Chickpea,Lentil,andDryPeaSpreads,DipsandButters

ProcessingExpandingYourBusinessInGreatFallsMontana

BrettDoney,President&CEOBDoney@GFdevelopment.org1-406-750-2119JoleneSchalper,VicePresidentJSchalper@GFdevelopment.org1-406-750-4481

ContentsExecutiveSummary........................................................................................................................1

PulseCropProductionResourcesintheGreatFallsRegion......................................................3

Table2:GreatFallsRegionPulseCropAcreageandProductionfor2015.................................5

ChickpeaProductionintheGreatFallsRegion..........................................................................5

LentilProductionintheGreatFallsRegion................................................................................7

DryPeaProductionintheGreatFallsRegion..........................................................................10

ProximitytoRawMaterials......................................................................................................13

PulseProcessingintheGreatFallsRegion...............................................................................14

BusinessOpportunity...................................................................................................................18

PulseSpreads,Dips,and/orButtersProductsTrends..................................................................18

Spreads,Dips,and/orButtersManufacturing.............................................................................19

FinancialIllustration.................................................................................................................21

Summary......................................................................................................................................23

References...................................................................................................................................24

TheGreatFallsDevelopmentAuthority(GFDA)isapublic/privateeconomicdevelopmentpartnershipservingthe13countyGoldenTriangleregionofnorth-centralMontana.OurmissionistogrowanddiversifytheGreatFallsregionaleconomyandsupportthecreationofhigherwagejobs.Weareaprivate-sectordriven,award-winningprofessionaleconomicdevelopmentteamthatpridesitselfonprovidingexcellentservicetosupportlong-termbusinesssuccess.WewerethefirsteconomicdevelopmentorganizationintheRockyMountainregiontoearnaccreditationfromtheInternationalEconomicDevelopmentCouncil.InAdditiontoWorld-RenownedAgriculturalProduction,weofferarangeofsupportforagriculturalandfoodprocessors,includingworkforcerecruitmentandtraininggrants,landandequipmentgrants,accesstolowcostcapital,lowcostutilities,competitiveshovel-readyrail-servedmanufacturingsites,abundanceofspringandmunicipalwater,the6thbesttaxclimateinthenation,andmore!Weareexpertsatstructuringpackagesfocusedonlong-termclientsuccess.PurposeofThisBusinessCaseistodocumentthecompetitiveadvantagesourregionoffersfornichesinagriculturalandfoodprocessingoperations.Wehavedevelopedbusinesscasesforavarietyofotheragriculturalandfoodprocessingnicheswhichmaybeofinteresttoyou.Welookforwardtolearningaboutyourcompanyandhowwemaybeabletofindagreatlocationforyourstart-uporexpansion.

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ExecutiveSummaryTheGreatFallsRegionisthepremierlocationforthedevelopmentofchickpea,lentil,anddrypeaspreads,dips,and/orbuttersmanufacturingfacilitiesforthefollowingreasons:

The Region is the site of abundant dry chickpea, lentil, and dry pea agriculturalproduction giving specialty spreads, dips, and/or butters producers an economicadvantagebyprocuringpulsecropsdirectlyfrompulseproducers.The Region has one of the lowest combined costs of industrial energy in the nationincludingoneofthelowestelectricalratesforindustrialuseinpulsecropgrowingareasinNorthAmerica,whichsignificantlyreducesproductionenergycosts.TheRegionalsoboastslownaturalgasratesforindustrialuse,whichisnecessaryforindustrialheatingpurposes.TheRegionhasplentiful laborresourcesthatcanbecoupledwithMontana-sponsoredworkforcetrainingfinancialincentives.The Region has two impressive, shovel-ready industrial parks with requiredinfrastructure to support chickpea, lentil, and dry pea spreads, dips, and/or buttersmanufacturingfacilities.TheRegionhas the I-15 InterstateCorridorandthenearby I-90/94 InterstateCorridorthatinterconnectwithmajorhighwaysystemsforefficienttransportofgoodsbytruckthroughoutNorthAmerica.TheRegionhasBNSFrailserviceforefficienttransportofgoodsbyrail.TheRegionisservicedbydozensofMontana-basedandout-of-statetruckingfirmsforefficientandcosteffectivetransportofgoodsbytruck.TheRegionhasbeenactiveinattractingandsupportingawidevarietyofspecialtyfoodandbeveragemanufacturingoperations.

Thisdocumentoutlinesthejustificationforthestart-uporrelocationofachickpea,lentil,anddrypeaspreads,dips,and/orbuttersmanufacturingfacilityintotheGreatFallsRegion.PulsecropsaregrowninlargequantitiesinMontanaandincludedrypeas,lentils,andchickpeas.Theopportunity that exists for processing pulse crops inMontana is uncommonly advantageousdue to the rapidly increasing demand for food products derived from pulse crops and pulsecrop-derivedingredients.

