CHS: Taking It To The Next Level

Carl Casale of CHS

When opportunity came knocking for Carl Casale last year, it was worthy of serious consideration. John Johnson was getting set to retire as president and CEO of CHS Inc., the diversified agricultural cooperative, and the search was on for his replacement. Casale, then executive vice president and chief financial officer of Monsanto and a friend of Johnson, had admired the company for some time, feeling it was making the right moves in a fast-changing and globalizing ag marketplace.

“I recall about six years ago, CHS entered Brazil and I called John to tease him a bit. I told him that if he could convince a conservative, farmer-oriented organization that it needed to be originating grain from competitors that he must be doing something special. That’s the day I learned that CHS had a different orientation toward the world, and understood what it took to be competitive in global markets.”

This was part of the reason Casale put his hat in the ring to succeed Johnson as president and chief executive officer at CHS, but there was more to it. First and foremost, the diversity of CHS was appealing, a company involved in food processing, traditional and renewable energy, grain marketing, crop nutrients and retail distribution, with net revenues at $25.3 billion in fiscal year 2010.

If you think of an acre of land as essentially a manufacturing plant, you think about all the inputs it takes to create the product,” says Casale. “You have crop nutrients, seed, energy, crop protection, and CHS plays in all that. And when you think about linking to the output of that manufacturing plant, CHS can play in that area as well. In looking at the total spectrum there’s no other company that can connect the farmer to as much of it as CHS can. I thought that made the company unique in this space.”

The second big factor in making the move was ownership structure. “In my view it is not coincidence that most of the largest firms in agriculture have some form of private ownership and that includes cooperatives. There’s a different view, and a different patience that goes along with that. Private companies tend to maintain the perspectives of the longer term that I think you really need to have to be successful.”

Quick Immersion

Casale didn’t spend a lot of time at CHS headquarters the first few months. He immediately hit the road, meeting with farmer owners and getting a sense for the business challenges facing folks in the countryside. In other words, meet the owners, meet the employees, and listen.

“We got a very good feel for the issues at the owner update meetings, and I would say the biggest issues mentioned were access to capital, access to talent, and the changing competitive landscape. That’s what they were saying in January, and our sense is that the issues are even more intense today. What that is going to look like longer term is what our owners are trying to sort out right now.”

CHS also held 13 employee meetings in conjunction with the owner events, something that had not been done before. The diversity of divisions and locations made the meetings both challenging and exhilarating for the management team. “We, and all the employee participants, really gained a sense of appreciation of how diverse we are,” says Casale. “Employees who would never have otherwise gotten to know each other across divisions got to meet and interact; it was really a lot of fun.”

The owner meetings are serious listening sessions when CHS executives can ask questions and get to the heart of what they need from the company.

“What we took out of meetings with owners and what we told them our goal was that we have to earn as much of their business as we can every day as we possibly can. It’s not their job to do business with us just because we are CHS and they happen to be our owners — we have to earn that business with high quality and fair prices. I’d like to think that we win all the ties, but we still have to go out and earn the business.”

Meeting follow-up with the location management was equally critical. “We’ve done a fair number of follow up calls with individual co-ops and asked them three simple questions: ‘Tell me what your long-term objectives are, how can we help meet them, and how do we earn your business.”

Internally, CHS is more formally organizing and gearing up to deliver the answers to these questions through its Business Solutions group. “We’ve actually developed a business development function that’s no different than a relationship manager at a bank who can sit down, ask those questions of the owner and, be it energy or seed or crop nutrients, they can go back and assemble a team for the cooperative and start discussions. We’ve seen some results from that already where we’ve gone back with teams of senior management to sit down and ask, ‘what do we need to do to be of value to you.’ It’s a simple thing, but it is part of the enterprise-wide approach we are trying to implement across CHS.”

Setting The Bar

At a higher level, CHS management has been directing a project that identified the company’s core “aspirations,” work that started a couple of years ago and is nearing completion under Casale. “This work was done along with codifying our key mission, vision and values,” he explains. “The idea was to identify what CHS aspires to across the enterprise. The five aspirations are focused around the energy business, global commodities, food and processing, producer focus, and leveraging enterprise value.”

Casale notes that literally thousands of employee hours and about two years were carved out to do the work, but at the end of the process CHS had five high level aspirations. In recent months, the project has moved to the audit phase to determine where CHS is today vs. these key aspirations — as Casale says, “How do you know where you need to go unless you know where you’re at?”

Now, management is working on fully vetting out each aspiration to ensure all employees understand the goal and their role in making it happen. “For example, with energy if the aspiration is to be ‘the leading energy supplier in rural America,’ do we mean ‘A’ leading supplier or ‘The’ leading supplier? What exactly is ‘rural America?’ The ultimate goal is for an employee of CHS to be able to look at that aspiration and say, ‘I get it, and I know what I have to do today to help the company achieve that.’ It will also inform us on our investment decisions we need to make across divisions to make these aspirations a reality.”

