By Dan Rahn
University of Georgia
It’s put-up-or-shut-up time for Southern farmers who may resent
or envy the share the “middle man” gets of their crops.
“Farmers always say the guy they sell their crops to is the one
who makes the most money,” said Robert Carlson, chief executive
officer of Farmers Oilseed Cooperative of Claxton, Ga. “Now they
have a chance to be that guy.”
The FOC began offering stock in the “new-generation cooperative”
last December. Carlson and others are crisscrossing the state,
meeting with potential investors. The co-op plans to build a $66
million processing facility near Claxton, Ga.
The plant would crush 900 tons (30,000 bushels) of soybeans or
700 tons of canola or peanuts per day. It would supply a refinery
that would produce 300 tons of edible oil per day, focusing on
high-value retail and food service products.
Sales slow
So far, farmers haven’t been beating down doors to get in on the
deal. The co-op must sell at least 8 million shares and aims for
11 million. But in late January, sales had reached only 280,000
shares.
To invest, a farmer must buy a $500 share of common stock and put
down a 10-percent deposit on at least 2,500 shares of class A
stock at $2.45 per share. The latter are tied to the right and
the obligation to sell oilseed crops to the co-op. A 10-percent
discount is available until March 15.
“I don’t think the money is that big an issue,” said George
Shumaker, an oilseeds economist with the University of Georgia
College of Agricultural and Environmental Sciences.
Three hurdles
Three things, he said, are holding back farmer investors.
One, “trying to grow a new crop for a market that doesn’t yet
exist is hard to visualize,” Shumaker said. Part of the
uncertainty is that Georgia farmers aren’t familiar with the new
co-ops. Successful examples, though, are plentiful in the Midwest.
In the co-ops they’ve known, someone starts a business and
invites others to buy into it. New-generation co-ops start with a
group of farmers who obligate themselves to making the venture
work.
A second restraint, Shumaker said, is that for most Georgia
farmers, oilseeds aren’t their biggest concern. Cotton and
peanuts are their big crops. Canola, in particular, is a crop few
Georgia farmers have grown. But Shumaker says it has the sweetest
potential in the new co-op.
Canola gold
A few farmers here have successfully grown the winter crop but
couldn’t make it work with the nearest market in Canada. The
co-op would provide a local buyer, and Shumaker pegs the income
for co-op members at $2.50 per bushel above the market price.
A third hold-up, he said, is the discouragement farmers are
hearing from buyers, grain elevator operators and others who
would be competitors. “These are people they’ve had long-term
relationships with,” he said. “These are people they trust.”
Both Shumaker and Carlson, a 30-year veteran of the oilseed
industry, say they’re confident the venture will succeed if the
needed farmer investments materialize.
“I don’t think there’s any doubt they will be successful if they
get the funds,” Shumaker said. “Their business plan is sound. You
can see in the Midwest how competitive these co-ops can be in a
market that seems to be driven by large corporations.”
Spinoff
If the co-op does succeed, he predicts it will lead to similar
co-ops for other Georgia crops. The one abiding question, though,
is whether enough farmers will invest to get it started.
Carlson said farmers must appreciate its value-added nature.
“And they have to be willing to think long-term,” he said. “It
will be late 2007 before they get the first nickel back.”
Will farmers come up with the money? Carlson isn’t making bets.
“I’m much more confident in the plant succeeding than I am in
getting the investment funds,” he said.
(Dan Rahn is a news editor with the University of Georgia
College of Agricultural and Environmental Sciences.)