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Importantly,agriculturalproductionofhighqualitypulsecropsinMontanaisrapidlyincreasing.ResourcesthatenhancevalueaddedagriculturalmanufacturingareabundantlyavailableintheGreatFallsRegion.Pulsecropmanufacturingtechnologythatisfeaturedinthisbusinesscaseinvolvescleaning,hydration,cooking,millingandpackagingpulseingredientsintorefrigeratedand/orshelfstablespreads,dips,and/orbutters. Chickpeaingredientscomprisethemajorityof pulse crop-related spreads, dips, and/or butters with lentils and dry peas rapidly gainingacceptanceinretailfoodmarkets.AgricultureisthenumberoneindustryfortheTreasureState,Montana.Accordingtothe2015MontanaAgriculturalStatistics,Montana’sagricultureindustryemployedover9.5millionacrestobringinover$5.7billioninrevenuetothestate.i Agriculturalproducersandprocessors inMontana have demonstrated the ability to efficiently grow and process agriculturalcommodities for shipment to customers throughout theworld. TheGreat Falls Region is anagriculturalprocessinghubthatexcels intheconversionofMontana-growncommodities intointermediateandfinishedproductsforfoodandfeedindustries.Thecollectionoffoodandfeedcomponentmanufacturers intheGreatFallsRegionhasbeenverysuccessfulinsupplyingfoodandfeedsupplychainswithefficientproductionandshipmentof a wide variety of intermediate and consumer products. Prime examples of bulk,intermediateproductsproducedintheGreatFallsRegionareconditionedgrains,oilseeds,andpulses;milledflours,durumsemolina,pastaproducts,barleymalt,vegetableoils,andhoney.TheRegionisalsohometoalargescaleeggproductionoperation.Companiesthatoperateagri-processingoperationsintheGreatFallsRegionare:

GeneralMills PastaMontana MalteuropCenexHarvestStates CerealFoodProcessors JMGrainGreatNorthernGrowers MontanaMilling MontanaSpecialtyMillsMontanaAdvancedBiofuels MontanaEggs LLC ColumbiaGrainTimelessSeeds GiantSpringsWater SmootHoney Table1:GreatFallsRegionAgri-processingCompaniesSource:GreatFallsDevelopmentAuthority

The stateofMontanahasbecome thenation’s leadingproducerofpulse crops. Montana isrankednumberoneintheproductionofdrypeasandlentils.In2015,Montanaproducedover9.4millionhundredweightofdrypeas(48%ofU.S.production),over2.5millionhundredweightoflentils(47%ofU.S.production),andover475,000hundredweightofchickpeas(17%ofU.S.productionin2014).iiIntheU.S.,drypeapriceshaveaveraged$10.50/cwt($6.30/bushel)overthe last ten years.iii The commodity value of pulse crops harvested in Montana currentlyexceeds$100millioninsales.Chickpea, lentil, and dry pea spreads, dips, and/or butters are rapidly gaining in favor withconsumers worldwide as preferred food sources that are non-allergenic, non-GMO, high inprotein,low-glycemic,andhighinfibercontent.Thesepreferredveganfoodsourcesarewell

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known to be agriculturally sustainable due to their nitrogen fixing ability and low agronomicrequirements.Throughfoodprocessingtechnologies,pulsecrop-relatedspreads,dips,and/orbutters are increasingly manufactured and gaining in distribution in retail and food servicemarketsintheU.S.andCanada.Chickpea, lentil, anddrypea spreads, dips, and/orbuttersmanufacturing technologies rangefrom high technology, fully automated processing systems to low technology, highlymanualsystems. Manualsystemsinvolvetheleastcapitalcostrequirementsandhaverelativelyhighoperatingcosts. Fullyautomatedprocessingsystemshavehighcapitalcostrequirementsbutfeature lower operating costs. The degree of sophistication in spreads, dips, and/or buttersmanufacturing systems is dependentuponoutput volume requirementsof a chickpea, lentil,and dry pea spreads, dips, and/or buttersmanufacturer. All levels of spreads, dips, and/orbuttersmanufacturingsophisticationhaverequirementsforprocessingenergy.Electricityandnatural gas are important energy resources required in the processing of pulse crops intospreads,dips,and/orbutters.Chickpea, lentil, and dry pea spreads, dips, and/or buttersmanufacturing operations can beestablished in the Great Falls Region due to favorable energy and human capital economicfactors.TheGreatFallsRegionboastsofaqualifiedlaborforcethathasaveragehourlywagesthatare79%of thenationalaverage.iv In fact, theGreatFallsareahas loweroverallhourlywagesthanothermetropolitanareasofMontana.v Thecombinationoffavorableenergyandlabor costs along with increasing demand for pulse-related spreads, dips, and/or butters inretailgroceryandfoodserviceindustriesthroughouttheU.S.andCanadamaketheGreatFallsRegionasuperiorcandidateforpulsecropproductsmanufacturing.TheGreatFallsRegionhassomeofthenation’s lowest industrialelectricalcosts.viTheCityofGreat Falls has the lowest industrial natural gas cost inMontanaand that cost is lower thanalmost all industrial sites in the nation. With lower energy and human resources operatingcostsandoperatingwithinsubstantialpulsecropproductionacreage,achickpea,lentil,anddrypeaspreads,dips,and/orbuttersmanufacturingoperationintheGreatFallsRegionwouldhavesignificanteconomicadvantagestocompetition.Achickpea,lentil,anddrypeaspreads,dips,and/orbuttersmanufacturingfacility intheGreatFallsRegionwouldhavetheopportunitytobecomeoneofthelowestcostproducersofpulsecrop-derivedspreads,dips,and/orbuttersinNorthAmerica.

