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

StewardshipMichigan Agriculture Leaders On Toledo Water Ban: We Want To Be Part Of The Conversation
August 8, 2014
Leaders of Michigan agricultural organizations said Thursday that the government should not have a “knee-jerk reaction” based on last weekend’s water ban in Toledo due to fertilizer run-off in Lake Erie. Read More
ManagementRussia Bans U.S. And EU Ag Product Imports In Ukraine Sanctions Battle
August 7, 2014
Russian President Vladimir Putin has banned the import of agricultural goods from countries that have imposed sanctions on Russia. Read More
EmployeesAsmark Institute Dedicates New Training Center To Ford West
August 6, 2014
The Asmark Institute plans to recognize the retired industry leader's years of service to the fertilizer industry at the new state-of-the-art facility in Owensboro, KY. Read More
LegislationUSDA: Quick Implementation Of Disaster Assistance Programs A ‘Top Priority’
July 9, 2014
USDA has processed 106,000 payments to farmers in 40 states across the country who suffered livestock and grazing losses between Oct. 2011 and passage of the 2014 Farm Bill. Read More

Trending Articles

ManagementExpert To Discuss Farmland Value, Rent At Farm Science Review
August 18, 2014
While cropland values in Ohio increased in the past two years, they have remained flat in 2014, declining in some cases, according to an Ohio State University agricultural economist. Read More
EquipmentAdvance Your Technology IQ At MAGIE
August 13, 2014
The Midwest AG Industries Exposition (August 20-21) is the place you need to be to see, study and evaluate how new advances in the equipment, operations, crop protection and fertility sectors can help your business prosper. Read More
HerbicidesScouting Key To Next Season’s Soybean Herbicide Program
August 12, 2014
When growing soybeans, growers need to think ahead to stay one step ahead of weeds. That means examining weed threats and evaluating which herbicides work best. Read More
StewardshipMichigan Agriculture Leaders On Toledo Water Ban: We Want To Be Part Of The Conversation
August 8, 2014
Leaders of Michigan agricultural organizations said Thursday that the government should not have a “knee-jerk reaction” based on last weekend’s water ban in Toledo due to fertilizer run-off in Lake Erie. Read More
CropLife 100BRANDT Acquires Lemon Ag Services
August 4, 2014
The acquisition of Lemon Ag fits BRANDT’s aggressive corporate strategy of providing superior agronomic advice and services for customers in central Illinois. Read More
Eric SfiligojThe Resurgence Of Crop Protection
August 4, 2014
Plenty of new offerings over the next few years should see a rebirth for the crop protection products category in terms of market share. Read More

Latest News

Crop InputsBASF Is Betting On A Bright Agricultural Future
September 1, 2014
The crop protection products giant is gearing up for a busy time in agriculture by investing in both product production and development over the next couple of years. Read More
Eric SfiligojAn Erie Feeling For Ag
September 1, 2014
Plenty of water issues have been in the news lately, including the continuing drought in California. Read More
CropLife 100Pinnacle Acquires California-Based Retailer
August 29, 2014
Pinnacle Agriculture Holdings will acquire Kerman Ag Resources, Inc., which will operate under Pinnacle's Performance Agriculture brand. Read More
Allied Cooperative Grain Plant
ManagementArcadia Co-op To Merge With Allied Cooperative
August 28, 2014
Allied Cooperative has announced that members of Arcadia Co-op voted in favor of a merger with Allied Cooperative, paving the way for the consolidation which will be effective on December 1, 2014. Read More
InsecticidesBioinsecticide VENERATE Now Registered In California
August 27, 2014
Marrone Bio Innovations' VENERATE is a new tool to help California growers control crop-damaging insect pests, fight the development of insect resistance and reduce pesticide residues on fruits and vegetables. Read More
CropLife 100Two Iowa-Based Ag Co-ops To Merge
August 27, 2014
The Board of Directors and management of United Western Coop, Missouri Valley, IA has completed a merger with Heartland Co-op, West Des Moines, IA, effective September 1, 2014. Read More
FertilizerKoch Expands AGROTAIN Nitrogen Stabilizer Portfolio
August 26, 2014
Koch Agronomic Services, LLC has added two new innovative nitrogen stabilizers to the AGROTAIN product family – AGROTAIN ADVANCED and AGROTAIN DRI-­MAXX. Read More
Seed/BiotechDuPont To Build Two Seed Treatment Centers
August 26, 2014
DuPont has announced construction on two state-of-the-art centers dedicated to developing and testing seed treatment formulations, applications and seed handling techniques in an important step toward bringing new solutions to growers. Read More
Seed/BiotechLoveland Products Acquires A Controlling Interest In Ag…
August 26, 2014
Loveland Products, a subsidiary of Agrium , has announced the company has acquired a controlling interest in Agricen, a Dallas-area agricultural biotechnology company delivering biochemical-based products for efficient and sustainable plant nutrition. Read More
StewardshipUp Close Look At The 2014 Environmental Respect Award W…
August 25, 2014
The 2014 Environmental Respect Award winners were honored recently at the 24th annual event in Wilmington, DE. Read More
Eric SfiligojAg Science Rejection Carries Consequences
August 25, 2014
As innuendo and fear dog the regulatory process, agriculture can’t get the new tools it needs to combat world hunger. Read More
LegislationFarmers Dismayed As New Farm Bill Dumps Direct Payments
August 25, 2014
The threatened end of cash subsidies to the nation’s row crop farmers dates back through at least the last two iterations of national agriculture policy legislation. Read More
MAGIE 2014 ShowStopper
EquipmentJohn Deere Again Wins MAGIE ShowStopper Award
August 25, 2014
For the second consecutive year, John Deere was honored at the Midwest AG Industries Exposition (MAGIE) for its new R4045 sprayer. Read More
CropLife 100GROWMARK CEO To Retire
August 22, 2014
GROWMARK chief executive officer Jeff Solberg has announced his retirement effective September 15, 2014. Read More
InsecticidesDuPont’s Prevathon Approved For Dry Beans
August 22, 2014
DuPont Prevathon insect control powered by Rynaxypyr has received EPA registration for foliar use on dry bean crops, including dried shelled peas and beans. Read More
ManagementNCGA DuPont New Leaders Program Enters Sophmore Season
August 20, 2014
The National Corn Growers Association and DuPont are pleased to announce the second year of the NCGA DuPont New Leaders Program. Read More
FungicidesVerdesian Links Up With Mitsui, Hokusan
August 20, 2014
Mitsui Chemicals Agro, Inc., and Hokusan Co., announced the signing of an exclusive licensing agreement allowing Verdesian Life Sciences global access to its patented technology for suppressing mycotoxin contamination in wheat and barley. Read More
SprayersUniversity Of Illinois Introduces New Spray App
August 18, 2014
University of Illinois Extension has released a new smartphone app for making sprayer-related calculations. Pesticide Spray Calculator, or Spray Calc, Read More