Members of the Dakota Growers Pasta Co. have voted to change from a
grower-owned company to a common stock corporation, a move that might
spur interest among Canadian farmers.
Dakota Growers general manager Tim Dodd said the change will allow the
North Dakota company to attract the capital needed to remain nimble in
the marketplace while better accommodating the needs of farmer members.
Dodd hoped the change, which lets the company sell stock to the public,
will encourage greater involvement from western Canadian durum growers.
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“We’re not going to discriminate. To me, a producer is a producer. It
doesn’t matter to me which side of the border they’re on.”
The new corporate structure allows for common and preferred stock.
Farmers who own the Series D Delivery Preferred Stock will have first
right of delivery to Dakota Growers Pasta.
Dodd said the preferred stock will be more affordable for farmers than
current shares in the company. Delivery obligations will also be less
onerous than they are under the current structure.
Dakota Growers Pasta describes itself as the third largest producer of
dry pasta products in North America.
Organized as a new generation co-op a decade ago, it was viewed as a
way for farmers to profit directly from the processing of their crop.
In recent years, a group of Canadian farmers showed interest in
becoming partners with the pasta company.
Prairie Pasta Producers, also a new generation co-op, has been leading
the effort to link the U.S. company with western Canadian durum growers
Prairie Pasta chair Perry MacKenzie said Dakota Growers’ corporate
conversion should attract participation from Canadian producers.
During a membership drive in Western Canada last fall, liquidity was an
issue raised by Canadian producers, MacKenzie said. The growers wanted
to know who would buy their shares if they later decided to opt out of
Dakota Growers Pasta.
MacKenzie said the conversion and the ability to sell stock to the
public will create a larger market for the common shares.
So far, no one with Prairie Pasta has invested in the U.S. pasta maker.
Last year’s membership drive was stalled until the question of Dakota
Growers’ future corporate structure was settled.
Dodd said the change should be complete in June.
Dakota Growers Pasta voted more than a year ago to allow non-American
growers to be part of its membership.
A declining durum harvest in North Dakota forced the company to search
further afield for its grain supplies.
Dodd still sees a role for Prairie Pasta once the conversion is
complete. He said the group could help co-ordinate the gathering and
shipment of Canadian durum to the Dakota Growers Pasta plant in
Carrington, N.D.
He envisions an identity preservation system to move durum from Western
Canada, which would allow the company to track shipments of grain back
to farms where it originated.
MacKenzie agreed that grain procurement could be part of Prairie
Pasta’s role and he doubts the Canadian Wheat Board’s export monopoly
would thwart that effort.
He said the wheat board has given Prairie Pasta no concessions. If the
new generation co-op wants to buy and ship durum to North Dakota, it
would be treated the same as a milling company buying grain from the
board, he added.
MacKenzie said Prairie Pasta would like to buy grain from the wheat
board based on world market prices. The hope would be to return
premiums above those prices to producers.
There will be a small dividend paid to producers with the delivery
preferred stock. There might also be a premium for grain delivered to
North Dakota through an IP system.
Dakota Growers’ biggest competitors are American Italian Pasta Co. of
Kansas City, Missouri, and New World Pasta Co. of Harrisburg,
Pennsylvania.
Dakota Growers lost $1.8 million during its last budget year on sales
of $135.9 million. However, the company reported a $4.3 million profit
from July through December of 2001, the first six months of its new
budget year.
Earlier this month, Dakota Growers chair Jack Dalrymple assured the
company’s 1,155 farmer members that the planned conversion will not
mean the loss of Dakota Growers’ rural essence.
Farmer shareholders will still hold a controlling stake, according to
Dalrymple. The conversion plan requires that its nine-member board of
directors include five North Dakota residents and three farmers.
