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PGG seeking alliance with multinational corporation

PGG is seeking approval from members to pursue an alliance with multinational corporation CHS Inc.


EO Media Group

Published on February 1, 2014 3:57PM

Pendleton Grain Growers, a longtime local farmers’ cooperative with roots back to the Great Depression, is looking to partner with a multinational agribusiness collective to spur new growth and investment.

A letter sent Thursday to approximately 1,700 PGG members across Eastern Oregon announced the board of directors has entered into a non-binding agreement with CHS Inc. of St. Paul, Minn., to pursue a possible alliance.

Details so far are scarce, but General Manager Rick Jacobson said such a deal would not affect the co-op name, brand, business model or its local control. The added capital would help members improve their operations and meet changing needs, he told the East Oregonian editorial board.

PGG’s financial performance over the past decade has not allowed the organization to stay current or maintain adequate reinvestment in business, according to the letter signed by board chairman Tim Hawkins. The co-op signed a loan agreement Jan. 20 with CHS Capital for $10 million.

Money will go to upgrading grain elevators, technology and providing affordable agronomic services, Jacobson said. Agriculture is changing, especially as precision farming gains steam in the Northwest.

“This is about the future,” Jacobson said. “I think it’s very exciting.”

In order to pursue and later finalize any alliance, it must be approved by the membership.

If a deal is on the table, PGG will hold a special membership meeting. The board, meanwhile, is in lockstep working to do what’s best for local farmers, Jacobson said.

“If we’re going to be a meaningful organization to our members, we have to make some moves,” he said. “We could continue as we are. But you cannot save your way to prosperity.”

The history of PGG dates back to the stock market crash of 1929. It was incorporated the following year, one of the newly formed local cooperatives to make up the regional North Pacific Grain Growers, as farmers united to protect themselves against tumbling wheat prices.

What started with 71 members its first year has grown into an organization worth more than $17.5 million. About 230 employees work for PGG, which includes facilities in Pendleton, Hermiston, Milton-Freewater, Athena, Island City and Joseph.

Jacobson joined PGG as interim CEO after Allen Waggoner resigned May 9, 2012. Jacobson became general manager later that year.

Profit returns have been marginal for decades, Jacobson said. The board determined it should explore the possibility of an alliance with CHS to survive and grow.

The two organizations are no strangers. They formed a joint venture 15 years ago at the Feedville plant in Hermiston and have a long history of working together, Jacobson said. With 10,000 employees in 24 countries, CHS is a producer-owned Fortune 100 company diversified in energy, grain and foods.

Preserving the co-op model and local control is at the front of directors’ minds, Jacobson said. But PGG must find the resources to stay in front of the industry.

“When you look at all the things a company needs to remain vibrant, we have to have capital,” he said. “Nobody wants to see a company with the tradition of PGG backing up ... it probably hasn’t played the role it should have over the past couple decades. And it can, but we need the leg up to get us there.”

Jacobson knows not all members will be thrilled with the proposal, but insists it is the best avenue for PGG to explore.

“It’s to keep their own destiny within the co-op model. To me, that’s the deciding factor,” Jacobson said. “(Members) see a co-op as part of their farm, and we need to make it a good part.”


Contact George Plaven at gplaven@eastoregonian.com or 541-564-4547.


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