By Betsy Freese of Successful Farming at Agriculture.com.
The history of the former Premium Standard Farms (PSF) hog operation in northern Missouri is as tortured as any in the modern swine industry. (See the 30-year time line at the bottom of this story for details.)
When Smithfield Foods bought the formerly bankrupt 221,000-sow complex in 2006, PSF was the second-largest pork producer in the U.S. (behind Smithfield). It was bogged down in nuisance lawsuits, the barns were in disrepair, and pig performance was poor.
Keeping the operation running was a struggle for several years after the purchase. One industry analyst told Successful Farming magazine in 2011, “I advised them to get a bunch of bulldozers and push it in a hole and walk away. That would be cheaper than feeding it.”
Smithfield stuck with the business, now called Smithfield Hog Production – Missouri, bringing in a new general manager, Michael Rainwater, more than six years ago and infusing substantial capital to turn the operation around.
A tour of the headquarters and a winding drive up and down rolling hills between Princeton and Milan showcases the improvements made to the pork complex, which includes 56 sow farms over 600 square miles. (There are also 7,500 sows in Wayne County, Illinois, as part of gilt multiplication.)
Sow units are in clusters with three to 16 barns in a cluster. The finishing sites are in clusters of eight barns, with sites ranging from five to 17 clusters. Each barn holds 1,100 pigs.
These tight building clusters reflected historic design practices that had to be overcome.
“All this was built before PRRS was a big problem,” says Rainwater. “These large concentrations of animals can involve ongoing animal health challenges.”
Rainwater, who joined Smithfield in 2008 to run its Oklahoma sow farms, was assigned in 2011 to run the struggling northern Missouri operations. At the time, Premium Standard Farms was facing nuisance lawsuits, a federal and a state consent decree, and a corporate farming law issue. Most importantly, the operation was struggling to be competitive in the Smithfield system.
Today, Smithfield-Missouri is producing more pigs from fewer sows, has resolved the disease and labor issues, and has settled most legal issues. “We’ve been on a growth path in the last five years. That’s all been about understanding our role within Smithfield and making the most with what we’ve got,” says Rainwater.
3 Ways Smithfield Tackled the Problems
When Rainwater arrived in 2011, there were 1,200 employees, a number he immediately saw was inflated based on pig production on the farms.
“My first summer here we significantly trimmed the workforce during the first 90 days in order to increase the percentage of frontline workers and to get them better trained and engaged,” he says.
To facilitate the transition to an improved system, Rainwater’s team depopulated several farms in the production system and then began to rebuild with a new employee training program.
“Twenty years ago, when I was hiring workers for dairy farms, I would get 50 résumés, and 20 of those came from farm kids,” says Rainwater. “Now I get 100 résumés and if five have a farm background I’m lucky. We have to teach people the basics.”
The on-farm training, called onboarding, takes four weeks. About 30% of the people don’t make it through the training and evaluation process. Those who do start at $11.25 an hour plus benefits. After 90 days, they are eligible for a pay bump to $14.50. If they become certified to work in farrowing barns, for example, they qualify for another raise. Bonuses for production workers are common, says Rainwater.
Turnover is always an issue, he says, because jobs like power-washing barns are tough to keep filled. The Smithfield-Missouri labor pool contains about 10% of employees from outside of the U.S. “Many of those are highly skilled managers and supervisors who help train the remaining workforce,” says Rainwater.
The Missouri operation is unique in the Smithfield business in that the ratio of company-owned to contract operations (pigs are raised by local independent farmers) is much higher, with approximately 80% company-owned and 20% contract operations. Finding people with experience in pig raising is a challenge.
“The old regime that was here confused good leadership with being demanding,” says Rainwater. “There isn’t a tree where herdsmen grow. You must develop them.”
He encouraged all his employees to watch the movie Moneyball. “They needed to understand that we are not the Yankees and we never will be,” he explains. “This is a commodity business. We may not be the homerun leader, but we can be good at base hits. Our nearby plant in Milan needs the pigs.”
2. Herd Health
A huge challenge for Smithfield-Missouri is the 30-year-old cluster barn design and the implications on pig health. The former herd health strategy, says Rainwater, focused on trying to create pristine conditions; the modern strategy focuses on the broader issue of herd health.
