Midwest Farmers Co-op members
benefitting from new rail terminal
Until recently, it wasn’t unusual to see 2-to-3 million
bushels of grain piled up on the ground around the Midwest
Farmers Cooperative railcar loading terminal outside
Alton, Iowa. But in April 2001, the tarp covering 2
million bushels of corn blew off in a storm, and then the
skies opened up, dumping more than six inches of rain on
the exposed grain.
Co-op Manager Ellis “Skip” Hein still recalls that
nightmare vividly. “All you can do in a situation like that is
ship it as fast as you can,” he says. “We were fortunate
that we handle enough grain volume at this location that
we could blend the quality to No. 2 corn. We dodged a
bullet, but it made us realize that we didn’t want to be put
in that position again.”
So the 1.1 million bushel vertical elevator at the terminal,
originally built in 1997-98, was expanded
with an additional 4.1 million bushel,
automated flat storage facility. The co-op’s
board agreed to invest $7.7 million for the
original terminal and $2.8 million for the
expansion, which were both completed on
time and under budget. “Start-up was virtually
flawless, which amazed everyone for
a facility of this size. It only required some
minor tweaking,” Hein says.
Despite the mammoth size of the facility,
the loading operation is so automated
that it can be operated by a single worker
on the outside. The diesel locomotive that
pulls the hopper cars into place is operated
by remote control, eliminating the need
for at least one additional worker at the
terminal. The terminal can load a 90-100
car train (with each jumbo hopper car
holding 4,000 bushels) in just 10-12 hours.
The co-op loads 35-to-40 unit trains annually,
and trucks several million more
bushels each year to area grain processors, including
soybeans sent to AGP and corn shipped through Midwest’s
feed-manufacturing operations.
Need for new terminal fuels co-op merger
Midwest, with 9 branches and 13 locations, was
formed in 1997 when Sheldon Farmers Co-op merged its
three locations with
Alton-Orange City
Cooperative’s five
locations. The co-op
expanded again in
1999 when Sutherland
Farmers Cooperative
joined it.
Today, Midwest has 2,300 class-A producer members
within its 70-mile long, 50-mile wide trade territory. Last
year, it had $78 million in sales. In addition to its grain
and farm supply businesses, the co-op also provides
agronomy services, petroleum products, and operates
its own lumberyard, custom cattle feedlot and a dairy
heifer replacement program. It also has an over-theroad
trucking operation that hauls for Farmland Foods,
Land O’ Lakes, Sara Lee and others.
Prior to the 1997 merger, the Sheldon and Alton-
Orange City co-ops were “truck houses that only had
access to 25-railcar loadout terminals,” says Hein, as he
watches corn-laden trucks pull onto the scales of the
Alton terminal, where a hydraulic sampling arm lowers
into each hopper brimming with Iowa gold. But 25-car
terminals no longer cut it. “They just aren’t competitive
in today’s business environment,” Hein says. The railways
say they can’t make a profit from short trains, “and
it is the rail rates that are driving this type of expansion.”
The need for a larger rail-loading terminal was the
primary issue that drove the 1997 merger. “Neither coop
had the resources to build something like this on its
own, even though both were strong co-ops,” Hein says.
“Together, however, we were able to combine resources
and meet a crucial need.” Indeed, the co-ops
were strong enough that they used working capital to
finance about 25 percent of the terminal, with a loan
from CoBank providing the rest.
“Many times in mergers, you see one strong company
absorb a weaker one, which can ultimately weaken
the stronger company. If companies recognize opportunities
when both are strong, it works out much better,”
says Hein, who has been with the co-op since 1997, prior
to which he managed a multi-branch grain and farm
supply facility for Land O’ Lakes in Minnesota. After
mergers, Hein says, co-ops should “make adjustments
in operations as well as with the balance sheets and
valuation of assets so that the surviving company
remains strong.”
The new rail terminal gives co-op members much improved
access to a greater variety of markets, Hein
says, which means better prices. The co-op now has the
option of shipping to the Pacific Northwest or Southwest
livestock feeding markets, as well as the Gulf ports
and Mexico. This has helped add 6 to 10 cents per
bushel for members, he estimates. “So this facility is
very much adding value for our members, who also earn
equity by doing business with their cooperative.”
