Tri-State Neighbor: South Dakota Farm Newspaper

Jeff Dragseth, general manager of Cenex Oil Company, stands outside one of the petroleum cooperative’s convenience stores in Sturgis, S.D. The cooperative was established in 1958 and serves the petroleum needs of producers, homeowners and businesses in five communities. Tri-State Neighbor photo by Lura Roti

Like the producer/members it serves, Farmers Union Oil Company is a self-sufficient operation that understands the value of expansion and increased efficiencies.

“We are a stronger company because we take care of ourselves,” said Jeff Dragseth, general manager of Farmers Union Oil Company, which does business today as Cenex Oil Company.

Established in 1958 in Union Center, S.D., the cooperative meets the petroleum needs of agriculture producers, homeowners and businesses in five western South Dakota communities - Union Center, Sturgis, Rapid City, Belle Fourche and Hot Springs.

From its small beginnings in Union Center, a ranching community named for the cooperative, it is headquartered in Sturgis, S.D., has 50 employees and conducts about $35 million in sales.

“Our board recognizes that what was once a little cooperative, has always done well - we are the largest locally-owned co-op in western South Dakota,” said Larry Rhoden, South Dakota State House majority leader and a board member who ranches west of Union Center.

He adds that although the board is fairly conservative, as times and the agriculture industry have changed, they have expanded the cooperative's operation to meet their members' needs and increase the co-op's efficiencies.

Along with petroleum, the cooperative has expanded to home heating, and owns and operates a tire and automotive shop, Mr. Tire, in Sturgis.

The cooperative owns multiple convenience stores and sells a small line of agriculture products, like fencing equipment and agriculture protection products.

“We are still ag based, but we welcome and recruit residential and commercial business as well,” said Cliff Jensen, the chairman of the co-op's board of directors. “By expanding, it keeps the cooperative in a healthy position so we can still provide the products and services that our original ag producers need.”

A fourth generation rancher who operates a cow/calf and feeder operation near White Wood, S.D., Jensen represents the many producer/members that make up the cooperative's voting base.

Jensen says he has been involved in the cooperative system since he took over his family's operation and has served on the board since 1981. In 1994, his local cooperative, Patrons Oil Company, Belle Fourche, S.D., merged with Cenex Oil Company.

“I want customers and members to know that this is their company. Our cooperative is working for anyone that walks in the door and buys product from us,” he said. “It does not belong to the board, to the manager - a true cooperative belongs to everyone it does business with.”

He says that Cenex Oil Company has experienced a lot of growth the last 10 years - expanding the home-heating and commercial fuel aspect of their business.

“We realize that the ag base doesn't change a whole lot. There are only so many acres and only so many ranchers and farmers. Those numbers don't change a whole lot,” Jensen said. “We've expanded to urban areas with our propane business. That is where the business is.”

Dragseth says that cooperative members are the board and management's largest motivation to make changes and increase the cooperative's efficiencies.

“The board has recognized over the years that to maintain products and services for rural customers, the cooperative needed to expand to urban areas,” said Dragseth, who started with the co-op in 2005 after working as a fuel marketer for Cenex for 10 years. “As a co-op, we owe it to our members to repay back stock that has been acquired in this company.”

In 2007, Cenex Oil Company distributed $300,000 in cash patronage and deceased stock to its membership. In addition, Dragseth says that the cooperative saved producers over $200,000 on contracted fuel gallons this year.

“Hedging, to me, is one of the only ways that you can beat the market. Market volatility is a huge challenge every day,” he said. “There are forces at work that you can't control - hurricanes, financial markets and issues outside the market that drive the market on pure emotion.”

He says that the cooperative staff has a strong focus on educating their members in the benefits of contracting fuel.

“We've had grower meetings, but you can't take a canned presentation and make it work for everyone. Everyone's operation and needs are different,” Dragseth said. “Building relationships with our customers is key. We sit down with our customers and visit with them so we can better understand their needs.”

Purchasing their own fuel transport truck has allowed the cooperative to provide fuel to their customers at competitive rates.

Two years ago the cooperative purchased a 5,000-gallon fuel delivery truck designed for terminal direct activities.

“Our ability to go into Rapid City and with our new truck and pull directly from the terminal allows us to compete with the live fuel price each day,” Dragseth said.

Moving forward, Dragseth says that his management staff and the cooperative board will continue the tradition of meeting the challenges that come along with their member/owners' best interests in mind.

“Our locations have stayed the same, but the volumes have increased dramatically because we provide excellent service through quality employees and providing tools to our members that have not always been available to them,” he said.

Editor's note: This is the second of three articles featuring the people and businesses of Union Center, S.D.

Comments »

PauNoyce wrote on Apr 5, 2009 9:44 PM:

" id like to know if this stock bought by my mother in october of 1958 is still a live i have a certifacat says patrons oil company Belle Fourche so.dak. number 757 had bought 2 shares please can you tell me something of it or what it has coming would like some emformtion please Paul "

Alvearna Kowalski wrote on Dec 26, 2008 4:50 PM:

" Great story;my husband owns (1) preferred stock in Farmers Union Oil Company and we were wondering if you would know the value.It was bought in 1957 in Roundup,Montana. Were all of the Farmers Union's bought by another company? Thanks for any information. "

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