July 03, 2002 11:00 pm

By Ray Linker

Observer Staff Writer

In agriculture, the profit is in the value-added aspect of the business.

Added value is driving a group of four Powder Valley ranchers, who have formed an ownership group designed to better produce and market the fruits of their labors.

Their latest efforts toward more profits end has resulted in the group — calling itself Powder Valley Products — obtaining a $90,000 grant from the Northeast Oregon Alliance Opportunity Fund to start an animal-feed processing plant.

The plant will take the raw material grown in the Powder Valley — wheat, oats, barley, as well as alfalfa and hay — and process it for marketing.

"The plant will clean, process, blend, package and ship the feed products to market," said Sara Miller, Northeast Oregon Alliance program manager for the grant.

If all goes according to plan, the plant will be processing 2,000 tons a year in about three years, Miller said. The plant should be operational by next spring, owners said.

The limited liability company had hoped to get the grant six months ago and be in business this year, but the award was delayed because of the uncertainty of the lottery funds from the Legislature.

"We started putting this whole process together about two years ago, said Curtis Martin, rancher and one of the organizers. He will serve as chief financial officer. "Production won't start this fall. We're now shooting for next spring for the first bag to come out of the plant," he said.

The company will package blends mainly in 50-pound bags bearing the company's name, Martin said. The company will look at offering the product in bulk in up to 2,000-pound sacks.

"We want to stress that the effort to offer a quality product will be intensive. We want the last bag to be as good as the first. That has been a big complaint with some products. Sometimes you get a good one and then the last bag is very poor.

"We will get the waste and chaff out. We will run the grain through a cleaner to get a really pure product. Quality will be our main focus," Martin said.

"They will be trying to capture more of the value-added part of the finished product," Miller said. Turning the raw grain into a marketable product should result in a 300 percent increase in the grain's value, Miller said.

"They would hope to add $75 per ton of added value, and that's a conservative estimate," she said.

The group will match the grant with $90,000 of its own money, said Martin.

For the plant, the company has already bought six-tenths of an acre in North Powder. It has three 18,000 bushel grain bins on site.

"The land is next to the railroad tracks, which will give us another option in the future. We don't plan to ship by train at first. In the future, we could bring in corn, which we don't grow here," Martin said.

The next step is to design the processing plant. Then it will cost $80,000 for the site preparation and construction of the building.

"We want to try to take our commodities — small grain — to the retail market in the Northwest. We have already done some market research, but we need to do more on the different blends people want," Martin said.

The raw product will come from between 10,000 and 15,000 acres of local ranchers, Martin said.

The initial market focus will be on the Northwest, from Boise to the Willamette Valley, he said.

"We will be regional to begin with, counting on quality to help widen our market later," Martin said.

Previously, the group received a grant of $27,250 from the Alliance to buy scales in North Powder to weigh bulk grain and hay. The scales, which were in need of repair and about to be shut down, were the only legal ones between La Grande and Baker City. A grand opening and dedication of the repaired scales was held June 28.

In its first full year of operation, the plant should turn out 1,300 tons for market, hit 1,600 in the second year and then reach the 2,000 level by the third year. Miller said.

While some services may be contracted out, the plant will produce a half-time job at start-up, and by the third year it should have two full-time equivalent jobs, Miller said.

Initially, the plant will not turn any of the grain into pellets, Miller said.