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Ohio co-op's soy-crushing plant produces for expanding trans-fat-free oil market.

Developing 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.

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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 producer-members 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-fat-free 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.

By Michael Jones

Public Affairs Director

USDA Rural Development, Ohio
COPYRIGHT 2008 U.S. Department of Agriculture, Rural Business - Cooperative Service
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Title Annotation:VALUE-ADDED CORNER
Author:Jones, Michael
Publication:Rural Cooperatives
Date:Jan 1, 2008
Words:670
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