The Riverview wayMORRIS, Minn. — If you never read about Riverview L.L.P., that probably would be just fine with Gary and Brad Fehr.
By: Mikkel Pates, Agweek
MORRIS, Minn. — If you never read about Riverview L.L.P., that probably would be just fine with Gary and Brad Fehr.
For the past 16 years, the Fehrs and some 210 investors have quietly, steadily built Riverview, now an “umbrella” entity that manages a collection of dairies and related businesses in western Minnesota and eastern South Dakota.
Individually, their dairies are large for the area — some sites 7,500 cows, but modest by national standards. Together, their dairies milk some 30,000 cows every day, making this group the largest concern of its type in Minnesota. All of their milk goes to Valley Queen Cheese of Milbank, S.D. Riverview entities have grown to account for 40 percent of the milk that runs through that plant.
Recently, the Riverview folks have agreed to talk about what they do, why they do it and what it all means.
Faith, farm context
There are hints of the underpinning of the Fehr mind-set in the Riverview L.L.P. website.
According to the family story, Paul and Anna Fehr came to this region from West Bend, Iowa, in 1939. Anna had grown up near Morris. Both went to the same church.
Paul and Anna Fehr had five daughters and three sons, including Lloyd and Paul Jr., who both figured into the farming operation. The Fehrs raised beef cattle and crops and incorporated as Riverview Farms in 1976. The Fehr farm gets its name because it overlooks the picturesque Pomme de Terre River (Potato of the Earth).
Lloyd and his wife, Diane, had four children, including Gary (1963), Randy (1967) and Brad (1974), who all stayed with the farm. Paul and his wife, Pam, had two daughters. One daughter, Echo, married Andy Hacker, who works with Riverview. Gary is the chief executive officer of the company, and the rest work in various capacities.
The Fehrs generally had looked to farmland as a good investment. They managed to transition from the 1970s into the 1980s, despite a general farm crisis.
“I just think we’ve always have done things steadily, consistently,” Gary says. “We keep doing the same thing, and that helped us get through.”
From the early 1980s to the early 1990s, Lloyd’s children were coming back to the farm. Lloyd and Diane decided beef feeding profits were shrinking as the feedlot industry was moving farther south in the Great Plains. So the Fehrs studied their other options in livestock — pork, poultry and dairy.
“I remember Mom and Dad went to Michigan on a dairy tour,” Gary says. “It was a pivotal trip. I remember Mom looking at us and saying, ‘We can do it.’”
The dairy direction
Lloyd and Gary wanted to build a commercial-scale dairy, but wanted to attract outside capital and business expertise. In 1994, they invited family and friends to invest. There were about 25 investors, most of whom still are owners.
In 1995, the then-Riverview Dairy L.L.C. established its first dairy — a double-24, parallel parlor, to go with a 1,250-head dairy facility. The barn setup was an “H” style, with the free stall barns on the outside and a crossbar that included the parlor. Two years later, they expanded that site to a 2,500-head capacity.
In 2000, the Riverview Dairy built an identical dairy in DeGraff, Minn., about 40 miles away. Here, the Fehrs and many of the Riverview Dairy investors would form a new partnership with local landowners — the Yost and Walsh families, who already had a permit for a dairy. This Dublin (Town-ship) Dairy L.L.P. also was 2,500 cows, but this time, the Riverview folks built a carousel-style, rotary parlor manufactured by the Westfalia company.
Significantly, Dublin Dairy expansion established an ownership pattern that was repeated later. Equity investment opportunities first were offered to the original 25 owners. Second, the local neighbors could invest, and third, the Riverview employees. So far, the organization has not had to go outside of those three groups to build new projects.
Eventually, Riverview L.L.P. became the “umbrella” organization that managed the other entities.
Riverview — the umbrella
The past decade has seen a parade of expansions, with the Riverview partnership investors, with support from Farm Credit Services AgCountry, based in Fargo, N.D.
In 2004, Riverview added a new entity — West River Dairy, eight miles to the west of the original Morris dairy. This initially was a 5,000-head facility; it has since expanded to include 6,000 head. It was an H-style barn, provided with another 80-stall carousel parlor.
In 2005, they built District 45 Dairy (named for land that once the site of a country school). It was another 5,000-head barn, and another carousel. The same year, they bought Moore (Township) Calves, a farm that had been started by neighbor Tim Gramm in 1995, to develop heifer calves to eight months for Riverview Farms. Gramm went to work with River-
The same year, Riverview tried in vain build a heifer feedlot in Redpath Township of Minnesota’s Traverse County, but were turned away because of local resident concerns about labor, odor, and traffic.
