PORTLAND, OREGON, US — Columbia Grain International (CGI) Chief Executive Officer Jeff Van Pevenage, whose career in the grain industry spans 34 years, has never seen a more challenging business environment than the one he and other grain company executives around the world have encountered in recent years.

Since 2020, they have dealt with a once-in-a-lifetime global pandemic that forced companies to alter the way they conducted business, geopolitical turmoil in the Black Sea region and other parts of the world that has altered traditional trade flows and caused significant market volatility, and a prolonged period of global inflation and high interest rates not seen since the 1980s.

Adding to the angst in recent weeks has been a series of events that have made shipping grain in an efficient manner difficult. Low water levels due to drought have limited the amount of grain flowing through the Panama Canal. Yemen-based Houthi rebels have been firing missiles at commercial ships passing through the Suez Canal in response to the hostilities between Hamas and Israel.

For about a week in mid-December, rail traffic was halted at the southern border of the United States as government officials closed off routes on the Mexican border going to and from the United States due to security concerns linked to the immigration crisis. And if all that wasn’t enough, the US government recently unveiled a $1 billion plan that would study the potential breaching of the Columbia and Snake River dam system in the Pacific Northwest to address salmon declines. Such an action, taking place in Portland, Oregon, US-based CGI’s backyard, would effectively shut down the world’s third largest export corridor for grains and oilseeds.

Jeff Van Pevenage

|

Credit: ©CGI

“We need to keep the lower Snake River dams,” Van Pevenage said. “It’s the top wheat export gateway in the nation and the third largest grain export corridor in the world. If farmers and the export industry in the Pacific Northwest lose this critical barge shipping route, there will be further strain on an already broken supply chain.”

During a wide-ranging interview with World Grain in December, Van Pevenage, who was vice president for five years and senior vice president for three years at CGI prior to becoming president and CEO in 2016, talked about how the company has operated in this challenging environment and emphasized its positive developments in regenerative agriculture and the burgeoning demand for specialty crops.

Sustainable and regenerative ag practices

A vertically integrated company that purchases grains, oilseeds, pulses and organics from more than 5,000 farmers in the northern tier of the United States and operates grain elevators, processing plants and agronomy centers, CGI has made regenerative agricultural practices a top priority, Van Pevenage said.

“Columbia Grain has been a champion of regenerative agriculture for decades,” he said. “Back in the early 2000s, Columbia Grain was instrumental in supporting the introduction of pulses, lentils and chickpeas as viable rotational crops for producers across the Pacific Northwest by making markets for our customers both here in the US and abroad. We are the largest handler of lentils in the US and are experts on the importance of lentils in a farmer’s crop portfolio to benefit the farmer and the sustainability of the planet.”

Van Pevenage noted that adding lentils to crop rotations “fulfills a demand for this popular food while improving soil health, reducing greenhouse gas emissions, and storing up to 30% more carbon in the soil than most other plants.” To further strengthen its commitment to this movement, the company is in the process of hiring its first director of regenerative agriculture.

“This person is going to begin programs working directly with farmers and hooking them up with end-use food companies that need regenerative agriculture or sustainability in their supply chains,” Van Pevenage said.

CGI also recently partnered with a company called AgriCapture, which helps identify and implement climate-friendly practices. The rice produced by Enrich Foods, a subsidiary of CGI, is being grown and harvested in ways that reduce greenhouse gas emissions, improve soil health and conserve water, not to mention it showing substantially lower levels of arsenic which is healthier for everyone, but partcularly children.”

Pivoting toward specialty crops

CGI, a leader in origination, processing, and distribution of bulk grains, pulses, edible beans, oilseeds and organic crops for the US and global markets since 1978, has expanded its specialty crops business in recent years. Van Pevenage noted that starting in 2005, CGI’s commitment to the pulse industry was critical to expanding the production of lentils and peas.

“With the help of my team, I was able to really kickstart the business for us in Montana,” he said. “Since then, we’ve built four processing facilities in Montana and are handling those products at 10 facilities. That created a market for farmers. It gives them a place to deliver those crops and encourages them to grow more acres. Montana and western North Dakota have the highest density of pulse crops growing in the United States.”

He said CGI’s increased attention on pulse production, storage and processing is partly due to the growth in consumer demand for those crops as well as headwinds in the export of traditional grains from the US.

CGI’s increased attention on pulse production, storage and processing is partly due to the growth in consumer demand for those crops as well as headwinds in the export of traditional grains from the US.

“It’s no secret that (grain) exports from the US are suffering,” Van Pevenage said, noting that South America has overtaken the United States as the world’s top soybean and corn exporter. “There’s too much capacity in the Pacific Northwest and too much in Canada as well. Markets continue to evolve and grow, but the problem facing the US is that the competition is doing it cheaper and growing more.”

While the company continues to expand its specialty crop business and increase capabilities at its existing facilities, Van Pevenage said CGI plans to originate more of these types of crops within its five-state footprint (Washington, Idaho, Montana, North Dakota and Nebraska) and will look to expand that business further where appropriate.

