The boards of directors of three Minnesota cooperatives – Central Farm Service (CFS) in Owatonna and Truman, River Region Cooperative (RRC) in Sleepy Eye, and South Central Grain and Energy (SCGE) in Fairfax – announced on Dec. 21 that they will bring a merger proposal to members for a vote in February.
“Agriculture continues to dramatically change,” said Eric Schrader, board chairman of CFS. “The global collapse of prices, volatility of markets, increased regulatory mandates, and overall increase in operating expenses have created an opportunity for three strong cooperatives to create a stronger supply partner for our members.”
If approved, the combined organization would have annual sales of more than $1 billion and span a large geographic area stretching across central and southern Minnesota down to northern Iowa. The co-ops entered into a merger study in September 2016, which identified potential savings of $3-5 million through synergies in purchasing power, logistics, back office administration, and growth.
“This merger will create new opportunities in services and innovations for our members, while providing advanced opportunities for our employee base,” said Bruce Kuelbs, board president of RRC. “This merger allows us to control the change we want to see in our organization, rather than having to react to changes out of our control,” added Larry Dean, board president pf SCGE.
A number of informational meetings for members are planned at different locations from Jan. 30 to Feb. 3, with voting packets going out on Feb. 3. Membership voting will close on Feb. 20, and the votes will be tallied at a special meeting on Feb. 21. If approved, the merged company will operate under the CFS name and be headquartered in Mankato, and will have a potential effective date on or before Aug. 1, 2017.
Todd Ludwig, current CEO of CFS, has been tapped to lead the merged company as CEO, with RCC General Manager Kevin Subart and SCGE General Manager David Peters serving in leadership positions. The board of directors of the combined organization will be based on the amount of equity of each cooperative, and will consist of 12 CFS members, three RRC members, and three SCGE members.
According to an FAQ provided by the co-ops, the consolidated company will be able to leverage its size to receive better prices and services in agronomy, feed, and energy products; improve logistics across an expanded geography by taking advantage of arbitrage opportunities and better fleet utilization, as well as access to all major railroads; negotiate better interest rates and insurance premiums while eliminating duplicate costs in systems and processes; and offer new merchandising, precision agriculture, and grain pricing programs to members. Also included on the list of objectives is the construction of an agronomy plant north of the Minnesota River to expand the business’s northern territory.
The co-ops also highlighted new employment opportunities with the merger, noting that more than 100 employees – or 20 percent – of the consolidated company’s workforce will be over the age of 60. “One of the reasons the boards explored this merger was to create a company for employees that would be a ‘destination employer’ in our geography” that offers more benefits at a better rate, the companies said.
CFS was formed less than a year ago by the merger of Watonwan Farm Service Co. in Truman and Central Valley Cooperative in Owatonna (GM Jan. 1, 2016). The company provides grain, agronomy, feed, and energy products and services from 28 locations stretching from Randolph, Minn., down to northern Iowa.
SCGE operates agronomy, grain, feed, propane, and refined fuels businesses from nine Minnesota locations at Buffalo Lake, Cosmos, Darwin, Eden Valley, Fairfax, Gibbon, Hector, and Stewart. The co-op’s agronomy facilities in Buffalo Lake, Cosmos, Fairfax, and Gibbon offer dry and liquid fertilizers, ammonia, crop protection products, seed, and precision ag services.
RRC is a full-service co-op offering grain, energy, agronomy, and feed products and services from multiple locations in Sleepy Eye.