How does the Poultry Co-Op work?

On Wednesday, Feb. 28, Central Virginia Poultry Cooperative launched. Now the question is how does it work? How do farmers join, who runs the operation and what is the process to get eggs to market? After last week’s announcement, The Dispatch talked with a number of people involved in the Co-Op, to paint a clearer picture of how it all comes together. 

First, let’s start with the basics. The Co-Op is designed to fill the gap left behind when Tyson Foods closed its broiler plant in Glen Allen last year. But this isn’t just a replacement. Broiler chickens are raised specifically for meat and that’s what the plant processed. This operation is different in that it’s focusing on eggs instead. The farmers collect eggs from their chickens, then deliver to the Co-Op. In turn, the Co-Op sells the eggs to its contracted partner. 

The Co-Op has a 13-year deal in place to sell cage-free eggs to Dutch Country Organics LLC, based out of Indiana. Dutch Country may not sound familiar, but we promise you’ve seen their products. The group provides eggs to national outlets including Walmart, Kroger, Aldi, Target, Costo and Albertsons. 

The Co-Op gives its farmers the chickens and feed, while later also arranging the sale and distribution of the eggs later on. Now here’s where the major investment comes for the farmers. Each Cooperative member is responsible for converting or assembling their own housing for the chickens. That means if they have housing designed to raise broilers, it has to be converted to cage-free hen houses. Farmers get paid on a per-egg basis or if they’re focused on raising the chickens, a per-bird basis. Dutch Country, meanwhile, will then handle the cleaning, sorting and grading of the eggs. 

HOW DOES SOMEONE JOIN? 

Cooperative President John Bapties said he expects to see growers place the first laying hens in April. Once profits start coming in, he added, that money will be reinvested in the products and processes/equipment. He also said money will go toward member dividends. 

But the biggest question for some people is how does a person join the Cooperative? And the answer is that there’s a couple ways. First, the group has one rule. You have to buy stock in the Cooperative in order to sell. No stock, no sale. This isn’t a case of anyone coming up and asking the Cooperative to sell their eggs. This is a members only operation. 

“Every member has to buy one share of common stock,” Bapties said. 

That’s step one. Want to be a member of the Co-Op? You have to buy a share of common stock. Members will each have one vote and make decisions about governing the cooperative, including selecting the board of directors. Now as far as farmers go, if you want to sell chickens or eggs through the group, then you have to make another purchase and buy shares of non-voting Class A preferred stock. 

“It’s a little bit more of an investment for the growers,” Bapties said. 

Class B non-voting stock, meanwhile, is for would-be investors. 

“Anyone can buy the Class B,” Bapties said. “There’s no cap.” 

He pointed to the Virginia Farm Bureau Foundation as an example. The foundation’s board of directors has authorized purchase of up to $500,000 in Class B non-voting stock, once the cooperative’s documents are finalized this month. 

And for anyone wanting to buy stock in the group, you contact Bapties at his email, which is johnbapties@gmail.com.

HOW IS IT FUNDED? 

Beyond the stock, how does the financial part of the operation work? Part of that comes from the Virginia Agriculture and Forestry Industries Development Fund, through a $35,000 planning grant. The grant required a match, so the seven counties in the region split that up, with each one paying $5,000 towards the bill. 

Gov. Glenn Youngkin also approved a $50,000 general grant from the Development Fund, with counties once again matching that. The operation will also get a $1.4 million grant from the Tobacco Region Revitalization Commission, to help convert broiler production houses into homes for the cage-free egg operation and $341,750 from the Rural Rehabilitation Trust Fund. The goal, according to Tony Banks, is to try and help the group get through these first two years of operation. Banks serves as Senior Assistant Director for Virginia Farm Bureau’s Agriculture, Development and Innovation section. 

“We’ve invested in a number of different businesses over the years, but this is probably the biggest in the last generation or so,” Banks said. “This first year or two is going to be a challenge, just like any new business. As a co-op, they’re starting from scratch. A lot of the equipment an existing business takes for granted, they’re having to source, buy or build.” 

Banks said looking at the equipment and infrastructure, he estimates costs will probably run between $40 million to $42 million, including converting chicken houses. With most of that cost falling on farmers, Banks and his group are trying to help them find as many grants as possible. 

“Part of the emphasis in helping the cooperative here is trying to minimize the amount of funds the individual growers would need to invest,” Banks said. “We’re helping them look under every rock for the financial support they need.” 

LOOKING BEHIND AND AHEAD

Banks and Farm Bureau in general have played a couple roles since last March. They were concerned growers didn’t have appropriate counsel when being offered Tyson buyouts, so they identified some resources available. As far as the Cooperative goes, Banks and his people have been advising since September on different aspects of establishing the operation and highlighting business issues. 

“It’s been a challenge,” Banks said. “Give a lot of credit to the growers. When we first started (talking about the Cooperative), it was five farmers sitting around a table. Look at how far they’ve come in such a short time.”