“We see great potential in the chickpea market here in the US,” he said. “People are steering away from plant-based meats and want plant-based ingredients. They don’t want to incorporate ingredients like chickpeas into fake products; they want to figure out how to incorporate them into natural protein-rich products.”

CGI debuted a small-pack pulse line for the consumer market, called Balanced Bushel, in 2022. Balanced Bushel is grown and processed near several of CGI’s processing plants, and is now packaged at the Great River Organic Milling facility in Fountain City, Wisconsin, which CGI just acquired. The acquisition allowed CGI to consolidate its Hastings, Nebraska, small-pack business to that facility.

“Our new Hastings facility processes several pulse and bean crops and has filled a gap for farmers in the Nebraska region,” Van Pevenage said. 

Other recent acquisitions

One of the most significant moves as part of CGI’s growth strategy was the acquisition of eight grain facilities from Gavilon in North Dakota and Montana in 2022. The transaction added nearly 30 million bushels of grain storage capacity, increasing its overall capacity to 79.4 million bushels, which ranks 21st in North America, according to Sosland Publishing Co.’s 2024 Grain & Milling Annual. Prior to the acquisition, GGI ranked 34th in total grain storage capacity. 

The company now operates 48 grain and storage facilities and 10 processing plants.

CGI’s most recent addition to its business portfolio was in June 2023 when it established a new subsidiary, Enrich Foods, LLC, with the acquisition of Great River Milling in Fountain City, Wisconsin, US, obtaining its milling operation and a new packaging and distribution facility. 

Great River Milling specializes in organic and specialty baking flour, grains and breakfast products, which have nationwide distribution through leading retailers and major e-commerce platforms in the United States.

Van Pevenage said the new venture provides the foundation for the company to expand into the consumer packaged goods category and to welcome future business and acquisition opportunities and new market penetration.

“CGI’s acquisition of Great River Milling to launch Enrich Foods gives us the platform to develop healthy, clean, packaged food innovations,” he said. “It allows us to leverage our agricultural base of 5,000 producers to open new markets for them thanks to our unique processing and packaging capabilities, all in an effort to further our mission of nourishing the world safely.”

In addition to shifting more attention to specialty grains, CGI is distributing more of its traditional grain products domestically due to a variety of factors. 

The plant features high-speed robotic lines for high capacity, offering packing, milling and blending capabilities for stone or hammer mills. It offers a range of package sizes and types for retail, club and foodservice use. It is Safe Quality Food, gluten-free, organic and non-GMO certified, kosher and has allergen-friendly capabilities.

In addition to shifting more attention to specialty grains, CGI is distributing more of its traditional grain products domestically due to a variety of factors. Up until this year, about 100% of CGI’s soybean crop was targeted for export, Van Pevenage noted. 

“This year, with an increase in crushing capacity in North Dakota, we will likely target 70% of our handle through export channels and 30% into domestic markets,” he said. “More crushing facilities are going to come online that will adjust it more toward domestic use. And our wheat that is grown in Montana and North Dakota typically run 80% to export, but with lower export demand we are seeing a shift allocating close to 40% toward domestic use.”

Challenges aplenty

Looking ahead, Van Pevenage believes CGI has positioned itself to withstand some of the headwinds that are beyond the company’s control.

But the prolonged period of soaring inflation and high interest rates is starting to take its toll on the agribusiness industry, Van Pevenage said. If these trends aren’t reversed, there could be significant consolidation.

“I think, particularly in our industry, which is a very low-margin business, the high interest rates are really starting to hurt a lot of companies,” he said. “I would say that almost every week someone brings their business to me saying: ‘We’re looking for a buyer. We want out. We can’t take it anymore.’”

Van Pevenage said the cost of doing business has soared over the last four years. Labor costs, for example, “have gone through the roof,” he said. 

“I would guess our overall wage rate is probably 25% to 30% higher since the pandemic,” he said. 

He said the fallout from COVID also exacerbated labor shortage issues that already were starting to surface prior to the pandemic.

“The labor problems really boomed during COVID, and they haven’t subsided much either,” he said. “We continue to fight to have enough labor to keep all our facilities running. We are bringing H2A and H2B workers from overseas to fill the positions we can’t get filled locally.”  

Although the worst days of the pandemic are over, supply chains are still unsettled, and geopolitical tensions are at their highest point since World War II. Russia and Ukraine, both large grain producers and exporters, are still waging war after two years, the conflict between Israel and Hamas is expanding to other parts of the Middle East, and the tension between China and Taiwan continues to simmer. 

The uncertainty surrounding the geopolitical disputes and the sputtering global economy has adversely affected agribusiness, Van Pevenage said. With so much turmoil swirling, agribusiness companies will need to be nimble and resilient to survive, he said. 

“Having to deal with the intense volatility can be stressful and create a lot of economic harm to the industry,” he said.