MINNESOTA PORK PRODUCER SCHWARTZ FARMSPUTS FAMILY FIRST.

On a gravel road west of Sleepy Eye, Minnesota, is a well-kept yet unassuming farmstead. The farmhouse has been remodeled into an office, but there are no signs to tell you this is the headquarters of Schwartz Farms, Inc.

The plain, hardworking surroundings are by design. Inside the office, John Schwartz admits, “We like to keep a low profile.”

He would be the last to nominate himself as a top farmer, but Schwartz and his brother, Joe, are two of the most respected independent pork producers in the U.S. Their family-owned company owns 62,000 sows and finishes all the pigs produced. Another brother, Mark, and many other family members are involved in the business, as well.

The growth of the farm has been slow and measured. Schwartz Farms was founded by John and Joe in 1978 as a crop farm. Originally, the brothers wanted to remain on the dairy farm where they grew up.

“Joe and I wanted to start farming. We discussed our wishes with Dad to expand the dairy. He said we were better off doing something on our own,” explains Schwartz. “It was a hard decision to make, but in hindsight it was the best thing that happened.”

In 1981, John and Joe purchased a 700-head finishing barn to diversify their corn and soybean operation. That was their entry into the pork industry.

Contract growers are key ingredient

In the early 1990s, they pioneered the first farrow-to-wean contract in the state of Minnesota. Schwartz credits their contract growers with much of the company’s success.

“When I started going out to sign up contract growers in the early 1990s, I would lay awake at night worrying about the risk,” says Schwartz. “I felt a tremendous amount of responsibility toward those people. They would ask me, what’s this barn going to be worth in 10 years? I didn’t know. Now we know if was a good deal. Those barns held their value and are still going today. It was a success story. That has been rewarding.

“I know the hog industry has had its controversies, but it’s been a real success story from the standpoint of making equity. Even in terrible economic cycles, the assets really held their value. Back in the early 1990s, people didn’t know the value of manure, but that value is accepted now.”

Today, about two-thirds of Schwartz Farms pigs are housed and fed by more than 125 independent family farm contactors. Schwartz would like the number to be even higher, but many contract growers are aging and don’t have children coming back to the farm.

“We have to put our labor in the facilities because of the aging demographics. It’s not like the hog industry 20 years ago. But our first choice is to work with independent family contractors. They are hard to beat.”

Conservative growth

By purchasing, not building, sow farms, Schwartz Farms grew to 25,000 sows by 2003 and 50,000 sows in 2015. Today, the company owns sows in Minnesota, Iowa, Nebraska, and South Dakota.
Schwartz sells hogs to most of the packers in the Midwest. The family is not involved in the packing industry. Yet.

“We’ve been on the short end of the stick for past 24 to 36 months because we are not integrated,” says Schwartz. “The percent of the cutout pork producers have been receiving has been historically low during this time frame.”

He hopes when the new Seaboard-Triumph Foods plant in Sioux City, Iowa, gets a second shift and the new Prestage Foods plant opens in Iowa there will be a better balance between the supply of hogs and slaughter capacity. “It’s been a challenge for those of us that aren’t integrated.
“It has always been my hope that being a live producer and supplier to a packing plant can be a viable business model. However, the last 24 months have definitely challenged that in my mind,” says Schwartz. “We are looking at all options and not ruling anything out.

“We’re good at raising pigs, and they are good at packing, but we may have to go our own direction to get an equitable share of the cutout.”

Market discovery needed

Schwartz Farms negotiates 7% to 10% of its hogs on the open market. The goal is to keep the Iowa and Southern Minnesota negotiated hog market alive for the sake of market discovery.

“If we don’t keep it alive, the only thing we have is the cutout,” says Schwartz. “There is no producer participation in the cutout; it’s all the packer and retailer. Price discovery needs to be competitive and transparent. This has been a concern of mine for years. I encourage producers to negotiate more pigs. If they are not comfortable negotiating, there are firms available that will negotiate for them.”

He says the company has strategically aligned itself with some of the best employees, contractors, meat processors, and consultants in the industry. His parents, Jim (now deceased) and Irene Schwartz, instilled in their children five main values that still guide them today: integrity, respect, excellence, innovation, and adaptability.

“It’s been an interesting ride,” says Schwartz. “We are proud of our legacy and remain confident in the future.” BY BETSY FREESE.