Incorporated: 1923
NAIC: 111140 Wheat Farming; 325311 Nitrogenous Fertilizer Manufacturing
SIC: 0111 Wheat; 2873 Nitrogenous Fertilizers
The South Dakota Wheat Growers Association is an agricultural cooperative whose members, despite the name, now grow more corn and soybeans than they do wheat. The Aberdeen, South Dakota-based organization serves 16,000 equity holders and 3,600 farmers (who do at least $5,000 in business each year with Wheat Growers) in the James River Valley, which runs through the eastern portion of North and South Dakota. Wheat Growers provides grain-handling services that market more than 90 billion bushels of grain each year through 16 rail loading facilities, including four high-speed train loading facilities. The co-op also offers condo storage options, leasing space to members on a time-share basis; a bin probing service that takes a sample of a farm's grain, analyzes it, and offers guaranteed pricing; and an off-the-farm grain-buying program that transports a crop to the most profitable market.
Wheat Growers provides agronomy products--including fertilizers, herbicides, insecticides, and nutrients--and services, such as the delivery and application of the products, and seed treatments and inoculation. Wheat Growers also offers financing options through its Crop Input Loan and Operating Loan programs.
The organization is also involved in three joint ventures: Dakota Feeds, a feed and nutrition provider formed with partners Land O'Lakes, Farmland Feeds, and North Central Farmers Elevator; James Valley Grain, LLC, a train loading facility operated with Norway Spur Farmers Cooperative; and Petroleum Partners, LLC, a bulk petroleum products provider run by Wheat Growers and four other cooperatives, serving northeast South Dakota. Wheat Growers is governed by a 19-member board of active producers representing six districts, backed by 54 delegates who serve as the liaison with the general membership.
Early 20th-Century Rise of Farmers Elevators
When the 1900s dawned, grain farmers of the upper Midwest began to band together to gain much needed economic leverage. Unable to store grain themselves, farmers were reliant on their local grain elevators, which themselves were too small and were forced to sell the grain and ship it to the regional facilities of millers or grain merchants. Because so much grain was available at harvest time, commodity prices were depressed for farmers, but once the grain made its way to regional sites the economics changed, resulting in more realistic prices. In order to receive their rightful share of the profits that resulted from their hard labor, grain farmers responded by forming either marketing cooperatives or wheat pools.
Wheat Growers Formed: 1923
Wheat Growers was launched in 1923 when wheat prices were especially depressed, resulting in a rash of farm bankruptcies. A conference was convened in Sioux City, Iowa, where representatives from a number of states met to discuss ways of improving grain prices. Here the president of the Montana Wheat Growers Association, Dwight Cressap, told the participants how wheat pools had been successfully launched in Montana, Oregon, and Washington. One of the delegates, South Dakota Lt. Governor Carl Gunderson, was so impressed that he called for a meeting of interested participants to form a South Dakota wheat pool. About 30 members of the state legislature attended the meeting held at the state capital and a tentative agreement was reached to form the South Dakota Wheat Growers Association.
Wheat Growers established its headquarters in Aberdeen, South Dakota, and an organizational committee of 12 was selected. The number soon increased to 14 after the committee decided to divide the state into 14 districts. A wheat pool contract was drawn up, and the committee established a goal of one million bushels and a deadline to achieve it. Once enough farmers signed on, the committee hired a general manager of the association, Charles W. Croes, who was given a salary of $250 per month. Croes had attended the first organizational meeting and been selected to the organizational committee. He grew up on a farm near Wessington, South Dakota, but in addition to knowing firsthand the plight of growers, Croes was an experienced, banker, lawyer, and legislator. He would serve as Wheat Growers' general manager for the next 41 years.
The underlying tactic of the wheat pool was to withhold grain from the market, to regulate the flow to the market to improve the price--rather than have grain flood the market at harvest time and depress the price the farmers received. Initially, Wheat Growers owned no grain-handling facilities and had to rely on local elevators to ship its grain, which came from member farmers who signed commitment contracts to deliver a certain amount of grain to elevators that were allied with Wheat Growers. The improvement in prices from pooling was not especially dramatic in the early years, but a number of other factors combined to result in much better grain prices for farmers in the 1920s. Everything would change, however, when the stock market crashed in the autumn of 1929 and the country was soon plunged into the Great Depression of the 1930s.
Conversion from Pool to Co-Op and the Depression
At their annual meeting held in June 1930, the members of the South Dakota Wheat Growers Association considered whether to liquidate the organization and split the organization's reserve funds among its members. Instead, they decided to convert Wheat Growers into a farmer-owned cooperative. Hence, the group conducted its last pool in 1930-31. During a transition period, elevators were acquired in Andover, Bristol, Columbia, and Frankfort, South Dakota; Wheat Growers began to operate these on a cooperative basis in 1931. As well, the federal government had stepped in to support grain prices through the creation of the Grain Stabilization Corporation, putting an end to need for wheat pools. In 1933 the Roosevelt administration formed the Commodity Credit Corporation to stabilize and support farm income and prices.
