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.