What would be a fair deal for a producer??

[RedHogs]

I have just complete a the initial steps for organic certification on a new farm, and I have become associated witha number of families that would be interested in a organic co-op system for raising organic pork in a partnership deal. These canidates would take bred sows or feeders and house them on their farm that are mostly smaller homesites with wooded and open areas and fence them in with a quality electric set-up I would provide the charger and cedar fence posts and have a bulk supplier for poly wire. They would manage the herd and rotate the paddocks. I would provide the seed for certified organic cover crops. I could also provide the necessary hay... I have mainly a grass/clover mix. I would then use my sales system to market the organic pork from my farm. I would need to devise a sytem for paying them. I would want a price if they sold it and a price if I sold it. The breeding stock and fence material would remain mine. I think a realistic target price is 1.75 live weight. I think i would have .50 invested..... I would want .50 return and could pay .75 to the farmer. What are your ideas???

[highlands]

What you're proposing is to setup is pretty standard in the pork industry and not a very pleasant system for the producers. It keeps them small and in the clutches of the big ag companies.

Keep in mind that the most expensive part of raising a hog is the feed. For pasturing there is the cost of the land as well as taxes and alternative use considerations. On top of that the producers will have all the labor, facilities and other costs associated with doing the actual work of raising the pigs. $0.75/lb live weight is not enough, especially not for a premium product which will be selling at a premium price.

Cheers

-Walter
Sugar Mountain Farm
in the mountains of Vermont
http://SugarMtnFarm.com/blog/
http://HollyGraphicArt.com/
http://NoNAIS.org

[Junkmanme]

Interesting comment, highlands.

What would be fair?

Interested in the synergy of the idea,
Bruce

[highlands]

To figure out a fair price RedHog needs to look at the real costs. He must realize that doing a few pigs has a high facilities and labor cost compared with doing thousands.

He's talking organic and the cost of organic feed is very high and rising.

If they completely pasture the pigs, no feed, then it takes longer, about seven months or so, to raise the pigs to market weight. Time is money.

There is also the significant cost of maintaining the sow for those doing that and that extends the time investment by four to six months more.

A pig eats about 800 lbs of feed to get to market weight. I don't feed commercial feed so I don't have the most current prices but three years ago when I looked it was $350/ton for the cheapest feed which comes to $140 per pig. For organic feed I was told it was $450 making a feed cost of $180 per pig. That does not include delivery, storage, facilities, waste, interest, opportunity money or anything else. It also doesn't include the cost of the piglet or the sow maintenance. Sows eat about 10 lbs per day or about $821.25 per year on the organic diet. Divide that between her piglets and you need to add $36 more to the cost of each pig if you do the remarkable job of averaging 10 weaned and marketed pigs per litter and two litters per year. Also realize you need to add facilities costs for the sow.

Note that these feed prices assume you buy at least 6,000 lbs of feed at a time. Feed does not store well. It needs regular turn over. The dealers recommend no more than 30 days and in the winter around up north where we are no more than three months. That means you must buy 24 tons of feed a year to do that and you have to have the space to store it properly, feed it out, etc. Cost: $10,800 plus storage facilities, etc.

As the serf, if you're buying all that feed then you'll need to have enough pigs to eat it all. 22 tons/year * 2000 lb/ton / 800 lb eaten/pig = 60 pigs per year.

At $0.75/lb live weight offered by RedHogs and 225 lbs market weight we have the serf earning $10,125 per year after having spent $10,800 for feed. Not bad, the serf is only losing $11.25 per pig. Huh! That's just about the industry average for producers who serve big ag. What a coincidence.

Then there is cost of the sow, piglets, labor, facilities, taxes, land, real estate taxes, license, fuel... Good thing we love farming so much.

Note that each of the serfs will need to get certified organic to work in this plan. RedHog getting certified isn't enough. Each site and farm must also get certified. That costs hundreds to thousands of dollars and is a lot of paper work. As an alternative, look into http://NaturallyGrown.org which is Certified Naturally Grown. Much less cost and paperwork, better standards, farmer driven as opposed to big ag which has taken over the term Organic.