PulseCropProductionResourcesintheGreatFallsRegionIn1998, fewer than66,000acres inMontanawereplantedwithpulse crops. In2015,morethan880,000acresinMontanawereplantedwithchickpeas,lentils,anddrypeas.viiMontanaisnowthenation’snumberoneproduceroflentilsanddrypeasandranksthirdamongchickpeaproducing states. Pulse crop production has been replacing fallow land in Montana at anincreasing pace over the last fifteen years. Chickpeas, lentils, and dry peas grow well in

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Montana’scoolandsemi-aridclimate.TheMontanaDepartmentofAgriculturehaspredictedthatMontana’spulsecropacreagecouldincreasetomorethan1.2millionacresby2025.viiiIn2015,theGreatFalls13CountyRegionproduced67%ofMontana’schickpeaproductionon37,225 acres and yielded 55,837,500 pounds of chickpeas. TheGreat Falls Region produced16%ofMontana’slentilproductionon35,603acresandyielded40,943,500poundsof lentils.The Region produced 33% of Montana’s dry pea production on 196,711 acres and yielded324,573,200 pounds of dry peas. (Figure 1 and Table 2). Overall, the Great Falls 13 CountyRegion produced over 31% of Montana’s total pulse crop production in 2015. Pulse cropacreage inMontana increased from 701,780 acres in 2014 to 879,347 acres in 2015, whichamountedtoa25%jumpover2014acreage.

Figure1:2015PulseCropAcreageinthe13CountyGreatFallsRegionSource:MontanaFSAUSDAGreatFallsRegion2015PulseCropProductionbyAcreage

13CountyRegion ChickpeaAcreage LentilAcreage DryPeaAcreage CountyAcreageBlaine 625 1,978 16,178 18,781Cascade 107 530 7,379 8,016Chouteau 8,860 1,159 19,216 29,235Fergus 1,576 2,054 3,244 6,874Glacier 2,548 7,932 29,450 39,930Hill 7,981 5,240 33,878 47,099JudithBasin - 228 3,517 3,745LewisandClark - - 500 500Liberty 1,495 9,417 27,353 38,265Meager - - 2,153 2,153Pondera 1,120 2,196 7,723 11,039Teton 10,668 1,165 9,260 21,093Toole 2,245 3,704 36,860 42,809

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AcresofPulseCropsinGreatFallsRegionin2015

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13CountyAcreage 37,225 35,603 196,711 269,539MontanaStateAcreage 55,294 221,938 602,115 879,34713County/MTAcre% 67% 16% 33% 31%

GreatFallsRegion2015PulseCropProductionbyCWT13CountyCWT 558,375 409,435 3,245,732 4,213,541MontanaStateCWT 829,410 2,552,287 9,934,898 13,316,59513County/MTCWT% 67% 16% 33% 32%

Table2:GreatFallsRegionPulseCropAcreageandProductionfor2015Source:MontanaFSAUSDA

ChickpeaProductionintheGreatFallsRegionPulsecropspreadsanddipsareprimarilyproducedfromchickpeas. Asaprimary ingredient,chickpeas areused in food formulations toprovidenutrition in addition tobeing gluten freeand non-allergenic. The Great Falls 13 County Region has dramatically increased chickpeaproductionoverthelastthreeyears.TheGreatFalls13CountyRegionhasincreasedchickpeaproductionfrom4,898acresin2013to37,225acresin2015,a660%increaseoverproductionin2013.Figure1showsthesignificantriseinchickpeaacreageintheRegionandFigure2showsthe Region’s corresponding increase in the overall percentage of chickpea production inMontanafrom2013through2015.ChickpeaproductionintheGreatFallsRegionexceeded55millionpoundsin2015.

Figure2:GreatFalls13CountyChickpeaAcreageIncrease–2013through2015Source:MontanaFSAUSDA

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Figure3:GreatFallsRegionComparedtoMontanaChickpeaAcreage%-2013through2015Source:MontanaFSAUSDAIn 2015, 67% of all chickpea acres harvested inMontana were in the Great Falls Region asshown inFigure4. Thewidespreaddistributionofchickpeaacres intheGreatFallsRegion isshowninFigure5.

