Is a National Pork Marketing Cooperative Viable? A Case Study of Pork America within the Context of Structural Change in the US Pork Industry
Creators: name: Gehrke, Brad C.
name: Matson, James
name: Gehrke, Brad C.
name: Matson, James
Publisher: name: Unknown
Year: 2000
Subjects: Industrial Organization
Agribusiness

description: After World War II, livestock slaughter decentralized and livestock producers increased direct sales to packers. As a result, livestock producers have been less likely than other agricultural producers to use cooperatives to market their farm production. Between 1994 and 1998, less than 15 percent of livestock and wool production was marketed through cooperatives compared with 80 percent of milk production and 40 to 50 percent of grains and oilseeds. Recent structural change in the livestock and meat industries, however, has renewed interest in marketing cooperatives among livestock producers. In December 1998, the imbalance between market-ready hog supplies and slaughter capacity pushed hog prices to as low as $8 per hundredweight on a live-weight basis. In the wake of these market conditions, the National Pork Producers Council (NPPC) formed a Cooperative Task Force to study the potential for a national pork marketing cooperative. The activities of this Task Force lead to the formation of Pork America. Pork America is registered in 20 states and its members represent approximately 10 percent of U.S. hog production. The cooperative's goal is to create a producer-owned and controlled pork production, packing and processing system that will provide increased returns to independent producer members. Pork America is currently in the process of developing business and governance structures and identifying pork processing and marketing opportunities. The formation of Pork America is unique in the history of livestock cooperatives. To the best of our knowledge, it is the first livestock-marketing cooperative that has been organized with a direct nation-wide membership base. In the early part of the 20th century, Saprio fostered fruit, vegetable and specialty cooperatives with a national marketing scope, however production requirements limited membership scope to local or regional production areas. In the 1920s, Saprio's national concept was extended to cotton, tobacco and grain cooperatives, but these efforts collapsed during the depression. Since the 1930s, the scope of most marketing cooperatives has been generally limited to a local or regional membership base. Those cooperatives that have achieved national membership and marketing scale have done so through mergers and acquisitions. As a result, Pork America has had limited resources of experience to draw on. A single-case descriptive case study approach will be used to demonstrate that formation of a pork marketing cooperative with a national membership and marketing scope is a viable alternative to merging local and regional cooperatives to realize the economies of size and scope necessary to compete in the pork industry. The method is appropriate because the industrial environment in which Pork America formed contains qualitative and phenomenal information that can not be clearly separated from the quantitative description of industry structure. The single-case approach is appropriate, because as stated above, Pork America is a unique case of cooperative formation. The case study chronologically describes the formation of Pork America within the context of historical, current, and expected pork industry structure and market conditions. The structural and market conditions demonstrate why the national scope of Pork America is both a viable and desirable achievement. At this point in time, Pork America has not begun operations. Therefore, operational success or failure is unknown. Nonetheless, documentation of Pork America's formation and organizational process is important because of its unique status.