A. E. Staley Manufacturing Company (1922 - 1980s): Work with Soy

by William Shurtleff and Akiko Aoyagi

A Chapter from the Unpublished Manuscript, History of Soybeans and
Soyfoods, 1100 B.C. to the 1980s


©Copyright 2004 Soyfoods Center, Lafayette, California

The great majority of the world's soybeans are crushed as the first step in their utilization. Crushing yields two basic products: unrefined soy oil and defatted soybean meal. The oil is then typically refined, and often hydrogenated to make products such as margarine or shortening. Most of the meal is used as livestock feed, but some is used to make modern soy protein products such as soy flour, soy protein isolates and concentrates, and textured soy protein products. The soybean crushing industry dominates soybean processing in America and worldwide. Five US companies and the cooperative soybean crushers have pioneered in the development of this mighty industry.

A. E. Staley Manufacturing Company

(1922)

The A.E. Staley Manufacturing Company (referred to henceforth as "Staley") was the first major company existing today to begin crushing soybeans to yield oil and meal; they started in 1922. Indeed Mr. A.E. Staley was one of the first Americans to see the great potential of the soybean as a source of oil, meal, and flour. He was a true pioneer in the days when the soybean was so little known that national production and acreage records were not yet kept. He is generally regarded as the father of the soybean crushing industry. In 1981?? Staley was the third largest soybean crusher in America.

Augustus Eugene (Gene) Staley was born on 25 February 1867 in a log cabin in Randolph County near Julian, North Carolina, on his father's 265-acre red clay farm. When he was 6 or 7 years old, his father attended a Methodist conference in North Carolina. A church missionary who had returned from China attended the conference and brought with her roughly a bushel of Chinese soybeans. She told of their great food and commercial value, and gave Gene's father a handful. He took them home and repeated the story to his family. The father did not want to be bothered with the new beans, but Gene was interested so he planted them in two rows in the family vegetable garden, weeded them, picked them, and saved the seed for planting the next year . . . which he did. The missionary had said they would be good for the soil; young Gene believed this, even if his father did not. According to Dies (1942), "for a time, soy was added to the family diet." (In the 1930s, when Gene Staley recalled his youthful experience with the soybeans, he added, "There are still some soybeans in North Carolina parented by that original handful from China which I planted when I was a boy" (Forrestal 1982; Soybean Digest 1941; Staley Mfg. Co. 1947??).

Busy with farm work, Gene dropped out of primary school after a few years. At age 14 he successfully sold a wagon load of his father's produce in the nearest town. Soon he decided he liked selling better than farming, so he left the farm in 1883 (at age 16) and went on the road selling food products, including starch, for various companies. In 1898 he founded his own company, A.E. Staley Manufacturing Company?? in Baltimore, Maryland, and began packaging and selling "Cream" corn starch. In 1906 he incorporated the company in Baltimore. In 1909, wanting to manufacture his own corn starch, he bought a plant in Decatur, Illinois. In March 1912 the plant started production; he was a married man with 5 children, doing well. After a difficult period from 1913 to 1916, in which Staley had to shut down his plant and almost went bankrupt, he recovered skillfully and soon had built one of the largest corn refining businesses in America. Always eager to explore new vistas, in 1920 he pioneered the idea of professional football in America, founding the first league. His Decatur Staleys, men that both worked in his plant and played semi-pro football, went on to become the famous Chicago Bears.

By 1916 Staley was concerned that the Midwest was being slowly "corned" to death by successive plantings of corn. As he watched corn yields drop, he realized (recalling his childhood experiences) that soybeans might be just the crop needed to rebuild the land through crop rotation. At the same time, Staley had been watching how the growing of soybeans had been spreading westward from the Carolinas into Illinois and other Corn Belt states. He realized that if a soybean processing plant were established in Illinois it could serve as a market for these soybeans, provide a supply of locally produced oil and meal, and help America become less dependent on oils from East Asia. Staley's further investigations at the University of Illinois and other research centers firmly convinced him that the soybean was a crop with great potential, and moreover one that could help his company achieve growth and profit through corporate diversification. He also felt that the soybean's great potential had been overlooked. It needed someone to champion its cause in America. A true missionary at heart, Gene Staley decided to become that person. His trusted "sixth sense" told him he was on the right track.