Figure4:67%ofMontanaChickpeaAcresHarvestedinGreatFallsRegionTradeAreaSource:MontanaFSAUSDA

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Figure5:GreatFallsRegion2015ChickpeaAcreagebyCounty–37,225AcresSource:MontanaFSAUSDA

LentilProductionintheGreatFallsRegionPulse crop spreads and dips are increasingly beingmanufactured using lentils due to lentil’sreputationforhighnutrientvalue.Lentilsareusedinfoodformulationstoprovideproteinandfibernutritionalbenefitsinadditiontobeingglutenfreeandnon-allergenicTheGreatFalls13CountyRegionhasincreasedlentilproductionfrom21,062in2013to35,603acresin2015,a69% increase over production in 2013. Figure 6 shows the increase in lentil acreage in theRegion and Figure 7 shows the Region’s corresponding increase in the overall percentage oflentil production inMontana from 2013 through 2015. Lentil production in the Great FallsRegionexceeded40millionpoundsin2015.

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Figure6:GreatFalls13CountyLentilAcreageIncrease–2013through2015Source:MontanaFSAUSDA

Figure7:GreatFallsRegion/MontanaLentilAcreage%-2013through2015Source:MontanaFSAUSDAIn2015,16%ofalllentilacresharvestedinMontanawereintheGreatFalls13CountyRegionas shown inFigure8. Thewidespreaddistributionof lentil acres in theGreatFallsRegion isshowninFigure9.

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Figure8:16%ofMontanaLentilAcresHarvestedinGreatFallsRegionTradeAreaSource:MontanaFSAUSDA

Figure9:GreatFallsRegion2015LentilAcreagebyCounty–35,603AcresSource:MontanaFSAUSDA

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DryPeaProductionintheGreatFallsRegionPulse crop spreads, dips, and/or butters are being formulating using dry peas due toconsiderableprotein, fiber,andresistantstarchcontent.Drypeasarefavoredforuse infoodformulationstoprovideabundantnutritionandalsobeingglutenfreeandnon-allergenicTheGreat Falls 13 County Region has increased dry pea production from 169,638 in 2013 to196,711acresin2015,a16%increaseoverproductionin2013.Figure10showstheincreaseindrypeaacreageintheRegionandFigure11showstheRegion’scorrespondingincreaseintheoverall percentage of lentil production in Montana from 2013 through 2015. Dry peaproductionintheGreatFallsRegionexceeded324millionpoundsin2015.

Figure10:GreatFalls13CountyDryPeaAcreageIncrease–2013through2015Source:MontanaFSAUSDA

Figure11:GreatFallsRegion/MontanaLentilAcreage%-2013through2015Source:MontanaFSAUSDAIn2015,33%ofalldrypeaacresharvestedinMontanawereintheGreatFallsRegionasshowninFigure12.ThewidespreaddistributionofdrypeaacresintheGreatFallsRegionisshowninFigure13.

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Figure12:33%ofMontanaDryPeaAcresHarvestedinGreatFallsRegionTradeAreaSource:MontanaFSAUSDA

Figure13:GreatFallsRegion2015DryPeaAcreagebyCounty–196,711AcresSource:MontanaFSAUSDA

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The percentage of pulse crop acres harvested in the Great Falls Region is projected by theMontanaDepartment of Agriculture to increase asMontana farmers embrace the economicopportunity that includesplacingpulse crops into theirwheat crop rotation. Montana StateUniversity recently studied the economic impact produced by the introduction of dry peaproductioncroprotationintotraditionalwheatproductioninMontana.Netfarmreturnswerecalculated for four rotation scenarios. Drypea–wheat rotation consistently had the greatestnet returns among six historical systems studied. The study concluded that dry pea–wheatsystemscanreducenetreturnuncertaintiesforMontanawheatfarmers.ixThethirteencountyGreatFallsRegionhadharvested2.54millionacresofmultipleclassesofwheatin2015,whichaccountedfor48%ofallwheatacresharvestedinMontana.TheGreatFallsRegionharvested269,538acresofpulsecrops,which,comparably,wasonly10.6%oftheRegion’swheatacreage. (Figure14)Farmers in thethirteencountyRegionare forecastedtobecomemoreawareandmorereceptiveofthepotentialforhigheron-farmnetreturnsfrompulsecropproductionand farmersareprojected to increasinglyadopt thepracticeof raisingpulsecropsintheirwheatrotation.PulseproductionintheGreatFallsRegionisprojectedtocontinue to increase as part of the economically and environmentally superior practice ofrotatingpulsecropproductionwithwheatproduction.

Figure14:DrypeaandWheatAcresHarvestedintheGFRegionandOtherMTRegionsSource:MontanaFSAUSDA

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Compara_veAcresofPulseCropsandWheatinGreatFallsRegionin2015

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TheGreatFallsRegioncontributestowardMontanabeingtheleadingstateintheproductionofdry pulse crops, a statistic earned by the production of over 558,375 hundredweight ofchickpeas, 409,435 hundredweights of lentils, and 3,245,732 hundredweight of dry peas in2015.Montanahasbeenproducing48%ofthenation’spulsecropproduction.Asanexample,thestatenotonlyleadsinproduction,buthasshownconsistentgrowthindrypeaproductionoverthepastsixyearscomparedtototalU.S.drypeaproductionasshowninFigure15.

