Organic edge allows Pipeline Foods to buy Iowa grain elevator from ADM

Chief executive Eric Jackson says the construction of an ethanol plant nearby helped trigger a sale by ADM, which will continue to use part of the facility for conventional soybeans.

Continuing its efforts to assemble a supply chain dedicated to processing organic grains, AMERRA Capital Management portfolio company Pipeline Foods has acquired an Iowa grain elevator from Archer Daniels Midland for an undisclosed price.

Located near the city of Atlantic in the state’s southeast, the 3.4 million-bushel facility will be upgraded so it can test, clean, grade, dry, store and ship organic grains.

“This will allow the Pipeline Foods merchandizing team to originate organic grain from Iowa and surrounding states and improve logistical efficiencies when serving customers on both coasts,” the company said.

When it begins accepting organic grain deliveries, in mid-September, the asset will be the sixth processing facility in the US and Canada operated by Pipeline.

AMERRA created Minneapolis, Minnesota-headquartered Pipeline in February 2017 to focus on the creation of agricultural supply chains, initially organic grains and oilseeds. Last year, the company purchased grain elevators in Canada and North Dakota, began building a North Dakota terminal and expanded capacity at an organic soybean crushing facility in Missouri. Company executives told Agri Investor then that they plan to deploy between $300 million and $500 million over the next five years to bring together a supply chain of assets devoted to collecting, processing and delivering organic offerings.

Pipeline also runs a unit called the Farm Profit Program that offers debt and other assistance to farmers as they undergo the five-year transition to organic production.

The non-competitive edge

Pipeline chief executive Eric Jackson told Agri Investor that for years ADM has handled conventional corn and soybeans from the Atlantic facility, which is located near an ethanol plant currently under construction. Expected to come online during the third quarter, the Elite Octane plant has a planned capacity of 120 million gallons a year.

Its existence was probably a factor in ADM’s decision to sell the grain elevator to Pipeline, Jackson said, because its demand for much of the area’s corn is bound to leave little available for export by railroad through the asset. ADM will continue to use a segregated part of the facility for conventional soybeans.

“One advantage we have when we come into a market and want to buy an existing grain facility, and you have a seller that’s looking to sell a grain facility, is that they sometimes have tough choices to make because oftentimes the buyer might be a competitor,” said Jackson. “In our case, we’re not a competitor, we’re in the organic space and not in the conventional space, and we provide a unique opportunity particularly when we allow them to continue part of their program there, which a competitor would never let them do.”

As Pipeline assembles its organic supply chain, Jackson said, it looks for both origination and destination assets that offer good transport to clusters of supply or demand for organic grains. Such investments are worth it, he said, if the company is able to increase volume.

“Iowa is the largest surplus organic corn state in the country,” Jackson explained. “This facility is on the IAS short-line railroad, which is the only short-line railroad in the country that connects to all major class I railroads – all seven of them. We have the ultimate optionality, whether we are going to go east or west with the grain we originate there.”