Landus Cooperative: Plans to ‘consolidate then grow’
Wide variety of multi-million dollar projects are in the works
Landus Cooperative began implementation Project 2020: Consolidate Then Grow last summer, a multi-year initiative to enhance profitability and reinvest in more efficient assets on behalf of the cooperative’s approximately 7,000-member equity holders.
The implementation of the consolidation phase included:
• Full closure of four locations in Leland, Parkersburg, Bristow and Coon Rapids.
• Closing or seasonalizing several grain assets.
• Shifting agronomy product lines to regional hubs with central dispatch.
• Five percent reduction in staff across all part-time and full-time employees in the 26 counties in which the cooperative has locations.
“I think when people hear you are closing locations, the immediate thought is we are in financial trouble and that is not the case at all,” said Milan Kucerak, chief executive officer of Landus Cooperative. “We’re a strong working capital, our bank is aware of the moves and they’re supporting of that.”
He added the cooperative is taking measures like many are within the ag industry.
“We all know it is really tough to survive in the downturn that we are currently in in the ag industry,” he said. “Particularly in the grain commodity side. We’re just more or less deciding how do we hunker down, make sure we take care of our core business, the things that we do well and make sure we are focused on improving our efficiencies and reducing our costs in the operation so that we can continue to provide services our members need and position ourselves to really thrive when the ag economy turns around.”
According to Landus Cooperative, implementation of the growth phase is under way as capital expenditure proposals are being finalized for board approval, with implementation anticipated in the next fiscal year.
A variety of multi-million dollar projects are expected to be implemented through fiscal year 2020, which include:
• Automate grain assets and agronomy hubs.
• Build greenfield grain/agronomy hubs in currently underserved markets.
• Standardize processes and procedures.
• Continued focus on staffing efficiencies.
“For example, we want to have very fast, efficient, speedy-space on our grain facilities,” said Kucerak. “We want to focus on fast unloading at harvest time so that we kept he combines running in the field so they’re not waiting for trucks to be unloading at the elevator.”
Grain storage is also expected to expand for Landus Cooperative.
“We want to have adequate space,” said Kucerak. “We recognize, historically, we have had to rely on bunker capacity. We now know we need to move that to steel because trendline yield on grain, particularly corn, is real. It increases every year, so I think one of the challenges every cooperative — or anyone in the grain business has today — is the challenge to keep up with our membership.”
He added the cooperative is going to take a look at how it handles its agronomy products.
“The least number of times we handle it, the better it is,” he said. “The cost to move fertilizer from a hub location to a spoke location, the ag economy today won’t allow that margin to cover that cost, so we are going to unload to a hub and get it to the field without going to an intermediate location. It makes us more efficient. It cuts some of our costs and it servers our membership better.”
Erick Lerdal, regional sales manager for Landus Cooperative, agreed with Kucerak, with the fact that a goal to touch the product fewer times, from an agronomy perspective, will make the company more efficient.
“What this should allow us to do is improve our customer service by being able to consolidate the resources and pooling of our people to actually operate more effectively and efficiently for our membership,” said Lerdal. “We will have as good, if not improved service, due to the efficiencies that will increase through this.”
Landus Cooperative’s Project 2020: Consolidate Then Grow plan to help touch the agronomy products fewer times includes taking its dry fertilizer sites from 17 to eight; liquid fertilizer sites from 32 to 19; bulk crop protection storage from 35 sites down to 25, and anhydrous bullets from 60 sites down to 49.
Complete anhydrous site closures will include Scarville, Rands and Chew.
Locations that will become seasonal sites include Ackley, Aredale, Kesley, Plainfield, Thompson, Dayton and Sac City. Once these sites are full at harvest, they will close for the year.
Kucerak said there was a freight incentive to those producers to haul their grain to the Landus Cooperative location.
Last year, grain assets were closed in Dumont, Hampton, Audubon and Exira.
It is important to note that farmer-members of Landus Cooperative may not visibly be able to see immediate new construction, but to realize there is new technology be put into place on the backside of the cooperative’s operation, according to Kucerak.
“This is all about to consolidate then grow,” he said. “The difficult part about this is it won’t be visible to our members. We plan to look at automation — how do we automate some of our elevators in receiving? Other locations we will look at automating fully, not only in receiving but with unloading. These are the things people won’t see, but will add to the efficiency within the organization.”
On the agronomy side, he said they will begin with standardizing a system that will run all of the fertilizer and chemical plants to help increase efficiency.
“Those things we will do right away, in the next fiscal year or two,” Kucerak said. “Automation in receiving can be done in a year, but full automation takes a few years to get done.”
Some of the growth will be visible to its farmer-members in the near future.
