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The changing landscape of the feed mill industry

With futuristic tractors that drive themselves, hybrids that can tolerate just about anything Mother Nature throws at them and more data than farmers know what to do with, today’s agriculture is certainly not your Grandpa’s agriculture. With all of these amazing additions to farming in recent years, some things that have been a part of rural America for decades are disappearing. Does that include the small feed mill in town?

“The feed industry has been evolving for 30 years,” said Chris Henney, President and CEO of the Ohio AgriBusiness Association (OABA). “I can remember as a kid how we would buy bagged feed and we would take the empty bags back and the feed mill would refill them. You haven’t been able to do that for years now because regulations have been put in place to make sure that the feed is not adulterated or harmful in any way.”

The latest regulations are being handed down via the Food Safety Modernization Act (FSMA), the most sweeping reform of food safety laws in over 70 years, which was passed in 2011.

“Feed mills and smaller feed mills especially have had challenges staying up to current standards and meeting these new regulations,” Henney said. “That is causing some smaller feed mills to look at their time horizon, they haven’t updated their mills in awhile and maybe the owner is getting close to retirement and so they are making decisions as to whether it is worth their while to make these investments to meet compliance of FSMA or would the best option be to sell the mill or become a retail feed location.”

In today’s tight farm economy, the idea of costly regulations becomes even tougher to swallow for small agri-businesses. The larger mills, however, are able to make the necessary adjustments and are prepared to help smaller mills as a supplier or to possibly purchase them if they do come up for sale.

“The first thing that people think about when those situations arise is, ‘Am I losing some of my choices with my feed products?’ Certainly when you have a feed mill in your community that is just a few miles away you feel closer to them,” Henney said. “But I will tell you that OABA represents feed mills of all sizes and the larger feed mills are just as customer-driven. They want to build the same types of relationships that smaller mills have been able to build. Maybe the mill looks a little bit different in size and scope, but I think the same level of customer service can be achieved.”

As for the future of the feed mill industry, Henney sees a very similar situation to that which is happening in other aspects of agriculture and other industries. With Wal-Mart or Amazon types of business plans seeing success, economies of scale are ruling the day. He says that feed mills will either ramp up and become bigger or scale down and serve a niche market, with little room in between.

Earlier this year, two Ohio co-ops merged to form Centerra Co-op. The newly formed co-op is now a combination of Town & Country Co-op which once served north central Ohio from Elyria to Loudonville. Western Reserve Cooperative covered northeast Ohio from Kent to Ashtabula.

One of the first lines of business for Centerra Co-op after the merger was figuring out what to do with the feed mill in Ashtabula County formerly run by Town & Country.

“Leading into the merger as we toured the mill we had concerns about whether we could get that mill in compliance with FSMA,” said Jean Bratton, CEO of Centerra. “After the merger, we started digging in to the volume and the profitability of that mill and the volume has dropped off significantly as animal numbers, and the number of dairy farms in particular, shifted and declined in that area of the state. Profitability had declined along with that.”

If FSMA compliance was the only issue facing this particular feed mill, getting the facility up to par would have had a $500,000 price tag, but that wasn’t the main reason for its closure. Bratton said it was a “3 strike” rule for this particular mill and regulations from the Food Safety Modernization Act was the final strike, following behind declining volume and profitability.

“This was very tough decision, for us personally and then to communicate it out to the customers and the initial feedback was very negative,” Bratton said. “Dairy farmers are having a tough way to go financially right now as it is and farmers were very concerned about the additional cost of freight from a mill located farther away than this one. We sat down with many of those customers to work out plans that have included getting bins set up and making plans that make the change a little easier to make from a financial standpoint.”

Bratton said that the main purpose of a co-op is to serve its members and if there was thought to be any chance of turning the potential of the mill around, it would have been considered. She added that not everything has to make economic sense in the present but it does have to have an economic future.

ASE Feed & Supply has completed a major upgrade to the Plain City facility
ASE Feed & Supply has completed a major upgrade to the Plain City facility

ASE Feed & Supply Store is moving in quite a different direction, as they have recently cut the ribbon on the expansion of their facility in Plain City. Among the recent changes is a new building for the store and office space. A new grain bin is also in place, along with an expansive warehouse and a much needed additional parking area.

“When I first purchased this facility in 2001 we were simply a one room feed store,” said Ken Jewell, owner of ASE Feed & Supply. “We have become quite a bit more diversified since then by adding products for companion animals, bedding materials and retail feed to our store and that has been the reason for our growth.”

The changing landscape of the feed mill industry is not hard to see from Jewell’s standpoint.

“We are still an independent feed store and that is becoming rare these days,” Jewell said. “Good or bad, other smaller feed mills are getting gobbled up by larger companies and are going by the wayside. Our bulk trucks travel in a 40-mile radius now if that tells you anything.”

ASE is in the long process of becoming compliant with regulations coming down the line from the Food Safety Modernization Act. In fact, the store is working with Kalmbach Feeds and a program that company has put together to help feed mills get to the goal of complete FSMA compliance.

The biggest change that they have seen with these new regulations will be the amount of paperwork that is involved. Meeting future FSMA compliance is a continuing process but they feel that the extra steps will be worth it.

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