PGG Sells Grain Assets
by George Plavin
Pendleton Grain Growers might be a thing of the past, but its upcountry elevators and Columbia River terminal will remain open under new ownership.
United Grain Corporation, based in Vancouver, Washington, has agreed to buy all of PGG's grain assets including facilities, contracts and inventory. The deal was announced Tuesday, though terms were not disclosed.
PGG announced it would try to sell its grain division in October 2015, foreshadowing the co-op's final collapse and dissolution on May 2. Negotiations continued with United Grain, whose vice president of business development, Tony Flagg, used to head up Pendleton Flour Mills.
United Grain is one of the West Coast's largest grain exporters, owned by the Mitsui Group of Japan. Mitsui is one of the largest corporate groups in the world, with a market value of $22.5 billion, according to Forbes. Rick Jacobson, PGG general manager, said United Grain will invest "a significant amount of money" upgrading facilities around Pendleton, something PGG wasn't able to do in recent years.
"They will be looking for speed and space to meet the changing needs of the growers," Jacobson said. "I think this is going to be a step in the right direction."
Flagg did not return calls Tuesday for comment. United Grain is in the process of opening local offices and has retained a majority of PGG employees, according to a press release from the co-op. The sale comes about a month ahead of wheat harvest for most Eastern Oregon farms.
Tim Hawkins, chairman of the PGG Board of Directors, said the deal with United Grain is the best possible outcome for growers and the community.
"Through the negotiated agreement, (United Grain) has voiced a commitment to maintaining crucial operations as well as investing in the long-term viability of grain facilities," Hawkins said in a statement.
For PGG, it's another step forward in dissolving the 86-year-old cooperative, which had been synonymous with the region's agriculture. Members voted to dissolve PGG on May 2 following a string of devastating financial losses that pointed to a crisis of confidence among growers.
In 2012, the U.S. Department of Agriculture suspended PGG's grain warehouse license for 44 days due to auditing discrepancies. The license was restored, but the co-op discovered it had overstated earnings in 2010 and 2011 by a combined $7.5 million. The East Oregonian has requested public records from the Farm Service Agency pertaining to the case.
PGG lost another $4.4 million in 2013 and $7.9 million in 2014, according to financial records. Meanwhile, neighboring Morrow County Grain Growers posted a profit of $321,315 last year, and Northwest Grain Growers in Walla Walla made $4.4 million.
Jacobson said they were able to make some facility upgrades, such as adding grain piles at the McNary Terminal, but it wasn't enough. Members "voted with their bushels," he said at the time, taking their business elsewhere.
United Grain will have the chance to make those assets profitable again, he said.
"They can be competitive, and have the financial muscle to do it," Jacobson said.
As for PGG, the co-op must pay back a $15 million term loan to CoBank and will be on the hook for environmental liabilities from selling off its remaining divisions. Jacobson said he believes the other departments can be absorbed by outside businesses, similar to what has happened with grain. He said he is optimistic at least some equity will be returned to the co-op's 1,850 members, but it's too early to tell how much.
For now, he said the priority is on maintaining services for the farmers throughout the region.
"This has been a long and difficult struggle for a lot of these producers," Jacobson said. "This would probably be the best outcome we could have hoped for."
United Grain formed in 1969, and its Vancouver Export Terminal has a capacity for storing 8 million bushels of grain. For information on cash bids, visit www.ugcpnw.com.
learn more on topics covered in the film
see the video
read the script
learn the songs