Study: Area can support soybean crush
A feasibility study on Minnesota Soybean Processors' (MnSP) proposed soybean crush in Brewster touts the project as financially viable, but a producer survey shows more support is needed to get the project off the ground.

MnSP is proposing construction of a $50 million, 70,000-bushel-a-day soybean crush just north of Brewster. The new, farmer-owned cooperative currently has an option on an 81-acre tract of land, MnSP Chairman Bob Kirchner said.

In an interview Monday, Kirchner appeared optimistic about the feasibility study, which covers everything from world markets to local soybean meal consumption.

Perhaps the most positive statistic is the long-term return on investment, estimated at 30 percent for normal market conditions. Even at a five-year low in the soybean crush market, the return would still be 14 percent, the study shows.

The figures are based on a funding formula of 50 percent farmers' equity and 50 percent borrowed funds. At 50 percent equity, farmers would need to invest about $21.5 million to get the plant started.

South Dakota Soybean Consulting Consortium, an entity of South Dakota Soybean Processors (SDSP), conducted the feasibility study. MnSP has modeled its plant after SDSP's 80,000-bushel-a-day plant in Volga, S.D.

Kirchner said he was surprised at one finding of Pro Exporter Network, a consulting firm hired to analyze the project in conjunction with SDSP. With the MnSP soybean crush using 25 million bushels of soybeans a year, the firm's computer-generated model shows a price improvement of only 5.4 cents per bushel for area farmers - about half what MnSP expected, Kirchner said. He said he was optimistic that the actual price improvements would be higher.

Other findings of the feasibility study include:

* The initial plant would employ 36 people, not counting management.

* Expanding the operation to 140,000 bushels a day would cost $16 million, but also lower the per-bushel investment cost through improved economies of scale.

* The plant would be built with identity-preserved processing capabilities, but wouldn't do any IP processing in the near future due to a lack of contracts, Kirchner said.

* The initial plant would produce 140,000 tons of crude soybean oil a year. MnSP has proposed an oil refinery in the future, but until then, "We're working toward getting an oil marketing agreement to complete the marketing plan," Kirchner said.

While the study numbers look good in general, the results of a farmer survey reveal a bigger challenge.

Around 7,500 surveys were sent out to soybean producers in late September to gauge interest in the project. Only 714 responded, with 559 expressing an interest in the project. Kirchner cited a busy harvest season, lack of information and distance as reasons for the poor response. In fact, response was high and mostly favorable in Nobles, Rock, Murray, Cottonwood and Jackson counties, which were more likely to hear about the project through local media, he said.

Currently, MnSP is planning public presentations on the feasibility study and setting a timeline for the project.

"All the infrastructure needs have been addressed ... and they don't see any problems achieving the needed infrastructure," Kirchner said.

MnSP must eventually obtain a permit from the Minnesota Pollution Control Agency. Kirchner said the co-op will apply for the permit once an engineer's design is complete.

The feasibility study also states that "An effort between MnSP and SDSP to form a joint alliance is proceeding in the early stages." It goes on to state that the cooperatives share similar philosophies and could save money through successful negotiations.

"At some point in time, it could lead to a management contract," Kirchner said.

TENTATIVE TIMELINE

For MnSP soybean crush

MPCA PERMIT APPLICATION: June 2000.

MPCA APPROVAL: April 2001.

CONSTRUCTION BEGINS: Sept. 2002.

PLANT STARTS OPERATION: Dec. 2002.