Virginia poultry growers seize the organic opportunity

Two longtime friends and business partners, Corwin Heatwole and Wayne Billhimer, are betting that demand for organic chicken will give their fledgling grow-out and processing operations -- Shenandoah Processing LLC -- in the Shenandoah Valley of Virginia a chance to grow and succeed.

Okeefe T Headshot
{'span'=>'Two Virginia entrepreneurs, Corwin Heatwole, left, and Wayne Billhimer, are getting into the organic broiler processing business in Harrisonburg, Va.'}
{"span"=>"Two Virginia entrepreneurs, Corwin Heatwole, left, and Wayne Billhimer, are getting into the organic broiler processing business in Harrisonburg, Va."}

Anyone who has ever worked for or contracted with an integrated poultry company has heard some of the stories of how the modern industry got started. For most companies, an entrepreneur or group of entrepreneurs contracted with growers to raise birds and these industry pioneers gradually assembled the assets of a modern poultry complex: feed mill, hatchery and processing plant. This model was repeated numerous times across the country from the 1930s on.

As the U.S. broiler industry has matured, economies of scale have made it quite a bit harder for new start-up companies to compete in a marketplace where most chicken is sold as a commodity. Two longtime friends and business partners, Corwin Heatwole and Wayne Billhimer, are betting that demand for organic chicken will give their fledgling grow-out and processing operations -- Shenandoah Processing LLC -- in the Shenandoah Valley of Virginia a chance to grow and succeed.

Longtime partnership

Heatwole and Billhimer are both in their early 30s and have been around farming and livestock all of their lives. The duo had partnered in a number of business ventures, when Heatwole, who owns seven poultry houses, decided he wanted to own the birds and not contract with an integrator. He thought that raising organic broilers might provide the opportunity he was looking for, so he and Billhimer, who is a K-9 officer for the Virginia Department of Game and Inland Fisheries in his day job, partnered on raising organic birds in one of Heatwole's houses.

They found organic chicks and feed in Pennsylvania and a small plant in Northern Virginia to process the broilers, and the pair was in the organic chicken business. With each successive 2,000-bird organic flock produced, the partners became more convinced that serving the organic market could provide a unique opportunity for them to operate their own poultry plant.

Finding growers

Heatwole has contracted to raise both turkeys and broilers for several integrators over the years and has seen the pros and cons of the contract growing system. The Harrisonburg, Va., area has had significant contract poultry production since the 1940s, and there were a number of older, smaller poultry houses that were no longer under contract with integrators. Heatwole saw the owners of these out-of-service houses as potential suppliers of live birds for a local plant specializing in processing organic birds.

"The growers said that they would like to own their own birds and be their own boss," Heatwole explained. "They are taking on more risk, so they will expect a little more return." He said the growers will own the chickens and will pay for the feed. Certified organic feed and chicks will be trucked in from Pennsylvania suppliers. The growers' contract with Shenandoah Processing LLC is a cost-plus contract. The cost used in calculating the grower's payment will be an average cost based on performance of all the growers. Individual growers are paid plus or minus how their flocks perform versus the average cost.

Heatwole said that there are enough out-of-service houses in the Harrisonburg area to meet the goal of producing 50,000 organic broilers per week by the end of 2014. He said no houses have been signed that previously had an active contract.

"Some of the houses are a little older and need a little TLC," he said, and some "had been purchased out of bankruptcy by other farmers who were looking for a contract." Heatwole said the plan for the company is to process more than 50,000 organic birds per week in subsequent years of operation. This would likely require new housing to be built.

An old plant gets new life

The poultry plant on North Liberty Street in Harrisonburg has been out of operation for over 15 years. Before that, it served as turkey slaughter and whole bird packing plant for Wampler Foods and as a tom slaughter and deboning plant for Golden Acre Foods before that. The plant was acquired by Pilgrim's when the company purchased Wampler Foods and was later sold to private investors who gutted the plant and rented it out as warehouse space.

Heatwole and Billhimer signed a lease-to-own agreement for the plant and purchased 20 trailer loads of used broiler processing equipment at a bankruptcy sale in Mississippi. Shenandoah Processing was slated to open in March of 2014 with one, 70 bird-per-minute evisceration line. The birds will be manually opened and drawn, much like at a turkey plant. The live hang area is setup to allow for birds to be hung from cages that are dumped, as is common in the broiler industry, or from cages attached to the trailer, as is common in the turkey industry. Manual evisceration and the flexibility in live hang will allow the plant to process spent fowl in addition to organic broilers.

Heatwole said that processing spent fowl will provide volume for the plant while the organic business is given time to grow. Ultimately, the plant has room for a second evisceration line and could run a total of 140 birds per minute.

Heatwole was pleased with the number of job applications received, without advertising. Employees for the plant and live-haul crew will total around 70 at start-up.

Shenandoah Processing received two $50,000 grants, one from the state and one from the city, to help offset some of the estimated $2.2 million investment. Heatwole said that the acquisition of the idle plant and the equipment from a bankruptcy sale has allowed the company to pay "pennies on the dollar for our assets."

Points of differentiation

Broilers raised for Shenandoah Processing will be raised according to standards established by the Humane Farm Animal Care Certified Humane Raised and Handled Program as well by the standards of USDA's organic program. Each farm selling birds to the company will be audited to ensure compliance.

The organic standards require that broilers have access to outdoors and that they be housed at no more than 6.0 pounds per square foot. The company is targeting a live weight of 5.75 pounds per bird, but birds will be placed assuming 5.5 pounds per square foot to give wiggle room if the birds are bigger than expected. Heatwole is recommending that growers clean out the litter from their houses each flock since litter treatments are not allowed under organic standards. If complete cleanout is not performed by growers, he recommends that they top dress the litter after caking out.

The Certified Humane Raised and Handled program requires that chickens kept indoors be kept active by providing an "enriching environment." Suggested enrichments include "straw or hay bales and/or perches and the scattering of whole grain, or cabbages throughout the house."

Servicing further processors

Heatwole and Billhimer plan to sell output from the plant through their company, Shenandoah Valley Organics. Billhimer will serve as sales manager and Heatwole is the general manager. Upon start up, Heatwole said that the company plans on selling ice-pack carcasses to distributors who will either further process or repackage for retail sale. The company has a cone line and cut-up equipment and plans to offer these services sometime after start-up.

Heatwole said that there is strong demand for organic chicken meat and that word of mouth has already brought contacts from several companies asking about meat availability.

Page 1 of 33
Next Page