In 2006, they added Darnen Dairy, a second dairy on the original home site next to Riverview Dairy. This new entity was 5,000-head and would be a “cross-ventilated barn” — not an “H”-style barn. The new style is about 500 feet square. Instead of the curtain-style ventilation in narrower barns, this new design used a battery of fans on the south side to keep the temperatures in the barn more constant, with a steady, 4- to 5-miles-per-hour breeze inside. The square configuration was more compact than an “H” design. The design is less costly because there are fewer exterior walls.
Also in 2006, the Riverview investors built United Feeders in Frankfort, S.D., just east of Redfield, S.D. This is a 7,000-head lot, designed to take the calves from Moore Calves and grow them in open lots to the 2-year-old age. From that point, they’re bred and return to their home dairies for calving.
The 2008 expansions
Wulf says the year 2008 was significant for Riverview capital projects. It was just ahead of a historic run-up in grain prices late that year.
The Riverview group built “East Dublin” Dairy, seven miles east of the original Dublin Dairy site — adding another 6,000 head. The same year, they built Chippewa Calves, a calf development site near Murdock, between the two Dublin dairy sites. They also innovated a new way to raise calves — not in traditional hutches, but in a barn. Calves are raised in groups of 30, moving through a series of three barns. The manure is collected in pits, and the calves are fed using electronic, automated feeding systems.
Also in 2008, they were turned away a second time in Traverse County, this time in an effort to build a new dairy. At the same time, they built Clark Feeders, another heifer feedlot near Clark, S.D. The same year, they installed their first manure “digesters” at Riverview and West River dairies — both in the Morris area.
The digesters are for turning manure into energy, fertilizer and bedding.
In these systems, manure goes from “day pits” into a 150- by 300-foot concrete tank, about 16 feet into the ground. The “double-chamber” tank holds about 3.5 million gallons of manure. The manure fills the bottom 14.5 feet of the tank and is “digested” at 100 degrees, taking 21 days to release methane.
Methane gas rises to the top of the tank, in a 1.5-foot space. It is siphoned off to an engine room, where it is chilled to remove water, and runs through three large engines. The engines (roughly 1,000 horsepower each) produce a total 1,400 kilowatts — enough to power 1,200 typical homes. The electricity is “green” and is sold to Great River Energy at a premium on the power grid. The dairy doesn’t use this power, but simply buys electricity from the local utility.
After 21 days, the manure is pumped out and run through a series of separators. The relatively dry manure solids — still 65 percent moisture — provide healthy bedding for the cows. Compared with straw bedding, they reduce mastitis disease and lower the dairy’s somatic cell counts. Meanwhile, the manure liquids are pumped into ponds that are protected with a synthetic cover.
In most years, Riverview has offered its investors some kind of profit distribution, but also an option to reinvest. On Jan. 1, 2009, the Riverview companies streamlined by merging into four entities, which helped simplify tax matters for its investors.
The 2009 and 2010 the dairy economy has been “kind of scary,” Wulf acknowledges. Low milk prices have put some dairy producers out of business, but Riverview has stayed.
In 2009, Riverview purchased a farm near Atkinson, Neb. The owned and rented land in this Eagle Creek Farms totals some 4,500 acres and includes 37 pivots of irrigation, and continuous corn-on-corn production. In 2010, the Riverview L.L.P. entity built a 7,000-head grower feedlot to finish dairy bull calves and cross-bred bulls and heifers from the dairies up north. The feedlot option increases profit potential of their corn. Riverview is working on contracts to market their finished cattle.
Riverview grows about 20 percent of their own feed, companywide. That means 80 percent is purchased — mostly from local farmers. Conversely, they only have acreage enough accommodate 20 percent of the manure they produce. The rest is sold to local to the area farmers as fertilizer.
“One of our goals is to be a low-cost producer,” Gary Fehr says, explaining the company’s strategic thinking. “The way we see it, the milk price is just the average of cost-of-production, nationwide. If we’re lower than that, we have a higher margin.
Fehr says it is the company’s people who will help it get through challenges like October 2008.
“Everybody just pulled together and just got conservative,” he says.
He says Riverview buys feed every day and sells milk every day. They don’t hedge in the futures or use other complicated risk management strategies.
He says Riverview’s task is to manage capital, and not all of it is their own.
“We say, ‘Pick your partners the way you pick your wife.’ It’s important that they think like we think — have the same core values, the same goals.”
Fehr describes Riverview’s business model as “simple, straight-forward,” he says.
“When volatility hits, we don’t get nervous; we just keep going. If you were to ask me what the milk price is today, I would have no idea. I just don’t look. Price is really just cost of production of the average producer. At the end of the day, that is your price. If you can be above-average, you’ll get through it. That’s really how we run.
