Outstanding in the Field Podcast

Summary:

Listen in as host Mike Terning brings to light the incredibly unique challenges the U.S. feed industry has faced as a result of the global pandemic. Joel Dekkers, Senior Sales Specialist with Format Solutions, gives his first-hand experience with those challenges in this insightful episode of Outstanding in the Field.

What you will learn in this episode:

  • The overarching impact of COVID-19 (the Coronavirus Aid Relief and Economic Security Act) on the U.S. feed industry
  • How and why Format Solutions has pivoted to help their customers optimize livestock diets to slow the animals down as opposed to the fastest and best performance
  • Why Joel thinks speed of consolidation in the industry is certain
  • Why the discussion of traceability is beginning to speak to nutrients as opposed to ingredients

Relevant links:

Listen to the podcast:

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Transcription:

Mike Terning:   Well hello. This is Mike Terning. Welcome to another episode of Greenstone’s Outstanding in the Field podcast. Today I’m happy to introduce our guest today whose name is Joel Dekkers. Joel, why don’t you give us a little introduction of who you’re with and where you’re at?

Joel Dekkers:   Sure. Thanks Mike. I’m with Format Solutions. We are a wholly owned subsidiary of Cargill Animal Nutrition. Our software is geared at helping customers optimize their nutrition from the time of determining what diet to make and how to ultimately get that invoiced in a system like AGRIS. I’ve been doing this for 25 years. So it’s been an interesting time.

Mike:   Well congratulations.

Joel:   It’s actually 24 I guess. It’s not quite—I’ve started my 25th year, but I haven’t quite made it Mike so.

Mike: Well, let’s roll the clock back then just a little bit. Where’d you grow up?

Joel:   I grew up on a farm in northwest Iowa. A little town called Hawarden three miles from the South Dakota border.

Mike:   Okay. Alright. Then after high school?

Joel:   My degree is ag education from South Dakota State. So that was a long ways from home back then, 110 miles. So life’s changed since then.

Mike:   Yeah. Well so you were a jack rabbit, right?

Joel:   I was a jack rabbit, yep.

Mike:   Probably still are, right?

Joel:   Yeah. You just never really quite lose your alma mater. Certainly that college has changed a lot as well since those days.

Mike:   Yeah. It’s quite a program they have going on there.

Joel:   Yep. Pretty cool to watch.

Mike:   Yeah, definitely. Well, you’re my second guest who was a jack rabbit. So you’ll have to go back and listen to some previous–

Joel:   I will have to do that.

Mike:   Anyways. So graduated with, you said ag education?

Joel:   Yep.

Mike:   So what was your first job out of college?

Joel:   So my first job was with BASF. They were just entering the U.S. market in the ag pesticide market. They have found a new chemistry that was for soybeans. So I was kind of a first generation employee for our German company.

Mike:   Okay.

Joel:   Had nine counties in southwest Minnesota. As we talked about earlier, I lived in big city Worthington.

Mike:   Yes. Okay. So how many years were you with BASF?

Joel:   I was with them, I think, for a little over four I believe.

Mike:   Okay, alright. So became almost sales agronomist perhaps? Were you selling to the retailers primarily?

Joel:   It was primarily the retailers back then. That was kind of before the requirement like you would have today where you would have to get certified. It was prior to that world. Yep. Back then it was more of an education role. Information the growers about new technology at the time. Grower meetings in the winter and handling any performance issues in the summer kind of thing.

Mike:   Interesting. So then post BASF, what took place?

Joel:   Yeah. So I ended up actually with one of my customers, which brought me to where I live now Fairmont, Minnesota. A company called Rosen Diversified. They were a wholesale distributor of ag chemicals. I ran a retail fertilizer and feed location for them for about four years. Then eventually I moved into their wholesale distribution business and operations and helped kind of manage warehouses in an eight state region for them.

Mike:   Okay. Alright. Well, I think I first met you probably around ’96 or so, 1996, in Spicer, Minnesota. So you had a stint with a company that Rosen’s owned, correct?

Joel:   Yeah. So part of the evolution if you think about it—So you’re in this distribution channel and you’re trying to figure out how you get closer to your customers. So Rosen’s bought a small fertilizer blending software company and a mapping software company. So I ended up running that for a few years.

Mike: Okay. So you lived in Spicer at that time or that area?

Joel:   I lived in Spicer. Actually, we had a New London phone, a Spicer address, and our kids went to school in Willmar so.