Raising heifers
Another innovative way Midwest is providing service
to members with dairies is through a heifer-replacement
program. The co-op takes calves at just a few days old
and raises them in “a strict bio-security environment,”
where they remain for eight weeks. The calves are then
moved to two other places for an additional 8 weeks.
After that, they go to a heifer finisher, where they are
raised to a mature weight. Midwest then returns the
heifers to members’ farms. In less than 2 years, the business
owned by Midwest and its partners in a four-way
limited liability corporation has grown to about 6,000
cows and 4,100 calves.
Hein lives in Alton, less than a mile from the new terminal.
Alton has seen some decline in its commercial
sector over the past 20 years, but it is now taking important
steps to encourage growth again, says Hein, who is
a member of the city council and whose wife is the
town’s economic development director. There is a new
campground that just opened on the north edge of town,
a new 43-acre industrial park, and a new 25-acre housing
development on the west end of town. Funds are
also being raised for a new library and museum.
Midwest Co-op’s board encourages all co-op
employees to be active in the civic life of their communities.
Co-op officers and staff are “active on fire and rescue
teams, chambers, churches, you name it,” says
Hein. “Our philosophy is: if you are going to live in a
community, be a part of it.” And since Midwest is often
the largest employer and tax payer in the communities
where it operates, it has a vested interest in seeing the
towns thrive, and vice versa.
Keeping current with technology
Keeping ahead of the technology curve is a big challenge
for co-ops, and the new rail terminal with its computerized
receiving and loading systems is only one way Midwest is
doing so. All branches of the co-op are connected by fiber
optic cable, “so accounting and internal communications are
live at all times,” Hein says. Midwest provides full brokerage
service with licensed grain and livestock brokers on staff.
Midwest’s agronomy division is also totally computerized,
and it is developing a state-of-the-art manure-fertilizer
spreading system. With northwest Iowa’s huge hog and cattle
population, there is plenty of manure, which makes excellent
fertilizer and saves farmers big money on fertilizer bills.
But many producers don’t have enough land to take all
the manure generated by their livestock operations, and
application is coming under increasingly strict environmental
regulation to prevent problems with runoff and groundwater
contamination. Hein says a manure management plan
is required before most lenders will finance a new hog barn
or dairy. This often involves getting an easement from neighboring
farmers that agree to take the manure.
With so much manure readily available, it has cut into
sales of commercial fertilizer, always a major source of
income for local farm supply co-ops. Every 1,000-hog building
provides enough manure to meet the phosphorous and
potash fertilizer needs for 160 acres. Midwest Agronomy
Manger Larry Den Hartog says just one of the huge new
dairies moving into the area can take 2,500 acres of fertilizer
sales away.
But Midwest is making the most of the situation by offering
members variable-rate manure spreading service. The
co-op has one computerized GPS manure unit, costing
about $347,000, which is equipped with a grass/alfalfa applicator
bar, and has ordered a second unit from the Netherlands.
These are being used in combination with global positioning
system technology maps that show exactly where
and how much fertilizer can be applied to a field.
Den Hartog designed a mobile holding tank unit that supplies
the manure applicators. “The driver never even has to
get out of the cab it keeps the flow going,” he says, noting
that the co-op charges by the gallon applied. “We’re the first
co-op dealing with variable-rate manure application here,
but Europe is way ahead of us in this technology especially
Holland,” he says, where much of the best land is below
sea level and must be managed very carefully. Den Hartog is
planning a trip to Holland to study their manure management
techniques more closely.
The new applicator bars inject the manure several inches
deep into the earth, getting it down to the roots of the plants for
quicker intake, and making it less likely that there will be any
problems with runoff. The co-op expects to apply 25 million gallons
this fall, and hopes to do 30 million gallons next year.
Den Hartog says the co-op’s board is very supportive of
staying on top of new technologies. “They know we don’t
come to them on a whim; when we request a major purchase
of new equipment, we’ve already worked out the budget, the
hours and the supplies we’ll need to make it pencil out.”
By Dan Campbell
