Photo by Kris Kathmann
I like my bacon as well as the next guy, maybe better, and inch-thick porkchops simmer on my gas grill every week or so. Pork’s leaner these days, a big improvement, but pigs still smell. Years ago, I knew some pretty sharp hog farmers, nice guys, but even in their good clothes, they brought a certain odor to church. They might sit two pews behind me, but I knew they were there. Although I’d seen their hogs rolling around in the mud, it didn’t diminish my appetite for thin strips of crisp bacon.
Those random thoughts drifted through my head this fall as I drove toward one of south-central Minnesota’s biggest swine operations. I was ready to pinch my nose and prepared to do my journalistic whistle-blowing duty if there were any rivulets of liquid manure trickling toward a creek.
My destination was the Robert Fitzsimmons and Sons farm near Good Thunder, where four of Robert’s sons run a corporate partnership devoted exclusively to raising and selling hogs. My guess was these guys might be a little tight-lipped around a writer because of the bad press the swine industry has been getting about odor and pollution. And maybe they’d be just a bit edgy because commodity prices were in the doldrums.
Getting out of my car in front of a building plainly labeled “OFFICE,” I caught one brief whiff of hogs, and then it was gone. Two deep breaths of clean air told me there’d be no need to pinch my nose through this interview.
Inside, five minutes with Paul Fitzsimmons, one of the four partner-brothers, eased my reservations about these guys being tight-lipped or edgy. Laid-back and relaxed would be more accurate. Paul settled in his chair and traced the Fitzsimmons’ family history in farming, telling why the brothers decided to quit raising corn and soybeans and concentrate on hogs. The numbers are mind-numbing. They haul six truckloads to market every week, 45,000 hogs annually. Next year they’ll have a hand in marketing 115,000 annually when “Flagship Pork,” a new facility on their land, comes on line. He figures that project will devour $20 million before the first pig is sold. And nope, he’s not nervous about the numbers, despite soft market prices. (Hogs this fall dipped to 27 cents a pound, down from a high of 72 cents in the late 1980s. The 10-year average is about 48 cents a pound.)
One reason the brothers don’t get edgy about prices, at least not on a daily basis, is that they sell to Hormel in Austin on cost-plus contracts. This means they surrender the rewards of a rising market in exchange for not absorbing the losses in a down market.
I kept thinking of the hog farmers I used to know, who had 100, maybe 200 head, roaming in pastures, dozing in the mud and banging tin feeder doors with their snouts. These farmers listened to market reports on the radio, wondering when to rush a load to the packing plant. Well, Paul said, that’s how hogs were raised once upon a time on the Fitzsimmons farm, but that was awhile ago.
For years, Robert Fitzsimmons and his brother, Mike, farmed together near Good Thunder. “They farmed quite a few acres for that time (1,500), growing corn and soybeans and farrowing 200 sows,” Paul said. “They split up in 1979 because they each had sons coming in.”
After the split, Robert and Mike each fell back to farming 750 acres. John, the oldest of Robert’s four partner-sons, joined him in 1973 and the two escalated to 500 sows in 1979, after the split. The sows averaged eight pigs per litter, and the Fitzsimmons were selling 9,000 market hogs annually to Swift in Worthington.
Sons Richard, Paul and Bill gradually joined the operation. “We named our corporation Robert Fitzsimmons and Sons out of respect for dad,” Paul said. In 1985, when a Cokato hog producer decided to quit, they bought his site and began shipping hogs to finish there. Three years later, Robert retired and the four sons bought him out. “We could have all gone our own way, but we’ve made it work, working together,” Paul said.
By 1993, they had 800 sows. “All along we’ve been considered big in hogs, but not as big as everyone thought because there were four of us,” Paul said. That year, they more than doubled their herd, jumping to 2,000 sows and closing out their row-crop business. They began contracting with other farmers to raise pigs in nurseries or finish them to market weight.
“When we were farming ground, and it came spring or fall, one or the other was going to suffer, either the hogs or the crop,” Paul said. “The crop might suffer because of farrowing, or the hogs might suffer because of planting or harvesting.” It wasn’t just this twice-a-year conflict that figured in the decision. “We kept good enough books to know that we had a lot of machinery that was sitting in the shed nine months a year, not doing anything for us on a capital basis. So we said let’s take the machinery, sell it and use the money for more hogs and more buildings.”
