The Pipestone System is celebrating 25 years since the first contract for the first Pipestone System barn – Hiawatha Gilts — was signed. There are lots of ways to talk about the growth of the business model, from number of barns and animals to number of employees and shareholders. However, the best measurement is not in numbers of barns or animals, but in the individual stories of system shareholders.
There were 36 shareholders in the original Hiawatha Gilts barn, located northwest of Pipestone, Minnesota. Several remain shareholders in the Pipestone System, along with the other 450 shareholders from the Midwestern states who have invested in barns over the past 25 years.
For producers Don Buhl and Dennis Fultz, an initial investment in the Hiawatha barn led to changes in their production system, investments in other barns, growth in their operations, and opportunities for a new generation to transition into the farm.
In 1990, he saw the investment as a shareholder in the Hiawatha barn as a way to secure a healthy supply of replacement gilts for his farrow-to-finish operation. They had worked with Pipestone Veterinary Services to provide veterinary care for lambs, but the shareholder investment was their first interaction with Pipestone for swine production.
“We were looking for a source of better genetics for our own farrowing operations,” said Don. “We had always tried to buy the best boars and keep our own gilts, but after going with the Hiawatha replacement gilts, we made better progress with pig health.”
A few years later, the Buhls became investors in the Nokomis barn that provided a supply of isowean pigs. At the time, they were finishing pigs from their own farrowing barns as well as the Pipestone System barn.
As they began feeding pigs from the Nokomis barns, they saw the advantages of having larger groups of pigs and eventually acquired additional shares and stopped farrowing their own pigs. They now get all weaned pigs from Pipestone System barns.
Investment in commonly-owned barns also was a good fit for Don’s growth plans and investments.
“As we looked at growth opportunities for our farm, investing in Pipestone isowean barns required less capital expenditure than building or expanding our own farrowing barns,” he said. “I also realized that if I ever wanted to sell an asset, it would be much simpler to sell my shares than sell a facility built on my own farm.”
The Buhls currently finish about 48,000 pigs per year, feeding about a third on their own farm and working with contract growers for the remaining pigs.
They continue to raise corn and also built a feed mill in 2005. All feed for the pigs raised on their own farm and with contract growers is milled there.
“It has been a successful partnership and a good model for independent producers to work together,” said Don. “There are a number of progressive producers within the system, and through our affiliation with each other we have made one another better. Owning barns together has allowed us to do more things that we would not have on our own.”
The Pipestone System has also become a piece of the transition plan for his farm. He has established a partnership with two long term employees – one who has been with the farm for 27 years and another for 12 years. Transferring or selling shares in Pipestone System assets can be one piece of transition planning.
“The question is how you deal with an operation like this when you are done. You don’t just want to throw the keys on the desk and walk away. You want to have someone who will come in and run it as you have, or at least use most of the existing assets,” he said.
Other services from Pipestone have helped Don to continue improving the farm over the years, including marketing finished hogs through Big Stone Marketing, working with system nutrition team for improving formulating rations and with record-keeping services to look for ways to improve production, health and efficiencies.
“I can safely say that they’ve been an important part of our progress and being successful,” said Don.
Dennis Fultz was also one of the shareholders in the original Hiawatha barn. Dennis and his brother Eric own and operate the farm started by their father in 1947 near Tracy, Minnesota. In 1990, they had about 300 sows and saw the Hiawatha barn as a source for breeding stock and replacement gilts.
From 1990 to 1996, they continued to run a farrow-to-finish operation, and increased their sows to 450.
They converted their shares in the Hiawatha barn to shares in the Shetek barn that produced isowean pigs.
“The initial investment in Shetek was a big move to make,” said Dennis. “We saw that it was working well for us and for the health and quality of the pigs coming from the barns, so we invested in more shares.”
As their farm business grew, the Fultzes invested in the Bluestem barn, and recently sold Bluestem shares to invest in the newer Jackrabbit barn in South Dakota.
“One of the advantages of joint investment with neighbors is liquidity,” he said. “If I tried to build my own unit, it would be inefficient and not competitive, and would come with all of the regulatory and environmental hurdles to build and maintain it.”
The Fultzes currently finish about 35,000 to 40,000 pigs. The pigs are finished in a combination of owned and leased barns within seven mile radius of their farm. They maintain management control of pigs in leased barns as well. They have also gradually grown crop operation over the years, currently growing corn and soybeans on 4,500 acres.
Dennis sees the Pipestone System model as a way for family farms to compete and expand for the next generation.
“Large integrated processors are taking advantage of scale, so this type of system allows farmers to work together and achieve many of the same advantages at a local level, and maintain independences as family farm livestock producers.”
Dennis and Eric are also looking toward a gradual transition of farm management and ownership. Dennis’ son Jay is involved in the operation, and Eric’s sons are considering a role at the farm after college.
Pipestone Chairman of the Board, Dr. Gordon Spronk sees the stories of the Buhl and Fultz families as just two examples of how shareholders have used their investments to improve and advance their farms.
“Our success is measured by the success of our farmers,” said Dr. Spronk. “Whether that is raising healthier pigs more efficiently, growing their operations, or bringing back another generation, we’re proud to have played a role in helping farm families achieve their goals over the past 25 years.”