Poised For The Future: The Maschhoffs’ Adapt to A New Business Model

September 19, 2018 07:05 AM
 
The Maschhoffs want potential production partners to understand what’s involved before they enter into a contract agreement. They provide a comprehensive report that outlines the costs of constructing a hog building.

This is the second article in a two-part series from the September issue of Farm Journal’s PORK magazine. To read part one, visit “Family Values Propel The Maschhoffs Forward.”

 

The Maschhoffs are the first to admit they’re learning as they go. The decision to surround themselves with good people, whether consultants or employees, has had big benefits. For example, some of their early consulting veterinarians helped them think outside the box on day-to-day production practices. One of those influencers was Ralph Vinson, a veterinarian based in Oneida, Ill.

“Ralph challenged us to think beyond just building buildings,” Dave says. At the time, the farm didn’t have any contract production.

employees
Hands-on training, resource sharing, problem-solving and creative thinking have helped the massive organization scale quickly and ensure quality across multiple states and farm sites. That approach will be critical for future growth.

“He helped all of us think about the power of using somebody else’s assets and capital–not just financial assets, but human capital,” Ken explains.

Another mentor was Ted Fritz, of Beardstown, Ill. When it came to selling pigs, Ken credits Fritz for teaching him to be a tough and honest negotiator.

“Selling pigs to Ted was never as easy as I wanted it to be, but it was always honest and fair,” Ken says of this mentor. He credits the good relationship he built with Fritz as the basis for other relationships the family enjoys today with people up and down the supply chain.

Creating win-win scenarios has enabled The Maschhoffs Inc. to grow along with other independent producers.

When the Maschhoffs started their business, hog producers were hesitant to construct buildings and own pigs because of volatile markets. Dave and Ken adopted the contract model that had worked well for poultry producers in the Southeast to address those concerns.

“The mindset we brought to it was a family of family farms,” Dave says. “We can grow faster by using somebody else’s land for manure and someone else’s facilities and labor. You can still manage all those things and control them, while owning the beginning and the end.”

The venture wouldn’t have been successful, however, if it hadn’t been underpinned by those important values.

“The starting point is they’re just very good people,” says Mike Ellis, animal science professor at the University of Illinois. “The Maschhoffs have a genuine passion for agriculture and swine production, and they’re very production-focused. They’ve set their goals to have one of the best pork operations in the U.S. and the world, and ... they’ve been very successful in achieving those goals.”

Ellis has worked with Ken, Julie, Dave and Karen for more than 20 years. Bradley Wolter, now president of The Maschhoffs, was a graduate student under Ellis. The two were instrumental in helping form a partnership between the university and the business to work on research projects of mutual interest. Ellis believes the difference between The Maschhoffs and other large pork businesses is largely due to their hands-on approach and their ability to find and retain good people.

“They’re all actively involved, and their children are engaged in the business in various capacities. They’ve also recruited a group of talented young people. They’ve supported, developed and encouraged those individuals,” Ellis says.

Helping Production Partners Succeed

The Maschhoffs want potential production partners to understand what’s involved before they enter into a contract agreement. They provide a comprehensive report so potential partners have a thorough understanding of the costs associated with constructing a hog building, including an income and expense budget.

The Bank of Springfield has helped finance more than 15 of The Maschhoffs’ production partners’ barns.

“The projections provided by The Maschhoffs give production partners a good idea of what to expect financially, particularly in the first two or three years,” says Mike Halsne, regional president, Bank of Springfield. “Their estimates have been quite accurate and we use this information to do our own projections.”

Meanwhile, those partnerships have enabled contract producers to build their own operations and bring young people back to the farm. “If we look at that wall of partners in the boardroom, we see not just dozens, but hundreds of farmers that today have their kids, the next generation, involved in agriculture that would not have had that otherwise,” Ken says. “They weren’t going to sign with a corporate company and just be a number—they wanted to maintain their pride and independence. We’ve helped them do that.”

Speaking for the Industry

The responsibility of sustaining growth for the business as well as the industry is great. To help ensure pork demand and market access grows in the U.S., Ken served as president of the National Pork Producers Council from March 2017 to March 2018. He understands the importance of free trade, particularly with Canada, Mexico and China as well as Japan and Korea; and The Maschhoffs, like other U.S. producers, is feeling the economic pain from current trade tariffs.

He says the U.S. pork industry is “all for modernizing NAFTA, but we cannot support efforts that would undermine the livelihoods of America’s 60,000 pork producers.”

Farm to Table

It’s not every day public audiences get to interact with pigs and the people who raise them. To help bridge that gap, The Maschhoffs created the Farm-to-Table Experience to explain the process of raising a pig from start to finish. The interactive digital tool can be used by consumers as well as high school and college instructors to provide a good overview of pig production that’s honest and devoid of emotionally-charged rhetoric.

map
The Farm-to-Table Experience to explain the process of raising a pig from start to finish. 

“Today, less than 2% of the U.S. population is working in agriculture,” says Bradley Wolter, president of The Maschhoffs. “Many people have no connection to who produced the food they eat. The map will serve as a tool … for consumer audiences to learn more about what goes into raising the pork they buy.”

“With this Farm-to-Table Experience, users can gain a deep understanding of how we produce enough pork to feed 16 million people each year,” says Josh Flint, associate director of communication and people projects. “We are extremely pleased with the result and are looking forward to seeing the value this map brings to our business as well as the pork industry.”  Read more. 
 

Looking Forward

Respect, a commitment to core values and a strong sense of collaboration and trust have filtered down from the company’s owners to define their relationships with employees and production partners. Hands-on training, resource sharing, problem-solving and creative thinking have helped the massive organization scale quickly and ensure quality across multiple states and farm sites. That approach will be critical for future growth.

The owners have invested in businesses outside of production agriculture to diversify their base and create a cushion when the protein market is less profitable.

“To say how much we grow or contract in the future depends on the risk-adjusted rewards in the business,” Ken says.

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