Figure15:MontanaandU.S.DrypeaProduction:2010–2015Source:USDA,NASS,2010-2015Data

Theavailabilityofpulse crops isnot inquestion in theGreat FallsRegiondue towidespreadpulsecropgrowingregionwithinMontanaandtheprairieprovincesofCanada.InadditiontoabundantandincreasingpulsecropproductionintheGreatFallsRegion,pulsecropproductioninCanadahasalsobeenincreasingoverthe lastdecade. Pulseproduction inCanadain2015exceeded119millionhundredweight.x Drypeaproduction inCanadaadjacenttoMontana isconcentratedprimarilyintheprovincesofSaskatchewan,andAlbertawithSaskatchewanwithpulsecropproductioncontributingover60%ofCanada’soutput.xi

ProximitytoRawMaterials

Oneconsiderablebenefitderivedfromoperatingachickpea,lentil,anddrypeaspreads,dips,and/orbuttersmanufacturingfacilitywithinpulsecropagriculturalproductionareasisthatthemanufacturingcompanycancontractandpurchaseitspulsecommoditiesdirectlyfromregionalfarmers. By receiving pulse crops directly from regional farmers, the company can capturereceiving,cleaning,andconditioningmargins thatcanamount togreater than10%ofannualrawmaterialcosts.Currently,chickpea,lentil,anddrypeaspreads,dips,and/orbuttersmanufacturingcompaniesare generally located outside pulse growing regions. An analysis of major competitors that

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marketpulse-relatedspreads,dips,andbuttersshowsconcentrationsofoperationsinVirginia,New York, Massachusetts, Ohio, New Hampshire, Vermont, Illinois, Colorado, Washington,CaliforniaandNorthCarolina.Ingeneral,U.S.chickpea,lentil,anddrypeaspreads,dips,and/orbutters manufacturers are located in higher population states. Smaller, regional humusmanufacturerscanbefoundintheprairieprovincesofCanadaandafewU.S.plainsstates.Byestablishing chickpea, lentil, and dry pea spreads, dips, and/or butters manufacturingoperationsintheGreatFallsRegion,chickpea,lentil,anddrypeaspreads,dips,and/orbuttersmanufacturing companieswouldbeoperating in closeproximity to rawmaterials, using costeffectiveenergyand labor,andwould therebydrivedowndirectcosts tobecomea lowcostproducer.

PulseProcessingintheGreatFallsRegionThepulsecropproductionandprocessingvaluechainconsistsoffivebusinesscategoriesthatinteract to supply a range of pulse crop-based product ingredients and finished products tofood,feedandpetfoodmanufacturers.Figure16showsadiagramofdrypulsecropindustryparticipants involved in delivering pulse crop-based consumable products to consumers andfeedersoflivestock,poultry,andpets.

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Figure16:PulseCropProcessingValueChainParticipantsintheGreatFallsRegionParticipants in the pulse crop processing value chain in the Great Falls Region are shown inFigure 17. TheGreat Falls Regionhas a significant numberof pulse cropproducers that areincreasing in number and acreage every year. Family farmers and Hutterite colony farmorganizations in the Region grew over 269million pounds of pulse crops in 2015. The vastmajorityofpulsecropsgrownintheGreatFallsRegionarepurchasedbyadiversecollectionofpulsecropconsolidators.Consolidatorspurchasepulsecropsforthemselvesorforclientsandhavetheoptiontograde,clean,andconditionpulsecropsinpreparationforexportordomesticuse.Someconsolidatorsare engaged in further value added processing of pulse crops including de-hulling/splitting,colorsorting,andcustompackaging.ConsolidatorsintheGreatFallsRegionrepresentthevastmajorityofcompaniesthatparticipateintheprocessingsegmentofthepulsecropvaluechainintheGreatFallsRegion.

