Bigger Yields

By Heuer, Robert | Independent Banker, February 2002 | Go to article overview

Bigger Yields


Heuer, Robert, Independent Banker


Rural communities look to vital growth, new jobs and more profits in value-added agriculture

Community banker DeWayne Streyle is lending working capital to a pasta company that's creating 40 jobs in his hometown of Leeds, N.D. Golden Plains Frozen Foods projected $1.9 million in sales during its first year of operation last year. But this is no brand-new enterprise. Golden Plains rose from the dreams of a bankrupt business that lost money for Streyle's bank, United Community Bank of North Dakota, and many of its customers.

Booking this deal is great news to Streyle, United Community Bank of North Dakota's president and CEO. That's because Golden Plains reflects a trend that's giving hope to rural communities struggling to reverse decades of population and economic decline.

After the 1980s farm crisis, North Dakota farmers began talking about how to break the cycle that leaves them at the bottom of the agricultural production food chain. "The impetus was the lack of consistency by federal inspectors and local elevators in the grading of raw products," Streyle recalls. "The dockage might range from 2 percent to 15 percent for the same coffee can full of wheat."

A decade ago, North Dakota farmers decided to form a cooperative and open a pasta plant. Their idea was to add value-add a processing or manufacturing step to the growing process-to the goods that they produced. Rather than ship raw commodities across the country where somebody else gains from processing and packaging, these farmers figured they should earn additional profit off the crops they grew. They might sell their crop for higher prices or derive income from having an ownership stake in the local processing business. One way or the other, the business would also provide more employment opportunities where farmers and their families live.

Value-added agriculture is catching on nationwide. In the Texas panhandle, farmers are selling corn to nearby processors that serve the Mexican food market. In the Midwest Corn Belt, local communities are starting ethanol plants to produce a clean-burning gasoline additive that helps reduce automobile emissions. In North Dakota, durum wheat provides a competitive advantage.

In 1992, a $50,000 state grant paid for a feasibility study to launch a pasta plant. The farmers raised seed capital and issued a letter of intent for a formal stock offering that drew investments from 1,200 grower-owners. Over the last decade, Dakota Pasta Growers became a poster child for valueadded agriculture.

Streyle wished his town of 650 residents had gotten that Dakota Pasta Growers plant. After all, Leeds had more members within 60 miles than any other North Dakota community. In retrospect, he realizes the Dakota Pasta Growers board made the right decision to locate the facility 70 miles away in a town with four times the population. Today, the Carrington-based company is the third largest pasta processor in the United States, employing 270 people.

Tapping Local Talent

In the mid '90s, Leeds area farmers considered building a fresh-frozen pasta plant. The idea sounded good to Streyle, whose 400 farmer customers account for 45 percent of the $92 million-asset United Community Bank of North Dakota's loan portfolio.

As chairman of the nonprofit Leeds Economic Development Corp., Streyle led efforts to get a $75,000 state planning grant. The bank spent $25,000 to rehab a shuttered drugstore that became the enterprise's interim headquarters. A fund drive led 328 farmers from a 90-mile area to invest $3.5 million, a sum sweetened by a $5.75 million federal loan guarantee. A $960,000 USDA Rural Business Enterprise grant financed sewer, water and roads for a new industrial park.

Farmers Choice Pasta Plant was ahead of its time. During a two and a half year run, the company couldn't develop a distribution channel. The board conveyed the business back to United Bank of North Dakota and other loan participants. …

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