A fair price is a lot higher than $0.75/lb live weight. Do the math. Get your own answers. It's fun and good exercise. Then backup your numbers by actually doing it for five years (to ride out a cycle) and see how they run.

Now I've got to go as I have pigs to load to take to the butcher.

Cheers

-Walter
Sugar Mountain Farm
in the mountains of Vermont
http://SugarMtnFarm.com/blog/
http://HollyGraphicArt.com/
http://NoNAIS.org

[Junkmanme]

THANK YOU, Walter, for a very astute analysis!

I'll copy your answer. I found it very enlightening!

Bruce

[RedHogs]

Good grief, did i mention that i was approached...not the other way around. As to your cost of raising pork...... get real. I am able to produce a majority of my own feed so that throws my numbers off but my 14% base feed which is all natural with not animal by products or additives is 153.80 a ton or 176 bagged. The pasture system requires much less graining so this lowers the cost again. I have not devised this program myself... I'm hoping to copy a older system used many years here in middle tn by a local dairy farmer who let people use a milk cow for 9 months and he gets the calf. I can raise pastured pork for 28 -33 cent a lbs 12 months out of the year with rotational grazing and on farm feed. I am confident that with adequate pasture a farmer can finish porkers for less than .25 cents a pound. I'm maxed out, I can't get any bigger in forage based system and see this as a growth option with a win - win for me and others. As to the organic certification, if the smaller farms are under 5,000 gross sales and sign a commitment to maintain the applicable standards they are exempt.
I'm not going to apologize for trying to grow... My family is interested in having a brother-in-law join to farm full time... allowing my work schedule to free up some and add some additional help as I work off the Farm full time. This means I get bigger or make less.

[highlands]

RedHog, I'm well aware of how a pastured system works. That's how we do things here at Sugar Mountain Farm. The cost basis you give is in dream land - you need to do a more careful analysis of what the costs really are because you're leaving out a lot of factors. Even with you raising your own feeds you still must raise those feeds. That takes time, land, typically seed, often equipment, generally labor, etc. It isn't as simple as you make it out to be.

As to the feed you mention buying, you said you were doing organic certification - that means you'll have to buy official certified organic feed if you're feeding. That is a lot more expensive. Under organic certification you can't feed just any old feed you like. They want organic feed grown with organic seed on certified organic fields. I feed organic goats and cow milk whey from organic milkers at organic dairies but even that is not allowed to be called organic. Beware.

As to the signing a commitment and being under $5,000 annual sales, that does mean you follow through and don't buy non-organic feed. Don't say you're doing the standards and then violate them. Beware.

As to your claims of costs and pricing, I would suggest you carefully review your numbers and business plan. More importantly one must ask, why would they want sell to you, a middle man, for so little when people could easily sell the same pig, since it is pastured and organic, for a lot more... Why should they make you more profitable and cut their own profits so much?

Then there is the whole issue of organic pastured pork is a premium product. Why are you underselling it? Or are you? Are you low balling the farmers so that then you can make more profit by being a middle man to the stores? If you aren't selling the premium product at a premium price to the store then why not? Very odd.

Cheers

-Walter
Sugar Mountain Farm
in the mountains of Vermont
http://SugarMtnFarm.com/blog/
http://HollyGraphicArt.com/
http://NoNAIS.org

[RedHogs]

As to the feed you mention buying, you said you were doing organic certification - that means you'll have to buy official certified organic feed if you're feeding. That is a lot more expensive. Under organic certification you can't feed just any old feed you like. They want organic feed grown with organic seed on certified organic fields. I feed organic goats and cow milk whey from organic milkers at organic dairies but even that is not allowed to be called organic. Beware.