Mike:   Wow. Okay.  That’s clean.

Joel:   Yeah.

Mike:   So then after Rosen’s Diversified, where’d you go?

Joel:   Yeah. So actually that’s when I moved into the current job. So it was a company at the time called Easy Systems. We were building a solution for the animal feed industry. So that would have been ’96 actually. So it was kind of in that time frame. So we were actually—at Rosen’s Diversified—already we were kind of a development partner. I ended up moving over to Easy Systems that time. That brought us back to Fairmont, which was kind of home for us and it was a chance for us to get closer to friends and family.

Mike:   Okay. Great. So you’ve been in Fairmont since?

Joel:   I have. Early in my career and in our marriage I think we moved 13 times, and now we’ve been in our home for 22 years. So it’s a bit of a nice change.

Mike:   Well, that’s good. I went to a wedding two or three summers ago in Fairmont. That’s the first time I’d really gone to town. Just a beautiful chain of lakes there. I enjoyed poking around there.

Joel:   We actually live—I think if you count it it’s five lakes south of town. So the chain actually extends south of town. You can’t go there by boat. I could canoe to town if I wanted to portage three times.

Mike:   Okay.

Joel:   Which I haven’t done. I understand early on in the past that the boy scouts, that was part of their adventure. They don’t do it any longer, but there was a time when they actually portaged down. There’s a boy scout camp on the south end of our lake here. So a little trivia.

Mike:   Yeah, yeah. Interesting. Good. Well Joel, your role today with Format is providing the helping new customers and existing customers utilize the Format Solutions to the fullest extent. Is that a good way to put it?

Joel:   Yeah. That’s a good summary. It’s complex. So I have our strategic accounts. So we have a couple of mutual customers and some of our large accounts. Then I help our sales team configure new customers with the right software because, as you’re well aware, this business has gotten relatively complex and so have the tools. So getting the right solution with the right customers. Then I do some sales training and sales optimization work for kind of internal. So kind of a multifaceted role.

Mike:   Okay. Great. Well, good. Well thanks for that journey back and back to the present. Appreciate that. We’ve had some challenging times here so far in 2020. Kind of the early thing that we’ve run into here is a depressed market, which was a result of last year and even before then. Now we’ve had this coronavirus COVID-19 happening. The USDA came out with theCoronavirus Aid Relief and Economic Security Act. It was about a $19 billion program. $16 billion was direct payments to producers. I think over 50% of that went to the livestock/dairy/hog market if I’m not mistaken. I think almost $10 billion of it. So what sort of impact has all of this had on what you and your colleagues do at format solutions?

Joel:   Well, you know, it’s really challenging to see our customers go through some of the challenges that they’ve seen. Hearing stories of customers having to destroy 340 pound pigs that are past the weight for market because there is no place for them to go. It’s been a really difficult time. So it’s kind of turned the supply chain a little bit upside down. There’s been lots and lots—One of the tools we have is software to optimize the diet. So we’ve gone from optimizing the diet to get the fastest and best performance to optimizing the diets to get the poorest performance possible to slow that animal down. So there was shackle space available in the harvest plant. There’s probably been more diet changes in particular the pork industry in this business in the last three months than we’ve probably seen in the last three to five years. So it’s put a lot of pressure on our customers. At the same time, they’re trying to adapt to a new working style where they’re working separate much like we are today. So they’ve had to adapt to not only the change of work environment but then also the extra workload that’s come with that whole process change.

Mike:   Yeah. So Format Solutions is known as the optimizer, coming up with the best formula and recipe and ration, right? It’s working in reverse.

Joel:   Optimized for the worst formula. If you could slow that animal down by a week or two and then hopefully find space. Certainly, the U.S. packing harvesting group—That industry has done a remarkable job of getting people back to work, getting their facilities changed in a way that people could get back to work safely. I think numbers I saw today, they’re back to 92% of capacity as an industry. So some remarkable progress has been made in the past weeks, right. Days and weeks.

Mike:   Yeah, yeah.

Joel:   But you still think about you had an industry that was pretty full from a capacity perspective prior. Now you close several of those facilities for a period of time and you get this backlog of animals in the system. So certainly that has depressed prices. It’s put a lot of pressure on the whole supply chain.

Mike:   Yeah, definitely. So I don’t know what—You probably came up with an internal term here, your team did, when they were probably coming up with this—What did you call them? Deoptimized rations?

