| Written March, 1995 |  |
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File B3-41 |
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Types of Swine Production Networking
Scott Burroughs, Director, Producer Networking, National Pork Producers Council
The industry is grouped into four major areas. Producers may be using one or more of these areas to network together. The four major areas are:
1. Group marketing and/or input purchasing networks
2. Group production plans and/or business arrangements
3. Information networking groups
4. Group financial networks
Group marketing
Pork producers are trying new marketing strategies to increase the price received per hundred weight and to lower their marketing costs. Group marketing is a strategy that some pork producers are using to help attain these goals. Group marketing is not a new idea, but is gaining support throughout the industry.
Marketing groups fit into two broad categories - transportation-oriented groups and quality-oriented groups. Transportation-oriented groups market hogs directly to packers in semi-trailer loads rather than smaller lots. Quality-oriented groups market a sufficient volume of similar, high quality pigs. The quality-oriented group yields the following results:
- increased price by increasing overall pig quality
- increased bargaining power
- decreased packer transaction costs
Group purchasing
Purchasing groups are not a new idea. Some of these producer networks had their beginnings back in the 1950s and 1960s. These groups purchase inputs in the bulk. They buy many items in volume, from fertilizers to premixes to pharmaceuticals. The discounts are passed on to members, usually with a slight commission.
Group production plans and/or business arrangements
This group involves producers developing a business arrangement with each other. These groups are often formed around group ownership of a phase of the production chain. Many are organized to supply a source of high quality breeding stock or to produce feeder pigs to take to their own farms. This arrangement is seen by many producers as an opportunity to stay involved and remain competitive. By using this plan, producers can take advantage of new technology without taking all the risk.
Information networking groups
The pork industry is entering the information era. It is vital to have access to the latest information and technology to make good management decisions. Raising hogs today is much more complex than it was 10 or 15 years ago. New technology is developing so rapidly that it is becoming increasingly difficult for pork producers to keep up with the changes. The role of information management and technology is an increasingly important component in obtaining and maintaining a competitive advantage with the changing marketplace.
In the corporate business world it is common for a group of business executives to meet on a regular basis to discuss their business problems and advise one another. Pork producers are beginning to follow this example by forming information networking groups. This type of network opens up avenues for acquiring information not available to individual producers.
Producers in these groups are usually from the same state, but in some cases from different states scattered all over the country. By coming from different areas the members feel more comfortable discussing sensitive issues than if they met with producers from their immediate area. These producers have organized to meet regularly to talk candidly about their operations. Producers in these groups exchange information that most business people would not think of sharing with their competition. Members of these groups have found that participation in these groups can provide information that a single operation would not receive. By combining the expertise of the group each member becomes more competitive.
Group financial arrangements
Access to capital is one of the main factors that limit uptake of new technology for many producers in the pork industry. The capital may be available but it is not widely accessible through traditional means. Groups are now starting to form to take advantage of combined capital.
Examples of this are groups of producers who want to expand but can not secure adequate capital. By combining assets, the group is able to build off-site nursery or farrowing facilities. These groups are using the three-site production concept, without having to shoulder all the risk and capital investment.
Forming a network
Forming the network can be the most difficult part. To survive, a network must have good leadership. The leadership of the group is one of the most important considerations for success. This leadership can come from within the group or in many cases outside the group. Regardless, the leader needs to be someone in whom the group respects and has faith.
Selecting members of the group will determine a group’s success. Signing up the right people is essential. Some people will be very uncomfortable in a networking situation. These people should not be involved. To function in a group a producer must be a team player. Group members also must realize there may be a social cost in joining a network. Neighbors and businesses in the area may take a dim view of the new “big operation” in the area.
Conclusion
Building networking relationships with others that gives producers an advantage may be the factor that determines long term strength in the pork business. Change is going at an unprecedented rate, creating a substantially different operating environment. The change is forcing every agricultural organization to re-examine its purpose, organizational structure and approach to the market place.
By effectively planning and actively addressing the challenges, producers can meet the challenges of change. Producers themselves must and will shape their own destiny. The inability or unwillingness to change is perhaps the greatest single obstacle to a competitive place in a 21st century agriculture. Producers are often stuck grieving their losses or holding on to fantasies that keep them from investing fully in their current situation. Unrealistic fantasies and expectations interfere with healthy acceptance and appreciation. Part of getting on track is letting go of what could or should have been and paying attention and committing to what really is happening.
Networking is not the only solution. Some networks will work, and some will not. Most will evolve from their original form. The people involved, the commitment, the organization and outside forces will all play huge roles in whether a network will succeed. Networks simply offer a way for producers to compete.