It's Not Your Father's Co-op

“From the countryside to the coffee shops, there were some interesting discussions taking place to say the least,” says Davis. “But from the very beginning we knew the opportunity would far outweigh the risk, so we put together a good plan and presented our case in a clear and transparent way.

“Once we had a chance to sit down and address concerns directly, further concern over our direction became minimal,” Davis adds.

Their efforts worked pretty well, as today, 90% Gold-Eagle’s milling business is comprised of nonmember customers, representing the mammoth’s share of the cooperative’s growth in the last decade.

In 1998, Gold-Eagle entered into a lease agreement with Farmland Industries to lease its milling and processing facility in Eagle Grove. This move allowed them to boost their feed-making capacities from 450,000 tons/year to 600,000 tons/year. More importantly, it provided backup milling capacity for the Goldfield plant and allowed them to add pelleting capabilities as an offering to their customers.

So in a manner of 5 years, Kelley was able to increase his feed manufacturing output from 17,000 tons/year in 1993 to 600,000 tons annually. With Farmland’s exit from the feed business in the early 2000s, meant the time was right to purchase the facility outright.

With the need for pelleted feed products increasing, new pellet mills, unloading and load-out facilities and automated feed manufacturing systems were installed.

Other additions like boosting infrastructure to accommodate rail and truck access in the primary plants at Eagle Grove and Goldfield, overhauling the transportation services and building efficiencies throughout the entire 9-facilities which make up the cooperative, had put Gold-Eagle in a tremendous position to serve its key customer segment.

Then along came ethanol.

Here we go again

Never shying away from an opportunity to generate growth — or controversy — Gold Eagle decided, quite by happenstance, to get into the ethanol business.

Learning of the possibility that a group was looking to raise capital to build an ethanol plant near Goldfield, with its trademark aggressiveness, Gold-Eagle’s management team drew up a proposal to present to the board, outlining their own ethanol plant project.

For Duane Madoerin, merchandising manager at Gold-Eagle, the move represented a practical response to defend its customer base.

“Our success story begins and ends with our ability to originate grain and convert that raw product into opportunity for our customers,” Madoerin explains. “To let that supply slip away from us would negatively impact our ability to serve both our members and nonmember customers, which isn’t an option in our business.”

Again, approaching the board of directors with a well thought-out plan which outlined the risks of getting behind the plant vs. being on the outside looking in, years down the road; the board agreed, and gave its OK to begin an equity campaign.

Admittedly, Davis knows the timing of the biofuels boom had as much to do with its success as anything, but be that as it may, the group was able to raise the necessary equity in just two-and-a-half weeks! Compare that to the average equity campaign at that time of two years or more, and it demonstrates again how Gold-Eagle’s aggressive strategy of playing defense keeps them ahead of the curve and in a position to better survive market volatility. Within two years, Corn LP opened with Gold-Eagle Co-op as its majority owner.

Speaking of volatility, Davis and the others have had to defend their biofuels strategy from those that feel diverting feed-bound grain for fuel production has unnecessarily stressed feed manufacturing.

“Our customers know regardless of what condition the industry is in, a marketplace for their product exists with Gold-Eagle,” Davis notes. “As a result, their trust in our track record of recognizing and delivering opportunity helps boost confidence in volatile times.”

Making the grade

Davis, Kelley and Madoerin all agree that while some of their ideas haven’t panned out as they had hoped (an IP grain program for example) others have. (The DDGS’s produced by Corn LP’s ethanol plant have an eager market in Southeast Asia).