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Would Fufeng Group Ltd. corn wet milling plant be a boost or bust for Grand Forks, North Dakota?

Ross Kennedy, an agribusiness and national security expert is skeptical about the proposed biofermentation plant, while area farmers Paul Sproule, Matthew Krueger and Jared Hagert, are among those in support of it.

Yellow corn flows out of a white truck bottom.
Fufeng, the proposed corn wet milling plant in Grand Forks, North Dakota, would have an annual capacity of 25 million bushels.
Ann Bailey/Agweek
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EDITOR'S NOTE: An earlier version of this story indicated the wrong commodity group supported the Fufeng plant. It has been updated to indicate North Dakota Corn Growers Association indicated support in November 2021. We regret the error.

GRAND FORKS, N.D. — Depending on their perspective, members of the agricultural community, including farmers, believe that the proposed Fufeng Group Ltd. wet corn milling plant project proposed in Grand Forks, North Dakota, provides them with a tremendous marketing opportunity for their corn or that it is a project fraught with danger to the environment, the community and the United States.

The project raises major red flags for Ross Kennedy, a strategic supply chain consultant for U.S. public- and private-sector entities operating in the agribusiness, energy, logistics, and national security sectors, with particular emphasis on China-related activities

A picture of a man in a suit.
Ross Kennedy has concerns about the Fufeng Group Ltd. corn wet milling project proposed in Grand Forks, North Dakota.
Contributed

Meanwhile, Paul Sproule, owner of Sproule Farms, a potato, row crops and grain operation in Grand Forks County, believes the plant will give producers another marketing outlet for their corn and benefit the community as a whole.

Matt Krueger, operations manager of K and D Krueger Farms and Sons near East Grand Forks, Minnesota, also supports the Fufeng Group Ltd. project. He believes that opponents of the project are a small, vocal minority, and that the farmers who object to building the plant in Grand Forks don’t represent the majority.

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“You have kind of the loud, smaller people that are freaking out about it,” Krueger said. Most farmers and some commodity organizations are in favor of the project, he said.

In a Nov. 9, 2021, post on its Facebook page, the North Dakota Corn Growers Association said that “NDCGA is excited about the recent announcement of Fufeng Group Limited's plans to develop and build a wet corn mill in Grand Forks.”

3561426+0B6O2b61phok-NkVmZjRxUlpnQzA.jpg
Paul Sproule, of Sproule Farms in Grand Forks, North Dakota. Photo taken Aug. 1, 2017.
Nick Nelson / Agweek file photo

The real reason that most of the project’s opponents don’t want it in Grand Forks is because the plant and nearby businesses will have to be annexed into the city limits, not because they are concerned about other issues, Sproule said.

“People don’t want the annexation, period,” he said.

Kennedy’s concerns about the plant are larger than annexation.

Is there enough corn?

Kennedy, who is familiar with Fufeng Group’s production of food, animal feed, amino acids xanthan gum and monosodium glutamate, has been following the evolution of the project since it was announced five months ago.

Since November, opponents of the project, including farmers and landowners who live near the project site, have been vocal at Grand Forks City Council meetings about their concerns.

Despite the opposition and after several rounds of voicing it — sometimes loudly — during public comment periods at the end of the Grand Forks City Council meetings that included Fufeng Group project updates, members approved a development agreement for Fufeng Group on Feb. 22, 2022, by a 5-1 vote.

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At that time, Grand Forks City Council President Dana Sande said that while he appreciated people’s concerns and that they were willing to speak their minds, he believed that it was in the best interest of the city’s economic future to approve the plant.

Opponents went so far as to gather thousands of signatures in an attempt to force as citywide vote on the issue. But the city rejected the petitions as invalid .

But Kennedy, who started his career at ADM, finds it puzzling that the company, which is known in China as being clever and aggressive in its business practices and typically located near cheap energy and cheap inputs, would build in Grand Forks, which, historically, does not have an abundance of corn or energy.

