West Central Cooperative And Its New President Are A Match Made In Deviation

West Central Cooperative, Jefferson, IA

West Central Cooperative features 28 facilities in the Western half of Iowa, including this one in Jefferson — approximately 30 minutes from the company headquarters.

To appreciate just how unique West Central Cooperative is in the world of ag retail, an observer need only consider some of the company’s historic quirks. The Ralston, IA-based cooperative was first incorporated in 1933 as the Farmers Cooperative Association of Ralston. And until its adoption of its current name in 1978, West Central largely did what cooperatives do during the intervening years – conduct business by providing products and services to grower-customers in Western Iowa, one of the largest crop producing regions in the country.

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Milan Kucerak, president/CEO, West Central

Milan Kucerak, West Central

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Yet, according to Milan Kucerak, president/CEO, West Central did manage to follow a couple of unconventional business paths along the way. “We are not your grandfather’s cooperative,” says Kucerak of the company he now heads. “Above all else, we are a different kind of cooperative. Historically, we’ve been different. And still today, we are different.”

As an example of this deviation from the norm, Kucerak refers back to the early years of the cooperative. In the early 1940s, the company’s board of directors decided the time was right for the cooperative to begin processing its customers’ soybeans into meal. Naturally, soybean presses were needed to accomplish this.

“But this was in 1941, and World War II was going on,” says Kucerak. “At the time, with product rationing in place for materials needed for the war effort, getting the steel needed for soybean presses was pretty hard to do. But the board still went ahead with this plan.” In the end, the necessary steel to make West Central’s soybean presses was obtained, and the cooperative became one of the first in the Midwest to produce its own soybean meal.

Based in part upon this expertise with soybean meal, West Central again took an unconventional path to the livestock market 40 years later. During the early 1980s, the cooperative worked with researchers at the University of Wisconsin to develop a more nutritious soybean meal.

“The research showed that this meal offered a big increase in the amount of bypass protein available for cows compared with other types of feed,” says Kucerak. “So the cooperative branded this new product with the name SoyPlus and began plans to market it to cattle ranchers.”

However, there was still something very different about West Central getting into the cattle feed business at that time, he adds. “At the time, there were almost no dairy producers in the local area the cooperative did business in,” says Kucerak. Undeterred, West Central began marketing SoyPlus on a national basis instead, and it quickly became a best-selling product for the cooperative. In 1997, the brand went global as well. By the close of 2014, West Central had shipped more than 289,000 tons of SoyPlus to all markets, an increase of 15% from the 2013 total.

From Upstate New York To Iowa

As for Kucerak himself, the path to the top of West Central was also a bit outside the norm, with dairy and finance playing a larger role in his overall career compared with ag retailing. Originally, he grew up on his grandparents’ dairy farm in Upstate New York. During his high school and college days, Kucerak interned with now-defunct cooperative Agway (part of the GROWMARK system since 2000), learning the ins-and-outs of the ag retail marketplace.

“I worked in both Agway’s feed mill and retail store,” he says. “I got my commercial driver’s license during that time, so I got to drive both feed trucks and spray rigs doing custom application work.”

Still, Kucerak didn’t stay in ag retail for long. After only five years at Agway, he decided to make the move into finance, working for both the Farm Credit System and Purina Ag Capital, a small private bank based in St. Louis, MO. In this particular field, he stayed for the next 17 years.

In 2006, West Central called Kucerak, offering him the chance “to get back to my roots” and manage the cooperative’s animal nutrition division. “I thought that that would be a neat opportunity to run my own business unit,” he says. Finally, in late 2014, when then President/CEO Jeff Stroburg announced his retirement, the board of directors chose Kucerak as his replacement — becoming only the fourth person in the cooperative’s 80-plus-year history to hold this position.

“That’s a bit different than most other companies these days,” he points out. “A lot of cooperatives with a more than eight decade history would have probably had twice as many presidents/CEOs; maybe three times as many. But at West Central, there’s only been four.”

Still, although he hopes to honor this sense of history during his tenure as president/CEO, Kucerak doesn’t plan to be completely bound by it. “West Central has always had a very strong board of directors, and all of the previous CEOs have had a very close working relationship with these members,” he says. “And yet, the board of directors have shown a willingness over the years to be very open-minded, allowing the CEOs to make some bold new moves on their own as well as doing other things differently.”

It’s clear that one of the things that will be different about Kucerak’s tenure as West Central president/CEO is his view on personal growth. For example, Kucerak has encouraged employees to take higher education and career training classes (oftentimes sponsored by the company) if it will help their personal and professional growth.

Then, of course, there is his view on on-the-job learning — namely, the importance of failure. “Don’t get me wrong — success is great, but I tend to learn more from my failures than I do from my successes,” says Kucerak. “And if you can create a business environment that allows people to fail, that’s neat. I believe it’s more important to see how a person recovers from a mistake. That tends to make them a better employee.”

To illustrate this point, he recalls the time an employee made an error in ordering that ended up costing the cooperative $8,000. “When this employee told me about the mistake, I asked her what she had learned,” says Kucerak. “Her answer was that if this situation happened again, she would do things differently instead of the way she had this time so the company wouldn’t lose money. I told her that it was good she learned from her mistake, to go ahead and cut the check for $8,000 and move on from there.”

