Central Plains Ag Services
At the mercy of commodity exchanges and the weather, agriculture is unpredictable like few other industries. A farmer in North Dakota doesn’t just need perfect weather to grow his crops; he needs customers on the other side of the world demanding it.
In 2016, farmers across the U.S. yielded bountiful crops which lowered demand and caused grain prices to dip. Now, as agriculture faces a lull, the cooperatives that help farmers sell their grain to the world, as well as supply them with feed, fertilizer and chemicals, must find a way to stay financially stable. It’s a challenge faced by all companies related to agriculture, but one felt more acutely by co-ops that don’t receive federal subsidies.
Ben Jacob, general manager of Central Plains Ag Services in Hannaford, North Dakota, says his co-op stays competitive by focusing on services, especially agronomy, to supplement times when grain prices are low and margins tight. He describes this approach as “selling our people and not our brick and mortar,” meaning that salespeople and agronomists who bring in loyal customers are just as important as the grain the co-op sells.
Service is the slow and steady way
Central Plains Ag’s 50-person staff sells and applies agronomy inputs, finances equipment and resources, distributes propane and trades grain. The co-op mostly offers these services to growers in a 40-square-mile area, but serves farms as far as 130 miles away.
Jacob relies on his sales staff to know when to buy inputs like fertilizer for the lowest cost, so that they can keep the price down for co-op members while staying profitable. He says Central Plains has an advantage in its storage capacity, which lets it buy all of the fertilizer and crop protection it needs at a cheaper price and sell to growers as they need it, without ever having to make farmers wait or restock at a higher in-season price.
“These producers are getting good at planting grain in three to four weeks,” he says. “So we need to supply them in that same time frame.”
One of the quickest ways to improve service, Jacob says, is to support co-op employees, which it does most obviously by paying them well and offering comprehensive benefits with insurance and disability to protect them and their families.
“This can be a dangerous industry and a lot of our folks are young people with families,” Jacob says. “I have kids and I get it—if you want employees who work with a sense of ownership you have to build ownership in them as well.”
Staff members in every department are cross trained, and Jacob says he hires people who have a flexible attitude and are willing to learn about other disciplines. His goal is that when a grower walks in the door of Central Plains, he can talk to any employee, and if that employee can’t answer the question directly, he can direct the grower to a specialist who can.
“It’s crucial that sales staff not have blinders on and sell one product, but instead sell the whole company,” he says.
Problems, solutions, opportunities
Full service co-ops face another challenge that often goes unnoticed—the two sides of the business can at times work against one another. Jacob points out that agronomists want to help farmers grow the most bushels of grain, while grain marketers want to sell bushels for the highest price. But if there are too many bushels, it may drive commodity prices down.
However, Jacob says this is less of an insurmountable problem and more of a temporary imbalance. He points out that the unusually high yields of 2016 might depress grain prices for a while, but that ultimately the world is a growing place with more mouths to feed. He estimates that Central Plains Ag sells 80 percent of its grain overseas.
“We still need to grow as many bushels as possible, it’s just sometimes the market hasn’t adjusted for it,” he says.
He points out that co-ops and growers can’t base their strategies on a single big season because a draught or disaster anywhere in the world could instantly drive up demand. Though that volatility can sometimes benefit U.S. co-ops like Central Plains Ag, it can also hurt it if bad weather strikes too close to home.
Co-ops are not eligible for federal crop insurance; so if a farmer produces fewer bushels because of a disaster, the co-op doesn’t get reimbursed. However, like grain prices, Jacob says he and his team see this less as a problem and more as a way of life.
“We have to be really cognizant from one year to the next of how our financials will be for the next five years, so that even if you throw in one really tough year we have a good average overall,” he says.