Published on 01/29/04

Co-op stock sale 'put up, shut up' time for farmers

By Dan Rahn
University of Georgia

It's put-up-or-shut-up time for Southern farmers who may resent or envy the share the "middle man" gets of their crops.

"Farmers always say the guy they sell their crops to is the one who makes the most money," said Robert Carlson, chief executive officer of Farmers Oilseed Cooperative of Claxton, Ga. "Now they have a chance to be that guy."

The FOC began offering stock in the "new-generation cooperative" last December. Carlson and others are crisscrossing the state, meeting with potential investors. The co-op plans to build a $66 million processing facility near Claxton, Ga.

The plant would crush 900 tons (30,000 bushels) of soybeans or 700 tons of canola or peanuts per day. It would supply a refinery that would produce 300 tons of edible oil per day, focusing on high-value retail and food service products.

Sales slow

So far, farmers haven't been beating down doors to get in on the deal. The co-op must sell at least 8 million shares and aims for 11 million. But in late January, sales had reached only 280,000 shares.

To invest, a farmer must buy a $500 share of common stock and put down a 10-percent deposit on at least 2,500 shares of class A stock at $2.45 per share. The latter are tied to the right and the obligation to sell oilseed crops to the co-op. A 10-percent discount is available until March 15.

"I don't think the money is that big an issue," said George Shumaker, an oilseeds economist with the University of Georgia College of Agricultural and Environmental Sciences.

Three hurdles

Three things, he said, are holding back farmer investors.

One, "trying to grow a new crop for a market that doesn't yet exist is hard to visualize," Shumaker said. Part of the uncertainty is that Georgia farmers aren't familiar with the new co-ops. Successful examples, though, are plentiful in the Midwest.

In the co-ops they've known, someone starts a business and invites others to buy into it. New-generation co-ops start with a group of farmers who obligate themselves to making the venture work.

A second restraint, Shumaker said, is that for most Georgia farmers, oilseeds aren't their biggest concern. Cotton and peanuts are their big crops. Canola, in particular, is a crop few Georgia farmers have grown. But Shumaker says it has the sweetest potential in the new co-op.

Canola gold

A few farmers here have successfully grown the winter crop but couldn't make it work with the nearest market in Canada. The co-op would provide a local buyer, and Shumaker pegs the income for co-op members at $2.50 per bushel above the market price.

A third hold-up, he said, is the discouragement farmers are hearing from buyers, grain elevator operators and others who would be competitors. "These are people they've had long-term relationships with," he said. "These are people they trust."

Both Shumaker and Carlson, a 30-year veteran of the oilseed industry, say they're confident the venture will succeed if the needed farmer investments materialize.

"I don't think there's any doubt they will be successful if they get the funds," Shumaker said. "Their business plan is sound. You can see in the Midwest how competitive these co-ops can be in a market that seems to be driven by large corporations."


If the co-op does succeed, he predicts it will lead to similar co-ops for other Georgia crops. The one abiding question, though, is whether enough farmers will invest to get it started.

Carlson said farmers must appreciate its value-added nature. "And they have to be willing to think long-term," he said. "It will be late 2007 before they get the first nickel back."

Will farmers come up with the money? Carlson isn't making bets. "I'm much more confident in the plant succeeding than I am in getting the investment funds," he said.

(Dan Rahn is a news editor with the University of Georgia College of Agricultural and Environmental Sciences.)

Dan Rahn is a news editor with the University of Georgia College of Agricultural and Environmental Sciences.