Laying the Track for Success

The poultry industry has seen its share of better days. The price for breast meat has plummeted thanks to a gluttonous supply, and although the price of grain has decreased in recent months, it’s still well above average over the previous 30 years. These factors have forced Tyson Foods and other poultry producers across the nation to cut production and close processing plants’ doors for good. These conditions also contributed to the bankruptcy filing of the nation’s largest chicken producer, Pilgrim’s Pride.

Of course, many producers have escaped this fate, but not without making capital investments in their future. In today’s market, staying competitive requires companies to identify areas of vulnerability and address them early on with a well thought out long-term plan. An outstanding example of such a company is Virginia Poultry Growers Cooperative, headquartered in Hinton, VA, the nation’s sixth largest turkey company, which raises and debones approximately 7 million 40-pound toms a year and markets their products to further processors.

From the time it opened, the co-op had purchased grain for their feed mill from a nearby Pilgrim’s Pride facility. But in order to gain control of their feed costs, co-op managers needed to find a way to contract their own corn.

In April 2008, the co-op completed building a grain unloading facility 10 miles away from their feed mill in Broadway, VA, enabling them to cease purchasing corn from Pilgrim’s Pride. Under the direction of Phil Miller, engineering manager of VPGC, the $10 million project was completed in about a year and a half, and the co-op is now more in control of its future than ever.
Overcoming adversity

VPGC is no stranger to accomplishing what its members put their minds to. Prompted by Pilgrim’s Pride’s announcement that it would be closing its Hinton, VA turkey processing plant in September 2004, establishing the co-op took a mere six months thanks to the relentless dedication of its 154 members. Most of the co-op’s members had contracts with Pilgrim’s Pride and knew they needed to get the operation on its feet quickly, or risk being out of business.

Co-op leaders managed to rally the support of local growers, secure financing and devise a working business plan by July of 2004, and then purchased both Pilgrim’s Pride’s processing plant and their Broadway, VA feed mill. After accomplishing what some may think of as impossible in such a short span of time, the next hurdle the co-op needed to clear was to find a way to contract their own corn.

“Our senior management knew we needed to do something because we weren’t able to take care of ourselves. Getting our corn from another facility put us in a vulnerable position,” explains Miller.

VPGC’s feed mill, built directly after World War II, is rail accessible, but has only enough storage for approximately 14 railcars. The problem there is that railroad company Norfolk Southern’s freight rate per car is higher for individual cars than for a unit train. In some cases a unit train is up to 100 cars, but in the rural mountainside of Shenandoah Valley, a unit-train is 75 cars.

Jim Mason, president and general manager of VPGC, says that Norfolk Southern’s freight rate is responsible for the existence of many East Coast grain unloading facilities. “In the last five years Norfolk Southern has forced grain unloading stations, such as ours, to go up all over from Alabama to Pennsylvania because most businesses can’t afford to freight unless they can unload a unit train,” says Mason.

Time is also of the essence. Freighters are charged a hefty demerger fee if railcars are not completely emptied and ready to head back to the Midwest within 24 hours.

The only way to get out of their situation was to build a state-of-the-art grain unloading facility.

Planning makes perfect