The immediate problem, however, was to find a way to build up local soybean production to the scale that could support a commercial processing plant. So from 1916-1922 Staley had many representatives of his company travel throughout the Midwest; they passed out leaflets to farmers, extolled the virtues of the soybean, and encouraged farmers to try growing soybeans in rotation with corn (Staley 1947). In 1920 to prove that he was serious about getting into soybean processing, Staley ordered two Anderson expellers. Then in June 1922, after 2 years of equipment and plant construction, the company published and circulated an historic announcement:

The A.E. Staley Manufacturing Company announces that in response to the general and urgent desire on the part of the farmers of central Illinois, it has been decided to install a soybean plant in conjunction with the Decatur starch and glucose manufactory.

A satisfactory building is now in readiness. Several expellers have been purchased and delivered. Bean dryers are under construction. Storage for 150,000 bushels of beans is ready for use. The plant is planned so that large increases in capacity may be had without expensive changes. The first unit will have a capacity of about 800 bushels [13.6 tonnes] a day. It will be finished in ample time for the 1922 harvested crop (Forrestal 1982).

At about the time of this announcement, Gene Staley made a prediction, which would later come true: "The day will come when our plant will produce more soybeans than corn."

On 30 September 1922 Staley's new soybean crushing plant went into operation. His first actual purchase of beans occurred on September 28, from Andrews Grain Company of Walker, Illinois; 1,547 bushels at $0.9975 a bushel. Subsequently 5,674 bushels were purchased from various sources. However after operating for only 16 days and producing 209,300 pounds of meal and 42,036 pounds of oil, the expellers ran out of beans and had to be shut down. Later more beans were found, but the new mill was in operation for a total of only 74 days in 1922 and 57 days in early 1923. When the 1924 season approached beans were rather plentiful, but at $1.50 a bushel. Although soybean production and acreage in Illinois were now growing rapidly, times were still hard. A letter written by Gene Staley in May, 1924, in response to an inquiry from West Virginia, said, in part: "The result of our experience in the soybean industry so far has been both unprofitable and discouraging, but it is our intention to leave the machinery in our plant for another year. If the operations are not profitable, we'll dismantle the plant and discontinue the soybean business altogether."

Fortunately 1925 was a good year. The company bought almost 70,000 bushels of soybeans for $1.30 a bushel and stayed in operation for 7 months. This increased to 8 months in 1926. Staley continued to buy all the soybeans that farmers brought him.

Starting in the mid-1920s Staley began to put a lot of effort into expanding the markets for his soy oil and soybean meal. He was convinced that the oil, which had formerly been widely used in soaps and paints, had great potential, if properly refined, in food uses. Staley led the way in refining soy oil (when start??) and in proving its value in margarines and shortenings. In 1930 he sold the first tank car of soy oil to a margarine manufacturer. By 1927 he was also manufacturing soy flour (Horvath 1927). Staley was also concerned that farmers would not be farsighted enough to plant enough soybeans to keep up with his ambitious expansion plans. So he decided to conduct a massive education program throughout central Illinois by hiring a train! He announced that "the newest thing on rails will be the Soybean Special" (Ref??). Working together with the Illinois Central Railroad Company, the University of Illinois College of Agriculture, and Southern Illinois Normal University, Staley put together a promotional marvel. When the Soybean Special rolled out for inspection on March 28, 1927 in Decatur, it was "whistle-tooting proof that Gene Staley was a salesman, an `operator,' an entrepreneurial innovator, and an evangelistic crusader for the lowly bean" (Forrestal 1982). The six-car train contained exhibits and displays on soybean planting, cultivation, processing, and utilization, prepared with the help of Professor J.C. Hackleman of the University of Illinois. It also had two cars converted into motion picture theaters and a lecture car. Between March 28 and April 17, a total of 33,939 people passed through the train as it traveled 2,478 miles and made 105 scheduled stops. Prizes were awarded and Gene Staley even went aboard for some parts of the trip. When a reporter asked Staley if he had any hobbies, the latter replied, "Soybeans--just soybeans." (Forrestal 1982).