“Starting next year, what we will look at is actually building new grain structures at existing locations or greenfield sites,” said Kucerak. “We have identified right now, on the table, about five key areas that we believe there is growth for the existing marketplace or new marketplaces, or expanding marketplaces. Research, and significant capital dollars will be invested, and we want to make sure we have all of that approved before making anything public.”
Consolidate then Grow: Phase 3
Following last summer’s announcements, cooperative leadership said they’ve received both positive and critical feedback from customers and members.
“It’s never an easy decision to let an employee go or to close a location,” said Kucerak. “Those were choices we had to make to manage costs and re-focus our capital for a growth phase.”
He noted the “consolidate” phase of the initiative found additional ways to save money by selling under-utilized equipment and making asset investment decisions based on their expected return.
Landus Cooperative recently delivered a report to its lending partners stating the changes made in the Project 2020 initiative reduced operating costs by more than $5 million.
According to information provided by Landus Cooperative, beginning with capital investments approved by its board of directors last winter, the cooperative launched the “Grow” phase of the “Consolidate Then Grow.”
Kucerak anticipates more than $40 million in capital investments will go to the board for approval this fiscal year.
“We’re already well on our way,” he said.
Late last summer, the cooperative made a change to its agronomy application process to match the efficiencies gained in closing several dry fertilizer sheds.
“With help from new GPS tracking and dispatch software, each region of the cooperative has one dispatcher with access to every floater and sprayer in the company,” said Tim Unruh, vice president of agronomy. “As we moved to fewer, larger agronomy hubs for locations, we touched product fewer times, got the product to our farmers’ fields on time and reduced our costs in the process. That’s good for the members.”
Unruh added that his team is anxious for the spring season to begin to continue streamlining the central dispatch process.
“Fall was abnormally long and open,” he said. “With a few months under our belts, we’re anxious to get back in the field this spring.”
He noted the cooperative continues to see an uptick in variable rate applications.
“We invested in a zone-mapping company, called FieldReveal, to offer our customers another precision tool from our 1Recommendation offering,” he said.
That means geo-targeted seeding, fertilizer application and spraying prescriptions are available for farmers to do their own applications or via the cooperative’s custom application fleet.
Alicia Huen, director of communications, said applicators will be showing up in customer’s fields with new paint. In December, the board approved a $7 million, multi-year program to trade out every old floater and applicator in the company’s agronomy fleet.
“Beginning this spring, we will rotate out approximately a quarter of our fleet and replace it with new AGCO equipment,” Unruh said. “That means less downtime for our farmers.”
Within the next two years, the cooperative is planning to rotate out the rest of the agronomy fleet.
“In the process, we will continue to right-size our fleet as we continue to become more efficient with centralized dispatching,” he said.
Huen said new paint isn’t the only big spend the cooperative made this winter.
In January, the board approved a multi-million dollar project to overhaul the cooperative’s more than 20-year old computer system and allow all business on one seamless system by the end of 2019.
“No other farmer-owned cooperative, that we know of, is making this kind of investment to prepare for the future,” said Kucerak. “It will transform the way we do business. Our goal is to offer a better customer experience online and in-person at our locations.”
Huen added customers will see the benefits later this summer when a new, single customer portal with enhanced functionality is slated to go online. New functionality, she said, will also be added to the company’s existing mobile application.
The “grow” phase
This spring, according to information provided by Landus Cooperative, it is slated to review recommendations for new steel and new assets.
“In today’s ag economy, we are taking extensive time and doing a thorough analysis to ensure our capital investment projects meet the delicate balance of serving customer needs today, serve customers in the future and offer a return on the investment for the benefit of the entire membership,” said Kucerak.
In with the new will mean out with the old.
“As we build the new assets and make upgrades, we know we have some old sites we need to clean up and make safer,” Kucerak said. “I vividly remember a member meeting in Rockwell City a year ago when a member asked when we’re going to start cleaning up the ‘blight’ we’ve created on the countryside by letting facilities decay.”
“It’s time. We’re making plans to set aside as many dollars as we can to remove old sites or buildings which are unsafe or in decay.”
Kucerak added that he can’t promise everything that needs attention will receive it.
“These old sites are exorbitantly expensive to tear down, but we are working to make as much progress as we can as quickly as we can,” he said. “We are prioritizing the unsafe and unsightly for demolition because the towns in which we do business deserve good neighbors and safe sites.”
He added that he is looking forward to the future of Landus Cooperative with a lot of optimism.
“This is your cooperative,” he said when asked what he wants members to know about the future of the business. “The feedback, ideas and passion you have for your organization are helping to shape the long-term investment plan. I am excited about the future of Landus Cooperative.”