The Challenge Of Relevancy

Since officially taking the reins as president/CEO of West Central in February 2015, Kucerak has spent part of his time re-orienting himself with the ag retail/grower-customer world of the early 21st century. In many ways, he says, the overriding trends that are driving the marketplace today aren’t that different than those that were in place during his days at Agway. “When you boil it down, growers are still trying their best to preserve their crop yields while effectively managing their risk factors,” says Kucerak. “What is different are some of the ways they are going about doing this. These have changed drastically over the years. Now, such concepts as sustainability and precision agriculture are much bigger parts of the mix than they ever were before.”

In his mind, perhaps the biggest challenge this brave new ag world presents to ag retailers comes down to the role they ultimately play in the grower’s ability to accomplish higher yields and manage their businesses. “I think the biggest challenge for any ag retailer today — not just us — is how do we stay relevant to our customer base,” says Kucerak. “To do that, you have to understand your customer and what markets he or she operates in. As a cooperative, we might have a little bit of a different challenge in the sense that we need to serve a broad variety of growers. We can’t just focus on those customers with more than 10,000 acres and ignore those that farm fewer than 1,000 as some other ag retailers might be able to do.”

To help in this effort, West Central is attempting to utilize as many resources as possible, with perhaps the biggest challenge being integrating all the data currently available on agriculture into something “meaningful” to growers. “We are a customer cooperative, and there are plenty of different types of data out there that can be gathered,” says Kucerak. “And there are some systems out there right now that are trying to pull all of this together to help, but in my mind, no one has really accomplished this just yet. But at some point, someone will figure out how to easily connect all this information seamlessly, and that’s what we are trying to do.”

Right now, West Central has a pair of options for its customers in this area. On the agronomy side, the company has a dedicated technology person who is attempting to pull all the available data together into an easy-to-use format that grower-customers can use. The other is something called the Crop Innovators Club.

“This brings together many different growers to share their experiences in the field and learn new and different ways of using all the gathered data out there to boost their yields,” says Kucerak. “In this group, for instance, there was one soybean grower who got 91 bushels per acre by using the same planting and nutrition methods he always had, but by combining them in different ways based upon some new data he now had access to.”

In truth, access to data and conducting planting operations in new and innovative ways will only grow in importance for growers in the near future, predicts Kucerak. After all, West Central and its customers do business in the state of Iowa — which has made news headlines across the country and in the world of agriculture recently because of a lawsuit involving the Des Moines Water Works. This lawsuit cites unusually high levels of nitrates against 10 drainage districts in the state and indirectly points a finger at agriculture as a contributor to this problem.

West Central, like other ag-based entities in Iowa, is doing what it can to address this issue. In February, the cooperative held a series of five producer meetings on the topic. The company is also doing what it can to directly help in the field by following the industry’s Nutrient Reduction Strategy.

According to Scott Ahrenholtz, corporate sales director at West Central, the cooperative is also working with nitrogen stabilizers to aid in its quest to reduce any nitrogen and water quality issues. “We have to better utilize the nitrogen being applied to the field so the crops can use it,” says Ahrenholtz. “Right now, West Central is doing nitrogen stabilizer tests, comparing its use with not using stabilizers. We are also putting stabilizers down at different stages in the corn growing cycle, applying some at the preplant stage for instance. Ultimately, we as an industry have to figure out how to better fertilize the growing crops and not just fertilize the soil around them. At West Central, we’re focused on ‘feeding the plant and not the soil.’”

Growing & Adding

Besides dealing with challenges in the grower community, West Central also has a few of its own, says Kucerak. One of these is what he calls “rightsizing” the cooperative. “No matter what you are looking at, whether it’s the equipment or inventory side of our business, we are staying just ahead of the curve as far as demand goes,” he says. “And we are doing this for two reasons — so that our customers don’t get stuck with higher priced products and we as a company don’t get stuck with unused inventory. I think everyone in this business remembers what happened in 2009.”

The 2008-09 timeframe, of course, was when high fertilizer prices during the summer months led to virtually no fall application work being conducted. This meant many tons of fertilizer was left in ag retail facility warehouses across the country come year-end, which forced many companies to take high write-downs on their balance sheets.

Then there is the issue of industry consolidation. Although this trend pulled back some during the strong financial years between 2010 and 2014, it has started to pick up again in 2015. This has been particularly true in the cooperative world.

“There appears to be in Iowa and its neighboring states merger-mania going on among the cooperatives,” says Kucerak. For some perspective on this trend, he points to some figures. For example, there were almost 3,000 cooperatives doing business nationwide in 1990 according to USDA Rural Development statistics. Today, that number is down to less than 1,000, and projected to drop to less than 800 in the next five years.

And the situation is even more pronounced in West Central’s home state of Iowa. Back in 1951, there were 710 cooperatives based in the state, according to the company’s own data. Today, just more than 50 remain.

According to Kucerak, the reason for this merger-mania among cooperatives boils down to a single word — age. “Right now in agriculture, you have a slew of people who are at retirement age and don’t have a clear succession plan in place at their companies,” he says. “In these cases, a merger is probably a good option. The difficulty, though, will be finding the right people — ones that can step up from managing million dollar companies to ones that can effectively handle running billion dollar companies.”

Will West Central get involved in this cooperative consolidation game itself? Perhaps, says Kucerak, if the opportunity is there. Regardless, he says, West Central will continue to shape its own future as in the past — by staying the course when necessary, but taking different business paths when it seems to make sense to do so.

“I see tremendous growth opportunities in all of our divisions,” concludes Kucerak. “We have a very stable company, a strong balance sheet with good earnings and the backing of a strong board of farmer directors. But we also have a history of innovation and doing things differently compared with other companies, and that’s not going to change. That’s been the key to our success so far, and I believe it will continue to be that way for some time yet to come.”

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