The focus on hogs “has made us better marketers. We’re better at buying our corn and soybean meal because we’re not pulled in two directions,” Paul said. “We don’t hold beans in the bin, hoping they’ll go up. We’re interested in buying our grain at the best price.”
After their final harvest in 1993, they rented their land, sold their tractors, combine and planter, and now use the buildings where they shedded the machinery to manufacture feeders, gestation stalls, gates and other hog equipment. The 1993 expansion to 2,000 hogs meant a major change at the Cokato site. They built a farrowing barn and converted the two finishing barns to gestation barns so the site could accommodate 1,200 sows. The hogs are now fed for market in 15 finishing barns by contract producers near Good Thunder.
On the home place west of Good Thunder, the brothers concentrated gestation and farrowing barns for 1,100 sows. “We used to have nurseries hooked on to the farrowing barns, but now they’re off site for reasons of herd health,” Paul said. Litters are now averaging nine pigs because of better genetics. About 15 days after birth, the weaned pigs are moved to one of three nurseries 12 miles away. The brothers own one of these, while the other two are contract operations.
Paul estimates they employ 20 people full-time and about 30 part-time, many of them relatives, including sons and daughters, nieces and nephews. “We hire a lot of help in the summer because that’s when we do the majority of our building,” he said. The brothers contract with neighboring farmers for help in what is essentially a mass production manufacturing process. In addition to the nurseries, there are 25 finishing barns scattered around within a 12-mile radius of the Good Thunder farm. “All but two of these are buildings owned by the farmers who contract to finish our hogs,” Paul said. The hogs arrive at these barns weighing 52 pounds and 125 days later, they’re trucked to market weighing 280 pounds. A finishing barn costs the farmer-contractor $110,000 to erect and holds 600 hogs. One of these barns “will produce a cash flow of $200,000 a year, and the net depends on the price of the inputs,” Paul said. “When we had combines costing in that neighborhood, they didn’t contribute anything to our cash flow most of the time.”
This spring, the brothers set a gargantuan project in motion, the venture known as “Flagship Pork.” This 3,000-sow unit is being built on their land, about 4,000 feet east of their present buildings. The brothers are partnering with 10 other area farmers in building two gestation barns and one farrowing barn at a cost of $2.4 million. They own nine of the 44 shares in Flagship Pork. “By the time it’s done, counting the sows and the feed, there will be $20 million invested before we sell the first hog,” Paul said. The project involves putting up 44 finishing barns and six nurseries by next July. “Twelve are already built and most of the rest have already been permitted in Blue Earth, Waseca and Nicollet counties,” Paul said.
The brothers have a contract to manage Flagship Pork, which will send 70,000 hogs to market annually. Those hogs, plus the 45,000 the brothers already produce, mean they’ll be shipping 12 truckloads a week next year.
They began conceptualizing Flagship Pork in the fall of 1995. “We were looking at ways to expand. We saw what was going on, everything moving to larger units with pigs flowing all in and all out, being sold at the same time. To do that, you need pretty large sow herds,” Paul said. Some of the farmer-investors in Flagship Pork “never raised pigs before. Most of them were looking for manure for fertilizer,” Paul said.
The brothers aren’t daunted by the problems of manure and odor. “We haven’t had any complaints,” Paul said. “For the size of the industry in Minnesota, it’s been relatively clean. But now if you spill 1,000 gallons, it’ll make the newspaper. There’s a lot more pressure, more emphasis on making sure we’re doing things right. If we’re doing it right, it lessens the chance that people will complain.”
To insure they’re doing it right, the Fitzsimmons “have an agronomist who handles this for us, our contractor growers and the Cokato site. It involves manure-testing, soil-testing and crop rotation. We give the manure away to area farmers,” Paul said. Each finishing barn collects liquid manure during the year and pumps it from 210,000-gallon pits in the fall. This manure is “knifed into the subsoil” rather than being spread on the surface. Each finishing barn provides enough manure to fertilizer 60 acres every other year. “You raise one corn crop, then one bean crop, then fertilize again.” Right now it takes 3,000 acres to handle a year’s worth of manure from the Fitzsimmons’ operations. After Flagship Pork starts up, they’ll need 6,000 acres.
