University of Wisconsin Center for Cooperatives
Year in Cooperation: A Cooperative Development Magazine
Published by the Minnesota Association of Cooperatives
Spring 1996 -- Vol. 2 No. 2

Putting Their Ducks In A Row
South Dakota group builds soybean processing plant

by Jonathan Fure

The state of South Dakota has fallen behind neighboring states in the race to develop value-added ag processing facilities, but a group of soybean producers has taken a major leap forward by building one of the most sophisticated soybean processing plant in the country. When it is completed, the $32.5 million plant in Volga, S.D. will be the first new soybean processing plant that has been built since the 1970s.

Bill Riechers, the vice president of South Dakota Soybean Processors (SDSP), said their goal is to have the plant ready in time to process this year's soybean harvest. It will be able to process 50,000 bushels per day into soybean meal to be used for livestock feed, soy oil and a variety of other uses.

The project was started in 1992 by a board of nine members who wanted to have a processing plant built in the area. All of South Dakota's soybeans, about 90 million bushels per year, are processed outside the state in North Dakota, Minnesota, Iowa or Nebraska. The costs of shipping the soybeans out of state plus the costs of shipping back the processed soybean meal adds up to South Dakota farmers earning the lowest price in the country for their crops. Transporting the soybeans back and forth 50 to 100 miles is costing producers anywhere from eight to 15 cents per bushel.

The realization of the need for a local soybean processing plant eventually reached a sense of urgency. Paul Casper, president of SDSP and a farmer in eastern South Dakota, has been one of the leaders of the project from the beginning. After trying unsuccessfully to get someone else to build a plant, Casper said they decided to build it themselves. "Common sense kicked in and said This is crazy.' We needed to look at adding value to our crops. The middle man sets the price, and now we have put ourselves in the position where we are the middleman."

Not only will the plant enable them to set the price for their product, it will create 68 permanent jobs with an annual estimated payroll of $1.6 million. The plant will be a closed cooperative, and when it generates profits, members will receive quarterly pool payments over their delivery price. The increased revenue will revitalize the local farm economy and will lead to more money spent in local businesses.

With so much to gain, Casper and other board members persuaded the South Dakota Research and Promotion Council to sponsor an economic feasibility study in 1992, which eventually determined a processing plant in South Dakota would be viable. Armed with the results of the study, the group spent long hours developing a specific plan for the project. Casper says they held a series of informational meetings for farmers in early 1993 throughout the state to solicit members for the co-op. But not before they had answered all of the questions they had expected to hear while out on the road.

"When you're asking somebody for their money, you have to have all your ducks in a row," Casper said. "We had a marketing agreement and all of our financial documents. People want to know how long it will take to get a return on their investment, or how long it will take to get their money back."

Casper said the meetings generated a lot of enthusiasm, and they raised $7 million even though the 1993 growing season was below average. "We hit 14 towns in five days. We had meetings three times a day: morning, noon and evening. It was a media blitz. We also sent out 5,000 packets of information. Then we had a fantastic 1994 crop, and we raised another $15 million in four months that fall."

The media blitz was funded through grants from Otter Tail Power Company and East River Electric Cooperative, and other local companies. They set up a trust account in Sioux Falls to prevent mishandling of the money they raised. If the project fails, the members will get pro rate shares of their investment back.

The group took a step toward making sure the project does not fail by hiring a CEO with over 20 years of experience in the business. His name is Rodney Christonsen, and he came home to the Midwest from California. He is originally from Fargo, N.D., and Casper said his experience makes him perfectly suited for the job. "He is very aware of the co-op idea. There are 2,100 people who have invested their money, so he has to be aware of all of their needs," Casper said. "He has managed over 300 people and he has been involved with world markets."

Christonsen's experience will be invaluable in their search for markets. They are not only looking to take advantage of the demand for soybean meal in South Dakota, they intend to do business in the Western United States and in foreign markets, including Canada, Mexico and South America. Casper said they have already been approached by interested parties oversees, and they are anxious to get started. But they still have not lost sight of their first priority, which is competing with nearby processing plants. "We're going to have to be solid," Casper said.

"We are the newest processing plant in the country, and we will be using technology that no one has ever used before, which will give us better quality and more control."

While construction of the plant continues through the spring and summer, Casper will continue performing his responsibilities as board president and working on his farm. His busy schedule does not keep him from dreaming up new ideas. In fact, the idea for the soybean processing plant was cultivated while Casper was working in the fields. "My ideas come to me while I'm sitting on my tractor," he said. "It gives you time to think."

Casper credits the Minnesota Corn Processors with providing inspiration for his idea. "For a while it seemed like that was all you could read about," he said. "In all the major farm journals there was something about them every month."

Ideally, Casper and other board members are hoping their soybean processing plant will provide inspiration to others, who will in turn start up new feed businesses and other projects.

The extent of the influence of the SDSP processing plant remains to be seen, but it will likely be making an impact for many years in the future.

Jonathan Fure is a free-lance writer and reporter for a weekly newspaper in eastern South Dakota. He grew up in the Minneapolis area and moved to South Dakota to pursue a career in journalism. His interest in farming practices and agriculture-related issues can be traced to his childhood memories of visiting his grandparents' farm in Kiester, Minn. By living in the Twin Cities and in rural South Dakota, he has enjoyed a variety of writing experiences. He has written sports, news and feature stories for his community newspaper and has written articles for Minnesota's Journal of Law and Politics and collaborated on a script for a documentary video.

This material has been reproduced in electronic format with the permission of Year in Cooperation.

 Return to UWCC Homepage