The news three weeks ago that ag giant Cargill said it would invest another $75 million in Puris, a small but leading producer of protein foods made from field peas and other pulse crops, was heard as good tidings for a group of farmers and investors around Pierre and Harrold, South Dakota.
However, this big Aug. 28 news from Cargill, Puris and Minnesota Gov. Tim Walz, never mentioned the pea-processing plant built three years ago by the South Dakota Pulse Processors LLC just outside Harrold, a small town 34 miles northeast of Pierre.
Twin-Cities-based Puris began operating the Harrold plant early this year and has been paying off its debts, say those involved in the plant.
The Puris news is part of the big surge toward meatless protein foods that has restaurants such as Burger King offering burgers with no beef.
Puris is a main supplier of plant protein to Beyond Meat, a hot new stock that went public this spring, and for products such as Beyond Burger, the Star Tribune of Minneapolis reported last month.
Earlier this year, Cargill announced a $25 million investment in Puris, making it a round $100 million with the Aug. 28 announcement.
Much of the money’s effect will be seen first at Puris’ manufacturing plant in Dawson, Minnesota.
“This is more than a pea protein facility,” Puris’ President Tyler Lorenzen said in the companies’ joint news release announcing the big partnership on Aug. 28. “This is the future of food.”
Puris touts making high-protein foods in new forms using crops that leave the soil in better health. Farmers near Harrold who raise field peas say that like soybeans and other legumes, the crop actually produces nitrogen, a main fertilizer, instead of needing it added, like corn and wheat do.
“This investment will grant Puris the ability to support more food companies, more farmers and more consumers faster,” Lorenzen said.
Although the companies didn’t mention the Harrold plant in their announcements on Aug. 28, the new money will help the South Dakota Pulse Processors’ project, a company spokesman told the Capital Journal.
“The additional investment to increase Puris pea protein isolate output will mean a lot of opportunity for local producers to raise yellow field peas with a sustainable market,” Jordan Atchison, president of Puris’ Grains division, said recently via email in response to questions from the Capital Journal. “Puris will continue to operate the Harrold facility for processing whole peas for further food use and for seed stocks, which will increase for 2020 crop planting. Puris is excited to continue working with more and more local producers on our identity-preserved yellow field pea production to positively affect the future of food and the soil.”
The Harrold pulse processing plant was envisioned and built by a group of about 86 investors, some of them farmers, some who grow yellow field peas. They formed the South Dakota Pulse Processors several years ago.
The plan for the then-$4.5 million plant was about $2.5 million raised by the 86 investors; about $1.3 million borrowed from the Pierre Economic Development Corp., (PEDCO) and $700,000 borrowed from the state Railroad Authority through the Hughes County Railroad Authority for a siding to load out the processed pulse crops.
Completed mostly in 2016 using a Turkish company’s technology and equipment, the plant began processing peas in early 2017 but quickly ran into difficulties: The dozens of small electrical motors imported from Europe had to be switched out due to labeling issues, meaning a big unplanned expense. Also, the world pea market swooned due to machinations in India, one of the biggest costumers.
The Pulse Processors had to ask state and PEDCO officials for forbearance on their loans, which they received, while the plant was out of production. The Pulse Processors leaders said they were looking for a friendly investor who could provide them the capital resources they would need.
That’s when Puris agreed to operate the plant beginning early this year in a contract with the South Dakota Pulse Processors that includes a plan for Puris to purchase the plant eventually, said Tom Tveit, one of the leading founders of the Pulse Processors.
It’s pretty solid financing.
Cargill is the largest U.S. privately held company, with $120 billion in revenues in 2015, suffering a little the last two years as sales and other revenues fell to $114.7 billion in 2018 and $113.5 billion in 2019, according to the company’s profile and news reports. It’s net earnings last year were $3.2 billion and this year $2.6 billion.
Based in Minnetonka, a western suburb of Minneapolis, Cargill started in 1865 in Iowa. It does business in 70 countries hand has 160,000 employees.
A major producer of grains as well meats, Cargill says this move is part of its plan to get into plant protein foods in a bigger way.
Puris’ leaders moved their company from Iowa to the Twin Cities in recent years to be nearer the big farm and food companies such as Cargill, they said.
Puris’ main pea plants manufacture protein foods from the peas, using milling processes. The Harrold plant, with its Turkish equipment, processes whole peas into whole pea products and split pea products for dog food manufacturers and human food sales, many made overseas.
Jim Protexter, chief operating officer of PEDCO, told the Capital Journal the Cargill/Puris offers more possibilities in pea processing at Harrold and for area farmers.
“The Cargill investment means PURIS will need a lot more yellow pea contract production acres,” Protexter said. “Right now the Harrold plant would supply local peas to the existing milling plants, so we’d like to see a lot of their growth in contracted acres come from this area. The more important we become to their supply chain, the sooner we’ll see the job growth and additional investment we think they’ll want to make in milling capacity right here.”
In the near-term, the Cargill/Puris partnership helps right away financially, Protexter said.
“Our deal with Puris is a purchase agreement based on an existing amortization of about $1.3 million over 20 years with a five-year balloon,” Protexter said via email. “That has gone smoothly since it started in January and we are confident they will complete the agreement on time. The fact that Cargill has now pumped $100 million into Puris since January could move that schedule ahead. Most of what we’ve invested was borrowed from other lenders, but completing the sale will free up our credit position to pursue new projects.”
Protexter said Puris has been making the agreed-on payments. “When we set it up, they stated more than once that they would expect to pay it off early, “Protexter said. “With (another) $75 million ‘in the bank,’ that would seem even more likely.”
But Puris is concentrating more on their milling production at other plants, Protexter said. “We don’t do that in Harrold yet.”
The interest rate on the PEDCO loans also is low enough that it might make sense for Puris to “leave that in place for now.”
Puris began paying off the PEDCO loan in January, when it was $1.185 million, Protexter said. “That balance is now $1.167 million.”
The 86 investors behind the South Dakota Pulse Processors have even more at stake, individually and as a group.
But the news of the $75 million investment by Cargill can only improve what already is a successful agreement with Puris, Tveit said.
“There are two components to our agreement,” Tveit told the Capital Journal. “Part one of their agreement is to make payments on our debt. Component two is to pay us a royalty for processing through the plant. They are doing both. The royalty agreement continues on even after they complete the purchase of the plant.”
Although Puris is operating the plant now with a handful of employees and will at some point take over ownership, the South Dakota Pulse Processors will continue as a business entity of the approximately 86 investors, Tveit said.
“We are doing business with a company that will continue to have a business plan and continue to have a market,” Tveit said. “From that aspect, that makes us all very happy and comfortable.”
Interesting note: Puris President Tyler Lorenzen has a Super Bowl ring from a short stint with the New Orleans Saints.
He played quarterback of the University of Connecticut, passing for 3,236 yards and 16 touchdowns in 21 starts. At 6 feet, 5 inches and 230 pounds, he signed as an undrafted tight end with the Jacksonville Jaguars in the spring of 2009, then signed with the New Orleans Saints in September 2009, relegated to the practice squad. He caught no passes nor ran for any yards for the Saints, but when the team made it to Super Bowl XLIV on Feb. 7, 2010, and won, Lorenzen walked away with a ring.
He was born in Fremont, Iowa in 1985, when and where his father, Jerry Lorenzen, started the company that became Puris and Tyler went on to star as quarterback of Eddyville-Blakesburg High, leading them to two state playoff appearances.