Farmland Industries is entering into a 50/50 grain marketing joint venture with Archer Daniels Midland (ADM). Under the agreement, a new company, ADM/Farmland Inc., will lease and manage Farmland’s 24 grain elevators.
"Our initial efforts were to find a cooperative partner for the grain business, wrote Bob Honse, Farmland president and CEO, in a letter to members. "But after careful discussions with CHS Cooperatives, we were unable to structure a transaction that would meet both cooperatives’ financial goals.
"We are pleased to have found a partner in ADM, a company with a history of successful relationships with local and regional cooperatives, including Growmark, Countrymark, CHS Cooperatives and Goldkist."
Honse explained that grain businesses operate on very thin margins and generate low rates of return. "As a result of the leverage on our balance sheet, our interest expenses have grown," he added. "This has increased our costs and hampered our ability to continue to generate acceptable earnings in this business."
ADM will provide financing for the new company’s operations. Farmland and ADM will share equally in the earnings of ADM/Farmland Inc. Farmland’s share of those earnings will be patronage-based.