Perdue soybean plant in Lancaster County finds market
Last September, Perdue AgriBusiness opened Pennsylvania's first large-scale soybean processing facility in Conoy Township, Lancaster County.
The plant cost over $60 million to build, with state grants covering $8.75 million of the tab.
In building the plant, Perdue promised to purchase locally grown soybeans year-round from local farmers, and to sell soymeal, refined soy oil and soy hulls back to farmers to be used in animal feed.
The Salisbury, Maryland-based company also promised to comply with environmental regulations enforced by the federal government and by the state Department of Environmental Protection. Leading up to its construction, the plant was met with environmental concerns from both the state and the public, particularly surrounding its use of the chemical hexane.
Some of the compounds within hexane are considered precursors to smog, and one compound is classified as a hazardous air pollutant.
DEP issued two minor violations to Perdue so far, one related to storage tanks and one for air monitoring, according to John Repetz, community relations coordinator for the DEP Southcentral Regional Office. Perdue submits monthly, quarterly and semi-annual monitoring reports to DEP, keeping the lines of communication open.
A year after its opening, the plant has added over three dozen skilled manufacturing jobs and is finding a role in the region’s agricultural economy.
The plant buys soybeans from farmers and processes the beans to produce soymeal, soy hulls and soy oil, which is refined into vegetable oil. The farmers then buy those products to feed their animals.
It wasn’t always that simple.
How it works
The new Perdue AgriBusiness facility is a solvent extraction plant, meaning it uses hexane, a byproduct of petroleum, to extract oil — in this case, from soybeans.
Three products are created from the extraction process, according to Kevin Woleab, the plant’s superintendent: soy oil, soy hulls and soymeal. Each product has value, and each product has some power in influencing the state’s economy.
First, soy oil: it is extracted from the soybean at the plant and starts as a non-food grade product. A portion is then sold as-is to fuel companies for use in making biodiesel. Perdue also refines a portion of the soy oil in Salisbury, Maryland, where it becomes edible vegetable oil to be sold to farmers for use in feed mixes, as well as to snack food companies to be used in food production. Some of those companies are located in the same midstate region where the soybeans are grown.
Soy hulls are the high-fiber outer covering of the soybean, much like a peanut shell, according to Joe Forsthoffer, director of corporate communications for Perdue. The hulls are used in feed mixes for animals that can process fiber well, like dairy cattle.
Finally, the third and most valuable product, soymeal, is sold back to farmers to be used in animal feed. A typical feed mix includes soymeal, corn and vegetable oil. Manure produced by the animals, meanwhile, is used to fertilize the next crop of soybeans.
Before soymeal became available to farmers last year as a result of the new plant, farmers relied on dry distillers grain, mostly to feed their livestock, which they purchased from corn distillers that were often located farther away than Perdue’s new plant.
In addition to reduced transportation costs, soymeal also is farmers’ preferred feed ingredient: it’s a higher-quality product than dry distillers grain.
“Distillers grain is like the iceberg lettuce of feed,” said Jay Stauffer, a Lancaster County farmer. “Soymeal is like the arugula or mixed baby greens of feed.”
In years past, local soybean farmers transported their bushels to either small-scale operations or to ports in New York and Maryland for export to foreign countries. Transportation wasn’t cheap, and it was difficult to schedule deliveries due to limited receiving times at the ports. The logistics had to be determined in advance – costing farmers time during harvesting season.
Now, farmers can deliver to Perdue’s grain elevator in Lancaster County, 24 hours a day, seven days a week. The elevator adjoins the plant and acts as storage space for the soybeans until they are moved to the plant to be processed.
With an elevator capacity of 1.5 million bushels, Perdue was able to purchase $140 million worth of soybeans last year, according to Gary Cordier, senior vice president of domestic grain for Perdue.
The large-scale buying power has had a positive effect on farmers like Jay Stauffer, a grain, swine and heifer farmer in West Hempfield Township, Lancaster County. He also farms land in York County.
“We like Perdue, and we’re glad they’re here,” he said.
Just three months ago Stauffer added a driver and an extra tractor trailer to support the growing demand for soybeans from Perdue. Perdue temporarily leased land from Stauffer to store even more bushels after reaching capacity last year.
“Farmers have to trust us,” said Joe Forsthoffer, director of corporate communications for Perdue. “And we never turn a farmer away.”
In some cases, farmers choose to wait to sell their soybeans until prices are good, storing them in their own facilities until then.
“Unlike milk, farmers can store soybeans and wait out when they potentially sell them. But they need to pay their bills, so they can’t wait forever,” said Mark O’Neill, communications director for the Pennsylvania Farm Bureau, based in Camp Hill.
The price of soybeans reached a historic high in 2014 on the Chicago Board of Trade at $10.50 per bushel, which is equal to 60 pounds. The demand from foreign countries was high then, likely influenced by drought overseas and the relatively high value of the American dollar, according to O’Neill.
Prices have been on the downturn for the last year due to tariffs put in place by China. Even before the tariffs set in, the price began to drop, falling as low as $8 a bushel. Though Perdue and other buyers are largely unaffected by the price decrease, soybean producers have taken a hit.
“Growers are hoping it’s a short-term drop,” O’Neill said. “The income difference even from $10 to $8 is a major shock to the system.”
Because of the fluctuating market price, which is out of their control, farmers will often go to great lengths to save money on the things they can control, like transportation costs.
Stauffer isn’t sure exactly how much he saved by purchasing soymeal and selling soybeans locally to Perdue instead of shipping directly to the ports, but he is sure it has saved him some.
“Even if I could save just $300, I would do that. Everything counts,” he said.