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Mark Sandeen, AGP vice president, Processing Marketing
Over $40 Million in Premiums Paid by AGP Since 1999
Guest editorial by AGP
The pennies, nickels and dimes have certainly added up during the 15 years of AGP’s Component Premium Program. Since launching the industry’s first value-based marketing program for soybeans in October of 1999, AGP has paid over $40 million in component premiums. By selecting soybean varieties that produce not only top yields but also above average protein and oil content, AGP pays premiums ranging from 2 to 10 cents above the commodity price of soybeans.
“This program sets AGP apart from the competition,” noted Mark Sandeen, AGP vice president, Processing Marketing. “AGP recognizes that varieties exhibit a range of component value and obviously some perform better than others in terms of protein and oil content. By offering a premium to our members and their farmers they can make protein and oil content part of the seed selection decision. This program may add from 2 to 10 cents per bushel which adds up over time.”
The benefit to AGP is having a higher quality soybean to process. “If we can improve the quantity of oil it not only improves the farmer’s bottom line but it makes U.S. soybeans and soybean meal more competitive in the global market,” said Sandeen. “One goal of the program is to encourage more high yielding, high component value varieties and at the same time discourage planting low yielding, low component value varieties which would raise the overall average.”
Organizations such as the United Soybean Board (USB) have been very supportive of AGP’s Component Premium Program which aligns with the industry’s initiative for better quality soybeans.
“Our perspective has always been from a premium opportunity for producers rather than a discount program and we believe that approach has improved the soybean quality we receive at our plants,” said Sandeen.
The Component Premium Program is designed for member cooperatives and their farmer-owners.
“One of our objectives was to further demonstrate the value for producers being part of the cooperative system and having AGP as your processing arm,” said Sandeen. “If there’s value in it for us as a processor, we can share that value with our members and their producers and strengthen our ties in this farm to table system.”
One member cooperative, Canby Farmers Grain Company, Canby, Minnesota has taken the program a step further by investing in Near Infrared (NIR) whole grain analyzer technology at each of its three locations.
“We have actively promoted the program since day one,” said Doug Balvin, General Manager. “We looked at the program as a competitive advantage and a way to source more soybeans.”
The cooperative tests every load of soybeans delivered to their elevator locations. Premiums are paid to the producer on qualifying loads which are then recaptured by the cooperative when soybeans are marketed to AGP in Dawson, Minnesota.
Canby Farmers Grain Company also offers a delivered bid for producers to direct ship to Dawson, whereby the cooperative handles the transaction and passes on any premiums to the producer.
“We try to make sure the producer sees the difference in soybeans and that there is a reward for selecting higher quality varieties,” said Balvin. “Yield is still the major determining factor in seed selection, and in our area, nematode-resistance is an important trait. Producers are searching to find the variety that fits their ground the best. So far the Component Premium Program has been a success for our cooperative.”