Central Valley Ag Cooperative: Positioned For Success
February 1, 2013 
An overhead view of CVA’s Oakland, NE, facility, showing the cooperative’s “loop rail” design during the spring busy season.
Upon arrival one can’t help but notice the pioneering spirit that pervades Central Valley Ag Cooperative’s (CVA) Oakland location in northeastern Nebraska. It was, after all, once upon a time that Lewis and Clark’s Corps of Discovery Expedition passed through these very parts as the explorers followed the meandering Missouri River on their now-historic journey into the Pacific Northwest.
“We have really changed the landscape of the business here in northeast Nebraska,” says Karl Hensley, senior VP of agronomy. “And none of this would have been possible without the formation of CVA.”
With roots dating back to 1909, CVA came into existence on Sept. 1 2003, though the merger of Farmers Coop – Humphrey, NE; Central Farmers Coop – O’Neill, NE; Tri Valley Coop – St. Edward, NE; and Agland Coop – Oakland, NE.
Since that 2003 birthdate, the now No.13-ranked retailer on our 2013 CropLife 100 ranking has pursued an aggressive strategic asset acquisition plan, completing a dizzying timeline of mergers and acquisitions to get to where it is today as the premier ag retail presence throughout 27 counties in northeast Nebraska.
“We’ve had a good deal of growth and really have been proactive in our marketplace, acquiring independent companies and merging cooperatives,” says Doug Derscheid, CEO and president.
CVA currently supports and services its growers via 40 agronomy and grain locations with a workforce of around 380 full time employees and an additional 120 seasonal employees.
Total sales figures for CVA have shattered the 2003 pre-merger levels, from the combined $206 million, to CVA’s reported 2012 sales output of $711 million. Additionally, grain and agronomy sales overall have both doubled compared to 2003.
“Back in the beginning of CVA, we really took our time defining our brand essence and creating our business philosophy, right down to the logo,” says Derscheid. “We will not compromise our commitment to our customers – that’s really number one for us. Also our integrity and how we do business is important. Open communication is important not only with our customers but with our employees and the companies we do business with. That’s really what we stand for.”
Operational Efficiencies
One of the initial steps CVA took in redefining its retail presence was what the cooperative terms a “complete business process redesign,” spearheaded by Derscheid, which focused on gaining operational efficiencies by building new facilities and consolidating locations when called for.
“This is an ongoing philosophy and a lot of it is driven by both aging facilities that we have within the company and our need for speed and space,” says Derscheid. “Farmers operations’ are getting larger, CVA must continue to grow to adequately serve their needs. We’ve got to keep evaluating and improving efficiency in everything that we do in order to best serve our patrons.”
A major component of CVA’s business process redesign is combining both agronomy and grain services into single, consolidated retail “hubs” linked to smaller “spoke” facilities by major rail lines, according to Hensley. This is CVA’s “Hub and Spoke” facilities philosophy, which is ongoing. This year with the opening of two new hub facilities currently under construction, one at Royal, NE, and one at the intersection of state highways 81 and 20, dubbed the “81/ 20 Junction” its strategy continues to be implemented.
“One of the early keys to our expansion has been tying all of our grain and agronomy services together at our hub facilities,” Hensley says. “We operate on a hub and spoke concept and service our outlying locations through these hubs.”
“We don’t do any separate grain-only or agronomy-only facilities because it just doesn’t make good business sense,” explains Derscheid. “With these combined facilities we can share the cost of the infrastructure, with the rail alone being a multi-million dollar expense. With this combined facility, we gain many operational and financial efficiencies and are able to take advantage of volume incentives from our trading partners.”
Adds Bryan Reichmuth, senior VP of grain and feed processing: “For example, we had a facility at Tilden, NE, that had an agronomy location and the grain was kept separate in town, which was a little tight, so we comingled those activities in one facility.”
Reichmuth estimates that many of the older grain facilities had a 5,000 bushel-per-hour (BPH) grain unloading capacity at best, while CVA’s new facilities now feature two 20,000 BPH legs. This has not only improved operational efficiency and the cooperative’s bottom line, but time of service for CVA’s grower-owners as well.
