Cooperative Soybean Processors (1940 - )

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A Chapter from the Unpublished Manuscript, History of Soybeans and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

Farmers' cooperatives first started processing soybeans in the US in 1940. By late 1977 eight large farmers' cooperatives operated eighteen soybean crushing mills with a combined capacity of 232 million bushels a year; this was 19.0% of the total industry capacity, larger than that of the largest private soybean crusher, Cargill, which had 18.3% (Shearson Hayden Stone 1977). By 1980 the cooperatives had 19 soybean plants and 20.7% of the industry's crushing capacity.

Farmers' cooperative associations, established by farmers in the US during the 1800s??, set up cooperative grain elevators at an early date. By the early 1900s they had begun to process many farm products. The first cooperative soybean processing mill was organized in Henderson, Kentucky in 1940. During World War II there was a rapid expansion of such mills; by 1 December 1944 there were 14 cooperative soybean mills in operation and 6 more under construction. The main cause for the rapid expansion of these mills was the inability of farmers to obtain soybean meal to feed their livestock other than in mixed feeds. However, even if there had never been a shortage of soybean meal, farmers cooperatives would probably have eventually established soybean mills anyway to obtain greater financial returns for their members and to provide them with better services than would otherwise be available (Schiffman 1945).

Most of the early mills set up by farmers' cooperatives were small, screw press operations. Of the 20 mills in operation or under construction in late 1944, 18 used screw presses, one used both solvent and screw press equipment, and one used only solvent extraction. The capacity of these mills varied from 10 to 75 tons of soybeans a day. The estimated annual capacity of the operating mills was 5.6 million bushels and that of the planned mills was 2.2 million bushels. This total of 7.8 million bushels represented approximately 4.6% of the industry's annual capacity of 172 million bushels. As for organization, there were four general types of cooperative soybean mills: those owned and operated (1) as an integral part of a local cooperative grain elevator; (2) locally and independently of any other cooperative society; (3) by a federation of cooperative elevators; and (4) by and for a cooperative located outside the territory in which the mill secured its beans. In Iowa, for example, where there were approximately 300 cooperative grain elevators by 1945, three groups of these formed federations and began operating soybean mills.

A typical mill, operated in connection with a local cooperative grain elevator, obtained most of its soybean directly from its farmer members, sold most of the defatted meal directly back to the farmers, then sold the oil to outside buyers. In some cases, the meal went to a local cooperative feed mixing plant. These plants worked with what was known in the 1960s (now??) as the Farmers' Cooperative Division of the USDA.

During the 1950s a growing number of farmers' cooperatives and of cooperative federations or regional cooperatives started soybean processing. The capacity of the individual mills was expanded and the screw press or expeller plants were converted first to small solvent plants, and then to large ones (Strand 1945). An important phase began when some of the plants joined together and formed sales organizations to market their products. Two important sales organizations were formed. Soy-Cot Sales of Des Plaines, Illinois, was established in 1963 to handle domestic sales of oil and meal for the cooperatives it represented?? Soy-Cot grew steadily to the point where, by 1980, it sold the vast majority of cooperative-produced soy oil and a significant portion of the cooperative meal. During the 1970s?? it began to export soybeans and soy oil, and purchased oil storage facilities on the Gulf of Mexico. Another sales organization was Farmers' Export Corporation, established in 19?? Made of 10 or 12 Midwest regional cooperatives, they exported grain and soybean for cooperatives. They achieved rapid growth and prominence in world grain and oilseed trade. The 1970s were a time of steady growth for the cooperative soybean processors. During 1971-79 the cooperative crushing capacity increased 75% (from 160-280 million bushels a year), compared with a 45% increase in noncooperative capacity (from 740-1,070 million bushels). The increase was due primarily to the acquisition of new plants. The cooperative share of the industry's crushing capacity during this period rose from 17.8% to 20.7%, and the number of cooperative plants rose from 15-19, while the number of noncooperative plants fell from 108-75. The capacity of the average cooperative mill remained larger than that of the noncooperative mills; it increased from 10.7-14.7 million bushels a year, while the noncooperative capacity increased from 6.8-14.3 million bushels (Dunn et al. 1981).

In the late 1970s, the cooperative expanded their world trade by acquiring an existing worldwide sales network. Three regional cooperatives--Gold Kist, Land O'Lakes, and Indiana Farm Bureau--along with several other US regional and West European cooperatives formed a jointly owned subsidiary, Intrade, 19??, and acquired a controlling share of the stock in the Toepfer Co. of West Germany. Toepfer is a grain trading company with worldwide sales offices and substantial presence in East European oil and meal markets (Dunn et al. 1981).

Farm cooperatives were a powerful force in American agriculture by the 1980s. Local cooperatives handled an estimated 35-40% of total farm sales during the 1970s. Regional cooperatives handled between 19-28%, the bulk of which moved from local cooperative elevators.

In October 1979, eight cooperatives were represented in the top twenty soybean processing firms in the US: Gold Kist (#7), Farmland Industries (#8), Riceland Foods (#10), Land O'Lakes (#12), Honeymead Products, Inc. (#14), Agri Industries (#15), Boone Valley Co-op Processing Association (#16), and Missouri Farmers Association (#17). All of these operated solvent extraction plants. Only three co-op expeller plants remained at that time. Of these cooperative associations, Gold Kist, Farmland Industries, and Land O'Lakes each operated three soybean plants. Agri Industries and Riceland Foods each operated two. Iowa was the state with the largest number of co-op processing plants (8), followed by Arkansas (3), Minnesota and Missouri (2 each), and Kansas, Mississippi, Alabama, and Georgia (1 each). Note that there were no cooperative plants in the major soybean states of Illinois, Indiana, or Ohio (Dunn et al. 1981).

Cooperatives also sold a number of brand-name products. Riceland Foods marketed its Chef-Way shortening oil and shortening. Land O'Lakes made and marketed its margarine under a number of brand names, and had limited experience making soy protein isolates. Farmland Industries produced Ultra-Soy textured soy protein (extruded flour) for food use. Five cooperatives also had their own feed brands.

As of 1981 the USDA Agricultural Cooperative Service was the government organization working most closely with cooperative processors. Their excellent report by Dunn et al. has been a major source of information for this section.