The company was thriving by 1930 and in April of that year it moved into a new building, a towering 14-story, 206-foot-high "Castle in the Cornfields." By far the biggest building in Decatur, some said it looked like the state capital!

In 1927-28 the extremely important Peoria Plan was established to help expand soybean production, gain acceptance of soy oil and meal among users, and reduce processing costs (see Chapter 40). Gene Staley was one of the initiators of this idea and a driving force behind its implementation.

In the early 1930s soy meal suddenly became accepted as a livestock feed. Staley developed soybean meal pellets, each the diameter of a broom handle and about 2 inches long, bound together with a little molasses. They were meant to be scattered over the snow across the fields in the wintertime.

In 1932 Gus Staley, (A.E. Staley, Jr.), Gene's oldest son, took over as president of the company, as his father began to retire. Inevitably some comparisons were made. Gene, a giant of a man (who weighed as much as 278 lb) was a natural mixer, gifted with a memory for names and faces; adjectives used to describe him by those who knew him well were "approachable, confident, daring, enthusiastic, friendly, gregarious, honorable, intuitive, outgoing, persuasive, stubborn, trustworthy, visionary, and warm. Moreover, he thought, ate, and slept corn and soybeans" (Forrestal 1982). Gus was almost the opposite, aloof and cautious, though also an excellent businessman. And Gus was never very enthusiastic about soybeans. The profits, he felt, were in corn refining, and the company's share of the soybean processing market was steadily declining, from a high 39% in 1927 (Fig. ??.?).

By the end of the 1930s corn starches and corn syrup were the company's money makers; soy oil, meal, and flour (started by 1933) had to struggle to stay in the black. In 1933 Staley added soy sauce to its product line. The fact that the company had a "fundamental product line centering on food" helped it through the Depression years. In 1936 Time magazine (Ref?? at Ford??) cited A.E. Staley and Henry Ford as the nation's leading champions of soybeans. Ford was the most publicized promoter but Staley was the pioneer, long-time processor. In 1939 or 1940 the company purchased a plant site at Paynesville, Ohio, for crushing soybean. This was the first move toward processing away from Decatur.

The August 15, 1940 issue of Forbes magazine ran a story about A.E. Staley headlined "Soybean Pioneer;" it was subsequently reprinted in condensed form in Reader's Digest. Said Forbes: "Curiously, a man who hated farming has done more for the American farmer than almost any other man alive. A.E. Staley is the great salesman of the soybean, the only new crop of importance in many years."

On 26 December 1940 an era came to an end; A.E. Staley, Sr. passed away of a heart attack in Florida at the age of 73. Described as "a workaholic on a 7-day beat," who loved cigars and was increasingly bothered by diabetes, this non-stop dynamo, risk-taking and picturesque, had founded one of the nation's foremost agriculture-based corporations and helped make "soybeans" a household word in the Midwest (Ref??).

In 1941 Gus Staley got his company out of the soy flour business; although the flour was widely used by bakers and meat packers, it was not profitable. Shortly thereafter, however, World War II began and demand for soy flour skyrocketed. A new plant went into operation in March 1942, producing soy flour?? By 1946 the soy oil and meal were manufactured in a new $2 million solvent extraction plant with a capacity of 550 tons a day. The old expeller system was slowly phased out. During the war the US government bought thousands of tons of Staley soy flour for shipment to European allies for use in bakery products and prepared meats. However the fact that the government insisted that huge amounts of soy flour be produced in a hurry led to overproduction. Warehouses were filled with soy flour. One summer, some of the flour became contaminated by weevils; after deweeviling, it was purchased by the USDA for cattle feed. Because of the soy flour glut, the company decided to try to package the good fresh product in several sizes for national retail sale at grocery stores. They trade-named it Stoy in 1943 and published a 21-page soy flour recipe book to go with it. But American housewives were not very interested and the soy flour, though of good quality, was poorly marketed, so it just sat on the shelves; eventually it got wormy, and had to be recalled. Retail soy flour was, for Staley, a postwar casualty, further increasing the drag soybeans were seen as making on the company's earnings.