With the challenges of herd health that face the hog industry today, large concentrations of pigs add complexity.
“We have modified our acclimation strategy for the sow farms, reduced the number of gilt sources, and continue to find ways to reduce the number of pig sources that we place into a grow-finish complex, along with a continuous improvement effort in our biosecurity practices,” says Rainwater.
3. Manure Management
As part of federal and state consent decrees, the company had to use “next generation” technology for manure management including covers on lagoons, scrapers in barns, and a process called AND, which stands for advanced nitrification/denitrification.
“All of that is not something in the normal part of producing pigs, so those additional costs were just killing us,” says Rainwater. More than 100 finishing barns were sitting idle because there were other priorities for capital other than to install barn scrapers and related technology.
Along came Rudi Roeslein in 2011 with an idea. His company, Roeslein Alternative Energy, St. Louis, Missouri, wanted the methane gas from the lagoons. Rainwater was listening.
“I told him he could have whatever gas he captured for the next 10 years if he put new covers on the lagoons and scrapers in the barns,” Rainwater says.
Done. Finishing barns were soon back online.
“All of a sudden we go from selling 1.4 to 1.5 million pigs a year to almost 2 million,” says Rainwater. “Now my feed mills are used at 100% and my trucking fleet is used at 100%. All that math falls to the bottom line. That is pivotal.
“We’ve come a long, long way, and part of what has helped us get to where we are today is the relationship we have with Roeslein,” says Rainwater.
Innovation and Risk
The first Smithfield-Missouri finishing farm Roeslein worked with had nine lagoons and roughly 70,000 finishing hogs. (The smallest farm in the system has 40,000 hogs and the largest has 170,000 hogs.)
Roeslein (pronounced Race-line) used several different gas purification systems to remove hydrogen sulfide, carbon dioxide, and some nitric oxide from methane trapped and collected at each covered 3-acre lagoon. One large-scale system, pressure swing absorption, is designed to handle the potential gas from 70,000 finishing hogs. A new, simpler membrane system is capable of purifying gas economically from as few as 30,000 finishing hogs.
“We have to be 98.6% pure methane. If the gas is not pure, we send it back to the closest lagoon and run it through the purification process again,” says Roeslein.
A natural gas pipeline happens to cross Smithfield’s Ruckman farm, where Roeslein installed a facility to inject the gas into the pipeline. Purified and compressed methane produced at other Smithfield-Missouri farms is transported in special trailers to Ruckman where it can also be injected into the national pipeline. The operation has the capability of purifying and injecting about 1,350 standard cubic feet per minute. Methane release is recognized by the EPA as a much more potent greenhouse gas than carbon dioxide.
“We are selling this pipeline quality renewable natural gas to the California transportation market,” says Roeslein. “They have a D3 RIN (renewable identification number) market that is fairly lucrative right now and everybody is chasing. We’ve had to go through the EPA and other agencies to meet regulatory requirements.”
The three things Rainwater required for the biogas project were:
- It had to be environmentally sound and sustainable as well as fully compliant with all applicable requirements.
- There would be no involvement by Smithfield in the technology. The company’s core competency and business is producing pork, not energy.
- Smithfield needed help with costs and asset utilization of its land and facilities.
Roeslein, who has designed and built more than 200 modular beverage-can manufacturing systems collectively worth about $2 billion, has a bigger goal than just anaerobic digestion technology. He wants to reduce greenhouse gas emissions, help shrink Smithfield’s carbon footprint, and much more.
“I want to give farmers the opportunity to be in the energy market, a market that helps assure that we have clean water, soil for our future generations, and habitat for wildlife,” explains Roeslein. “I didn’t invest $50 million in this project because I needed to make more money. If you drink out of an aluminum can, I probably built the factory that made it. My real goal at this point in my life is to build habitat for wildlife and keep our water and air clean. Those are my altruistic goals, but I’m pragmatic enough to understand that if it doesn’t make money, other people aren’t going to do it.”
Besides the gas component, Roeslein wants to create revenue from the nutrient component – the nitrogen, phosphorous, and organic matter that’s left. “We are having discussions with people who have really great technology on how to separate nitrogen and phosphorous from the liquid,” he says. “We want to replace these denitrification systems that blow a bunch of air around.”
