Fears of Less Competition and Lower Crop Prices Drive Co-op Merger Failure

July 7, 2015 11:24 AM
Fears of Less Competition and Lower Crop Prices Drive Co-op Merger Failure

For months, two Dakota farmer-owned co-ops--South Dakota Wheat Growers and North Central Farmers Elevator--formally discussed combining operations to create CentraGro Cooperative.

Discussion for the merger began in late February when both co-ops noticed that combining the two groups could offer significant efficiencies and cost savings. Both CEOs were also nearing the ends of their careers, and the merger would have allowed both CEOs to retire as the new company moved forward under new leadership.

“It was like owning two lawn mowers when you only need one,” said Steve Briggs, senior vice president of South Dakota Wheat Growers.

With more than 100 member meetings over four months, Briggs said that the co-ops' leaders answered many questions posed by members about the merger.

The proposal seemed to be on track, until the member vote in June. Just a month before the merger was expected to occur, 51% of North Central Farmers Elevator members decided the merger was a bad idea and voted against the plan.

“It’s very disappointing,” Briggs told AgWeb. “It truly is the right thing to do for the farmers.”

No employees were going to lose their jobs, and no communities were going to be left, according to Briggs. Members like Harry Krause of Java, S.D., were “stunned” by the decision and couldn’t understand how the plan didn’t pass.

North Central Farmers Elevator did not respond to requests for comment on this story, but it did leave a post on social media about the situation: “The unification didn’t succeed, but we have been, and will continue to be, two financially strong, customer-focused cooperatives that will move forward. We look forward to serving your needs.”

The biggest objection to the merger, according to Briggs, was the loss of a competitor and the potential impact on farmers' grain prices. “I think everyone is concerned,” said Dwayne Bosse of Britton, to the Aberdeen News in March. “This doesn’t leave a lot of competition out there. The pressure from other companies helps farmers get a good price for their crops.”

The farmers were worried about the immediate effects of the merger on their crop prices, but Briggs said he believes co-op members who voted against the deal weren’t thinking far enough into the future. In the long run, the merger of the two companies was estimated to save $44 million over four years.

Those savings could have helped trim the costs of fertilizer, seed and chemicals over time for farmer customers. Without the merger, Briggs says these synergy dollars will now be spent on less than efficient operations, which puts the local co-ops at a disadvantage compared to bigger companies. “I’m sure there are lots of happy multi-national companies in the area because we were going to be a formidable competitor,” Briggs said.

What happens now? Briggs said the two cooperatives will go back to operating as two separate, farmer-owned cooperatives.

What are your thoughts on the failed merger? Do you think a bigger co-op would have been good or bad for farmers? Give us your opinion in the comments.

Back to news



Spell Check

three 40s
cokato, MN
7/7/2015 07:04 PM

  seen what happens after coops merge, not a good thing. departments and jobs in the coops were lost months afterwards, do not kid your self when mergers happen there is a reason and that reason is to in the eyes of management is to get more efficient but in some case it destroys the business, patrons stock in the coops and jobs in the towns that the coops are located. bigger is not better in some situations. could go on for hours about what could happen but kudos to those who voted this one down

Chappell, NE
7/8/2015 12:47 PM

  There hasn't been a single example yet of bigger is better after twenty years of Co-op mergers. And the merging of John Deere dealerships has been an even worse disaster.


Corn College TV Education Series


Get nearly 8 hours of educational video with Farm Journal's top agronomists. Produced in the field and neatly organized by topic, from spring prep to post-harvest. Order now!


Market Data provided by QTInfo.com
Brought to you by Beyer