“We have no three- or five-year plan for expansion,” he says. “To us, it’s a journey, not a destination; we never have arrived. We always know we can do better every day.”
Riverview adapts with Hispanic workers, rules
MORRIS, Minn. — Riverview L.L.P. accomplishes much of its day-to-day dairy tasks with a Hispanic workforce — a mix of permanent U.S. residents and visa holders. Of the Riverview group’s 400 employees, fully 320 are Hispanic.
Kevin Wulf, who handles human resources work for Riverview, says the company has had to adapt to a changing workforce reality over its 16 years.
“In 1995, we used all local help — people working on the first dairy farm were all living in the community,” says Wulf, who has been with Riverview since 2007. By 2000, Riverview couldn’t find local workers and turned to the Hispanic workforce that its counterparts in California, Arizona and Idaho had been utilizing for years.
“There were very few local people walking through the doors looking for jobs,” Wulf says. “Not milking the cows was not an option for us.”
First, the green card
Initially, Riverview relied on whether a prospective employee had a “green card,” which gives non-immigrants permission to work in the United States as a permanent resident. Green card workers are presumed to be in the U.S. legally. Unfortunately, Wulf says, there is to verify these documents are legitimate. An employer legally cannot ask a job applicant about his or her immigration status, Wulf says.
In about 2005, Riverview tried a new approach.
They started to hire workers under a 10-month visa, an H2A visa, designed for seasonal agricultural workers such as fruit pickers and landscapers. Shortly afterward, the government said this wouldn’t work.
“They said it’s not meant for ‘inside’ the dairy because dairy work is not seasonal,” Wulf says.
In 2006 and 2007, Riverview shifted again.
They hired a Minneapolis-based immigration lawyer who helped them secure some of their workers through a special Professional (TN) visa, available as a part of the North American Free Trade Agreement. The lawyer pointed them toward the “TN visa” as a way to fill some positions. The TN visa is for one- or three-year periods and is available through a U.S. Consulate in Mexico, where Mexican workers go to get their visas.
A key condition is that the TN visa holder must hold a five-year professional degree. And to work in the U.S. dairy industry, that education must be in something relevant like animal science, veterinary science, or animal breeding.
In 2006, Riverview’s Antonio Mendez, head of production in the company’s dairies, travel to Mexico to personally find recruits for the TN visas — a slow and expensive process.
“Besides the credentials, we were looking for people who shared our ‘core values,’” Wulf says. “You want to make sure this is what they really want to do.”
The core values: simplicity, humility, integrity, work ethic and candor.
In 2007, Riverview hired a Mexican-based recruiter from Queretaro, a city northwest of Mexico City. The recruiter is a lawyer by trade his father and two of his brothers had worked at Riverview sites in the past. He visits colleges, gives presentations about Riverview (including photos of blizzards) and helps applicants prepare packets and work through the paperwork. Riverview site managers do a second phone interview with the applicants.
Generally, workers operate under four kinds of credentials:
- Green cards: About 180 of Riverview’s 320 Hispanic workers have green cards, meaning they’re permanent U.S. residents, but not U.S. citizens. These are legal to work inside the dairy.
“There is no visa for people to work inside a dairy, milking cows,” Wulf says.
- Professional TN visas: Another 100 or so are in the U.S. on the Professional TN visas. A year ago all of those visas were limited to one-year visas. With those, the visa holder must go back to Mexico annually and go through the process again, which also gives them an opportunity to visit home.
- H2A seasonal visas: Thirty to 40 people have H2A seasonal visas. These are seasonal worker, either for agronomy — things like picking rock, harvesting crops, doing field work, spreading manure — or agricultural construction.
- H1B visas: Riverview has about six H1B holders. These are similar to the TNs, except they are capped at 66,000 visas nationally, and are not just for agricultural work. This visa is more expensive than the TN, which must be renewed every year. The H1B also must be renewed annually, but renewal is more assured. The next step is a green card and then citizenship.
“We do want people to be long-term employees,” Wulf says. “That’s our goal.”
Many of the workers are in their early to mid-20s. About a third are married, but only about 20 current workers have brought their families.
In 2000, Riverview’s Mexican workers lived primarily in nearby towns, renting houses. By 2004, the company built its first on-site apartments. Today, all of the sites have living quarters and the vast majority live on-site. This allows workers to walk to their jobs and avoid the expense of a car. Apartments are built in four- or six-unit models, each with six workers. Workers pay a modest rent, which includes utility, local phone and Internet, and function somewhat similar to college dormitories.