South Dakota Soybean Processors: The Green Bean

Energy Executive Spotlight
Written by Eric Slack
Friday, 30 November 2007
Rodney Christianson tell us how South Dakota farmers are finding new uses for, and new profits from, the soybean. Most of us associate soybeans with cooking oil, but that�s only one of many uses for this highly versatile crop. In South Dakota, agriculture has always been a key component of the state�s economy, with soybeans one of the major contributors. South Dakota Soybean Processors was created to keep it that way. Rodney Christianson, president and CEO of South Dakota Soybean Processors and chairman of Urethane Soy Systems Company �Our membership base is about 2,200 farmers from the same background�they were all trying to capture a larger portion of the food dollar,� said Rodney Christianson, president and CEO of South Dakota Soybean Processors and chairman of Urethane Soy Systems Company. �If you go back 50 years, we used to capture 85% of the food dollar. Today, it is somewhere below 20%. If you want to capture a greater share of the food dollar or the processing dollar, you have to vertically integrate.� New directions South Dakota Soybean Processors was created in the 1990s after a coalition of farmers sought to build and operate a soybean processing plant in the Mount Rushmore state. The plant launched operations in 1996 with the first soybean processing plant built in the US since 1978. In 1998, SDSP began working on soybean oil�s potential use in polyurethane applications such as spray foam insulation, truck-bed liners, and foam seating. In 2003, it added Urethane Soy Systems Company (USSC) to its portfolio, a company specializing in marketing and research in soy-based polyols (the raw material used to make polyurethane). Recently, the company expanded in another direction, moving into the renewable fuel industry and becoming the largest shareholder in a 30 million-gallon soy biodiesel plant located in Minnesota. By branching out, SDSP and USSC are able to use their processing operations to maximize return for the farmers the two companies serve. SDSP�s original intent was to bring more value to its farmers, who were forced to grow soybeans and export them out of state to processing plants. Many farmers then had to import meal made from the soybeans to feed their animals. The perseverance of the farmers when they decided to build their own processing plant became part of the company�s culture, and it has paid dividends. �When the farmers went to people in the industry to talk about the benefits of putting a facility here, it fell on deaf ears. So they decided to form a value-added cooperative and raise the money themselves,� said Christianson. Out of the gate, the company sought to establish a foundation built on developing a vision and following through. Its first priority was constructing the processing plant on time and on budget to give the fledgling organization a chance to get up and running. It turned a profit in its first year of operation. The primary driver behind the project was creating maximum value for its members; the secondary driver was growth and stock value. The board did a good job of establishing the company�s identity, and it shows. �If we look at our original investors who put in $21 million, through our last value-added payment in fiscal year 2006, we have distributed more than $36 million in cash to our members. On the stock side, those investors had a base of their shares increased by a factor of two,� Christianson said. Timely expansion The company�s expansion into the use of soybean oil for polyols was particularly timely. In the late 1990s, a family manufacturer in Illinois developed the concept of using soybean oil for polyols. Shortly thereafter, SDSP became the exclusive soyol supplier to USSC and in January 2003 became the majority owner. This gave the company the ability to return even more value to the farmers. �We originate beans from our farmers and convert them to meal and oil. We further refine the oil to take to the renewable fuels market, the polyurethane market, or the food market,� said Christianson. �We can modify it and make a polyol that competes with petroleum-based polyol. SDSP holds two patents for that conversion, and USSC is the holder of 10 US patents, with several foreign patents as well.� SDSP has been working with Ford since 1998 on soybean/polyol R&D projects. A few years ago, Lear joined the equation, moving the project from the drawing board to the testing room. The studies led to the launch of the 2008 Ford Mustang with the first soy-based seats. South Dakota�s farmers now have a piece of their product inside one of the country�s most famous cars. �If you look at the market segments for polyurethane foam or plastics, the automotive seating application is one of the most difficult in which to implement change because of the amount of time testing and approval takes,� Christianson said. �We�re pleased that our relatively small company has met the quality standards of the automotive industry and proven our capabilities in a difficult application.� Christianson is also hopeful about the potential of the biodiesel industry. �If you look at the history of ethanol and wind, costs came down considerably because of government support,� said Christianson. �Those types of policies would help create the infrastructure needed to make biofuels cost effective.�

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