CHS to close three soy processing plants

CHS Inc. closed its Hutchinson soy processing plant on Friday, laying off 77 employees.

The closure was one of three the company announced to employees during plant-wide meetings Friday morning as the global agribusiness cooperative moves out of soy protein production.

The others were in Creston, Iowa, and its Innovation and Technology Center at Eagan, Minnesota. In all, 144 employees were affected at the three locations and in sales positions, said spokeswoman Annette Degnan, marketing communications director for CHS.

Because of requirements under the federal Worker Adjustment and Retraining Notification Act, which requires notice of a closing involving 50 or more employees, the company will pay workers through Jan. 30.

The state was also notified of the closure, to comply with the WARN Act, though the company did not advise local city and chamber officials, according to Hutchinson City Manager John Deardoff.

"Eligible employees impacted are eligible for severance pay," Degnan said. "They'll also be eligible for transient benefits that include outplacement assistance. They have some ability to get some help in finding a different position."

The plant at 2701 E. 11th Ave. has been in Hutchinson for nearly 40 years. It formerly operated as PMS Foods Inc., then Legacy Foods before being purchased by CHS in 2008.

It was best known locally for producing Curley's Famous Barbeque Sauce, though, CHS sold that division in 2014.

Shift in business focus

The news of the closure was delivered in person to the 77 employees in Hutchinson by the plant manager, the CHS director of operations for this division, and a human resources representative, Degnan stated in an email. Employees were also each given a letter.

The plant produced Ultra-Soy brand textured soy proteins, an ingredient used by food service and food manufacturers as a nutritional supplement in processed foods containing meat and in snacks and health foods. Ultra-Soy helped food manufacturers extend meat, which reduced meat and seafood costs while adding protein to enhance the nutritional profile.

"If you look at many frozen entrees like pizza, you will see textured soy in the ingredients," Degnan said in a phone call. "We still have operations in soybean crushing and refining, but we're no longer going to make soy protein."

There was an unsuccessful effort over the last 11 months to sell the Hutchinson plant before the decision to close, Degnan said.

"In recent months, Jay Debertin, CHS CEO, shared strategic priorities for CHS with employees and our member-owners," Degnan's email stated. "Primary among these is restoring financial flexibility for CHS, which includes reviewing all company assets to determine which are a strategic fit for CHS now and into the future... CHS will continue to focus on operations which are more closely aligned with other CHS commodity-based core businesses."

For fiscal 2017, CHS experienced a loss before taxes of $54.8 million, down from income before taxes of $419.9 million in fiscal 2016, the company reported on Nov. 9 in the release of its annual report.

It blamed the loss on a Brazilian trading partner entering into "bankruptcy-like proceedings," as well as "intangible and fixed asset impairments, and bad debt and loan loss reserve charges, of which a significant portion relates to a single large producer borrower."

The company reported net income of $127.9 million for the fiscal year ended Aug. 31, compared to net income of $424.2 million for fiscal 2016. Consolidated revenues totaled $31.9 billion, about a 5 percent increase over consolidated revenues of $30.3 billion for fiscal 2016.

During 2017, the company produced some 3 million tons of soy products for use in human and animal foods, the report stated.

"We worked hard to reposition the plant with buyers," Degnan said of the effort to sell. "Each had their own list of conditions, and market dynamics forced a different path."

She could not say whether employees were aware of the effort to sell, but the company did not directly inform employees of the effort, she said.

"Business decisions like these are very fluid and have to remain confidential until we've explored every option," Degnan said. "We had to wait until all scenarios played out. We know it will mean losing valuable employees, but the decision was necessary."

"Every effort will be made to find a buyer for the facility and real estate there," Degnan said. "We're working toward the most positive outcome for CHS member-owners."

Business history

The property consists of more than a dozen individual buildings on 20-plus acres just east of Halstead Street on 11th Avenue. It has nearly 128,000 square feet of combined manufacturing space, including a 30,713-foot warehouse and nearly 14,600 square feet of building shells, according to the Reno County property data web page.

The first building went up in 1961 and others were added in 1964. Then there were expansions in 1974 and 2012, property records show.

The property was last valued at $4.989 million, according to the website.

CHS Inc. is a diversified global agribusiness owned by farmers, ranchers and cooperatives across the United States, with operations in energy, grains and foods.

The Fortune 100 company supplies energy, crop nutrients, grain marketing services, animal feed, food and food ingredients, along with business solutions, including insurance, financial- and risk-management services.

The company, headquartered in St. Paul, Minnesota, also operates several gasoline refineries in the U.S., including one in McPherson, manufacturing and distributing Cenex-brand fuels, lubricants, propane and renewable energy products.

The company completed a $3 million expansion at the Hutchinson plant in the summer of 2012, adding about 20,000 square feet of warehouse space, as well as upgrading its research and development center and its quality assurance area.

A Wichita couple, whose main customer - via Doskocil Foods - was Pizza Hut, originally owned the Hutchinson plant. A limited partnership, Simpson Capital LLC, purchased the company in 2002. The majority buyer was the Phil Simpson family, former operators of Republic Group paperboard plant in Hutchinson.

The Simpsons weren't looking to sell, former plant manager Michael Considine told The News in 2008, but "the right offer came along." Legacy had been a CHS customer, purchasing its soy flour for four or five years.

CHS Inc. was formed in 1998 as Cenex Harvest States with the merger of regional cooperatives Cenex Inc. and Harvest States Cooperatives.