PGG board recommends dissolving co-op
PENDLETON, Ore. — Members of Pendleton Grain Growers will vote at a meeting May 2 whether to dissolve the local farmers’ co-op, according to a letter sent to members Friday.
If the motion passes, it will spell the end for PGG, which has served Eastern Oregon farmers since 1930.
It’s been a tumultuous few years for the co-op, which has bled money and lopped off multiple business units trying to restore profitability. Retail stores closed in 2014; the agronomy division later sold to a company based in Colorado; and most recently, PGG has been in negotiations to sell its grain assets to multinational United Grain Corporation.
Now, PGG’s Board of Directors is recommending dissolution as the best course of action. That would mean selling everything — grain, energy, seed, transportation and the Precision Rain irrigation subsidiary — in order to pay off debt and have some equity left over to return to members.
If growers choose not to dissolve PGG, the co-op would likely still fold and members would be less likely to recoup any equity. In the letter, which was obtained by the East Oregonian, board chair Tim Hawkins stated that operating costs are too high and grain receipts too low to continue offering the same services.
“The decision to move toward a plan of dissolution was not easy, but we believe it is the best alternative to return what equity we can over time to members and allow the businesses to operate independently or with partners who can bring new resources and value to our Eastern Oregon farmers and families,” Hawkins wrote.
PGG has 1,079 members eligible to vote May 2. At least 50 members are required for a quorum, and the resolution will need a two-thirds majority to pass.
Rick Jacobson, PGG general manager, insisted the co-op is not insolvent and still has support from CoBank, which extended a $15 million term loan and $20 million line of credit last June. That came on the heels of PGG losing $7.9 million in 2014, and approximately $4.4 million in 2013.
The co-op also discovered through an audit that it had overstated earnings by $1.8 million in 2010 and $5.7 million in 2011, according to financial statements. PGG did net $434,681 in total income in 2012.
Jacobson, who was hired by PGG in 2012, said he is optimistic about getting a deal done with United Grain Corporation to sell the McNary river terminal, Feedville piles and 19 upcountry grain elevators, but couldn’t get into specifics. Other aspects of the business are doing well independently, he said, such as the energy division and Precision Rain. But PGG is simply not bringing in enough bushels of wheat to generate a profit that will allow it to invest in those services.
Last harvest, the co-op figured it would need at least 8 million bushels to continue on as it has. Jacobson didn’t provide the exact number it carried, but said it fell short.
“Some stayed with us, but nowhere near enough,” Jacobson said of members. “The vote was with their bushels.”
The board felt it would be best to dissolve PGG and sell off those assets to another company, Jacobson said, thus maintaining services and — hopefully — retaining jobs in the community. He said United Grain Corporation is in a good position to work with local farmers.
“I think it’s the best thing to do, given the circumstances,” he said.
Preston Winn, who leases about 147 acres of wheat fields near Weston, said he’s been a member of PGG for roughly 50 years. Over the years, he said, the co-op gradually lost focus on customer service, while members’ trust whittled away.
Winn, who also chairs the agriculture department at Blue Mountain Community College, said PGG was slow to change in how it received, stored and handled larger shipments of grain. Instead of taking 15 minutes to unload shipments at PGG’s old country elevators, he said, growers decided to turn to competitors that could unload them in a fraction of the time. In particular, he said Northwest Grain Growers of Walla Walla and Gavilon have both added grain piles in nearby Athena in recent years.
“We’re going to go to a place that has better customer service,” Winn said. “We’re going to go to a place that can unload us in an expeditious manner.”
The U.S. Department of Agriculture also pulled PGG’s warehouse license for 44 days in 2012 after discovering discrepancies, which Winn said shook some confidence.
“I’ve heard people say, ‘I don’t think I can trust them,’” Winn said. “Anytime you don’t have confidence ... I think that’s where this fell apart.”
Eric Nelson, who farms organic wheat north of Pendleton, said losing PGG would be a hard hit to the community. The co-op has been a major supporter of local organizations, Nelson said, and he hopes whoever comes in carries that same sense of commitment.
“It’s going to be hard to fill that hole,” Nelson said. “It’s a tough blow to the community in general.”
Jacobson said the board realizes how difficult the decision is, and carries the burden of the decision. He praised the board for its willingness to do what they feel ultimately will be the best for the membership.
“I feel reasonably confident the best will come out of this,” Jacobson said.