Will The Merger Of Wheat Growers And North Central Farmers Elevator Be A Good Thing?

When crop prices started heading south last year, we knew the industry was headed for a dynamic season of consolidation and mergers. We’ve seen a number of smaller acquisitions of note over the past six months, but in March we got the biggest so far.

Two organizations within the top 20 of the CropLife 100 retailers, Wheat Growers at No. 11 and North Central Farmers Elevator at No. 19 in the 2014 rankings, announced plans for unification. As far as cooperatives coming together, this is the largest we’ve seen in some time — a move that would put the combined organization in the CropLife 100 top 10.

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Cooperative mergers in the early stages are all about communication and due diligence, so I was glad to be able to track down Steve Briggs, senior vice president of agronomy and corporate marketing for Wheat Growers, while driving in his car. It’s about the only time he gets to himself in between the dozens of obligatory coop location meetings he is conducting leading up to the unification vote of the membership.

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Staying competitive in a market where investment continues to soar is one of the biggest reasons for the move, but Briggs pointed to the challenge from international companies as the most significant issue.

“We’re both very strong cooperatives in the Dakotas, farmer owned, controlled and governed,” Briggs explained. “If you look at agriculture in this part of the world, we are getting a lot of competition from huge international companies, whether it’s ADM or Mitsui, Marubeni or CHS, that’s the world of competition we are seeing coming into our area. If our farmers still want local control of their coop through governance, elections and decision-making, unifying two strong coops is just the right thing to do for our members.”

Another positive for the proposed unification is the dreaded “s” word — synergies. In this case, however, it appears particularly fitting on a number of levels.

From the standpoint of locations, only four municipalities have facilities from both locations. And in terms of the total employee base, no one will need to be let go as a result of the unification.

“We have 60 job openings that we have been desperate to fill but we cannot because we can’t find talent,” Briggs noted. Com­bining the two organizations will help close up the employment gap, create more advancement opportunities and increase the competitiveness of salaries, he adds. “Maybe we can keep some of these Dakota kids home and not having to look out of state for jobs.”

There should also be a significant boost in efficiency and management savings from consolidating redundant services to the tune of between $8 million and $14 million after the unification, according to a consulting firm hired by the cooperatives to examine the deal.

“That’s additional money we can reinvest in the business, or return to members as patronage,” said Briggs.

The definitive unification agreement is set to be complete by month’s end, and members are expected to be able to vote on the deal by June.

Consolidation creates uncertainty and heartburn wherever it’s occurring. But in this case I think it’s good to see two strong, well run organizations coming together to create a better, more competitive final product that stays true to the mission of both.

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