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Chicken feed development.


A tri-continental deal to build a soybean processing plant in Woodruff County, quietly in the makings for about two years now, could be completed during the next few weeks. Projections call for the facility to generate 25 new jobs and annual sales of more than $30 million. The plant will be a wholly-owned division of Taggart and Taggart Seed Co. of Augusta, which is in the midst of obtaining funding for the project.

"We'll get into this one for something under five [million dollars]," says Tommy Taggart, 49-year-old company president. "As soon as we get our financing straightened out, we're ready to go."

The deal represents the largest single-year investment for Taggart and Taggart, and if projections hold true, the cash stream from the plant would almost double the annual revenues of the family-owned enterprise to around $70 million.

The construction period is estimated to last 8-10 months, and if the bankers come through in timely fashion, the facility should be ready for the 1990 harvest.

Standing in the wings to assist the project is Credinvest International, a multi-national investment firm owned by a group of 10 European companies. Credinvest has pledged its assistance to help Taggart and Taggart market the soybean oil that will be produced at the Augusta plant.

The commitment should prove to be a significant aid in obtaining funding for the project. Selling the oil can make or break a soybean processing operation.

Soybean meal geared toward an ever-growing demand by poultry growers will account for much of the plant's production, but soybean oil typically accounts for about a third of an extraction plant's total revenues.

The Augusta facility is scheduled to operate around the clock with a capacity for processing 500 tons of soybeans per day, in the neighborhood of 16,000 bushels. With 11 pounds of oil cited as a normal per bushel yield, that peak level equates to about 88 tons of oil daily.

Credinvest has worldwide marketing connections and strong trading ties with Algeria, which imports more than 90 percent of the vegetable oils refined for its domestic consumption. The North African country, once enlisted as an investor in the deal along with Credinvest, is likely to be on the receiving end of soybean oil shipments originating from Augusta. If needed, Credinvest has also committed up to $1.2 million to back the project.

As it stands now, Taggart and Taggart intends to borrow the necessary start-up capital from the agriculture credit division of Wells Fargo in Denver, a lender which has an established relationship with the company providing operational funds for its grain business.

"If they require additional capital, Credinvest stands ready to help, but it's uncertain if the banks will request that," remarks Bill Adcock, an agribusiness consultant helping orchestrate the project.

Adcock, who has temporarily relocated to Augusta from Atlanta, will be coordinating the construction phase and will also stay on to help manage the processing plant for up to three years.

By industry standards, the Augusta facility - with its 500 ton per day production capacity - will be smaller than most. The average plant size of the 70 soybean processing plants in America is 1,761 tons daily, according to market research.

Arkansas is home to four facilities: Archer-Daniels-Midland in Little Rock, Riceland Foods in Stuttgart, Quincy Soybean Co. in Helena and Ag Processing Co. in Van Buren, which has been closed for two years. As is the industry norm, production capacity figures for these individual plants are considered confidential.

Some might question the viability of a new (albeit small) plant given the current overabundance of processing capacity in the United States. That statistical fact can be deceiving though, according to Adcock.

"The rock throwers will say that about 63 percent of [national] soybean capacity is in use, which means you have a lot of idle capacity," concedes Adcock, whose accent leaves no doubt about his North Carolina roots.

He points out that much if not all of that 37 percent processing capacity is not in use for reasons other than demand. Many of those plants are old and inefficient. Some are geared toward export markets and are poorly located to service domestic markets cost effectively.

"The naysayers have not recognized the opportunity for setting up a cottage-size facility to service the needs in Arkansas," Adcock reports.

An estimated 90 percent of soybean meal output by the new plant will be directed toward poultry markets lying primarily within a 100-mile radius north and west of Augusta. Sustained double-digit growth of poultry consumption in past years and projections for a continuation of this trend are touted as underlying support for the project.

The remaining 10 percent of meal production will address demands by area hog, catfish and cattle markets, again primarily within a 100-mile radius of Augusta.