There have been stumbles. First, fluctuations in pig production resulted, at times, in much less manure and methane production than expected. Next, a tornado swept through the main finishing site last June demolishing 16 finishing barns and ripping the covers off lagoons.
“We had fewer pigs than we anticipated and a capital asset sized for the expectation of more methane,” says Roeslein. “If we have a steady flow of pigs, we are looking at mid-teens returns on investment for the methane collection.”
Rainwater commiserates. “We continue to learn. We are going to get there. I am very impressed that Rudi can inject methane into a natural gas line. He has figured out how to take that gas out from under the covers and make it pipeline quality,” he says.
The EPA has identified 8,200 potential anaerobic systems on swine operations in the U.S., says Roeslein. “Smithfield is the largest producer of pork in the world. My hope is I could demonstrate some successes with them and then other farmers will see this and want to try it. My goal is to have it sized to the point where it has application to many farms. The Germans have more than 9,000 aerobic digestion systems and 25% of their energy is now produced through various renewable ways. It is possible,” Roeslein says.
This isn’t the first time the hog industry has tried to turn manure into a salable product. Looming next to Roeslein’s shiny new methane collector is a rusting “monument of what never to do again,” says Rainwater. The grain-elevator-sized project was the Crystal Peak fertilizer plant Premium Standard Farms built in 2004 to take solids out of the lagoons, pelletize it, and sell it as organic fertilizer.
“It never worked; never even close,” says Rainwater. The plant was shut down years before he came on board. “It causes me grief because people look at this new project and say, ‘Yeah, it sounds like another Crystal Peak.’ This is night and day from Crystal Peak.”
Roeslein understands the risk. “Nobody goes into these things thinking it’s going to fail, but there are a lot of unknowns. Knowing what I know about industry, I can see how something like that would fail. The engineer was trying to pioneer a new technology and unfortunately it didn’t work,” he says.
In the past, most attempts to collect gas and convert to energy have been failures both in function and financial returns. The vast majority of pig and poultry manure, when agitated correctly and applied in an agronomic fashion, is safe, efficient, and good for the soil, say experts. It is hard to get any high-cost system to compete with that unless carbon credits become very valuable.
Roeslein’s new proprietary system costs about $4 million, plus $350,000 for the lagoon covers. The pipeline and transportation costs are on top of that. “The entire thing for me is an R&D effort,” he explains.
Roeslein and Smithfield-Missouri share another goal: to improve the land in the area. Smithfield-Missouri partnered with the Missouri Prairie Foundation and set aside 500 acres of land to be turned back to true prairie. Another 1,000 acres is going in the program in 2018. Smithfield owns or leases about 45,000 acres in the state.
“We are establishing prairie habitat around the perimeters of our freshwater lakes to act as filter breaks so sediment doesn’t accumulate in the lakes,” says Rainwater. “We are proud of our prairie restoration project.”
Roeslein has a 1,758-acre farm in Missouri where he is restoring prairie habitat for wildlife and outdoor activities. An avid outdoorsman who loves hunting and fishing, he has a vision that there needs to be 30 million acres in the U.S. put back into savanna and prairie. Roeslein, who was named the Conservation Federation of Missouri Air Conservationist of the Year in 2016, wants to turn erodible land into prairie for ecological services that reduce erosion, prevent nutrient runoff, sequester carbon dioxide, absorb excess rainfall to reduce flooding, and create habitat for wildlife and pollinators.
But the pragmatic Roeslein knows landowners need to make money to think about converting erodible cropland back to prairie. So, he plans to test a system where sustainably harvested prairie grass sileage is used in anaerobic digestion to produce additional marketable purified methane. He believes that could make the environmental benefits of restoring prairie financially appealing.
This vision to restore prairie is decades in the making, says Roeslein. “I kind of feel like Moses. I don’t think I will ever see the promised land of restoring 30 million acres in 30 years, but I’m hoping this is the beginning of planting some seeds with Smithfield’s help. We are working with conservation groups, the Missouri Prairie Foundation, the Nature Conservancy, the National Wild Turkey Federation, the Department of Conservation, the Environmental Defense Fund, and a lot of other agencies. I’ve paid a lot of research money to Iowa State University and the University of Missouri to test water quality. I want to contribute to mankind. I don’t want my legacy to be that I made a lot of money.”