Changes On The Ground

The need to raise capital was one of the concerns that emerged from meetings with the local cooperatives, which is leading more of them to consider exchanging equity with CHS. “They retain local board management, so they basically run on our balance sheet,” explains Casale. “Generally that happens when a cooperative needs to get bigger but there’s no other local cooperative to merge with, or there’s a need for significant capital investment in the business so they look to us to help them strengthen the balance sheet.”

Casale puts aside the discussion of whether federated or central ownership is the best approach, and is focused on creating what he calls “aligned” ownership. “You can have alignment in a federated system or a central system, and because of our heritage you have both kinds of ownership at CHS,” notes Casale.

Capital needs, along with competitive pressures and the changing dynamics of growers, are forcing cooperatives and independent dealers to reevaluate whether they have the size and scope to compete in their markets. “On the crop input side the largest cooperatives I talk to — those in excess of $250 million — tell me their biggest challenge is keeping pace with the growth of their owners,” says Casale. “They’re telling the cooperative, ‘Hey, I’m getting bigger, you need three more floaters to keep up with me.’ I would argue that they need to get bigger just to keep up with this trend.”

Fresh off a 10-day trip through Asia, Casale is even more convinced that grain demand will continue to grow driven by China, India, and other emerging markets with a burgeoning middle class and improving diets. Producing food to meet the increasing demand is one issue, but another concern looming on the horizon is grain logistics here in the U.S.

Demand And Logistics

“Without any new capacity we will run out of rail capacity by 2035. The good news is that rail is run by private entities in this country, so if there is enough incentive they will likely invest. The greater concern is the situation with our waterway system. Our locks and dams are getting old. A great example of this is the corps of engineers said they received $35 million for dredging, they needed $100 million, and when they ran out they were done. Every foot of draft that you can’t load in a Panamax vessel is basically $1 million in lost cargo. And the freight companies don’t care, they charge by the boat, not by the weight.

Name me a sector of this economy where we have a better competitive advantage than agriculture. Wouldn’t you think we would be investing in it heavily?

To The Next Level

As its 2012 fiscal year began on Sept. 1, CHS was sharing more detail with its owners and employees about the alignment options that will become available for consideration. Once the domestic plan is firmly in place, Casale will turn part of his attention to growing and developing the international business.

“It’s really important for us on the grain side to be a reliable supplier to international markets 12 months out of the year,” he says.

CHS is established in many areas internationally but will need investment in infrastructure and people in several key areas, including Brazil and the Black Sea region. “We’re also looking beyond grain at how we can take advantage of other opportunities to diversify our business — more of an enterprise-wide approach,” says Casale.

Reflecting on the first six months of his tenure, he recalled telling the organization that “the hardest company to change is a successful one. It took a lot of time to explain to employees the reasons why we were making changes in strategy. There was a lot of communication internally, and probably four times that much discussion in the countryside.”