Kennedy is skeptical about whether the region surrounding the plant can sustain the kind of corn needed for the Fufeng plant because North Dakota and Minnesota frequently have flood and drought crop disasters that reduce the size of the crop.

Sproule, however, believes there is plenty of corn available in North Dakota and Minnesota, noting that in 2021, North Dakota harvested 3.63 million acres of corn, which represent only 4% of the Fufeng plant’s production capacity.

He argues that there is enough corn within a 40-mile radius of Grand Forks to supply the plant with the corn it needs, and in years with crops reduced by weather events, such as droughts or floods, Fufeng could buy corn from other states.

A smiling man in a suit.
Rep. Jared Hagert
Courtesy / North Dakota Legislature

Farmer Jared Hagert also believes there is plenty of corn available for the production needs of the plant.

“I think any company that is putting a plant like this up would do their own homework on whether the location would have a steady supply so they wouldn't have to bring it in from great distances,” said Hagert, who farms near Emerado, west of Grand Forks, and is owner of Integrated Ag Services, and a North Dakota legislator representing District 20. “As far as a reliable supply of corn, I don't have a concern about that. I think if that was a concern, the company would not locate in Grand Forks, North Dakota.”

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Meanwhile, the presence of the plant will encourage more farmers in the Grand Forks region to increase their corn production, Krueger said. Local elevators also would have an opportunity to send corn by rail to the plant if it needed to shore up its supply.

Besides his production concerns, Kennedy also questions whether the Fufeng plant will be the boon to the local corn industry that its promoters have touted. Large companies, such as ADM and Cargill hire outside experts to study the economics before they build, he said.

“If I wanted to quantify in realistic, knowable terms the economic impact to something like this, when you’re talking about something very complex like the local corn basis … there are companies that do that sort of thing,” Kennedy said.

Grand Forks Region Economic Development Corporation based a 40–cent per bushel increase on an estimate from a local corn farmer, said Keith Lund, Grand Forks Region Economic Development Corporation president and CEO in a Feb. 8 interview.

Sproule doesn’t think a study is needed to determine whether the lower basis of the plant will improve corn prices because he said that’s a given anytime a local agricultural manufacturer is buying commodities.

“That’s what an end-user processor does for you,” he said.

For example, the North Dakota Mill and Elevator has a much lower basis than that of local grain elevators, Sproule said, noting that he keeps track of the basis daily.

Meanwhile, farmers in the northern Red River Valley haul their corn to Tharaldson Ethanol in Casselton, North Dakota, for similar reasons, he said.

Even if the per bushel corn price increase is 20 cents a bushel instead of 40 cents, that would benefit farmers, Hagert said. If the plant used 25 million bushels of corn a year, as forecast, that would mean a total of a $5 million boost in farm income, Hagert said.

“Five million a year … is a good chunk of change to put in producers' pockets, that will in turn, be spent on main street,” he said.

“Looking at the project and sheer number of bushels, it will make Grand Forks a corn deficit county,” Hagert said. That also will raise the corn price, he believes.

“This isn't just a Grand Forks issue, this is the whole northeast region of the state that will benefit from this,” he said.

Krueger also is confident that the Fufeng plant would improve corn prices to farmers and that a study isn’t needed to figure that out. The ethanol plants, such as Tharaldson, add 20 to 30 cents per bushel to corn prices, so it makes sense that the Fufeng plant would add a similar amount.

But Kennedy insists that determining whether the Fufeng plant will result in large per bushel price increases for corn farmers warrants more study.

“For the EDC to ask a couple of farmers what their thoughts are, I can’t imagine a sloppier, less vigorous way of going about it next to flipping a coin on what the number would be or throwing darts at a dartboard,” Kennedy said.

If the plant is built, he predicts that there’s potential for it to dominate the market.

“All of the agricultural activity in the region is tied to corn and will essentially be a procurement, pricing and outlook decision made by Fufeng management,” Kennedy said.

Other concerns

Besides the agricultural issues, Kennedy questions why the project is being pushed through quickly without what he believes is proper vetting.