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Consolidators listed in Figure 17 and mapped in Figure 18 have facilities in the Great FallsRegion and are actively engaged in primarily receiving, cleaning, and conditioning bulk pulsecropcommodities.TheconsolidatorswithphysicalassetsintheRegionincludeColumbiaGrain,Chinook and Ledger, MT, which is a large grain procurement company headquartered inPortland,OR.BellePulsesUSA,Hingham,MT,isasubsidiaryofBellePulses,Ltd.,St.IsidoredeBellevue,SK,Canada. RegionalconsolidatorsincludeStricts, Inc.,Chester,MT,NorthernSeedLLC,Shelby,MT,SunburstGrainInc.,Sunburst,MT,PardueGrainInc.,CutBank,MT,HodgskissSeed,Choteau,MT. GlobalAgroCommodities,Chester,MTisasubsidiaryofBespokeGroup,LLC,Irving,TX,whichisanexporterofpulsecropsprimarilytoIndia.Listed in Figure 17, as Exporters/Brokers, are several companies that consolidate pulse cropcommoditiesbutmayormaynothavefacilitiesintheRegion.Companiesengagedinforeigncommerce in theGreatFallsRegionareclassifiedasExporters. Exportershave theoptionofpurchasingandtakingtitleofcommoditiesoractingasanagentforpurchasersforabrokeragefee. Exporters are charged with ensuring procurement and delivery of commodities topurchasers inforeignmarkets. Exporterswhohavefacilities intheGreatFallsRegion includeColumbia Grain, Chinook and Ledger, MT, Belle Pulses USA, Hingham, MT and Global AgroCommodities,Chester,MT.OthermajorexportersoperatingintheGreatFallsRegionincludeJMGrain,GreatFalls,MTwithheadquarters inGarrison,ND,andCommercialLynks, Inc.,CutBank,MTwithheadquartersinAlexandria,VA.Consolidators,exporters,andbrokerspurchaseandre-sellpulsecropcommoditiesprimarilytointermediate product processors and finished product processors. Processors that purchasepulse crops are primarily located in foreign markets, however, food, feed, and pet foodmanufacturers in the U.S. are increasingly using dry peas, chickpeas, and lentils asmanufacturingingredientsincurrentandnewformulationsofspreads,dips,and/orbutters.Pulsecropprocurementcompaniesthatoperateasconsolidators,exporters,orbrokersintheGreatFallsRegionrelyuponadependablenetworkofpulsecropproducerstoensureadequatequantities of pulse commodities are consistently grown each crop year. Pulse cropprocurement companies are in the business of connecting pulse crop producers withcommodity buyers to ensure pulse crop commodities are efficiently delivered to expandingmarkets.

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Figure17:PulsecropProcessingValueChainParticipantsintheGreatFallsRegion

Opportunity for Great Falls Region

Opportunity for Great Falls Region

Opportunity for Great Falls Region

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Figure18:PulseCropConsolidationLocationsintheGreatFallsRegion

BusinessOpportunityBy employing the combination of theGreat Falls Regional resources, a start-up or relocatedchickpea, lentil, anddrypea spreads,dips, and/orbuttersmanufacturing facility canbecomeoneofthelowestcostNorthAmericanproducersofpulse-basedspreads,dips,and/orbutters.TheGreatFallsRegionhassomeofthenation’slowestindustrialelectricalcosts.xiiTheCityofGreat Falls has the lowest industrial natural gas cost inMontanaand that cost is lower thanalmost all industrial sites in the nation. With lower energy and human resources operatingcostsandoperatingwithinsubstantialdrypeaproductionacreage,achickpea, lentil,anddrypeaspreads,dips,and/orbuttersmanufacturingoperationintheGreatFallsRegionwouldhavesignificanteconomicadvantagestocompetition.

PulseSpreads,Dips,and/orButtersProductsTrendsThere exists emerging interest in healthier eating by the American public. Global sales ofhealthyfoodsareexpectedtoexceed$1trillionby2017.The2015NielsenGlobalHealthandWellnessSurveyfoundthat88%of30,000individualspolledstatedthattheywouldpaymoreforhealthier foods. Healthier foodsaredefinedas thosethatareGMOfree,naturalwithnoartificial ingredients,high in fiber,high inprotein,containwholegrains,containvitaminsandminerals, and those that can reduce disease and promote good health.xiii Pulse commodityspreads,dips,and/orbuttershavethenutritionalfactorsthatpromotehealthyeating.

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Pulsesaremembersofthelegumefamily.Theterm“pulse”refersstrictlytodriedseedsfromlegumes. Drypeas, ediblebeans, lentils and chickpeasare themost common typesofpulsecrops. Compared to grains, pulses are higher in protein and fiber, lower in fat and have thebonusof being nitrogen-fixing crops that improve the environmental sustainability of annualfarmingsystems.Pulsesalsohavehighlevelsofmineralssuchasiron,zinc,andphosphorousaswellasessentialvitaminssuchasfolateandotherB-vitamins.xivPulsescontainattributesthatapplydirectlytotheeightmajortrendsthatareoccurringwithinthe food and nutrition marketplace. The list includes foods and feeds that have increaseddemandandconsumptionthatare:

VegetarianHighProteinHighFiberGlutenFree(GrainFree)Non-allergenNon-GMOLowGlycemicDemonstratesEcologicalSustainability

The primary pulse-based spread, dip, and butter food category is dominated by hummusproducts. Hummus is a spread of Middle Eastern origin that traditionally was made withchickpeas,sesameseeds,oliveoil,lemonjuice,garlic,andsalt.U.S.hummusretailsaleswerereported to have increased from $549.4million in 2013 to $695.5million in 2014, a 26.5%increaseover2015retailsales.xvThelargestproducerofhummustotheU.S.retailmarketplaceis Sabra® brand hummus, manufactured and distributed by Sabra Dipping Company, a jointventurebetweenPepsiCoand Israeli-basedStraussGroupLtd. TheSabra®brandofhummuscommandsa60%marketshareoftheU.S.hummusmarketplace.xviWithinthefreshdipcategoryconsistingofhummus,salsa,guacamole,andyogurt-baseddips,hummusleadsinsalesinthecategory.Theannualgrowthrateofhummusfrom2009though2013was18.5%withSabra®brandhummusgrowthof29.1%inthatsametimeperiod.xviiSabraDipping Co. operates a 250,000 square footmanufacturing facility in Chesterfield, VA. TheSabra Dipping Co. is workingwith the University of Virginia to grow chickpeas in Virginia toprovidea localsourceofrawmaterials.xviii Thisobservationconfirmsthestrategicthinkingofchickpea, lentil,anddrypeaspreads,dips,and/orbuttersmanufacturing facilities’placementnearpulsecropsourcesofsupplyintheGreatFallsRegion.