Leave a Reply

Management Stories

ManagementGROWMARK Meeting Visit, Company Takeover Updates, and RNC Invite
July 22, 2016
Editors Paul Schrimpf and Eric Sfiligoj discuss their recent speaking engagement at GROWMARK’s eastern event, crop protection company merger rumors, Read More
ManagementLand O’Lakes Announces SUSTAIN Business Unit, Other Changes
July 20, 2016
Land O’Lakes, Inc. today announced the formal organization of a new business unit, SUSTAIN, and its leadership. SUSTAIN will focus Read More
Corn and ditch
ManagementStudy: Saturated Buffers Reduce Nitrates From Subsurface Field Drainage Systems
July 19, 2016
The Agricultural Drainage Management Coalition (ADMC), Agricultural Drainage Management Systems Task Force and Dr. Dan Jaynes with the National Laboratory Read More
Soybean Field
LegislationOhio Soybean Association Names Brian Hill Legislator Of The Year
July 19, 2016
The Ohio Soybean Association (OSA) has announced that State Representative Brian Hill (R-Zanesville) has been named one of two Legislators of Read More
Trending Articles
Heritage Cooperative
Retail FacilitiesKahler Automation Designs State-Of-The-Art Facility For Heritage Cooperative
July 4, 2016
Heritage Cooperative in Marysville, OH, needed an efficient liquid, dry and grain facility to serve the many needs of their Read More
The Andersons Waterloo
ManagementFirst Indiana Facility Certified Under 4R Nutrient Stewardship Certification Program
June 27, 2016
The 4R Nutrient Stewardship Certification Program has announced that The Andersons, Inc.’s Waterloo, IN, facility has been added to its Read More
Food IT
Industry NewsCalifornia Event Will Mix Ag And Tech Professionals To Explore IT Solutions
June 20, 2016
Silicon Valley is hot on agriculture, and an upcoming event in California will bring together the food and tech industries Read More
Monsanto Luling Plant
Eric SfiligojWhat’s Next For Monsanto?
May 31, 2016
For the folks at Monsanto’s headquarters in St. Louis, MO, it has been an eventful few weeks. Back on May Read More
Soybean Plant closeup
Industry NewsMonsanto Rejects Bayer Bid; Open To More Talks
May 25, 2016
Monsanto Co, the world’s largest seed company, turned down Bayer AG’s $62 billion acquisition bid as “incomplete and financially inadequate” Read More
Eric SfiligojPity The Monsanto Haters
May 23, 2016
An old saying goes thus: “Be careful what you wish for. You just might get it.” Given current events, there Read More
Latest News
ManagementGROWMARK Meeting Visit, Company Takeover Updates, and R…
July 22, 2016
Editors Paul Schrimpf and Eric Sfiligoj discuss their recent speaking engagement at GROWMARK’s eastern event, crop protection company merger rumors, Read More
Crop InputsMonsanto: EU Approves Roundup Ready 2 Xtend Imports
July 22, 2016
Monsanto Co. announced today that the European Commission has granted import approval for Roundup Ready 2 Xtend soybeans. This milestone Read More
Syngenta headquarters in Basel, Switzerland
Crop InputsSyngenta Announces Alfalfa Seed Split Off
July 22, 2016
On September 1, 2016, Syngenta will transfer sales and distribution of alfalfa seed to the NEXGROW branded business that is Read More
Dow DuPont
Crop InputsDuPont, Dow Shareholders Approve Merger
July 21, 2016
DuPont and The Dow Chemical Company announced that, at their respective special meetings of stockholders held today, stockholders of both Read More
ManagementLand O’Lakes Announces SUSTAIN Business Unit, Oth…
July 20, 2016
Land O’Lakes, Inc. today announced the formal organization of a new business unit, SUSTAIN, and its leadership. SUSTAIN will focus Read More
Monsanto Luling Plant
Crop InputsReport: Bayer Shareholder Proposes Monsanto ‘Host…
July 20, 2016
One of Bayer AG’s top 20 shareholders said Wednesday it may make sense for the life-science company to launch an Read More
Young Corn Closeup
Industry NewsNew Leaf Symbiotics Snags Former Monsanto Microbials Le…
July 20, 2016
NewLeaf Symbiotics, announced today the appointment of Dr. Janne Kerovuo as Vice President for Research and Discovery.  Dr. Kerovuo comes Read More
Corn and ditch
ManagementStudy: Saturated Buffers Reduce Nitrates From Subsurfac…
July 19, 2016
The Agricultural Drainage Management Coalition (ADMC), Agricultural Drainage Management Systems Task Force and Dr. Dan Jaynes with the National Laboratory Read More
Case sprayer nozzle closeup
EquipmentAgronomists, CCAs, Custom Applicators Invited To FSR Ag…
July 19, 2016
Agronomists, Certified Crop Advisers (CCA) and custom applicators can stay current on agronomy issues on the grounds of the Farm Read More
Soybean Field
LegislationOhio Soybean Association Names Brian Hill Legislator Of…
July 19, 2016
The Ohio Soybean Association (OSA) has announced that State Representative Brian Hill (R-Zanesville) has been named one of two Legislators of Read More
Eric SfiligojThe Latest Monsanto Rumors: A Game Of Tones
July 18, 2016
When companies are engaged in the back-and-forth of the acquisition game, the tone of their various announcements is always important. Read More
Nozzle spray close-up
AdjuvantsWest Central Distribution Introduces New Elite Family O…
July 14, 2016
West Central Distribution recently released a new line of Elite adjuvants to work alongside the new herbicide technologies that combat Read More
Bayer sign
Crop InputsBayer Makes New Offer For Monsanto
July 14, 2016
Bayer AG boosted its takeover offer for Monsanto Co. to about $65 billion in a bid to overcome the U.S. Read More
ManagementAn Update on Water
July 14, 2016
CropLife Editors Eric Sfiligoj and Matthew Grassi discuss agricultural water issues in conjunction with a recent field trip in Ohio. Read More
Co-Alliance employee
EmployeesNew Purdue Program To Focus On Talent Management
July 14, 2016
Purdue University’s Center for Food and Agricultural Business is starting a new professional development program to help food and agribusiness Read More
Industry NewsFMC Agricultural Solutions Appoints New Global Regulato…
July 14, 2016
FMC Corp. has named Andy Hedgecock as Global Regulatory Affairs Director for FMC Agricultural Solutions. He joins the company this Read More
Corn Field
Seed/BiotechWhat Can Inoculants Do For You?
July 13, 2016
When it comes to preventing disease and promoting growth in your plants, who couldn’t use a helping hand? By forming Read More
Microbes
Seed/BiotechMighty Farming Microbes: Companies Harness Bacteria To …
July 13, 2016
What if farmers, instead of picking up some agricultural chemicals at their local dealer, picked up a load of agricultural Read More