9/24/02

After six months of discussions and negotiations, Southern States Cooperative Inc. and Perdue Farms Inc. signed an operating agreement last week, under which Perdue will take over operations at 13 Southern Sates grain facilities.
In addition, the long-term lease agreement outlines that Perdue will purchase grain inventories at the receiving stations, honoring all Southern States open purchases and sales contracts with grain producers and hire 62 Southern States employees, including most of the full-time employees at the receiving stations and all grain-related employees in Southern State's corporate office.
The 13 grain facilities, located in Delaware, Kentucky, Maryland, North Carolina, Pennsylvania, South Carolina and Virginia represent more than 10 million bushels of grain storage, expanding Perdue's storage capacity to 56 million bushels.
"We believe the agreement will mean a stronger grain marketing presence for producers using these facilities," said Joe Koch, Southern States Chief Operating Officer and executive vice-president of operations. "The shrinking number of acres in grain production makes it difficult to support different operations that can be effective players in the marketplace."
Dick Willey, president and general manager of Perdue Farms Grain & Oilseed Division, explained Perdue shares with Southern States a commitment to farmers and agriculture.
"By coordinating our efforts with Southern States, we can provide Mid-Atlantic farmers with even more marketing options — both domestic and international — while maintaining the local grain origination that is so very important to the regions' poultry industry," he said.
Brad Powers Maryland Department of Agriculture assistant secretary of marketing and aquaculture development, said the agreement was another indication of the concentration of agriculture.
"Some people view it as being detrimental to farmers. What needs to be looked at instead is that the broiler industry is the dominant market of grain in our area and if someone sold the grain to Southern States, chances are it would have ended up at Perdue or another broiler integrator anyway. This is just a more direct route," said Powers.
Jack Tarburton of the Delaware Office of Economic Development, said he always has mixed feelings over the loss of competition, as when a poultry processor or grain dealer closes down. "On the other side, because of rumblings at Southern States, this 10-year lease strengthens the grain sector for the southern peninsula." Tarburton hesitated to discuss what impact the joint agreement would have on grain prices.
Carl German, Delaware Extension specialist for marketing said he does not think the agreement will affect grain prices, but he added he understands why farmers are concerned that the agreement could affect the local basis because it makes one less grain buyer.
"It is going to take time though to see what the actual impact of the agreement will be," German said.
Lynne Hoot, executive director of the Maryland Grain Producers Association, said she was happy that Perdue is making business decisions to strengthen their roots on the Delmarva Peninsula because they are such an important part of Maryland agriculture.
"However, I am concerned farmers have lost another market outlet for their grain," she said.
Powers added, "the agreement clearly brings the expertise and financial backing of a strong company like Perdue to expand the grain industry.
Since Perdue now also has an export elevator in Virginia, this could also could mean a better opportunity to export grain through that facility in future."