Despite federal efforts the 1930s were a dark period for U.S. agriculture, no less so for Wheat Growers, which was soon on the verge of folding. By 1934 the co-op's staff was limited to just Croes, who took a steep cut in pay to keep the co-op going. The situation was so dire that Croes was authorized by the board to shut down the elevators at his discretion. Croes and Wheat Growers hung on, however, and in 1934 Croes seized an opportunity to make use of the elevators to supply feed grains to farms, made possible by a new government loan program for feed.
This business not only provided much needed revenue but also helped to establish Wheat Growers as an elevator operator. Six elevators were leased from the Omaha Bank for Cooperatives in 1937, and another lease was taken on the Farmer's Elevator in Aberdeen. Two years later Wheat Growers was able to buy all seven of these facilities, supplemented by the acquisition of five other elevators. Another, located in Glencross, was bought from the federal government in 1940. Also in 1940 Wheat Growers introduced its own brand of feed under the Blue Diamond name.
Postwar Growth
Following the interruption of World War II in the early 1940s, Wheat Growers resumed its growth. In 1945 it acquired a pair of elevators, and the following year an elevator and additional warehouses were picked up in auction. One of the new elevators was then supplemented with a pellet mill in 1947, allowing Wheat Growers to market Blue Diamond pelleted feed. A year later, when it marked its 25th anniversary, Wheat Growers had a membership of 5,000 farmers who were served by 15 facilities. In fiscal 1948 the co-op posted record sales of more than $3.3 million.
Grain harvests were plentiful in the late 1940s, leading to surpluses and falling prices, forcing the Commodity Credit Corporation to step in and acquire large amounts of grain to stabilize the situation. As a result, the government needed storage space and in 1953 Croes reached an agreement with Commodity Credit Corporation, which contracted to use 85 percent of a new grain-storage facility in the Aberdeen area to be constructed by Wheat Growers. A 550,000-bushel terminal was ready for the 1954 harvest, but soon proved inadequate to meet the needs of both the government and the co-op's members. More space was added in 1956, capable of handling a further 600,000 bushels. Two years later another 650,000 bushels of space was tacked on to the Aberdeen terminal, followed by a 250,000-bushel building, so that by the end of the 1950s the Aberdeen complex enjoyed a capacity of more than 2 million bushels.
Fertilizer Business Entered: 1964
At the start of the 1960s a new feed mill complex was completed in Bath, South Dakota. Two elevators were relocated here and production of Blue Diamond feed was transferred to the new plant. In 1962 Wheat Growers became involved in the fertilizer business, building a dry fertilizer warehouse at Bath, where other fertilizer assets would later be added to the mix. A liquid fertilizer supplier, Wheeting Farm Service, was acquired in 1964 and relocated to Bath, and anhydrous ammonia storage and the fabrication of liquid fertilizer attachments were incorporated into the business as well.
The 1960s also saw a changing of the guard in management. In 1964 the 78-year-old Croes stepped down as general manager after serving more than four decades. He passed away three years later. His replacement, Warren Grebner, wasted little time in making his mark, taking Wheat Growers in a number of directions. He expanded the co-op's reach to the south in 1965 by acquiring the 500,000-bushel elevator in Huron, South Dakota. Grebner also filled in the one gap that prevented Wheat Growers from being a full-service farmer cooperative. In 1966 the co-op began to offer members petroleum products after acquiring Tulare Oil Company.
Also during this period Wheat Growers forged an alliance with Farmland Industries, then known as Consumer Cooperative Association (CAA), which had invested considerable funds to establish research laboratories that developed "open formula" feed. Wheat Growers elected to cease production of Blue Diamond feeds and instead manufacture and market CAA feeds. Unfortunately, on the very last day of the 1960s, a fire destroyed the Bath feed mill.
Weathering Petroleum Shortages
The Tulare acquisition proved to be a godsend to Wheat Growers' members in the 1970s, when the OPEC oil embargoes caused major oil companies to all but abandon rural America. Wheat Growers was able to keep its members supplied with gasoline and other products, especially during the periods of shortage. The co-op expanded its petroleum business in 1975 with the addition of Huron Oil, Andover Oil, and Langford Oil. Petroleum sales grew steadily through the remainder of the decade, increasing from 3.8 million gallons to 7.8 million gallons in 1979.
The 1970s brought changes on a number of other fronts as well. Following the fire that destroyed the Bath feed mill, Wheat Growers replaced the operation by acquiring Hub City Feed and Seed and also added a wholesale seed business. The co-op expanded its grain-handling capabilities in the 1970s, acquiring the one-million-bushel Western Grain elevator in Redfield, South Dakota, in 1971. The following year another Redfield elevator was added and two years later made into a seed-cleaning plant. Also in 1972 an elevator in Cresbard, South Dakota, was purchased and 100,000 bushels of capacity was added to the Mallette elevator. In addition, a pair of dry fertilizer plants were opened in the 1970s, and agronomy services were expanded through the acquisition of new locations.