I farm 225 acres with a continuous hog operation from the late 60's... This is a conventional farming operation. The new organic farm is barely 60 acres and has been running smoothly without much financial input just organic cover crops that have been the entire feed so far and although more time consuming the farm is not running any more expensively than the conventional farm patured hogs. I hope to be able to resseed with my own seed in the future reducing the crop cost again. As to supplimental feed I have brokered a deal in the past fears and have still have it moving forward to havest C. organic wheat and organic corn for 1/3 and only have my diesel into the cost. The farmer is contantly recommending me and I hope with some farm help I could plant and combine several hundred more acres for a share of the feed. One main reason for the organic farm is to use some of this feed i was unable to sell readily.

As to my sales price, you can shear a sheep many times - but skin it only once. I have lower input cost, lower stock and feed cost..... I have these advantages and plan on using them.

[highlands]

Originally Posted by RedHogs

only have my diesel into the cost.

There is also:
Land
Real Estate taxes
Tractor
Hydraulic Fluid
Engine Oil
Maintenance
Insurance
Labor
Interest if you have any loans
Opportunity costs to be doing something else
Annual organic fees and paper work time to maintain organic status
Licenses and local fees if any - even worse if NAIS goes through.
...etc.

There are a lot of other costs to consider than just your diesel. This may explain why your estimate of the cost of production is so low. When you build a better model you'll find that the cost is significantly higher.

Originally Posted by RedHogs

As to my sales price, you can shear a sheep many times - but skin it only once.

What a funny quote to justify your errors. I have sheep and am well aware of the dynamics. It also isn't relevant to the discussion.

Originally Posted by RedHogs

I have lower input cost, lower stock and feed cost..... I have these advantages and plan on using them.

You are failing to account for a lot of the costs of production. You started out asking what a fair price is to pay other people to help you make more profits. I replied with some things you were missing - there are undoubtedly additional costs I didn't mention. If you structure the project such that it fails to account for the costs then it will be unsustainable for your suppliers and they won't last long if they try.

Cheers

-Walter
Sugar Mountain Farm
in the mountains of Vermont
http://SugarMtnFarm.com/blog/
http://HollyGraphicArt.com/
http://NoNAIS.org

[RedHogs]

Walter... take a minute and breath
I'd have to say you are getting upset over nothing... Wouldn't you agree that a number of folks on this website have started a pig operation with a run in shed a little electric wire and a water bucket. Come on man, pigs will eat about anything and if you stay ahead of them with pasture they are almost self sufficent. As to the cost of production, I keep a very close eye on my cost and feel confident that i could stay afloat if i had to sell everything at current market prices.... I don't want to, but that is always my measuring stick.
As to the value of premium pork, you've told us enough times what you charge and the local woman I compete with is priced nearly the same. I've watched her presentation and watched the response of those inquiring.... most I believe would like the pork but few buy a whole or half. I believe that she markets about 200 top hogs a year. I see a large gap in my market and i'm moving to fill it, I may not have the idealogical flare for my presentation that she or you would have, but I can sell the same quality product for alot less. By offering a product for 1/2 of what she is charging I will be able to market considerably more hogs. The pasture based system will allow me to run more hogs seasonly when the farmer's markets are open. My off the farm sales have multiplied by a factor of 10 in the past year as I've been on this website and found another niche with feeding an all natural feed to my cull hogs. When my organic hogs come on line to sell in novemberish I am only going to sell the meat by the cut or wholesale to my local buyer who can't get enough organic stock for upscale nashville restaurants. Now i understand your problem with me,,,,it is unpleasant when someone undercut's someone's price by 50%, she may go under.... I've dented her sales considerably already and I've not got into the swing yet but I feel confident that $40 profit per hog is acceptable and $75 is nice. Anything more than that is taking advantage of the situation.

[highlands]

Originally Posted by RedHogs

Come on man, pigs will eat about anything

Yet you want to market them as organic. If you are going to market them as organic then you can't just feed them anything. Watch out for those inspectors - you're playing with fire if you pretend to be organic and then go and violate the rules like you are proposing.

Originally Posted by RedHogs

By offering a product for 1/2 of what she is charging I will be able to market considerably more hogs.