The proximity to these markets is projected to give the new plant an edge over competitors. "We're not getting in this to put anyone out of business," remarks Tommy Taggart, seated behind the wheel of his Chevy pickup truck. "We just see an opportunity in the growth of poultry."

Geographic location relative to soybean growers is also cited as a key factor in the Augusta project. In 1988, a total of 830,000 acres of soybeans were harvested in Woodruff County and the six surrounding counties of Jackson, Poinsett, Cross, Prairie, Monroe and White. That acreage total produced 21.1 million bushels of soybeans.

"We know we can't capture all of that," Taggart says of both the available supply of soybeans and demand for soybean meal in the area.

Close proximity to both buyers and sellers is an important variable in controlling transportation costs and should contribute to higher prices for soybean farmers and lower prices for feed buyers.

Taggart and Taggart will be contracting with independent truckers to move the processed soybeans to the end-user. The company also has access to the Union Pacific rail line and barge service to the Mississippi River via the White River.

From the cab of his white Silverado, Tommy Taggart and a visitor are surveying the plant site, now a vacant lot. It is located off Arkansas Hwy. 33B adjacent to Taggart and Taggart's old seed cleaning and storage operation, which will be converted for use in servicing the soybean processing facility.

A short drive to the west is the family's homestead and a portion of the 3,000-plus acres the Taggarts farm in Woodruff and White counties. Brother Charles oversees the farming business while Tommy manages the grain merchandising operation - the mainstay of corporate revenues.

"We bought and sold about $33 million worth of grain last year," Taggart discloses. "You don't get to keep a lot of it, but you do get to handle it."

The company employs 50 workers and ranked as 74th largest U.S. grain company with a storage capacity of more than 11 million bushels, according to the 1989 Grain Guide. In addition to the seed company site, grain operations include Port Augusta (built in 1978) with storage and shipping facilities on the White River and buying and storage points in Alicia (Lawrence County), Macks (Jackson County) and Morning Sun (White County).

THIS MULTIMILLION dollar deal has taken some twists and turns before it coalescing into its current format. Initially, plans called for the building of a facility capable of processing 700 tons of soybeans per day. That was when agribusinessman Murry Lockhart, head of Lockhart-Coleman Co., was advocating the idea of a soybean plant in Augusta.

Lockhart, a local competitor with Taggart, was to hold a 40 percent interest in the project with another 40 percent divided among an investment group that included Taggart and Taggart among others. The remaining 20 percent was to be taken by the shareholders in Credinvest International:

* Extraction De Smet, an engineering firm in Antwerp, Belgium involved in the design and assembly of agri-related processing plants.

* Interprise, a holding company in Brussels, Belgium.

* Stolz-Sequipag, a Paris-based manufacturer of grain handling equipment.

* Argor, a holding company in Luxemburg.

* Silo Verfahrens AG, a Swiss holding company involved with innovative grain storage methods.

* Banque Internationale a Luxembourg, a large Luxemburg bank.

* Arbed, a large steel processing and trading company in Luxemburg.

* Siemens, the Belgian affiliate of the German electrical conglomerate.

* Socfinasia, a Luxemburg company with plantations and processing facilities in Malaysia and Indonesia for palm oil and rubber.

* Sotramar, a company in Antwerp, Belgium involved with the transport and export of goods.

At one time the Oil Ministry of Algeria also factored in as a would-be investor.

Those plans fell apart when Lockhart died shortly after inking the deal in February, and without his leadership, the deal was in limbo.

The plan was later resurrected with Taggart and Taggart filling the role of Lockhart-Coleman. Logistical problems altered that, and shortly after Labor Day, the current downsized version with Taggart and Taggart owning 100 percent of the venture went forward.

PHOTO : The old Taggart and Taggart seed plant in Augusta will help service the soybean processing facility, which will be built nearby.
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Title Annotation:Taggart and Taggart Seed Co.
Author:Waldon, George
Publication:Arkansas Business
Article Type:company profile
Date:Oct 9, 1989
Previous Article:Walking in the park.
Next Article:The clues to executive compensation.

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