“It became typical where customers would drive right past the facilities with the old 1,500 BPH legs to get to the ones with 5,000 BPH legs,” says Reichmuth. “And now they are all triple that, at minimum, because that’s what the farmer wants. In grain it’s all about getting patrons in and getting them out as quickly as possible.”
“When you look at our growth, these are the types of things that are driving that growth,” says Hensley.
Opened in 2006, the Oakland, NE, hub facility that CropLife toured is a prime example of this strategy in action. Featuring three million bushel permanent grain storage and three million bushel temporary storage, plus 30,000 BPH unloading and 60,000 BPH loading speeds, the facility itself is ringed by its rail line, allowing for quicker loading and unloading times. The two pending hubs will also feature this unique setup, according to Hensley.
“The significance of this facilities’ design is the loop railroad track,” says Hensley. “The train comes in and the locomotives remain connected, we train our people to operate the trains while they’re on our property. When we’re done loading or unloading the BNSF Engineers take over and off they go.”
OHSA requirements have also had an impact on facility improvements, according to Derscheid. “We’ve taken the stance that, instead of upgrading a facility that was built in the ’60s or the ’70s and making it OSHA compliant, in some instances we’ve either consolidated, closed, sold or even demolished those old ones,” he says. “In most cases they’ve used up their useful life and with today’s progressive farmers, we can’t even sell it because the farmers already have better facilities.”
Another powerful driver, according to Tim Esser, senior VP human resources, is the many challenges faced by ag retailers in securing personnel.
“With so many of our locations being in rural communities, and the communities themselves sometimes struggling, it’s absolutely critical to our success to have quality people,” says Esser. “So by keeping our facilities up to a certain standard it becomes easier to attract those quality people.”
The Points Of Difference
What sets CVA apart are what it likes to call its “Points Of Difference.” These are the organizational characteristics that the cooperative believes give it an edge in securing both grower-customers and employees in the ultra-competitive northeast Nebraska market.
Communication and the cooperative’s ability to effectively manage its message is one of many significant points of difference for CVA.
For instance, instead of outsourcing many of the marketing and communications duties of the cooperative to third-party electronic media companies, CVA runs its own in-house communications department, which includes a minute and a half, five-day per week radio spot that runs throughout CVA’s trade area, the cooperative’s newsletter, custom content for the cooperative’s website and all signage and marketing materials. This includes both OHSA signage as well as projects for some of the local FFA chapters that CVA works with.
“As a company we try to keep most everything in house,” says Steve Franzen, senior VP – CIO. “Doing so gives us a constant handle on our image at all times. It’s all consistent with our brand essence ‘Growing Agriculture Together’ and that’s what we’re looking for.”
Although the company has yet to jump into the social networking pool, there are plans in the near future to establish Facebook and Twitter accounts that will be managed in-house. In the meantime, the cooperative is busy launching its own mobile app for smartphones and tablets on both the Andriod and iOS platforms. The app will feature up-to-date grain and futures bids, news, weather and agronomy and feed updates, according to Franzen. Additionally, near-future plans include the launch of CVA TV, which will foster new communication opportunities to both employees and patrons.
“What we are seeing is more of the children of the current growers returning back to the family farm, and they are going to be the ones that drive the adoption of these mobile technologies,” he says. “We are also deploying iPads to all of our board of directors and we will leverage that as a means to communicate with them. So it’s on many different tenets that we are deploying our technology plan, both internally and externally.”
Advanced Cropping Systems
It’s not just mobile app technology that CVA is involved in, however. The cooperative also boasts its own full service precision ag program, trademarked “Advanced Cropping Systems (ACS).” ACS offers a full suite of precision ag solutions, including grid soil sampling, variable rate fertilizer application and seeding, yield mapping and monitor support, soil moisture monitoring and variable rate irrigation, all managed by technology director Glen Franzluebbers and his team of five full-time precision ag specialists.