The improvements in the Princeton hog production operation are paying off, says Joe Szaloky, vice president of business development and planning for Smithfield. “I believe Missouri has the potential to be the most cost-efficient business in our hog-production group. The grain cost is reasonable there. With the great progress they are making, I think they will soon be right up there at the top of our group rankings. It’s a good potential business, and the numbers are showing that,” he says.
The University of Missouri estimated the economic impact of Smithfield-Missouri to the state at $1.1 billion five years ago when he arrived, says Rainwater. “With all the things we’ve changed, I know it’s now $1.5 billion plus. If we don’t make this work, the world up here in these six counties is different.”
Rainwater is not ready to breathe easy. “This business is much better than it was, but we can still do better. We are in the commodity business, so we have to be in the top 10% to stay alive,” he says.
History of Premium Standard Farms
1988: Dennis Harms, a grain sales representative, and Tad Gordon, a Wall Street investment banker, form Premium Standard Farms (PSF) in Princeton, Missouri, as a vertically integrated pork company. The majority owner is investment bank Morgan Stanley, which raises $500 million.
1994: PSF acquires National Hog Farms, Dalhart, Texas, with about 18,000 sows.
October 1994: The inaugural Pork Powerhouses ranking of the largest U.S. pork producers is published by Successful Farming magazine. PSF is No. 3 with 96,800 sows. Ahead of PSF on the ranking are Murphy Family Farms (180,000 sows) and Carroll’s Foods (110,000). The main photograph is an aerial shot of PSF sow farms. The caption reads, “Premium Standard Farms, the nation’s third largest pork producer, has filled 37,000 acres in northern Missouri with 80,000 sows and 1.5 million pigs. Another 16,800 sows are in Texas. All growth has been since 1989.”
October 1994: PSF opens a $50-million pork-processing facility in Milan, Missouri, killing 3,500 hogs per day. It announces plans to expand to 80,000 sows in Dalhart, Texas, by the end of 1996. A site in Texas has been selected for a new packing plant.
November 1994: Hog prices plummet and corn prices rise. Rumors circulate that PSF is paying 12% interest to Morgan Stanley and losing $600,000 a day with a cost of production of $5,000 per sow.
May 1995: PSF suspends the expansion in Texas, blaming low hog prices.
August 1995: PSF lagoon release allegedly kills 200,000 fish in a 10-mile stretch of stream. PSF is fined $20,000.
December 1995: PSF reports losses for 1995 at $100 million. Huge start-up costs and hefty interest payments are blamed. PSF debt load is estimated at $470 million.
December 1995: PSF registers a lagoon release of 35,000 gallons.
March 1996: PSF misses an interest payment and defaults on two series of bonds worth $325 million. Withdraws registration with the SEC.
July 1996: PSF announces prearranged Chapter 11 bankruptcy following more than 18 months of volatility in hog and grain markets. “We will emerge from this process with a solid financial foundation and the ability to once again focus on the opportunities ahead,” says spokesperson Charlie Arnot.
September 1996: PSF opens an office in Kansas City “to focus on future growth opportunity,” says founder Dennis Harms. “It’s time to look to the future.”
September 1996: Former PSF executive tells Successful Farming magazine, “Labor was a big problem. We should have grown slower, but when you are handed $500 million you don’t say, ‘Let’s wait 10 years to spend it.’ You find a way to spend it now.”
October 1996: Industry analyst tells Successful Farming magazine that PSF suffers from four main problems: 1. Pig performance is poor at 16 pigs per sow per year. 2. Buildings are not well designed or constructed. 3. Maintaining a labor force of 2,000 people is impossible. 4. Bad management.
October 1996: PSF appoints Robert “Bo” Manly president and chief operating officer. Manly had been an executive vice president of Smithfield. Harms is still chief executive officer and vice chairman.
April 1997: A coalition of 40 families in northern Missouri files a citizen suit against PSF for alleged ongoing violations of the Federal Clean Water Act and Clean Air Act.
July 1997: PSF adds 3,500 sows in Texas, with plans for continued growth there. “We have resumed that project at a more conservative pace,” says Arnot.
October 1997: Missouri Attorney General Jay Nixon informs PSF of his intent to file a lawsuit in federal court against the company, alleging violations of state and federal water pollution laws.
