the bat. They were anxious to get our product. We did cooking demonstrations, and our sales were judged to be a good addition to the stores' offerings. Fresh Air could not afford to sell them pork at wholesale prices, and they had to pay retail price and then add their store margin on top of that. In spite of that price barrier they sold our pork on a regular basis. I called on one of those stores. The other health food store went out of business in 2001.

We developed a steady stream of sales straight from the freezers in the office that the local elevator provided. Local consumers liked our quality and selection. We promoted the pork through advertising and word of mouth. We had bus tours stop to check the operation and make purchases. Some local businesses used our pork in their customer dinners.

In spite of these promotions and the significant success of local sales, the Fresh Air direct pork marketing ended on April 1, 2002. The sales volume never reached a profitable level in three years. What went wrong? With so much done right, was there something out of place?

I led the initiative to try to sell our pork to two targeted institutions. We made "professional" approaches to the food service managers here. We donated and cooked meals for the advisory councils that advise the food service. We were well received, and when the required product specifications were detailed we met them. For example, these services need a select product cut into a precise portion and offered in a volume. In spite of repeated attempts, we never sold one ounce of pork to a single institution. This significantly hurt the potential sales volume and in time was a key factor in our decision to stop direct marketing.

All meat programs are complicated, and ours was no exception. Our local sales were strong on ground and packaged products like pork sausage and hot dogs. We had excellent bacon sales. However we could not sell enough pork loin items, and ham sales were so poor that we often had ham ground with the trim meat. Here we could not sell the high value pork and lost the margins that those cuts produce. You can only sell so many $3.50-a-pound pork chops in Iowa. The supermarkets are about $1 a pound cheaper, and that is where most people go.

Getting the best value from a hog carcass is a difficult task. Loins amount to 20% of the hog carcass. Selling the loin is critical as there is little processing in this item. However the cost of making bacon and sausage is considerable. The expense of processing cuts into the profits quickly. When hams are ground into processed products, they hurt profits from two directions. The ham is not sold as a high value item, and the amount of ham (a large portion of the carcass) that incurs processing expense adds to the bills. Fresh Air put most of the hams into their "All Pork Wieners." These pork hot dogs were a real treat, but we made very little money selling them for $2.75 a pound. Pork marketing is complicated, and the ham market is especially competitive. I really wonder how other direct marketers sell this item.

What lessons can be learned from this experience? Is there a place for direct marketing? I think so. But both the location and the right kind of individual must be found. A large population area is a major consideration. The marketers must accept the fact that it will take years to build the business volume that will return profits. This means that their effort will have to be subsidized in the beginning.

I have learned to respect the highly complex nature of the meat business. Fresh Air's best asset is the continuing relationship with professional marketing businesses. This is where I see the value of farmers investing in the cooperatives that sell what they can produce and give those farmers a true say in the pricing of the product. It limits the amount of time that the farmers have to put into becoming expert marketers. They are free to work on production issues. The marketing partners have a direct link with the farmers, and they can spend their time and resources doing what they do best. That job is to get the best returns for each of the many components of the hog carcass. This partnership looks like the way to go for my operation, and I think that the members of Fresh Air Pork will agree.