Watonwon Farm Service Cooperative

Industry: Farmer Grain Marketing RDP Investment: $20 million Launched: June 2011

Watonwan Farm Service (“WFS”) is farmer-owned cooperative in Minnesota, serving more than 4,000 producers in southern Minnesota and northern Iowa. In addition to its grain marketing services, WFS offers fertilizer, crop chemicals, seed livestock feed, petroleum products, and production financing.

WFS used a $20 million allocation as part of their financing to facilitate the construction of a new grain shuttle house and rail terminal facility located in Delavan, Minnesota. WFS will use NMTC financing to construct a high-speed working house including a concrete slip form elevator with two grain dumping pits, 20,000 bushel-per hour legs, a 10,000 bushel-per-hour dryer, and a 70,000 bushel-per-hour unit train load out station. A loop track will be developed along State Highway 109 east of Delavan, in the center of a cluster of four obsolete WFS locations, all located in Faribault County. In addition to the main working house, the facility would include two, 1.33 million bushel steel bins and four hopper-bottom bins each with the capacity to hold 220,000 bushels of grain, and an adjacent flat storage area with the capacity to hold up to 2.88 million bushels in harvest excess.

It is estimated that the NMTC-facilitated project will provide an average of $600,000 in new local, county, state, and federal tax revenue per year for the seven year NMTC compliance period. The estimated 18.84 million in construction costs for the project is estimated using IMPLAN to support 153 full time construction jobs during the construction period.

Without the completion of the Delavan project, Faribault County area would not have unit train capacity. WFS anticipates that by adding rail capacity that reduction in transportation cost input of the cooperatives’ services may increase value to the farmer member grain bids by at least ten and up to as much as 15 cents. This can be extrapolated in three ways:

First the 10 to 15 cent value per bushel can be extrapolated to 12 million bushels of grain that are anticipated to be routed through the new shuttle house ($.10/bushel times 12 million bushels). This equates to $1.2 million annually as added gross revenue for the farmers in the region, providing for an estimated gross annual value increase of $1.2 million in bid value to the farmers.

Second, the impact of this increase in bid value will overflow to the value of the grain bids in the immediate market region, which produces on average 247.7MM bushels within the radius of impact. Discounting for the amount running through the new shuttle house this has the potential to provide additional value of $23.57MM in bid volume growth for the area. This equates to $24.77MM of increased bid value in the area of impact, where 25% of the census tracts are LICs, for an annual potential increase of $6.2MM on pricing directly in these census tracts.

Third, the extrapolated value of the increase in pricing retained at the Cooperative level for the 12MM bushels is approximately $600,000 per annum. This value is provided in annual member dividend pay-out or used to support capital needs that extend the life of existing assets of the Cooperative, typically a combination of both.

Without the train capacity, WFS would not be able to connect to the growing grain markets of Asia.
Currently, according to the US Department of Agriculture, East Asia is the major source of demand for corn and soybean exports.

RDP Impact

Without the NMTC allocation, Fairbault County would not have unit train capacity for farmers. Train access increases bids to farmers by as much as 10-15 cents.

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