Crushing it: North Dakota ready to ride wave of demand for soybean oil and meal

In just a couple of years, North Dakota will go from a state that exported 90% of its soybeans to a state that will process and add value to more than half its soybean crop.

“It’s huge,” said Joe Morken, a farmer and former chairman of the North Dakota Soybean Council.

The transformation will come with the construction of soybean crushing plants at Spiritwood, near Jamestown, and at Casselton, about 20 miles west of Fargo.

“You don’t even have to deliver to this plant to see the economic impacts,” Morken said a day after the Casselton City Council on May 2 approved a permit for the North Dakota Soybean Processors to build just west of the town.

North Dakota Soybean Processors, a partnership between Minnesota Soybean Processors and Louisiana-based Consolidated Grain and Barge, or CGB, hope to start construction this summer.

At Spiritwood, Archer Daniels Midland is partnering with Marathon Petroleum to convert the former Cargill malt plant into North Dakota's first dedicated soybean processing plant.

The Green Bison plant will send all of its soybean oil to the Marathon refinery in Dickinson, North Dakota, to be further refined into renewable diesel.

It’s that renewable fuel market that is really driving the industry, said Jeramie Weller, the general manager of the Minnesota Soybean Processors plant in Brewster, Minnesota, which also produces biodiesel.

“With renewable diesel and the price of soybean oil on the rise, there have been many plants that have been announced and are being built,” Weller said.

Minnesota has a 20% biofuel blend mandate in Minnesota for part of the year.

“We’re one of two major suppliers for that mandate in Minnesota,” Weller said.

But he said what’s really pushing the renewable industry along is the expansion of their low carbon fuel standard in states like California and Washington.

“So renewable diesel and biodiesel have both become a large player in the state of California, also now in Washington because of the reduction in carbon footprint that it gives,” Weller said.

“We’re thrilled,” said Connie Ova, executive director of the Jamestown/Stutsman County Development Corporation, of the ADM-Marathon partnership.

She said demolition on what used to be a Cargill malting plant is moving along rapidly. The Cargill plant was past its useful life and she is happy to see it being replaced with a “state of the art facility.”

She also said BNSF Railway is in the process of taking bids for additional track on the rail loop that will serve the Green Bison plant and also serves the Dakota Spirit Ag Energy plant that makes ethanol from corn at the Spiritwood Energy Park.

“There’s lot of synergy there,” Ova said.

The two plants are being built in counties that are not only the top producers of soybeans in North Dakota, but rank among the top 20 producing counties nationwide.

“North Dakota is one of the top 10 soybean producing states in the United States. It is the only one that does not have a dedicated soybean processing facility built in it … the least has two,” said Scott White of North Dakota Soybean Processors. “The whole idea is to add value to North Dakota produced soybeans.”

“We have had some outside studies that have been done by soybean growers in the area and they figured maybe 5 to 10 cents a bushel as a basis differential premium for having dedicated soy processing in the state of North Dakota,” White said.

Processing 90 million bushels at a 5 to 10 cent premium, “the math tells you it's a bump of $5 million to $9 million,” White said.

Nancy Johnson, executive director of the North Dakota Soybean Growers Association, said a 5 cent per bushel premium is “very conservative” but she hasn’t seen detailed studies on a potential economic impact.

North Dakota soybeans have mostly been shipped through ports in the Pacific Northwest for China and some other Asian markets. When a trade war erupted between the U.S. and China in 2018, North Dakota soybean growers were collateral damage.

Johnson said having local markets will be a welcome change.

“It’s a huge opportunity for North Dakota farmers,” Johnson said. “Clearly there will be an impact.”

But she said just how big an impact will become clearer this fall when the Green Bison plant starts offering contracts for delivery in 2023.

One hoped for side-effect of the soybean crushing plant is to spur along North Dakota’s livestock industry, which lags behind its neighbors.

Johnson said she also hoped that the availability of soybean meal might translate into more livestock in the state.

“We’re optimistic that this might lead to additional animal agriculture blossoming in North Dakota," she said. “Soybean meal is a high quality feedstuff for hogs and chickens in particular.”

Weller said the Brewster plant sells a lot of soybean meal to the hog and poultry in its area of southwest Minnesota and neighboring states.

“This may give the state of North Dakota the opportunity to grow that industry,” Weller said.

Weller said there also are market opportunities in Canada and Mexico and growing demand in the U.S.

“If you look at the domestic meal market over the last 10 years, it continues to grow by 3 to 6% every year because of the livestock industry,” Weller said. “We expect that growth to continue.”

Much of the soybean meal produced in North Dakota also will likely be shipped out by rail.

“That is where the railroad is key,” said White, with Casselton being served by BNSF and Red River Valley and Western railroads, making it the best location it could find in North Dakota.

Unlike Brewster, there won’t be biodiesel coming out of Casselton, but it could be shipped to a biodiesel refinery. The oil will be food grade, meaning it could be used for french fries or any of a number of other uses. But end-users of the oil have not been locked in yet.

North Dakota might be a little late to the soybean crushing party but the party's still going strong.

Jeramie Weller, general manager of Minnesota Soybean Processors plant at Brewster in southwest Minnesota, can look around and see soybean processing projects in every direction:

Iowa: Work is underway at Shell Rock Soy Processing in Shell Rock, and Platinum Crush at Alta is expected to be operational in 2024.

Minnesota: CHS has added capacity at its crush facility in Fairmont, Minnesota, and plants to upgrade it Mankato, Minnesota, facility as well.

South Dakota: The South Dakota Soybean Processors in February announced plans to build a multi-seed processing plant near Mitchell to be operational in 2025.It will be able to process soybeans and sunflowers.

Weller said a crush plant doesn’t just benefit the co-op members or farmers that sell to the plant, but many elevators in the region. He said 65% to 70% of its beans come from elevators.

“It gives the local elevators a very good market,” said Ron Obermoller, a member of the Minnesota Soybean Processors board of directors.

“They (the elevators) watch the basis and we (the farmers) watch the price,” Obermoller said.

Obermoller said he would have liked to have seen the co-op have a greater percentage of the ownership in the Casselton plant, but they have a conservative board and “didn’t want to risk too much.”

There will not be a separate set of shares for North Dakota Soy Processors. Farmers interested in shares will buy into Minnesota Soy Processors, with Weller saying some already have bought shares through the co-op’s website.

Weller said stock shares have been increasing in value steadily, especially since the Casselton project was announced in December.

As of May 16, the most recent transaction had been for $5.50 per share but there were offers for $5.70 and in April there was a large transaction for $5.75 per share. The minimum buy-in is 2,000 shares.

Last year, Minnesota Soybean Processors paid a dividend of 80 cents per share, Weller said.

Obermuller said that translates to about another $2 million in income for the 2,300 or so co-op members that includes producers in South Dakota and Iowa.

Minnesota Soybean Processors began crushing soybeans in 2003 and then in 2005 added a biodiesel plant that was expanded in 2017. About half the soybean oil it produces goes to biodiesel.

So how did the soybean crushing party get started?

“It kind of came together with a bunch of farmers standing in line waiting to dump beans at the local elevator, said Obermoller, who was part of the group that founded Minnesota Soy Processors in the late 1990s. “Sometimes it took two-three hours to get rid of a load of beans at the elevator. You stand around and talk, that’s really where it started.”

After taking about four years to get the Brewster plant up and running, Obermoller said the Casselton timeline looks very different: “What’s going on up there is warp speed compared to what we are used to.”