January 1998: Continental Grain Company purchases a 51% majority interest in Premium Standard Farms. As majority owner, Continental Grain leads the management team, appointing John Meyer, vice president and general manager of Continental Grain’s Pork Division, as CEO. Continental already has 20,000 sows in Missouri. It adds PSF’s 105,000 sows and processing plant, making it the nation’s second-largest pork producer. Continental is best known for its grain business (second largest behind Cargill) and for being the world’s largest cattle feeder. The new company will be called Premium Standard Farms, based on the brand name recognition in the fresh pork market.
November 1998: Cargill buys the grain-merchandising business of Continental Grain Co. Continental Grain changes its name to ContiGroup.
December 1998: The live hog market crashes. A PSF executive tells Successful Farming magazine, “We are losing $70 per hog produced, but we are making $30 back at the plant.”
January 1999: Missouri Attorney General Jay Nixon sues PSF and seeks an order to halt breeding at the state’s largest hog operation until alleged waste violations are corrected. Nixon says PSF has averaged spills once every 80 days, calling the frequency unacceptable and a pattern that is likely to continue. PSF says it has revamped and greatly improved its waste-management system.
January 1999: PSF hires an independent audit team to inspect its hog operations throughout north Missouri.
April 1999: A St. Louis Circuit Court jury awards $5.2 million in actual damages to 52 rural citizens who allege damages from nuisance created by odors, flies, and waste spills from PSF/Continental Grain. Jury awards $100,000 to each family, fewer than half of the people who filed suit.
July 1999: PSF reaches an agreement with the State of Missouri that resolves all pending state environmental claims against the company. PSF will invest $25 million over the next five years to install improved waste-management systems and reduce odor. “The settlement puts these issues behind us,” says John Meyer, CEO of PSF. “We have made substantial improvements in our environmental systems since 1995, and we look forward to making additional improvements using the latest proven technology.”
August 1999: Friends of Agriculture for the Reform of Missouri Environmental Regulations files a lawsuit in Cole County district court alleging that new air-quality rules are contrary to federal regulations.
September 1999: The Sierra Club criticizes the use of economic development money to draw large corporate hog farms to Missouri, creating pollution problems. The Sierra Club says more than $1.5 million from Missouri’s Department of Economic Development has gone to Premium Standard Farms, as well as tax abatements that can extend for 25 years.
September 1999: PSF advertises its contract finishing program to farmers and ranchers in northern Missouri. A newspaper ad reads: “If you own 100-plus acres of land and have 3 hours a day of labor, you can earn up to $20,000 a year. Reduce fertilizer cost. Consider PSF’s Grow/Finish Contract Program.”
April 2000: EPA notifies Premium Standard Farms it has allegedly violated the federal Clean Air Act. The action could have broad implications for intensive agricultural operations, which generally have been considered exempt from industrial air-pollution regulations.
May 2000: Lagoon covers are installed by PSF on nine lagoons in Putnam County, Missouri.
May 2000: The Missouri Attorney General files a suit contending it is a violation of the state’s corporate farming law for PSF to allow local farmers to graze cattle on the company’s property in north Missouri. For several years, area farmers have rented land from PSF for grazing cattle as well as growing row crops and hay.
June 2000: PSF opens a new 10,000-sow unit in Texas.
June 2000: PSF acquires The Lundy Packing Company, Clinton, North Carolina, including Lundy’s pork production operations. Lundy’s pork production operation, Dogwood Farms, has 40,000 sows and about 100 contract producers in North Carolina. It is merged with Carolina Farms, the North Carolina hog operation of ContiGroup Companies, including about 25,000 sows.
July 2000: Sows for PSF include 105,000 in Missouri, 25,000 in Texas, and 65,000 in North Carolina.
July 2000: The Missouri Clean Water Commission says it will look further into allegations of illegal disposal of manure by PSF and other large hog farms.
February 2001: The Missouri Court of Appeals in St. Louis, Missouri, upholds the 1999 St. Louis jury verdict for alleged odor and nuisance.
