University of Wisconsin Center for Cooperatives
Rural Cooperatives, November/December 1997, pp. 22-25
Published by the Rural Business and Cooperative Development Service 

The Power of Cooperation


Members and Rural Communities Benefit from AGP Operations

Patrick Duffey
USDA Rural Development Information Staff 


    Created just 14 years ago, AgProcessing Inc. (AGP) has grown at a remarkable rate, based on a keen ability to find common ground among agricultural producers and to demonstrate that cooperation is the best avenue to adding value to farm products. In the process, this Omaha, Neb.-based cooperative is helping to boost the overall economy of the rural Midwest.

    AGP has become a classic example of the power of cooperation, with sales that topped $2.9 billion for fiscal 1997 and net earnings (before taxes) of $40.4 million. That's up from total sales of $896 million and net earnings of $4 million in its first year of operation. During its 14-year history, AGP has returned nearly $240 million in cash patronage to its members. With the opening of a new soybean processing facility in Emmetsburg, Iowa, last fall and the announcement of plans to build a new plant at Hastings, Neb., AGP is positioned for further growth. Jim Lindsay, AGPs chief executive officer, says "the new plant fits our mission to continue adding value to our members' agricultural products."

    Plant construction at Emmetsburg, in northwest Iowa, took 16 months. The plant, which began operations last October, will devour 60,000 bushels of soybeans per day, or the equivalent of 1,500 acres of soybeans daily. With this addition, AGP's system of soybean plants can now process more than 15,000 acres of soybeans per day. That makes AGP the largest cooperative soybean processor in the world and fourth largest U.S. processor of soybeans. It is also the third largest U.S. refiner of soybean oil.

Co-op's Truck Fleet Generates Income

To service its system of plants, AGP operates a for-profit truck division of about 600 semi trucks. These trucks also provide a for-hire service to AGP's member cooperatives and the general public. Every day, about 100 AGP trucks will cross the scales at the Emmetsburg to maintain its round-the-clock operating schedule.

    Storage bins at Emmetsburg can hold more than 1 million bushels of soybeans, a 17-day supply. The plant is also equipped for rail service. AGP operates a large fleet of railroad hopper cars and tank cars. Soybean oil will be shipped by rail from Emmetsburg to its vegetable oil refineries in St. Joseph, Mo., Sherman, Texas, and the just-completed refinery in Eagle Grove, Iowa.

    AGP is now in the design phase for a new soybean processing plant in Hastings —a strategic location selected because it fits well into AGP's multi-plant operation and management system and because soybean production continues to expand in central Nebraska. AGP also has a corn processing facility in Hastings, where it manufactures ethanol.
 
Sophisticated monitoring equipment at AGP processing plants, including this control panel in St. Joseph, Mo., help maintain product quality: Photos courtesyAGP

How lowa's Economy Benefits

    Dave Lyon, director of Iowa Department of Economic Development, says the presence of the Emmetsburg plant has led to expansion of the soybean industry elsewhere in Iowa, including at Eagle Grove and Sergeant Bluff. "This plant is helping to directly support three communities," says Lyon. "Iowa is the largest soybean producing state in the nation, so investing in this industry means more prosperity for local Iowa communities and producers."

    Dollars generated from value-added processing of farm products multiplies repeatedly in the Iowa economy. AGP payments to producers, employees and suppliers are spent in rural communities on everything from groceries to farm equipment to office supplies and entertainment, creating a dollar "rollover" effect which is higher than for any other industry in Iowa, Lyons notes. Indeed, AGP's payroll will turn over seven times in the economy before it's consumed, he says.

    "Studies show that $1 of every $32 of income in Iowa is associated with the soybean industry. Each dollar the industry generates multiplies several times in local communities, from farm retailers to the local grocery store," agrees Gary Langel, president of the Iowa Soybean Association and a grower from LeMars, Iowa. He says "profitable soybean production has many components, including strong partnerships between its growers and the processing industry."

Leading the Way

    The Emmetsburg plant, Langel continues, is indicative of the soybean industry's growth, both in Iowa and across the nation. "Soybean exports are up; soybean crush is up; and soybean oil consumption is growing. Our success has come as growers and users have seen the need to partner to capture an increasing share of the world market for soybeans and soybean products."
But growers themselves have contributed to much of the soybean industry growth in the 1990s, believes Mark Berg, president of the American Soybean Association and a grower from Tripp, S.D. He credits growers for starting the national checkoff in 1990-91 "to pool their resources to capture the merging opportunities for soybeans.

    "Since the checkoff began," Berg says, "the value of soybeans at the farmgate has increased from $11.5 billion to about $17 billion. I strongly encourage all farmers to be involved with commodity (promotion) groups."

