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ND mill grinds out profits

GRAND FORKS -- Running the nation's only state-owned flour mill appears to be no grind for Vance Taylor.

In his 14th year as general manager of the North Dakota Mill and Elevator, Taylor just reported to his bosses in Bismarck -- three top elected state officials who as the Industrial Commission act as board of directors -- the mill netted $11.9 million in profit in the fiscal year that ended July 1.

That's the third-highest net in the 90-year history of the mill. The record was $16 million in 2011.

"The past four years have been the four highest-profit years" in mill history, Taylor said Tuesday.

Which is a big improvement from 2008, when the mill lost $16 million in a year, due largely to a small wheat crop that contributed to the market "moving erratically," leaving the mill on the losing side of lots of deals, Taylor said.

Since then, he's tightened up the marketing strategies to protect the mill against such volatility.

In his first full year as manager, the mill made $1.9 million in profits on $103 million in sales. Except for a couple of down years, the mill has made a profit every year under Taylor's leadership.

A good year has ripple effects.

Not only do 52 percent of the past year's profits go into state coffers -- $5.63 million to the general fund plus $595,361 to the farm fuel tax fund -- but the good results will mean bonus checks averaging about $10,000 soon to be cut to the mill's 132 employees, Taylor said.

"They earn it," he said.

Taylor also gets a bonus. And deserves it, said Doug Goehring, the state's agriculture commissioner, who with Gov. Jack Dalrymple and Attorney General Wayne Stenehjem make up the Industrial Commission.

"Vance Taylor is a very competent, capable individual and a good manager," said Goehring, a farmer who has grown the durum wheat and high-protein hard red spring wheat North Dakota is famous for and the state mill turns into flour for pasta, bagels and bread.

The latest gross revenue of nearly $320 million was a record, as was the shipment of 1.1 billion pounds of flour in fiscal year 2013, Taylor said.

Last year, the mill bought a record 25.5 million bushels of spring wheat and durum, about 20 percent of it directly from area farmers who haul their crop to the mill in their trucks.

Some of the tall concrete grain silos filled with grain here date to the mill's founding in 1922, when the state decided it needed to grind its own wheat to keep the big-city millers and grain dealers from taking advantage of the state's farmers.

The one-of-a-kind arrangement is working better than ever, Taylor said.

"It starts with the farmers, who grow the world's best wheat," he said.

Taylor credits the mill's employees, all state employees like him, many of them averaging 50-hour weeks to keep the milling going 24 hours a day using the seven separate milling units, three of them added since Taylor became manager.

"They really work together as a team," he said. "It takes everybody."

The mill buys the equivalent of about 8 percent to 10 percent of the state's crop of spring wheat and durum.

"A big reason we exist is to create a market for farmers," Taylor said. "Hopefully, with the demand we create, we increase the wheat prices to the farmers, at least a little."

It's better to process the state's grain here, creating jobs and adding to the price farmers get, Goehring said.

Despite the mill's birth in the midst of prairie populism that was seen as socialism by many, today the state mill operates as a business like any privately owned mill, Taylor said.

"We receive no state money," he said.

The mill finances its own operations, including the employee pay.

Goehring acknowledged it doesn't even seem fair: In the good years, the mill must share half its profits with the state, while in a bad year, "it has to eat the losses."

Within a few days, Taylor expects to see newly harvested wheat come to the mill, and he figures it's good enough that the mill can set new records by next summer, besting competitors.

"We produce about 250 different flours," he said Tuesday. "It seems like every customer wants something special."

Whether the high-protein wheat flour prized by bakers or the semolina flour used in pasta, most of the 4,000 rail cars of flour leaving the mill each year end up on the East Coast.

"New York City is our biggest market," Taylor said. Only 3 percent gets packed into the 5-pound and 10-pound bags with the distinctive Dakota Maid logo seen on grocery shelves across the region.

Twenty-five years ago, the state mill's output was 90 percent durum flour, 10 percent spring wheat flour. Now it's the converse as the mill has reacted to consolidation in the pasta markets and concentrates on producing spring wheat flour for bagels and breads that have broadening demand, Taylor said.

Meanwhile, world demand for U.S. farm products is at new heights.

"Third World countries are developing new tastes," he said. Asian nations with swelling populations have growing middle classes looking for better foods, especially breads, Taylor said.

"You see a lot of bagel shops in (South) Korea," he said. There is a similar uptick in demand for the mill's flour from Caribbean nations, he said.

Exports only make up 1 percent of the mill's business, but it's growing, he said.

Now 55, Taylor came to the mill after 20 years with food giant ConAgra, mostly in Omaha, Neb.

He has no plans to go anywhere, he said.

"This is a great place to work," he said.

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