March 2001: PSF commits to reduce nutrients produced from its waste-handling system in Missouri by half. This reduction will allow the company to dramatically reduce land used for application. The commitment to reduce nutrients is part of a consent decree between the company, the EPA, and the Citizens Legal Environmental Action Network (CLEAN). The agreement settles all environmental claims against the company by EPA and CLEAN. The agreement also settles all environmental claims against ContiGroup Companies, Inc., formerly Continental Grain Company, for alleged environmental violations on swine farms in north Missouri.
March 2001: PSF launches a $38-million project to update and expand its Clinton, North Carolina, pork packing plant (formerly Lundy Packing Co.) so it can nearly double the number of hogs slaughtered there per year.
July 2001: PSF sow total is 211,000. It produces around 4 million hogs per year.
August 2001: PSF reports net profit for the April/May/June quarter at $9.1 million. “Our results reflect the successful integration of our North Carolina acquisitions, consistent operational performance, and favorable market conditions,” says Meyer. “We are experiencing a continuing period of higher live hog prices.”
August 2001: PSF is investigated for seven alleged manure spills on July 11, 25, and 31, among other dates, according to the Missouri Department of Natural Resources.
September 2001: A rash of claimed environmental infractions prompts the Missouri DNR to pursue enforcement action against PSF. DNR says it has investigated nine spills this summer and 53 water and air violations since 1999. Among recent violations was failure to report an alleged discharge from an 80,000-head complex and allegedly spilling untreated waste near a stream.
December 2001: Linn County commissioners ask PSF to remove hogs from a contract finishing farm near Linneus, Missouri, in response to an alleged manure spill. This request comes after a fish kill allegedly resulted from a 500,000-gallon release from a lagoon.
December 2001: PSF reaches a settlement with the EPA and the Justice department in which it agrees to a 50% reduction in nitrogen application to spray fields at the company’s swine operations in Missouri. In addition, air emissions will be lowered, and research will be conducted with the objective to further reduce the environmental impact of its swine production systems.
December 2001: A circuit court rules that PSF is not in violation of the state corporate farming law by allowing local farmers to graze cattle on its property in north Missouri. The judge ruled that the state statute clearly authorizes PSF to rent pasture to neighboring cattle producers.
May 2002: PSF reports that net income for fiscal 2002 was $25.4 million.
June 2002: The Missouri Attorney General files a lawsuit against PSF and ContiGroup Companies Inc. for a series of alleged releases in northern Missouri. One of the releases cited by the state includes a May 21 manure spill that occurred when a pipe being used to transfer hog waste burst, sending more than 1,000 gallons of manure into a tributary of Little Medicine Creek and a nearby lake in Mercer County. PSF CEO Meyer says, “We take full responsibility for our environmental performance and look forward to a speedy resolution with the state. We remain committed to developing and implementing environmental technology that will improve our performance.”
August 2002: PSF holds an open house for Missouri and federal officials to see the company’s three waste-handling systems. The systems include an advanced nitrification/denitrification setup, a process to transform hog waste into a pelleted fertilizer, and another designed to process wastewater for refeeding to livestock.
August 2002: PSF sow total grows to 225,000, with 10,000 new sows added in Texas since one year ago.
October 2002: PSF is pleased with the findings of a Missouri Department of Health study, which confirms that levels of ammonia from one of its largest farms do not pose a health risk. Dave Townsend, vice president for environmental affairs at PSF, says the study “should put to rest any questions about ammonia releases from our facilities.”
October 2002: PSF says the West Coast port shutdown is costing the company $1 million a week. It has about 500,000 pounds of fresh pork on docks or ships awaiting export to Japan.
November 2002: PSF reports a $14.8 million loss for the first half of its 2003 fiscal year. “This has been a challenging year with the collapse of pork product prices and live hog prices due to the glut of meat protein in the marketplace caused principally by the Russian ban on poultry and the increased pork and beef supply,” says Meyer.
March 2003: PSF reports net loss for fiscal 2003 at $38.6 million compared with net income of $25.4 million for fiscal 2002. “Hog prices declined 24% in fiscal year 2003 compared with fiscal 2002,” explains Meyer.
May 2003: PSF depopulates and repopulates its sow farms in northern Missouri to fight disease challenges.
June 2003: PSF announces that all of its hogs in its system will be COOL (country of origin labeling) compliant. Charlie Arnot, PSF spokesperson, says PSF is the first company to announce compliance with COOL. The company can certify that all pigs in its integrated system are born, raised, and slaughtered in the U.S.
