AGP offers huge opportunities, down-to-earth culture to area farmers

Erin Ballard

AGP will begin processing soybeans in town within days, but its impact on the community goes far beyond agriculture.

Ag Processing Inc., commonly called AGP, had a grand opening for its Aberdeen plant Wednesday. The $300 million project is the largest in the company’s history and is a game-changer for the region, said CEO Keith Spackler. It will employ about 60 people.

“The mere presence of this plant and the 50 million bushels it’s going to buy (each year) should elevate the prices for farmers across the whole region, because it’s a brand new market for beans,” Matt Caswell, AGP vice president of member/corporate relations and government affairs, said during a Tuesday interview.

As a high-quality, low-cost protein, soybeans have become an increasingly widespread and productive crop in the country, and especially the Midwest.

Roughly 80 percent of a soybean is processed into meal for livestock, primarily pork and poultry. The other 20 percent, give or take based on quality of the bean, is made into oil that is used for cooking food and in biodiesel fuel, Caswell said.

AGP, which broke ground in spring 2017, will primarily ship beans by rail to Aberdeen, Wash. From there, they will go to southeast Asia, which has seen a massive rise in demand for soybean meal in recent years, according to Caswell.

“There’s been a growing middle class in Asia that wants more meat. We believe that more people will add protein to their diets as time goes on,” he said. “More mouths to feed led to U.S. farmers producing more soybeans. In this region especially, the acres have really expanded.”

The goal of AGP, Spackler said, is to provide markets for producers of soybeans, add value to those soybeans and generate competitive return for cooperative owners and producers.

A decade ago, soybean production in South Dakota was 140 million bushels, compared to 256 million in 2018, according to Mark Sandeen, senior vice president of marketing.

“That’s a whopping 85 percent increase in just 10 years,” he said at Wednesday’s grand opening. “With Brown County, which Aberdeen is in, and Spink County, just south of town, now two of the largest soybean-producing counties in the United States.”

Five-hundred million bushels of beans were processed last year in the Dakotas alone, Sandeen said.

“The Dakotas have become a steady supplier of soybeans,” he said. “Now is the perfect time to give the producer, our local AGP member cooperatives, a dependable market for soybeans 12 months a year.”

While area farmers have had huge yields of the crop in recent years, distance to a viable market was a problem many couldn’t overcome. They had to either transport beans to a processor or export them overseas whole. Both options have associated costs, with shipping being a key factor.

Now they’ll have a local processor, which will make a world of difference, Caswell said.

“Their prices will go up, their transportation costs will go down. You multiply that across all the farmers in the region, it will elevate the economics of the entire region,” he said. “That’s what it means to the farmers. That’s why they’re excited.”

It’s no secret that this year has been tough for local farmers, with a long, harsh winter, spring flooding and trade disputes.

Because China is a huge importer of whole soybeans, which have been directly affected by tariff disputes, distance to a market has especially hurt local farmers, Caswell said. Unlike corn, which has domestic value in ethanol, soybeans are very export-dependent.

“Farmers in this area have been hit harder by the trade war. They’ve been hurting,” he said. “Without (AGP) here, they’re stuck. They have to hold onto it.”

While a true picture of the current crop won’t be known for a few months, AGP isn’t concerned that there won’t be enough soybeans to process in its first year.

In fact, at the grand opening, Gov. Kristi Noem said the plant would provide much-needed relief to regional farmers, while establishing a foundation for the future generation of farmers.

That’s because there is currently a billion-bushel carryout, or surplus, of soybeans in the market, Caswell said. Those soybeans are sitting in storage bins on farms or elevators across the country, with a large number in the Aberdeen area.

There are more than 20 cooperatives in South Dakota that will do business with AGP, including Aberdeen-based Agtegra. AGP will work with 145 farmer-owned co-ops across the Midwest, according to Spackler.

AGP uses a unique business model that enables local producers to not only have a better price and market for their soybeans, but also allows them to participate more directly in the earnings, which all going back to producers, Caswell said.

The easiest way to describe it is that AGP is a large cooperative made up of lots of smaller ones.

The company has no corporate owners but is owned entirely by co-ops, which are owned by farmers. So, farmers who want their beans to go to AGP will have to do it through a local cooperative.

AGP’s board of directors provides a snapshot as to who has power in the company — five members are co-op managers and four are farmers.

One of the company’s main goals, in simplest terms, is to do right by those people. That mission is one it takes seriously, Caswell said, as its owners are people who live in the towns AGP serves.

“Our money stays here,” he said. “Our corporate profits are returned directly back to the communities where we do business.”

Compared to companies that move into areas to extract a resource and then leave, AGP’s business model couldn’t be more different, he said.

“The reason we built this plant was not for short-term economics,” Caswell said. “Farmers have a to-the-grave investment strategy. Our company is the same way.”

That mentality is the same reason many people won’t often hear about things happening at AGP, or about the ways in which it will give back to the community. Much like the farmers who own AGP, it prefers to keep a low profile, instead letting results speak for themselves, according to Caswell.

“(Farmers) demand a certain level of quality, transparency, honesty,” he said. “All those things that farmers are about at the core we can say are reflected in our company’s values. Humility being the most important.”

The AGP soybean plant in Aberdeen. Photo courtesy of Malone and Co
Soybeans grow in a nearby field as railcars sit on the railroad track northwest of the new AGP on the northeast side of Aberdeen on July 16. Farm Forum photo by John Davis
The AGP soybean plant in Aberdeen. Photo courtesy of Malone and Co
Photo courtesy of Malone and Co

4.2 million: Bushels of soybeans that can be stored at the plant.

70,000: Pounds of crude soybean oil that will be processed each hour.

53,000: Yards of concrete used in construction.

27,000: Rail ties on site.

20,000: Yards of dirt moved every day during the height of construction.

10,000: Hours of labor it took to program all the facilities.

4,500: Tons of soybeans that will be processed each day.

1,950: Devices installed.

1,500: LED light fixtures put in.

660: Motors that keep the plant running.

545: Miles of wire pulled.

158: Feet high at the plant's tallest point.

140: Tons of soybean meal that will be processed each hour.

8: Miles of railroad track on site.

6: Minutes it takes to unload a full truck of soybean meal.