Spreads,Dips,and/orButtersManufacturingShown in Figure 19 is a spreads, dips, and/or butters manufacturing process diagram. Thesimplified diagram includes the basic processing steps for the production of spreads, dips,

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and/or butters. Since there exists a wide range ofmethodologies involved in the steps ofsoaking, cooking, mashing, ingredient addition, sterilization, and packaging, processingdiagrams can be expanded far beyond the basic diagram shown in Figure 19. The latestcomputerizedfoodprocessingtechnologiesinvolvefullautomationofeachmanufacturingstepinvolvedintheproductionofpulse-derivedspreads,dips,and/orbutters.Figure19:DryChickpea,lentil,anddrypeaspreads,dips,and/orbuttersmanufacturingProcessChickpeas are traditionally the primary ingredient in hummus. Figure 20 show the nutrientvalueofatraditionalhummus.

Soaking

Cleaned Pulses

Soaked Pulses

Cooked Mashed

Base Cooking Mashing + Ingredients

Sterilization

Base + Ingredients

Spreads Dips

Butters Packaging

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Figure20:HummusNutrientContent Source:USDANutrientDatabaseTheappealofdevelopingapulsecrop-basedspreads,dips,and/orbuttersproduction facilityliesinthefactthatproductionfacilitysizescanrangefromthesmallscaleutilizationofrentedcommercial kitchen space to large scale automated processing facilities occupying sizeablebuildings. The choice of facility size and complexity depends upon a number of factorsincluding available capital, market accessibility, manufacturing expertise, and enterpriseobjectives. Withthis inmind,smallvolumespreads,dips,and/orbuttersproductionfacilitiescouldbelaunchedwithaminimalamountofequipmentcostinglessthan$250,000.A factorof4.55 isappliedtoequipmentcosts toarriveata totalplantcost.xix Inadditiontoequipment costs, total plant costs include equipment installation, instrumentation, piping,electricalsupplies,buildings,land,yardstructure,railimprovements,engineering,supervision,construction,contractor’sfees,contingencyfee,certifications,taxes,andworkingcapital. Ifasmallscalefacilityhadequipmentcostsof$250,000,totalfacilityandequipmentcostswouldbemore than $1.1million. Any proposed facilitymust be designed as an FDA human foodfacility with full compliance with the 2015 FDA Food Modernization Safety Act in order toaddresspetfood,animalfeedandhumanfoodmarkets.

FinancialIllustrationThesummaryfinancialTable6showsapotentialcashflowforecastfora1,000bushelperdaypulse-orientedspreads,dipsandbuttersmanufacturingfacility.Assumptionsincludedebtpaidbackover7 yearsat a5% interest rate,plantoperationona single shiftbasis. All chickpea,lentil,anddrypeaspreads,dips,and/orbuttersmanufacturingproductsareforecastedtobesoldF.O.B.factoryonaverageat$1.50perpoundinretailpackaging.

Protein8%

Starch/Sugar14%

Moisture62%

Fat10%

Fiber6%

Other-1%

HummasNutrientContent

Protein

Starch/Sugar

Moisture

Fat

Fiber

Other

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The example shown below features the production of hummus from chickpeas. The USDAAgricultural Marketing Service posted grower prices for chickpeas on December 1, 2015 at$30.00/cwtandposteddealerpricesforchickpeasat$42.00/cwt.Organicallygrownchickpeasbrought $97.00/cwt for organic growers on December 1, 2015. Purchasing chickpeas fromdealers provides the majority of hummus formula costs of $0.457/lb on a dry basis. Theadditionofwater(62.2%offormula)andtoahummusformulareducesthecostofhummustoanestimateoflessthan$0.17/lbforthechickpeacomponents.Theadditionof sesameseeds,oliveoil, garlic, and salt canaddanadditional$0.20/lbof thefinished,hydratedproduct.Rawmaterialcostsofbasichummusformulasareestimatedtobe25%oftheF.O.B.plantsellingpriceof$1.50/lbforretailhummusproducts.Labor,packaging,and other direct costs can be another 35% of the selling price. Addition of administration,marketingandotherindirectcostscanbe30%ofthesellingpricetoleavenetmarginearningsbefore interest, taxes, depreciation, and amortization of 10% for a hummus productionoperation.