July 2003: For a second consecutive year, PSF receives the Gold Medal Taste Award in the natural premium fresh pork category as judged by the American Tasting Institute.
August 2003: PSF announces its commitment to have all company-owned farms assessed through the National Pork Board’s Swine Welfare Assurance Program. “Assuring animal welfare is critical to socially responsible livestock production,” says Bo Manly, president of PSF.
October 2003: PSF joins the Chicago Climate Exchange (CCX) as a charter member, the first agriculture/livestock company to join the CCX. CCX is the first multisector, multinational market to reduce and trade greenhouse gas emissions. Members of CCX voluntarily make a binding commitment to reduce emissions of greenhouse gasses, such as carbon dioxide and methane, by 1% per year for a minimum of four years.
May 2004: A group of law firms files a lawsuit against PSF over alleged odors and manure coming from the company’s pork operations. Among the firms is one led by Robert Kennedy Jr., a member of the Waterkeeper Alliance. The lawsuit sought class-action status to represent all property owners within 10 miles of 20 pork operations that the company owns in seven northern Missouri counties.
July 2004: PSF breaks ground on the $9 million Crystal Peak fertilizer plant at the Valley View farm in Sullivan County, Missouri. The goal is to convert hog manure into a high-value commercial fertilizer using a process developed and patented by PSF and its technology partners. It should eliminate the use of traditional anaerobic lagoons for manure treatment and storage. The commitment to install the technology is part of a consent decree with the State of Missouri. [The plant is built, but eventually it shut down.]
August 2004: PSF CEO John Meyer tells Successful Farming magazine he is worried about the effect the new Triumph Foods pork processing plant in St. Joseph, Missouri, could have on the business. “There will be a sucking sound when the plant opens,” says Meyer. “These hogs will come out of the hide of somebody else. Every packer will be chasing hogs 15 months from now.”
November 2004: PSF reports net income in the first six months of fiscal 2005 was $21.3 million compared with a net loss of $300,000 in the same period last year. The protein industry is positively impacted by the low-carb diet phenomenon, which translated into higher domestic demand for all proteins.
February 2005: PSF phases out its entire internal multiplication system in Missouri and Texas and signs a dedicated multiplication contract with Genetiporc to source parent gilts for its 145,000 sows in those two states. Genetiporc commits to provide an uninterrupted flow of high health, PRRS-naïve gilts.
February 2005: PSF partners with PIC North America to produce a custom sire line called Premium Legacy. The objective is to improve the quality and consumers’ eating experience of PSF pork products. PSF says it targets high-end independent grocers offering fatter margins than national supermarket chains do. The company seeks to differentiate itself from the competition with what it calls moisture-enhanced pork for the domestic market and antibiotic-free “healthy pork” for the Japanese market.
June 2005: PSF debuts on the trading board with its initial public offering, but investors are unimpressed. Stock falls at the end of the day to below its offering price of $12.50 and well below company owners’ target of $15 to $17 a share. “It went below what we hoped,” says Meyer. PSF pulls its initial public offering off the table. Shares were to have traded under the PORK listing.
July 2005: PSF sow count is 108,000 in Missouri, 33,000 in Texas, and 80,000 in North Carolina. Hog prices hit record levels. PSF says prices will fall soon and warns that it expects 2006’s net sales and income will be “substantially lower” than this year’s totals.
March 2006: PSF breaks ground on a new addition to the Milan, Missouri, processing facility that will increase daily capacity by 35% to 10,000 head – an increase of 2,600 per day.
April 2006: PSF announces plans to make a secondary offering of 6 million shares of common stock. Existing shareholders, including ContiGroup, will sell all the shares in the offering. The company has 31.6 million shares outstanding.
June 2006: PSF announces that certain stockholders, including ContiGroup Companies, have agreed to sell 4,196,245 shares at a price to the public of $16.25. PSF will not receive any proceeds from the offering.
July 2006: The new Triumph Foods pork plant in St. Joseph, Missouri, starts processing hogs. Bob Christensen, an owner of Triumph Foods, tells Successful Farming magazine, “We are looking at buying PSF. They want to sell, and the price is pretty good. But it would be a difficult system to turn around.”