“In agronomy, ACS is what we hang our hats on, so to speak,” says Hensley of the growing program.
What sets CVA’s ACS offerings apart, according to Franzluebbers, is the company’s “One Size Does Not Fit All” philosophy. “We have a really wide range of customers at CVA, some are just starting to familiarize themselves with precision ag technology and some have been using it for a long time,” he says. “We can customize our program to meet their individual needs.”
Franzluebbers estimates that about 20% of CVA’s grower-customers participate in the full ACS program, and he expects those numbers to increase as awareness grows. ACS also sells and services equipment from Ag Leader, Precision Planting, Ag Cam and Intuicom Wireless Solutions, as well as sets up and manages My Way RTK networks for growers.
“There’s unlimited growth potential and guys are willing to spend money on this stuff,” Franzluebbers says. “More and more growers are using smart phones and apps in the fields, and for us the benefits of offering these services far outweigh the risks.”
Risk Management
Managing risk for its grower-customers is a win-win for both CVA and its members, so naturally the cooperative offers full service commodity risk management via its ProEdge Grain Marketing Solutions division. Launched eight years ago, ProEdge’s seven full-time consultants help growers manage grain purchasing and selling, promote non-traditional contracts and hedging strategies, help develop personalized grain marketing plans and manage direct delivery of grain.
“Our philosophy is that there are a lot of brokers out there, there are a lot of grain and futures companies and some of them shoot for the home run or are all-in/all-out,” says Keith Borer, risk management consultant. “We want to earn their long term business by finding the best market for them to maximize their sales.”
One reason Borer feels ProEdge stands out from its competitors are the personal relationships his staff fosters with CVA’s customers.
“We feel like we know our customers on a personal level just from being out on the farm visiting with them every day,” says Borer. “The hardest thing a lot of these guys are dealing with is how to sell next year’s crop.
“The risk that these farmers have is just so huge and more farmers are being proactive in selling ahead,” he continues. “But one strategy doesn’t always work every year. We want to help diversify their sales and keep them looking long-term. Probably our highest hurdle to clear is just keeping people looking long-term.”
Recruiting Challenges
As senior VP of human resources Tim Esser previously stated, ag retailers are finding it more difficult to secure quality personnel.
“We recently had the chance to review a Land O’Lakes grower survey and one of the key things it found is that these large farmers have the same problems we have in recruiting good people,” says Esser. “It’s so important for us to have quality people because the some farmers would rather have us do the application work than do it themselves.”
Ensuring a steady stream of quality employees is a multi-pronged attack, from traditional word-of-mouth referrals to the cooperative’s college internship program, Clayton Hensley, recruiting specialist. “This is not your typical cookie-cutter college internship program. They get the full package of grain, agronomy and feed when they intern here,” says Clayton Hensley.
“The idea is to get them into CVA before they enter the job market to see as much as possible and understand our company and culture.”
The program, which offers 15 internships in nearly every facet of CVA’s business, has been a good source for full-time employees. Most interns come from nearby Northeast Community College and University of Nebraska-Lincoln, and Hensley estimates nearly 90% are students in Northeast CC’s diversified ag or agronomy programs.
One of Clayton Hensley’s goals for the program in 2013 is to work with more interns carrying non-traditional majors. “A willingness to learn and a good work ethic are probably the two most important characteristics we look for,” says Hensley. “We hire for attitude and train for everything else, because the work will always be there. It’s kind of like a three month interview for the intern, but it’s also a way for us as a company to learn from the students and better ourselves.”
Bettering themselves and constant self-evaluation: it’s one of the many aspects that sets apart the progressive, successful company in it for the long term from mere profit chasers, and CVA certainly falls within that definition.
“One of our tag lines is ‘Recommit, Reinvent and Reinvest’,” says Derscheid. “Other companies are being impacted by what we’re doing, and we’ll continue to do that because there are opportunities to grow. If other people don’t want to step up and make new, we will.”
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