“These types of things, if you want to do it right, there’s a lot of legwork upfront. There are a lot of people that have to be reassured at the state and federal level of everybody involved, and you want to do that up front, long before time and effort is wasted by anybody,” he said.

The concerns that some Grand Forks opponents to the project have voiced about its potential ties to the Chinese government are legitimate, Kennedy believes. China has made food security a core tenant of its Made in China 25 program and its Belt and Road program, which are core parts of President Xi Jinping’s agenda.

“It’s very fair to say that any Chinese company operating in the United States, locating itself near to more stable food supplies of products, anywhere in the United States, and then exporting those ingredients that are produced, that is a very desirable, sanctioned activity for Chinese companies to engage in, in the U.S., by the Chinese government,” Kennedy said.

An April 14, 2021, Official Journal of the European Union report, echoes that, saying that the Chinese economy's direction is determined by "an elaborate system of planning which sets out priorities and prescribes the goals the central and local governments must focus on."

“Overall, the system of planning in the PRC results in resources being allocated to sectors designated as strategic or otherwise politically important by the government, rather than being allocated in line with market forces, ” it said.

Fufeng Group as recently as 2020, publicly has stated, in press releases and other forms, its operations domestically and internationally serve the will of Xi, Belt and Road, and the Chinese Communist Party, or CCP, Kennedy said. The Official Journal of the European Union report also noted a high-ranking Fufeng Group official, Chairman of the Board Li Xuechun, had been appointed as a member of the Linyi City People's Congress, and the company "hosts Party-building activities, which influence its operations.”

Fufeng’s connection with CCP doesn’t concern Sproule. He likened a Chinese business owner being tied to the Chinese party as being similar to a business owner in the United States being a member of the Democrat or Republican parties or being an independent.

Moreover, the majority of the products produced at the Fufeng plant in Grand Forks would be consumed in the United States, Sproule said.

Fufeng’s connection to the CCP does bother Kennedy.

“Any infrastructure built on private property that isn’t controlled by U.S. entities, but, instead, by the Chinese government exposes the region, particularly its military assets, to infrastructure, hardware, software and people in the location. to monitoring and critical disruptions of data flow, digital transmission and activities at Grand Forks Air Force Base," he said.

“Because it is a food production facility does not mean that it could not serve another purpose, and, in fact, that fusion of civil and military activity is a portent of China’s military structure as well as its CCP,” Kennedy said.

Kennedy acknowledges that he and others who have been critical of the plant have been accused of being the “hired guns” of Fufeng’s competitors.

“That’s not true at all. Attacking the source is a really time-tested way of trying to discredit the black-and-white validity of information, rather than addressing the details of the data on its own merits,” Kennedy said.

The Fufeng project, more than most, should be undertaken with a high level of transparency and disclosure, he said.

For Sproule, Fufeng, though, would be just another Chinese business joining others that are in Grand Forks and one on which opponents of the plant are unfairly focusing.

Following the opponent's line of reasoning, if the biofermentation plant project should be halted because it is a Chinese company, then others in the city also should be, Sproule said.

“We should take Cirrus (an aviation business) out of Grand Forks, too. We should stop contracting with the Chinese airlines that come over here to fly, that we’ve done business with (University of North Dakota) aviation,” Sproule said.

Krueger, like Sproule, also has no concerns about security issues.

If China wanted an opportunity to spy, they could do so from the planes they fly over the area, and anyone who drives by Grand Forks Air Force Base or has farmland behind it, Krueger said.

Hagert concurs with Sproule and Krueger.

“I don’t have any concern about national security issues. You look at the different things that China has been allowed to participate in the U.S., the acquisition of Smithfield or their ownership of Syngenta.

“They’re involved in much larger aspects of agriculture than a 25 million bushel corn wet milling facility,” he said.

But Kennedy believes the possibility of security breaches should not be ignored.

“To deny that is a risk portraying a very clear lack of understanding and an unfamiliarity with an enormous body of work that has been produced by the United States military around how commercial assets can be weaponized as hubs of activity for the Chinese government, even on foreign soil like ours,” he said.

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