After months of study, members of the Farmers Co-op Elevator voted in favor of merging operations with the Farmers Win Co-op, based in Fredericksburg, Iowa. The decision comes as agriculture is changing rapidly across the country and smaller co-ops struggle to remain independent and equitable.

The board considered several other cooperatives before choosing Farmers Win as the best merger partner for their members.

Among the most important criteria that Farmers Win met successfully were a strong upper-management team, appropriate locations, protecting the current employees, and most importantly, protecting the equity of Farmers Co-op Elevator members.

“We started out looking at six neighboring cooperatives,” said Farmers Co-op Elevator interim manager Aric Gordon. “We met with each of the cooperatives and then narrowed the selections down through a process of scoring. Farmers Win stood out among everybody else.”

Trade territory was another critical factor in the choice. The trade territories for both organizations line up well. Farmers Win has a facility in Mabel, which is very close to the Farmers Co-op facility in Spring Grove. Another important consideration was how well the two organizations complement each other. “We do some crossover business,” Gordon said. “We felt that where they were strong in agronomy, we were strong in feed, and thereby we complemented each other.”

Farmers Win Co-op also put a lot of time in to making the decision to merge operations. Farmers Win General Manager Trent Sprecker said their merger study showed some real benefits to memberships of both co-ops and they’re very happy the merger came to a vote and was passed.

“The trade territories really matched up well and this gives us an opportunity to be more competitive in that area,” Sprecker said. “We spent time looking at the financials of the other company, talking to their employees, and looked at their locations, all of which took time.”

Gordon specializes in interim management of co-op elevators and joined the Farmers Co-op board in February 2017. Gordon first began working with the elevator board to examine different options going forward. Some of the choices included staying independent and hiring another manager, or potentially looking for a merger partner.

“They could have looked at liquidating a location or a division,” Gordon said. “Or [liquidating] other parts of the co-op and remaining a single entity. We even talked to several private companies about possibly purchasing parts of the Rushford operation. My job coming into this was to educate the board on all of their available options and let them make the decision.”

It’s common practice for elevators to retire a certain percentage of equity out every year. Gordon said things had gotten tough for Farmers Co-op and they were having a hard time returning some of the equity. There’s a big pool of member-owned equity available, which made it important during a merger that the operation be able to pay out parts of that equity over time.

Access to ideal shipping locations was another reason the merger made sense, according to Gordon. The organization could buy grain in Fredericksburg, Iowa, and store it there. However, they may want to sell it out of the Rushford location because it’s a better deal to send it to the river in Winona as opposed to selling it to an ethanol plant down in Fredericksburg. The official name for that kind of process is arbitrage.

“Just because you own grain in Rushford on paper doesn’t mean it’s actually there,” Gordon said. “It could be located in Fredericksburg. You’ve got all these facilities that are required by law to carry x-number of bushels to cover the farmer obligations, but it doesn’t mean it has to be in the facility the farmer delivered it to.”

Agronomy is a volume-driven business, so a bigger trade-territory means more potential customers. Plus, the more products bought means bigger savings for the organization, which is then able to pass on savings to their customers. Finally, the larger the organization becomes, the easier it is to avoid dealing with a middle man and buy straight from the wholesaler.

“Now that the merger has been approved, all the legal work has to take place,” Gordon said. “Then the transitioning; getting the employees up to speed with the Farmers Win accounting system, and that the main office won’t be in Rushford but now will be in Fredericksburg, Iowa. There’s a lot of little things behind the scenes that need to take place.”

Trent Sprecker will now be the official General Manager of Farmers Co-op. When the merger becomes official on March 1, all operations will be under the name Farmers Win Co-op.