Another embarrassing incident in the soyfoods line occurred in 1947. The maker of La Choy soy sauce in Los Angeles was Staley's biggest customer for hydrolyzed vegetable protein liquid. La Choy would buy the liquid in 8,000 gallon tank cars, add corn syrup, caramel coloring, salt and water, then bottle and sell. Through no fault of Staley's (who says??), a small amount of weed killer from a chemical container got mixed into Staley's basic liquid. La Choy's soy sauce had to be recalled. There were many suits and, fortunately, no fatalities.

And still another. In 1952, Staley, the only major soybean processor that was not vertically integrated, tried to diversify into mixed feeds or formula feeds for livestock. Other major processors had already established a strong foothold in this market. Staley purchased several small milling companies but by 1954 the effort was considered unsuccessful; it ended up costing the company several million dollars.

In 1922 A.E. Staley, Sr. had predicted that "our plant will produce more soybeans than corn." By 1950 that prophesy had come true; the company boasted of being the world's largest in soybeans and No. 2 (behind Corn Products Corp.) in corn, using 50 railroad carloads of soybeans and 30 carloads of corn kernels a day. It took 3,500 acres of soybeans to keep the company operating for one day. Decatur began to call itself the "soybean capital of the world." But soybean profits for Staley were poor. In fact, during the 1950s, the company let the soybean business slip through its fingers.

By 1960 soybean processing was considered a minor and relatively unprofitable part of Staley's total business. Soybean earnings were the lowest since 1922. Also in 1960 a new $4.2 million research center was dedicated. In 1963 the company decided to get into manufacture of crystalline dextrose; a big plant was built in Decatur. The same year the company's stock was first traded on the New York Stock Exchange. In the late 1960s, partly because of new research capabilities, Staley got into the new field of modern soy protein products, such as isolates and concentrates. In 1969 Staley acquired Gunther Products, a pioneer in this field.

By the 1970s Cargill was America's leading soybean crusher, followed by ADM, with Staley in third place. By the mid-1970s Staley had slipped to the undistinguished position of crushing only 2% of the nation's soybeans--in an old Decatur plant. But then a change began. Gus Staley passed away in 1975 and Don Nordlund took over the leadership position. In 1975 Staley introduced textured soy protein concentrates. In March 1976 Staley announced that it was making a big move into soybeans; the company had purchased four soybean processing plants from Swift & Co. for $45 million in Des Moines, Iowa; Champaign, Illinois; Frankfurt, Indiana; and Fostoria, Ohio. In 3 years, earnings from these plants had paid for their purchase. By 1981 the company was thinking of buying a sixth soy plant at Memphis, Tennessee. For the first time ever their market share in soybean processing started to increase (Fig. ??.?).

Staley's basic business had always been moving massive shipments, often entire train loads, of soy and corn products to major processors in a host of industries. By the 1970s, this generated 95% of the cumulative earnings. They also had a small retail business selling food and laundry starches, corn syrups, and fabric softeners. In some years, these were more profitable than all soybean products. During the 1970s corn sweeteners became big business for Staley. The company had made corn syrup by acid hydrolysis since just after World War I, and Sweetose (50% as sweet as sugar) with enzymes since just before World War II. From the mid-1960s they made dextrose (75% as sweet as sugar) with enzymes. Then in 1971 they developed and pioneered IsoSweet, a high fructose corn syrup that was as sweet as sugar. In 1974 major soft drink companies started to use Staley's corn syrups in soft drinks, but the breakthrough came in 1978 when they started to be used in Coca-Cola. Staley became the leader in this burgeoning field. In 1980 the company took another bold step by building a large plant to manufacture ethanol for gasahol. That year total corporate sales topped $2,000 million. In 1981 the company celebrated its 75th anniversary and commissioned a book to be written about its history titled The Kernel & the Bean by Dan J. Forrestal. Our chapter has drawn heavily on the material provided in that book.

By 1980, in addition to its basic soybean meal and soy oil, the company had a full line of soybean products including defatted soy flour, grits, flakes, soy protein concentrates (Procon and textured Procon), textured soy flour (Mira-Tex), Gunther's whipping proteins and soy albumin, hydrolyzed vegetable proteins (granules, seasoning powder, and HVP powders), and lecithin (concentrates and compounds). The protein concentrates were increasingly popular as a fortifier and extender in processed meats and baked goods; the US Army had become a major customer.