Rapid Growth Follows Formation

    AGP was formed through a reconfiguration of soybean plants owned by Farmland Industries, Inc., of Kansas City, Land | O'Lakes Inc., of Minneapolis, and Boone l Valley Cooperative Processing Association, of Eagle Grove, Iowa. In 1983, Farmland and Land O'Lakes sold their soybean processing plants to the new farmer-owned cooperative, which was named Ag Processing Inc., or AGP.

    Within two years, AGP had acquired two additional soybean processing plants in Iowa from AGRI Industries and installed equipment for refining soybean oil at its plant in St. Joseph, Mo. By 1993, AGP acquired a pair of Texas refineries and set up a joint corporation, AGP LC, to share ownership with Archer Daniels Midland (ADM).

    AGP expanded its refining capacity with the addition at Eagle Grove. The cooperative operates a methyl ester refinery at Sergeant Bluff, Iowa. Methyl esters are used in the production of biodiesel, solvents and spray adjuvants.

    In succeeding years, more cooperatives joined the AGP fold. Today, its membership includes 302 local and 12 regional cooperatives representing 300,000 farmers from 16 states and Canada. "Partners in food production," is AGP's motto.

Multi-Faceted Product Line

    AGP's soybean product line fits into four categories: soybean meal, sold as a protein source for livestock and poultry feeds; soybean hulls, used for blending protein guarantees in the domestic market and pelleted for export; soy flour and grits, used in manufacturing of meat extenders, pet foods, baking ingredients and other food products; and soybean oil used by major food companies.

    Various products are derived in the processing and degumming of soybean oil: feed grade lecithin is sold to food manufacturers as food emulsifiers and additives; once-refined soybean oil is marketed to manufacturers of lubricants, chemical carriers and the food processing industry; salad oil is sold to manufacturers of salad dressings, mayonnaise, margarine and cooking oils; and hydrogenated vegetable oil is sold to manufacturers of margarine, shortenings, frying oils, potato chips and for other food uses.

    In addition to its soybean crushing business, AGP operates a grain division: AGP Grain Cooperative and AGP Grain Ltd. AGP also operates a livestock feed business in the United States and Canada. The feed company, Consolidated Nutrition, is the third largest livestock feed company in North America and is owned 50/50 with ADM.

    AGP is also very active on the export scene. AGP's largest export market is for grain and soybean meal, which it is selling in 20 foreign nations. It is also enhancing the development of overseas cooperatives. AGP has joined forces with cooperatives in Hungary to develop new markets for AGP soybean meal and feed products. Through AGP Hungary Ltd., AGP manufactures feeds for livestock and gains a foothold in the growing agricultural economy in Central Europe. AGP also operates a food and feed company in Venezuela called PROAGRO.
 
Looking Ahead

    AGP has been streamlining some of its domestic operations, having recently sold its pet food division and a string of grain elevators in Ohio and Indiana. These actions were taken to better concentrate on its core businesses in the Midwest.
"AGP is positioning itself for a world with a growing population," says Tony Porter, AGP's group vice president for processing and transportation. "Improved international purchasing power and the desire for improved diets has lead to solid export growth for U.S. agriculture."

    AGPs export volume increased 40 percent in 1997, Porter notes. "Reduced duties and trends toward free trade, backed by NAFTA and GATT and World Trade Organization rules, are helping make the U.S. more competitive."
The partnership AGP has with its members has worked well for the benefit of farmers, said Larry Burkett, senior vice president for corporate and member relations. "We have created a huge market for our owners and excellent earnings, which have averaged in excess of 25 cents per bushel over the past nine years.

    "We have a bright future as partners— farmers, cooperatives and AGP—providing we can think and perform as a soybean food system. It will be important that we close ranks and intensify our partnership," Burkett said. A
 



A Look at AgProcessing Inc.

True to its cooperative structure, the stockholders of Ag Processing Inc. are its owners—302 local cooperatives and 12 regional cooperatives representing 300,000 farmers from 16 states and Canada. Its "Partners in Food Production" motto focuses on all stakeholders, including stockholders, customers, suppliers and employees. Since its formation in 1983, AGP has been dedicated to the success of its owners. Following are some "snapshots" about the cooperative's operation.

  • AGP processes more than 15,000 acres of soybeans every day.
  • It is the largest cooperative soybean processor in the world.
  • AGP has the storage capacity for more than 40 million bushels of grain.
  • It is the third largest refiner of vegetable oil in the United States.
  • AGP is the managing partner of Consolidated Nutrition, the third largest commercial feed manufacturer in North America.
  • AGP expanded its export customer base by trading in 20 countries around the world and increased 1997 export sales 40 percent from 1996.
  • With the addition of a new refinery in Eagle Grove, Iowa, AGP now processes 2 billion gallons of crude soybean oil annually.

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