Prairie Farmers Cooperative

February 1999
Interview with: Dennis Timmerman
Goal: Add value to pork through processing and marketing fresh cuts.
Date Established: Initially incorporated in 1996 and reincorporated in February 1997.
Area Served: Southwest Minnesota
Number of Members: 15
Key Challenges: Financing and community support
Helpful Resources: Agriculture Utilization and Research Institute, Minnesota Department of Agriculture, Farmers Union Enterprises, and US Department of Agriculture, Rural Development

Hog producers who are now members of the Prairie Farmers Cooperative began their collaborative marketing efforts in pursuit of a perceived market opportunity. "Our locker plant always told us that we had good tasting meat," recalls Dennis Timmerman, who manages Prairie Farmers Cooperative. "That gave us the idea to market our hogs for a premium." Timmerman and a handful of other hog producers formed the Prairie Farmers Cooperative in West Central Minnesota during December 1996 to process and market high-quality, fresh pork cuts.

Why market collaboratively - identifying a need and an opportunity

Collaborative organization offered hog producers a way to jointly finance the processing, packing, and delivery of their meat while maintaining a steady flow of high-quality product. Timmerman and a small group of other hog producers agreed to a cooperative structure early on in their discussions before turning their attention toward marketing and facility research.

Exploration of an idea

Beginning in September 1996, prior to cooperative formation, Timmerman and several other producers decided to test their hunch about retail demand for fresh pork cuts. Using funds and technical assistance provided by the Agricultural Utilization and Research Institute (AURI), they hired a marketing firm to survey retail food stores. More than 185 of the 225 targeted retailers responded to the survey and over half showed interest in eventually buying fresh pork chops, sausage, and other cuts from the proposed cooperative. Moreover, working with the Minnesota Department of Agriculture (MDA), the group identified retailers in Colorado who showed interest in purchasing antibiotic-free pork. "This is a direction that we’d like to head in," Timmerman says. "We’d like to get a reputation for high-quality, drug-free pork."

Following market research and cooperative formation, Timmerman and the other producers agreed on the need to process and pack their own pork to ensure product consistency, quality, and regular packing availability. "The alternative - hiring out the processing - meant several problems," Timmerman explains. "We couldn’t control quality and we weren’t sure how to secure packing space. If there’s a glut of pork on the market, you run the risk of being turned away from packers."

Challenges and opportunities

In-house processing and packing requires the purchase or construction of a building and equipment - a task that has not proven easy. Prairie Farmers Cooperative encountered their first major challenge when developing a financial plan for the plant. "We had to find a way to come up with money for the processing plant without putting all of our farms at risk," he says.

Cooperative members have been working for well over a year to arrange financing for a processing facility and individual stock purchases by potential members. "Our bank needs some form of guarantee before agreeing to the building and equipment loan," Timmerman says. As a solution, the Cooperative approached the USDA Rural Development Division, which offers technical and financial assistance. "We have gone through a lot of paper work, but hope it will pay off if USDA agrees to back our bank loan."

With financing options identified, Prairie Farmers Cooperative explored the purchase of an existing facility and, in fact, had signed a purchase agreement for a small plant in New London, Minnesota. "We were really excited about the New London plant," Timmerman recalls. "We even recruited bids on expanding the facility’s capacity from 75 hogs per day to 200 hogs per day." In the end, community opposition to the plant expansion forced Prairie Farm Cooperative to abandon its processing plans in New London during July 1998.

Almost immediately, Prairie Farmers Cooperative began searching for a new plant location. Three cities showed strong interest in hosting the plant and some offered development assistance. Ultimately, the Cooperative decided to build its processing and packaging facility in Dawson, Minnesota. The plant, designed by a Fargo architecture firm, will have a daily processing capacity of 200 to 250 hogs and employ 42 people in addition to generating more profit for the Cooperative’s growing membership.

Membership recruitment, responsibilities, and benefits

Following an informational meeting on January 6, 1999, approximately 80 local hog producers showed strong interest in purchasing stock to become Cooperative members. Each member will be asked to purchase a minimum of 400 stock shares once Cooperative financing is secured. Members will be obligated to deliver one hog per share of stock annually. This will guarantee a market for farm members and an adequate supply of hogs for the new plant.

According to their business plan, Prairie Farmers Cooperative will offer its members $55 to $65 per hundredweight for conventionally produced pork once in-house processing, packing, and marketing is underway.

Future opportunities

Based on the Cooperative’s marketing plan, the group intends to move "as rapidly as possible" toward antibiotic-free pork production. "There’s a lot of demand for antibiotic-free pork by out-of-state natural foods stores," Timmerman says. "We hope to fill that demand and take advantage of market premiums in the future."

In the meantime, Cooperative members and managers will prepare for their first run of processed pork. If the construction and financing process go smoothly, Timmerman expects the Cooperative will begin processing and packing its first pork cuts by November/December 1999 - just in time for the seasonal surge in retail pork demand.

December 1999 update

In May 1999, Prairie Farmers received word from USDA Rural Development that their financing had been approved. The Co-op then held a membership drive in July. Shares were sold only to active producers. They were successful in selling enough shares to begin processing plant construction. With those two key pieces in place, the group broke ground in November for their new processing facility in Dawson.

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