Just don't lie about what you're offering. On the one hand you talk about being a big conventional hog operation (confinement?) and on the other hand you talk about going organic and then you talk about feeding the pigs just anything. Which is it going to be. Doesn't sound like you're offering the same product for half the price at all. Careful about making claims.

Speaking of making claims, have you gotten your USDA approval for making your claims yet? Best look into it now while you're still in the thinking stage and things are flexible.

Originally Posted by RedHogs

Now i understand your problem with me,,,,it is unpleasant when someone undercut's someone's price by 50%, she may go under.

No RedHog, you haven't figured it out yet. Keep thinking. You're not even close. Go reread...

Cheers

-Walter
Sugar Mountain Farm
in the mountains of Vermont
http://SugarMtnFarm.com/blog/
http://HollyGraphicArt.com/
http://NoNAIS.org

[RedHogs]

Walter
The hogs we are currently selling are pastured pork with no hormones or antibiotics, I only feed a 14% all natural feed. My barn hogs are for breeding stock purposes and are on a special feed...The leave to be momma's not meat. My Organic farm ( Which will be under review for 3 years) hasn't sold anything yet and it's also geared to be oriented for selling highend registered breeding stock. My girl is reading over my shoulder... she says "the whole point is we can't raise organic pork here"... that's what i have been trying to say.... We market pastured pork... We are trying to max out production this season. We want to add another product line... Organic pork
I understand the two are different. I'm trying to sell two products.......... not two disguised as one.

I'm fully aware of the rules in organic farming... I plan to follow them, I don't plan to allow any farm suppling me to cheat the system either.

I don't know whats got you so upset, I am trying carve out a niche market here... My girl handles all the sales and basically runs the farm. You've sucessfully got her mad... I can hear dishes banging. If I tell her you're a yankee she might break the computer monitor. I've got a clean farm and clean reputation, I'm not gonna jeopardize that to sell a few hogs. I will with your permission continue on, and if you are right i will be bankrupt in a couple months and be a total failure.... and you will have warned me.

[agmantoo]

RedHogs,
I would enter into a partnership with a grower that could take my excess hogs and raise that excess to market at a profit. That profit would be shared equally between us. I would retain ownership of the broodstock and spit the value added by the finisher. You would get compensated for your investment and risks associated with the broodstock and he would have an incentive to make the offspring grow at its maximum potential. I would let the market for the organic meat dictate the price. If you are selling out then it is too cheap. If you are having to sell organic produced meat at commercial prices then you should look into the least cost method to produce such meat and function there.

[RedHogs]

the split profit idea is probably the best, i was trying to avoid the arguement of what the profit is.... Its sometimes hard to judge what is fair. One gentleman wants to run about 30 head from april till thanksgiving. He has about 25 acres fence really well that has not been farmed in 8-10 years. He wants to maintain the electric fence and waterering duties and me provide supplimnetal corn and wheat which I have available. Its hard to put dollars to this transaction unless i state for half of the return i would supply x tons of corn and 30 feeders.

[seedspreader]

Originally Posted by RedHogs

the split profit idea is probably the best, i was trying to avoid the arguement of what the profit is.... Its sometimes hard to judge what is fair. One gentleman wants to run about 30 head from april till thanksgiving. He has about 25 acres fence really well that has not been farmed in 8-10 years. He wants to maintain the electric fence and waterering duties and me provide supplimnetal corn and wheat which I have available. Its hard to put dollars to this transaction unless i state for half of the return i would supply x tons of corn and 30 feeders.

Corn is cheap (relatively speaking) your reputation and future ability to do business with other producers is what you lack more than corn.

Over figure the corn and call it fair. Even if the hogs don't eat all the corn and the farmer uses it. Finding 25 acres fenced that he pays for water/electric that hasn't been farmed (i.e. used chemicals contrary to organic standards) won't be easy to find... corn on the other hand is easy to find.

[tyusclan]

With all the ethanol plants going in corn is not going to be as easy to find in the future.