VALUE-ADDED CORNER
Ohio co-op’s soy-crushing plant produces
for expanding trans-fat-free oil market
By Michael Jones
Public Affairs Director
USDA Rural Development, Ohio
eveloping new markets
and responding swiftly —and correctly — to
market changes are
qualities all successful
businesses share. Mercer Landmark Inc.,
a northwest Ohio cooperative, exhibited
those business skills in positioning itself
to become a significant regional supplier
of soybean-based products.
Mercer, a 74-year-old, locally owned
farm cooperative, has more than 2,000
producer-members and operates 15
facilities in Mercer, Darke, Van Wert and
Paulding counties. Although Mercer focuses on delivering a
variety of agronomy, livestock, grain-marketing and related
services to its members, it constantly evaluates new
opportunities that could increase the cooperative’s overall
profitability.
The motivation to financially reward its producer
members prompted Mercer to investigate the potential
market for soybean oil. To do so, Mercer sought USDA
Rural Development’s help, securing a $30,000 Value Added
Producer Grant to evaluate the soy-oil market. The grant
provided half of the funding needed to conduct a feasibility
study and complete a business plan. The study, completed in
2006, confirmed that Mercer’s management was right on
target in seeking to enter the soy-oil market.
“When we look at growth opportunities, our main
concern is making sure whatever decisions we make produce
positive financial returns for our members,” says Mike Fry,
president and CEO of Mercer Landmark. Fry has been with
Mercer since 1995 and is responsible for directing and
leading the business operations.
“This venture is an opportunity for us to position Mercer
to benefit from current trends, as well as to anticipate and
incorporate any future industry developments,” adds Fry.
Study leads to crushing plant
As a result of the feasibility study, Mercer constructed a
small soybean-crushing plant where it processes a special
low-linolenic soybean, grown under contract by 200 Mercer
producer-members. The co-op then sought, and received, a
second Value Added Producer Grant: $300,000 in working
capital for the soybean-crushing venture.
Producer members will earn a premium of 60 cents per
bushel when delivering this product to the plant at harvest, or
70 cents per bushel if the soybeans are stored on their farms
until the plant calls for their crop. Mercer’s producermembers
will also share in profits from operations at the
soybean-processing plant.
Using a mechanical extrusion technique, the process
separates soybeans into food-grade soy oil and soybean meal.
The extrusion process, which doesn’t use chemicals, produces
a premium-quality trans-fat-free oil and high-protein soybean
meal that can be used in feeds.
“We’ve been very deliberate in our approach to launching
this venture and have specific marketing goals in mind,” says
Scott Boulis, facility manager for Mercer Landmark.
“Developments within our industry occur very rapidly and we
have to strategically respond to them
if we want to remain competitive.”
For instance, he says, recent
consumer focus on healthier eating
has created more incentives for
companies to expand their product
offerings. “That’s what we’re doing
with production of the soybean oil,”
Boulis says. “We’re also responding to
the agriculture industry’s demand by
providing our high-end soy meal for
use in their feeding practices. I think
adaptability is the key to our business
success.”
Reducing transportation costs
As Mercer consolidates its
operations and brings its soybean
processing plant to full capacity, it
eliminates the roundtrip costs of
transporting soybeans to regional
processors. Since Mercer currently
buys soy meal from these same
regional processors and has it shipped
back to Ohio, bringing the plant into
production will reduce product
transportation costs by more than 50
percent.
Additionally, health benefits from
using trans-fat-free oils are triggering
an increase in consumer demand.
Major fast food chains and food
manufacturers either have changed, or
are considering changing to trans-fatfree
oils in their food preparations.
These developments have helped to
validate Mercer’s market projections
and its decision to initiate this new
venture.
Cooperatives exist for the single
purpose of improving the business
profitability of their members. The
commitment of Mercer’s management
and its ability to reach beyond current
operations and find new venues to
generate positive financial returns
reflect the spirit and mission of all
cooperatives.