Expanding Transportation and Other Services
The 1980s brought new multicar freight rates by railroads. Some of the co-op's elevators laid sidetrack to accommodate the loading of multicar trains, which grew from 26 cars to 54 cars in 1983. To make unit trains even more cost-effective, some of the grain-handling facilities were expanded and renovated and switch engines were bought to speed up loading. About 60 percent of all Wheat Growers' grain was shipped on unit trains by 1986.
On other fronts in the 1980s, another 320,000 bushels of storage space was added to the Chamberlain elevator in 1987. A year later, Wheat Growers purchased Cargill elevators located in Aberdeen and Athol, while an elevator located in Milbank was sold to another cooperative. Because a pipeline would no longer carry the co-op's liquid nitrogen fertilizer to its terminal, Wheat Growers joined forces with Farmland in 1988 to establish their own two-million-gallon storage terminal that could be supplied by rail.
Wheat Growers also opened a new dry fertilizer plant in Tulare in 1986, followed a year later by the addition of a fertilizer storage plant in Cresbard. The co-op then expanded its fertilizer business into North Dakota with the acquisition of Oakes Fertilizer Company. The petroleum operation was also enlarged through the 1986 acquisition of Brown County Co-op and James Valley Co-op, and the unit closed out the decade by buying several bulk oil plants from Harms Oil Company of Aberdeen.
New Markets and Value-Added Products
Wheat Growers became involved in agricultural processing for the first time in the 1990s. This was in response to a 1987 survey conducted with co-op members, who indicated they wanted Wheat Growers to process their raw materials into value-added products that would open up new markets. As a result, Wheat Growers and Farmland Industries joined forces once again to form Heartland Grain Fuels, LLP, which opened an ethanol plant in late 1992 to produce a gasoline supplement.
Following the passage of the 1996 Farm Bill that eased some regulations and eliminated the requirement that farmers leave land unused in order to qualify for crop subsidies, many Wheat Growers' members began producing corn to be sold for ethanol or soy beans, which were becoming more valuable due to changes in the diets of many Americans. Some members stopped growing wheat completely, prompting the co-op to ask members if they wanted to change the organization's name. The consensus was to keep the Wheat Growers name, which the members had devoted decades to promoting.
McLaughlin Farmers Cooperative Acquired
Despite its involvement with ethanol, the handling of grain, fertilizer, feed, and petroleum remained Wheat Growers' core business in the 1990s. The co-op expanded to the west in 1991 through the acquisition of the McLaughlin Farmers Cooperative, which brought with it grain, fertilizer, and seed operations. Later in the decade the Maple Valley Farmers Co-op based in Elendale, North Dakota, was added, strengthening Wheat Growers' footprint in North Dakota, although the Maple Valley facilities were subsequently sold.
During the 1990s, Wheat Growers added new products and services for its members, including the addition of hybrid seeds; a financing program to help buy agricultural "inputs" and services; more marketing information made available to growers; a program to connect farrowing producers with farmers who finished hogs; and precision farming services, such as grid sampling and advanced variable rate fertilizer application using global positioning technology.
Not every member of Wheat Growers was satisfied with the co-op, however. In 2000 a number of farmers called for the resignation of board members who had supported the proposed construction of a 110-car grain-handling unit in one community while refusing to build a grain dryer in another. The essential complaint was that Wheat Growers favored the large producers over smaller growers who made up the bulk of the co-op's membership. Two years later more members were upset over Wheat Growers' decision to close small elevators in Stratford and Hecla, South Dakota, and Ellendale, North Dakota, thereby forcing growers to bear the additional expense of hauling their crops to the co-op's larger elevators. Wheat Growers maintained that the smaller elevators were simply no longer economically viable. The three elevators were later sold.
Wheat Growers reached out to members in 2003, conducting a customer-needs assessment. The co-op was told that it should improve on pricing, marketing, and communications. Over the next few years Wheat Growers attempted to address these concerns. It increased the marketing of ethanol by expanding plants, and instituted the Power Bin Probe program to help growers monitor and better market their grain. At the same time Wheat Growers continued to invest in more storage and additional tracks to accommodate unit trains.
Principal Subsidiaries
Dakota Feeds LLC; Heartland Grain Fuels, LLP; Petroleum Partners LLC.
Principal Competitors
Cargill, Inc.; Country Pride Cooperative; Northern Growers LLC.
Further Reading
"Farmers Upset with Wheat Growers Decision to Close Elevators," Associated Press Newswires, October 2, 2002.
Fennel, Ian H., "South Dakota Wheat Growers Co-Op Selling Grain Elevators," Aberdeen (S.Dak.) American News, September 26, 2002.
Keen, Russ, "Brown County, S.D., Wheat Farmers Protest Board Members' Policies," Knight-Ridder/Tribune Business News, February 3, 2000.
Miller, Ruth, South Dakota Wheat Growers: The History of a Cooperative, Sioux Falls, S.Dak.: Vista Publication, 1998, 49 p.
Schofer, Dan, "South Dakota: Great Faces, Great Places--and Great Value-Added Opportunities," Rural Cooperatives, September-October 2007.
"Wheat Growers Grow Corn, Soybeans but Name's the Same," Associated Press, October 4, 2004.
— Ed Dinger