EquityInvestment $750,000Debt $75,000TotalInvestment $1,500,000 Year1 Year2 Year3Sales $1,000,000 $1,200,000 $1,500,000CostofSales $600,000 $720,000 $900,000GrossMargin $400,000 $480,000 $600,000IndirectExpenses $300,000 $360,000 $450,000EBITDA $100,000 $120,000 $150,000Table6:ExampleofHummusSpreadsManufacturingFinancialIllustrationSummary

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SummaryTheGreatFallsRegioniswellsuitedforthedevelopmentandoperationofchickpea,lentil,anddrypeaspreads,dips,and/orbuttersmanufacturingfacilities.TheRegionhastheadvantagesofanabundantsupplyofhighqualitypulsecropcommodities; lowcostelectricalandnaturalgasinputs;shovel-ready,fullyequippedindustrialparks;robusttransportationsystem;plentifullaborresources,andapro-businessattitude.Chickpea, lentil, and dry pea spreads, dips, and/or butters manufacturing operations in theGreatFallsRegionwouldhavetheopportunitytoobtainhighqualitypulsecropcommoditiesdirectlyfromagriculturalproducers.PulsecropprocurementtransportationcostsintheGreatFallsRegionwouldbelowrelativetocompetitorslocatedoutsideofpulsecrop-growingareas.On-farmstorageofcommoditiesthroughouttheGreatFallsRegionprovideyeararoundaccesstopulsecropcommoditydeliveriestochickpea,lentil,anddrypeaspreads,dips,and/orbuttersmanufacturingfacilities.The combination of cost effective energy, water, property, pulse commodities, and humanresourcesallworktogethertoprovideasuperiorbusinessenvironmentfortheestablishmentof profitable chickpea, lentil, and dry pea spreads, dips, and/or butters manufacturingoperationsintheGreatFallsRegion.TheRegioncanprovideanoptimumenvironmentfordryandwetchickpea,lentil,anddrypeaspreads,dips,and/orbuttersmanufacturingoperations.

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References i Montana 2015 Agricultural Statistics, http://www.nass.usda.gov/Statistics_by_State/Montana/Publications/Annual_Statistical_Bulletin/2015/Montana_Annual_Bulletin_2015.pdf ii USDA, National Agricultural Statistics Services, Quick Stats, http://www.nass.usda.gov/Statistics_by_State/Montana/ iii Legumematrix.com, December 10, 2014, http://www.legumematrix.com/images/563/12-10-14.pdf iv U.S. Bureau of Labor Statistics, Occupational Employment Statistics, May 2014. www.bls.gov/regions/mountain-plains v Montana Department of Labor and Industry, Montana Labor Market Information, http://lmi.mt.gov/ vi U.S. Energy Information Agency, April 27, 2015, http://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_5_6_a vii Montana FSA USA, Montana Reported Crops Excel Spreadsheet. viiiHow Pulse Crops Are Saving Montana Grain Farmers, Great Falls Tribune, David Murrey, August 27, 2015, http://www.greatfallstribune.com/story/money/2015/08/27/pulse-crops-saving-montana-grain-farmers/32456249/?from=global&sessionKey=&autologin= ix Pea in Rotation with Wheat Reduced Uncertainty of Economic Returns in Southwest Montana, Perry R. Miller, et. al., Crop Economics, Production & Management, Agronomy Journal, V. 107, Issue 2, February 25, 2015, https://www.google.com/webhp?sourceid=chrome-instant&rlz=1C1AVSX_enUS413US416&ion=1&espv=2&ie=UTF-8#q=Pea+in+Rotation+with+Wheat+Reduced+Uncertainty+of+Economic+Returns+in+Southwest+Montana x Commodity News Service Canada, November 24, 2015, http://futures.tradingcharts.com/news/futures/Ag_Canada_Adjusts_Pulse_Special_Crops_Supply_Demand_Tables_242227780.html xi Saskatchewan Pulse Growers, http://saskpulse.com/about/the-industry/ xii U.S. Energy Information Agency, April 27, 2015, http://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_5_6_a xiii Consumers Want Healthy Foods – And Will Pay More for Them, Forbes Business, Nancy Gagliardi, February 18, 2015, http://www.forbes.com/sites/nancygagliardi/2015/02/18/consumers-want-healthy-foods-and-will-pay-more-for-them/ xiv Pulse Canada, What is a Pulse, http://www.pulsecanada.com/food-health/what-is-a-pulse. xv Retail Sales of Hummus in the United States in 2013 and 2014, Statistica, http://www.statista.com/statistics/440990/us-hummus-retail-sales/ xvi Hummus Market Share of Sabra and Tribe Brand in the United States in 2014, Statistica, http://www.statista.com/statistics/440974/sabra-s-and-tribe-s-us-hummus-market-share/

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xvii Statistics and Facts on the Refrigerated Spread and Dip Market in the U.S., Statistica, http://www.statista.com/topics/2524/refrigerated-spreads-and-dips/ xviii Sabra Dipping Co. Opens New Plant Expansion, Richmond Times-Dispatch, John Reid Blackwell, October 8, 2014, http://www.richmond.com/business/article_7d6d6ea8-34d9-579b-8695-ade53328cfc5.html xix Peters, M., K. Timmerhaus, and R. West. 2003. Plant Design and Economics for Chemical Engineers, 5th ed. New York:McGraw Hill.