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United Grain Corporation to Invest Millions in Old PGG Facilities by George Plaven Capital Press, July 21, 2016

Morrow County Grain Growers broke ground Wednesday on
a major expansion of the Boardman Grain Elevator in Boardman, Ore.

PENDLETON, Ore. -- It's been a hectic homecoming for Tony Flagg.

After nearly two decades as CEO of the Pendleton Flour Mills, Flagg finds himself back in the Round-Up City -- this time as vice president of business development for United Grain Corporation, which recently bought all grain assets from the now-dissolved Pendleton Grain Growers.

The deal became official June 10, which gave Flagg one month to hire staff and open a new office on Main Street before the start of wheat harvest. The sale included PGG's upcountry grain elevators and Columbia River terminal, but not its other businesses or main office building on Dorion Avenue.

The timing was tricky, having to jump directly into harvest. But Flagg said they've hit the ground running and made a good first impression on producers.

"I think we've been received very well," he said. "They appreciate that we're here."

United Grain now has the task of picking up where PGG dropped off, while updating infrastructure that has become obsolete. When UGC agreed to buy the facilities, it promised to invest $9 million toward making them more modern and efficient. Flagg said the contract gives them five years to get the job done, but added they want to move forward as soon as possible.

"Many of the elevators are so antiquated they're no longer competitive and, quite frankly, no longer safe," he said.

That level of commitment from United Grain comes at the backing of its owner, the Mitsui Group, a multi-billion dollar international trading company with offices in Tokyo and New York City. Mitsui became interested in food production after building its portfolio in mining, energy and manufacturing.

United Grain is at the forefront of that strategy, Flagg said. The company formed in 1969 and now operates the largest grain export terminal on the West Coast in Vancouver, Washington. For years, UGC operated purely as a wheat exporter, but with the rise of genetically modified crops, an emerging middle class in China and deepening of the Columbia River channel to accommodate larger ships, Flagg said the market has become significantly larger and more complex.

That, in turn, has led United Grain to branch out and work directly with farmers, which Flagg said gives them a greater command of the whole supply chain. In other words, they can supply more grain at a faster rate, amounting to more reliable service for customers.

"It's all about speed, space and service," Flagg said. "That's why we're here."

The PGG Board of Directors voted to dissolve in May, ending 86 years of service in Eastern Oregon. Flagg said everyone, including himself, regrets that the co-op failed. But UGC is excited for the chance to develop relationships directly with farmers. UGC did retain nine former PGG employees, including Jason Middleton, who was hired as region manager.

Flagg knew even before the sale it would take time and money to get the elevators where they need to be. Some just simply aren't equipped to handle the needs of today's farmers and, when it comes to harvest, time equals money.

"I'm dealing with truck lineup issues at McNary, and it's only the front end of harvest," Flagg said. "If the trucks don't get back to the field, harvest stops ... We need to make these facilities faster, and hold more grain."

The first step, Flagg said, is to look at which elevators are worth updating and which UGC will have to close. Flagg, 66, said he will facilitate that process and, once the operation is running smoothly, he plans to retire.

Umatilla County is one of, if not the best, grain producing counties in the U.S., Flagg said. He said it's up to them now to improve their level of service and win PGG's customers back.