The Contract Grower Story
One of the keys to the success of our company is the business relationships we have formed with independent farmers. These relationships have provided opportunities for many hundreds of farmers and their families to stay on their family farms, to make investments in their future, to stabilize their incomes and to diversify their operations. These relationships have increased farm incomes and provided a level of financial stability that would not have been possible otherwise. Farmers who have contract production agreements with Murphy-Brown have been able to provide a better education for their children and to create real incentives for their children to remain in production agriculture if they are so inclined. All of these factors have the effect of preserving family farms as viable and sustainable enterprises, farms that otherwise would likely have gone out of production and would have been sold for other types of uses.
What do we mean when we refer to “contract grower”?
Contract grower is a term that refers to a private landowner and independent farmer who has entered into a contractual business arrangement with our company to produce livestock for the company. The concept of contract production had its origins with the founders of what is now known as Murphy-Brown, LLC.
Beginning in the late 1970s these forward-looking founders, most of whom were involved in supplying feed to local livestock producers, realized that it would make a lot of sense to partner with these local farmers to produce food animals in an arrangement that was mutually beneficial to all involved.
In this relationship, who does what?
The typical contract growing arrangement as practiced by Murphy-Brown requires certain things from the independent farmer and certain things from the company, which is sometimes referred to as the “integrator.”
The grower provides:
- A farm site which meets all the relevant local, state and federal legal, regulatory and permitting requirements
- Animal production facilities which meet the technical and animal care requirements of Murphy-Brown
- Day-to-day management of the farm
- Financing for the construction and operation of the farm
Murphy-Brown’s responsibility under the contract includes:
- Providing all the animals to the grower
- Providing all the feed to the grower
- Transportation of all animals to and from the grower’s farm
- Veterinary support services
- Ongoing production consultation and advice to ensure the company’s animals are properly cared for
- A predictable and stable payment based on agreed-upon contract terms
What are the risks and benefits to each party in the integrator-grower relationship?
Under this type of arrangement the integrator assumes the risks associated with the variable costs of feed grains and other inputs as well as market fluctuations in the price of hogs in the marketplace. The benefit to the integrator is the ability to grow a larger number of animals in facilities owned and financed by others.
Under this arrangement the grower’s risk is limited to his or her investment in facilities and his or her ability to properly manage the operation. The major benefit to the grower is the absence of risks associated with input costs and the fluctuations in the market price of hogs.
In addition to the hogs produced on our Murphy-Brown farms, we have relationships with about 1,700 independent producers who supply us with animals on a contractual basis. Our contract growers are an important part of our business structure and they are as valuable to us as our employees. Here’s what a few of our contract growers had to say about their experiences with Murphy-Brown:
“The company has taken a lot of the stress off the contract producer. My contract gives me the freedom to do what I want to do—raise hogs.
If you took Murphy-Brown out of this area, tumbleweeds would blow through it. That’s how much of an impact the company, and the industry itself, has on our economy.”
“Our contract with Murphy-Brown has been really good for us because it insulates us from the variations in hog prices and provides us with a steady income regardless of market conditions. And we take this opportunity very personally, concentrating on making improvements to our technique, our facilities and our animals. We want the company to be very successful, because if they’re successful, we will be, too.”
“I like to talk and I know no strangers and sometimes when I dine out I’ll tell people, ‘if your food was as good as mine, thank a farmer.’ I know what it takes to get that meal on your plate and I’m proud to be a part of the process.
Being a contract grower for Murphy-Brown has been a great adventure and it has meant a whole lot to me and my family.”
“We’ve been feeding with Murphy-Brown for 12 years and it has been an excellent experience. It is great to be able to reach the production department whenever we need help and Murphy-Brown always takes a teamwork approach.
As far as an addition to our farm operation, the production facilities have brought a stability that provides a great base to work from. We have also watched it provide jobs for young people who desire to be involved in the agricultural industry.”
“Being a manager of multiple sites, I appreciate the manner in which the production staff approaches their jobs. The people we deal with are very professional and have a high degree of knowledge. Whether we are devising a plan to deal with the pigs, feeds or medications, we know it will get done. We also purchased two sites four years ago and these have provided us a good avenue to build our personal equity. Because we manage quite a few sites, we hire people for various jobs such as vaccinating and power washing. The sites create good-paying jobs for many people in the community.”
“My family began with Murphy-Brown in the late ’90s and we are happy that we joined an organization that cares about the people involved. When there is a problem, it is dealt with in a timely manner. It takes quite a bit of coordination when lining up trucking or feed deliveries and these are usually very well organized.
As far as the company is concerned, when things are promised it is followed through on. In other words, what Murphy-Brown says, it does. Our financial expectations have been more than met and this encouraged us to expand our site after the initial project was established and in production.”