MITCHELL — Construction of the largest soybean processing facility in South Dakota began Tuesday with a groundbreaking ceremony.

The High Plains Processing plant, 2 miles south of Mitchell, is a project of South Dakota Soybean Processors, which already operates two processing plants in Volga and Miller. The company also announced Tuesday that a subsidiary of multinational oil and gas company BP is a major investor in the project. 

CEO Tom Kersting told attendees at the groundbreaking that “the great energy transition” is driving the project. He described the nation as moving from below-ground to above-ground energy sources — from coal and natural gas to biofuels, wind and solar power. 

Ty Eschenbaum, with a development firm assisting the project, A1 Development Solutions, said low-carbon fuel standards such as those adopted by California have created demand for U.S.-based soybean processors.

“There are two main products made here: soybean meal, which is used as feed, and soybean oil, which can be turned into renewable biodiesel,” he said.

The company said the new processing plant will cost about $500 million to build, will employ an estimated 85 full-time employees, and be capable of processing 35 million bushels of soybeans annually when it begins operation in 2025. Eschenbaum forecasts new demand for soybeans will raise the price “10 to 20 cents per bushel.” Soybeans are currently selling for around $13 per bushel.  

Kyle Peters, also of A1 Development and the son-in-law of Gov. Kristi Noem, emceed the event. He said because of the price projections for soybeans, “We call this a regional project. We don’t call this a Mitchell project.”

The Davison County Commission unanimously approved $21 million in public financing for the project in May. The money will flow from a tax increment financing district, which provides upfront financing that’s paid back later with the new and higher property tax revenues generated by the project. The state granted the project $6.7 million through the Governor’s Office of Economic Development to assist with construction.

Gov. Kristi Noem attended the groundbreaking. She said the state’s Freedom Works Here campaign is helping ensure workers are available to fill positions. In a previous news release, Noem highlighted the project and said, “South Dakota’s work ethic, business climate, and love of freedoms makes us the best state in the nation for businesses to start and grow.”

Diversifying options

The United States is the world’s leading soybean producer and the second-leading exporter, behind Brazil. Over 60% of exported soybeans are imported by China. 

The Mitchell facility is taking shape as the U.S. and Brazil compete for soybean export markets, and forecasts of Chinese imports of U.S. commodities feel less certain, according to Jerry Schmitz, executive director of the South Dakota Soybean Association. He said that’s partly what makes the facility so important: “Ensuring soybean producers have options,” so that if China buys less U.S. soybeans for livestock feed and cooking oil, producers also have the option of selling them to the Mitchell plant to be turned into U.S. biodiesel and livestock feed. 

U.S. agricultural exports to China in fiscal year 2022 reached $36.4 billion, making China the U.S.’s largest agricultural export market for the second consecutive year. Soybeans accounted for nearly one-half of those exports to China, at a record $16.4 billion in 2022. 

Unless that changes, Jerry Schmitz said, “some of the product produced at the plant will have to go overseas.”

“But this will also allow our swine industry to grow,” Schmitz said, because feed supply produced at the plant will drive down regional feed costs, making hog barns more lucrative. 

China’s soybean consumption surged when it started importing more to address its need for animal feed and cooking oils. China began buying more soybeans from Brazil after China put a tariff on American-grown soybeans during trade disputes with the Trump administration.