A mutually beneficial partnership
In addition to the internal adoption of the Hedgehog Concept, JBS United has sought out external productivity-enhancing opportunities.
In 2005, JBS United customer The Maschhoffs, one of the largest family-owned pork production networks in the United States, purchased an old Tate and Lyle feed mill in Pittsfield, IL. When The Maschhoffs outgrew the Pittsfield plant, the company decided to build a new feed mill and grain receiving facility near Griggsville.
“Since [JBS United] has always been the only supplier originating corn for [The Maschhoffs] in western Illinois, we decided we wanted to explore all the possibilities for a joint partnership when we found out they were going to build a new feed mill and elevator,” Bleich says. “Since we had a good working relationship in the last six years, we thought there may be good possibilities to do the origination for the new feed mill.”
In 2009 The Maschhoffs opened its 1.6-million-bushel grain receiving facility. Unique to their business model, JBS United leases The Maschhoffs’ new grain elevator and originates the grain coming into it — but The Maschhoffs’ employees operate the facility. Under the grain origination contract, JBS United is the sole supplier of grain to The Maschhoffs’ Griggsville facility.
“The producer delivers directly to them as if it were another JBS United operation; we pay the farmer, and then The Maschhoffs purchase it from us,” Hurd says. “This is a unique method of operation because all the grain that comes through [The Maschhoffs] is purchased by [JBS United] — but we do not run the elevator.”
Brett Roe, associate director of ingredient purchasing and feed order management with The Maschhoffs, explains: “We simply communicate our needs with [JBS United] and buy x-amount of bushels a week and they designate The Maschhoffs as a destination point to the producers.”
Once The Maschhoffs’ feed mill is up and running in June, the grain JBS United procures will be used in the new mill.
Hurd describes the partnership as creating a “three-way benefit” between the area producers, The Maschhoffs and JBS United.
“The way it’s set up is good for everybody,” Hurd says. “Forming a partnership with a major end user in the area has created synergy between [JBS United] divisions.”
Meanwhile, JBS United and The Maschhoffs benefit because they are not competing against each other for grain, affecting the profits of both companies and increasing volume at a lower cost.
“To the producer, they can deliver to [The Maschhoffs] facility or any of the other three JBS United facilities in that area,” he explains. “Whether they choose to put their grain into storage for delayed pricing, or to put it into a merchandising program — it doesn’t make a difference where they deliver it — they will receive a check from us. It’s a one-stop shop.”
Local producers also cut their transportation costs because there is now another outlet to consume an extra 3 million bushels of corn in the area.
“The benefit we brought to the table is another destination location for JBS United,” Roe says. “Your infrastructure is only going to support so much, and we made the investment in infrastructure to allow them to merchandise more corn without making an investment in bins, pits or people. It’s an opportunity for them to have access to another dryer; with a wet harvest this is a tremendous benefit to have access to another dryer.”
The consensus: It’s been a win-win for everyone involved. “It made sense from both sides, another location for them — worked out well for both parties,” Roe says.
Last fall was a successful “dry run” for The Maschhoffs as it filled its elevator for the first time.
Plumer explains: “The wet corn last year did produce a backlog, and we were working to catch up with the drying. It was a great help to us because we were able to use [The Maschhoffs] 5,000-bushel/hour GSI dryer — helping to double our drying capacity.”