Landus Cooperative announces multi-year plan
Landus Cooperative has begun implementation of a multi-year initiative to enhance profitability and reinvest in more efficient assets on behalf of the cooperative’s approximately 7,000 equity holders.
It is being called Project 2020: Consolidate Then Grow.
The implementation of the consolidation phase includes:
– 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;
– A 5 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.”
Of the four sites facing full location closure, Kucerak stressed that Landus Cooperative will still be able to service its membership, with one exception; the Leland location.
“That area will cause the most stress for our membership,” he said.
Kucerak further explained 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 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 with 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 underway 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 the 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 the 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.”
Kucerak said the cooperative is also going to take a look at how they handle their 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 serves 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 the Scarville, Rands and Chew locations.
Some of the cooperative’s grain locations will become seasonal sites, including 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 will be a freight incentive to those producers to haul their grain to another Landus Cooperative location.
“We will add so much a bushel, so that covers the freight cost, it should be financially natural to the customer,” he said.
Effective July 1, grain assets being closed will include Dumont, Hampton and Audubon, with Exira to be closed effective January 1, 2018.
These closed grain assets are simply no longer efficient and will be for sale. Kucerak thinks this may be an opportunity for a larger grain producer to be able to increase their storage capacities, more so than a competitor to come in and buy them.
“The efficiencies of those sites make it reluctant for a competitor to come in and buy,” he said. “A farm that has an eight, 10 or 12 row corn head, they don’t want to be delivering to an elevator that only as 5,000 bushel per hour unloading capacity. They don’t want to wait two hours in line to wait to be unloaded. They need a half-hour turn around time to get back to the field. They only have a certain amount of time to get the crop in and the equipment they use is pretty expensive to just have sitting there waiting.”
It is important to note, Kucerak said, that farmer-members of Landus Cooperative may not visibly be able to see immediate new construction, but to realize there is new technology being put into place on the backside of the cooperative’s operation.
“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,” he said. “Automation in receiving can be done in a year, but full automation takes a few years to get done.”
However, some of the growth will become visible to their 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.”
An important part of this announcement that Kucerak wants to make public is to clarify some rumors.
One of them, saying one of the nation’s largest cooperatives coming in and buying Landus Cooperative, is simply false, according to Kucerak.
“We have heard those rumors and they are absolutely not true,” he said. “We are not selling to CHS or any other big regional and we’re not going broke and I can say that unequivocally.”
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