Farmers like it because it saves them $40 per acre they’d otherwise spend for commercial fertilizer “plus they get higher yields and it’s ground-friendlier. It must break down before it’s usable by the plant, which makes it a safer form of nitrogen, and it has a tendency not to leach into groundwater,” Paul said. He hopes to eventually see the time when “guys will at least pay for the application.”
To get a Minnesota Pollution Control Agency permit for Flagship Pork, the brothers had to complete an environmental assessment. “We have to monitor for hydrogen sulfide and ammonia levels in the air at the nearest property line, which is 380 feet away,” Paul said. “But we’re almost 2,000 feet from the nearest neighbor-occupied farmhouse.”
He’s following research being done on ways of reducing the hydrogen sulfide and ammonia produced by hog manure. “There’s a lot of research on reducing ammonia levels by feeding synthetic proteins, but very little is being done about hydrogen sulfide other than a new technology called ‘bio-filtering.’ This exhausts air through wet straw, leaves or wood chips and captures the hydrogen sulfide,” Paul said. For now, the Fitzsimmons have no plans to feed synthetic proteins or try bio-filtering. “We want to find out what the base-line emission levels are first, then we’ll do whatever it takes,” he said. “More state regulation of the hog industry is fine as long as it’s reasonable and we can manage it. But if they set manure regulations that aren’t agronomically, financially and environmentally feasible, there won’t be a hog industry in Minnesota.”
Another of the partner-brothers, Dick, has dropped into the office, eased back in a chair and joined the discussion about technology. “Manure application has a long way to go to be scientific,” he said. “The application equipment isn’t that sophisticated, but it’s coming. Right now application rates vary because of pressure in the tank. All we can do is our very best right now and it’s going to get nothing but better.”
Paul said the brothers used their agronomist and hired a computer programmer to meet Flagship Pork’s manure management program for the MPCA. “There wasn’t a data base available, so the programmer wrote one. It takes every farm and breaks the fields down into acreage groups. It uses soil tests to tell how much manure can be applied to specific acres in a plot,” he said. “It figures in your crop rotation, your yield goals, then at the end of every year it tells you what you should have left for nutrient value.”
They began using the program this fall and are considering ways to market the software they’d developed. “The Minnesota Pork Producers Assn. is looking at it to see if they can incorporate it into their environmental assurance program,” Paul said. “The Pork Producers have been very pro-active on these issues.”
Marketing this software represents an attempt to diversify, to sell something besides hogs, Paul said. Having a management contract to run Flagship Pork is another form of diversification. “It helps the cash flow,” he said.
The Fitzsimmons are already selling one financial management program to other producers. “In 1994, we hired a consulting CPA to help us go through and determine our costs at four different levels every quarter,” Paul said. “What does a pig cost us at birth? At weaning? What at the nursery? What’s the cost when they come out of finishing?” he said. “We close the books every quarter, and we have remained profitable each quarter.”
Paul admits he was sometimes nervous “prior to knowing what our cost of production was, or prior to knowing what our financial status was on debt-equity on a daily basis.” Dick shakes his head, indicating he’s not nervous these days either. “Been at it too long,” he explained.
“The best managers will be the ones who survive, it won’t be the biggest,” Paul said. “We want to be the best managers and that means absolutely knowing your cost of production, then understanding ways to change it. It doesn’t matter what kind of industry you’re in.”
Paul disagrees with what he calls “the big push in the media that small producers, the family farmer, can’t survive. If you really dig into this, the large producers don’t have very many advantages over the small producer. We buy our corn and meal at the same price, right off the board, and that’s 70 percent of your costs.” He feels a small farmer could run a “very profitable operation” with as few as 35 to 50 sows. “If you have a guy who does his own labor, gets good production, has his building paid for, he’s the least-cost producer. But you’ve got to know what it costs you and you have to maintain a quality animal that’s marketable.”
Even though Flagship Pork isn’t complete, the brothers still have further expansion on their minds. “But I think there will be opportunities to own existing operations or obtain management contracts. We won’t necessarily have to build to get that growth,” Paul said.
The prospect of getting bigger doesn’t seem to make the brothers nervous, not even Dick, who’s in charge of marketing the hogs and lining up the trucks. “Standing still is boring,” he said. “But only if it is profitable and makes sense.”
©1999 Connect Business Magazine