July 2006: PSF announces that Bo Manly has resigned as president to pursue other opportunities, effective immediately.
August 2006: PSF announces that first-quarter revenue dropped 16% from last year. “We experienced a year-over-year decline in both our production and processing volume during the quarter relating primarily to animal health issues,” says John Meyer, president and CEO. He tells Successful Farming, “The Triumph start-up is having an effect on the live hog market.”
September 2006: Smithfield Foods agrees to acquire all the outstanding shares of PSF for $810 million, including the assumption of PSF’s $117 million of net debt. ContiGroup Companies (ContiGroup), which owns 38.8% of PSF’s stock, signs a shareholder support agreement committing to vote its PSF shares in favor of the transaction. “Strategically, this is a very good long-term fit. Near term, this combination should generate benefits for both organizations and our customers,” says C. Larry Pope, Smithfield’s president and CEO.
January 2007: Smithfield announces it will phase out gestation crates at its 187 sow farms over the next decade.
February 2007: Smithfield completes the acquisition of PSF and agrees to abide by a series of requirements placed on PSF as part of state and federal consent decrees, including installing cutting-edge technology to reduce odor and to improve waste management in hog farms in five northern Missouri counties.
December 2007: A Jackson County jury returns a verdict in favor of PSF in a case alleging nuisance from odor.
April 2008: PSF founder Dennis Harms, 56, dies of a heart attack.
January 2010: The U.S. Department of Justice’s Antitrust Division and Smithfield Foods enter into a settlement to resolve DOJ allegations that Smithfield engaged in gun-jumping in connection with Smithfield’s 2007 acquisition of PSF. Smithfield agrees to pay a civil fine of $900,000 to resolve the allegations that the two companies had struck several multiyear procurement contracts calling for tens of millions of dollars in purchases.
March 2010: A jury in Jackson County, Missouri, awards $11 million to families living near a 4,300-acre hog farm owned by Premium Standard Farms. The verdict is reached against PSF, a subsidiary of Smithfield Foods, and ContiGroup. Some 250 claimants remain in cases against PSF and ContiGroup.
September 2010: Premium Standard Farms reaches an agreement with the Missouri Attorney General that gives the company until July 31, 2012, to complete installation of Next Generation Technology at its farms. The company will install barn scraper systems by July 31, 2012, in all 366 barns that had been identified by the Management Advisory Team as requiring barn-odor control. Since 1999, the company has spent about $40 million implementing improved environmental technologies, including lagoon covers and land-application technologies. Since 1999, the company researched and field-tested 13 different technologies to address barn odor.
June 2011: A jury in rural DeKalb County returns a verdict for PSF in a nuisance case alleging damage from odor, flies, and water contamination. This is the first case tried outside an urban area.
August 2011: Rudi Roeslein first meets with PSF managers Michael Rainwater and Bill Homann through an introduction by the Missouri Prairie Foundation, which was involved in a prairie restoration project at a PSF farm.
September 2012: Smithfield reaches an agreement to settle substantially all the Missouri nuisance litigation. The agreement effectively brings the Missouri nuisance litigation to a close.
May 2013: Premium Standard Farms, a unit of Smithfield Foods hog-production subsidiary, Murphy-Brown, changes its name to Murphy-Brown of Missouri.
May 2013: Smithfield is sold to Chinese meat processor Shuanghui International (now called WH Group) for $4.7 billion ($34 a share). It is the largest combination of American and Chinese companies in history.
January 2014: Murphy-Brown of Missouri and Roeslein Alternative Energy announce joint plans to develop a $100 million renewable biogas project in northern Missouri. Rudi Roeslein, president of Roeslein Alternative Energy and CEO of Roeslein & Associates, says, “Utilizing proven anaerobic digestion technology, we expect to achieve reduced greenhouse gas emissions, shrink MBM’s carbon footprint, and eliminate rainfall effects on treatment systems, all while capturing a valuable and renewable biogas energy resource.”
May 2014: Lagoon cover installation begins at two farms.
September 2015: Smithfield Foods ceases using the Murphy-Brown name.
2016: An interconnection with a natural gas pipeline at one Smithfield-Missouri farm is installed. Roeslein begins producing purified methane.
2017: The gas purification system is completed at a second farm.