Joel:   I think it was so busy that people didn’t really focus on anything. Because our team was also going through the same thing. It was adjusting to a new work style. As your team has too, right? It’s been an interesting time as people work through their challenges at home and work. So yeah. No new terms, yet, but if you think of something, we could probably get that out there for you.

Mike:   Well, I hope it’s a short lived label, whatever the name is.

Joel:   That’s right. That’s for sure.

Mike:   Yeah, I’m sure that’s quite a change in thought process when all of a sudden now you’re going, “Okay, how can we slow these animals down as quickly as possible?” Has that ever happened within the Format Solutions before?

Joel:   No. No, I don’t think we’ve ever seen anything like this. Yeah.

Mike:   Wow. Yeah, interesting times.

Joel:   Yep.

Mike:   Yeah, I’ve heard a few stories. Market ready pigs with contract grown, full barns, 2,400 in a barn. Producers looking at a loss of about $150 each plus $40 to euthanize them. Just a heartbreaking story.

Joel:   Yeah, it is. What’s interesting about agriculture though is how resilient this business is. Certainly, there are older facilities that were nearing end of life that probably won’t repopulate after this, but in general it’s a very resilient industry. The people that—We’ve seen consolidation happen over the years. Not saying there won’t be some additional consolidation through this, but I think the players that are left are in it for the long term. It seems like they found a way to get through in general. So a real credit to agriculture, how this business is adapting. Quite frankly I’m not a huge believer in government intervention, but I think in general our government probably has intervened fairly well with aids in a critical time for both individuals and businesses. Obviously, it’s not a perfect situation. The moneys don’t get necessarily put in the perfect spot, but certainly our stock market and our businesses seem to be doing relatively well considering what we faced.

Mike:   Yeah. Yeah. It’s been impressive how agile the USDA has been with this. You’ve got complexities working through all these things. From my chair, it seems pretty remarkable the agility at which it moves.

Joel:   Yep, yep. I agree. Yep.

Mike:   One of the things that we were faced with with this COVID-19 is for the grain/grow crop producers with corn, soy beans, and wheat, we had to go back in time and try to calculate what storage balances were as of January 8th. So we obviously came up with ways to do that, but it’s the type of thing where we weren’t planning on anything like that. Then all of a sudden there it is. Let’s make this easy for the customer to get to. I’m sure your team probably faced similar things in trying to work through all this as well. Trying to get through it with the least amount of impact on our retail customers.

Joel:   Yep, absolutely.

Mike:   So, yeah, interesting times. Well, consolidation has certainly been a theme throughout our careers in agriculture. Do you see that changing Joel?

Joel:   I think the speed of consolidation is certainly—I don’t think we’re going to see the number of deals, but the ones that are out there are large deals. The system that had four elevators and one feed mill now is the system that has, I don’t know. What do they have? What’s a typical system have? 50 elevators? 40/50?

Mike:   Some are higher than that. 20 locations plus is pretty common now.

Joel:   Yeah. 20 locations plus. Then instead of one feed mill they have a couple three. So the number of consolidations that probably are going to happen won’t be as many, but they’ll be larger. I think you look at some of the efficiencies that some of those groups have put together and some of those changes, probably a little bit more consolidation is probably going to happen, especially with some of the economic pressures in the business today.

Mike:   You know one of the things you mentioned earlier was the supply team disruption. Do you think there will be any—what shall I call them? —niche players or sort of smaller businesses that decide to get into this market to maybe work a little bit more closely with local producers and have maybe local processing facilities? Maybe buy some assets that might be viewed as sort of out of date, but leverage them to create more of a local play on protein?

Joel:   Well, you had me until you said buy the assets that appear to be out of date. So the out of date assets really haven’t proved to work very well. So I think certainly you see niche players and—I mean you see in the grain market with organic products now becoming somewhat more mainstream. So I think from what I’ve seen from an integration if you will to some niche markets, the ones that are most successful actually are doing those with probably new assets or relatively new assets rather than refurbishing old.

Mike:   Okay.

Joel:   In general I mean.

Mike:   Yeah. So there might be some interesting green field startups as a result of this. Producers might band together and do some of their own things I would suspect.

Joel:   Yeah. If you think about some of the producer co-ops in probably the 90s that kind of jumped up in Minnesota. They seemed to struggle with some of the times of consolidation. It would seem like there’s some of those kinds of things that there’s space for with some of the niche stuff that’s happening in the market. But at the same time you have companies like Costco, right, who are owning birds and owning feed mills and further integrating deeper into their system. So you also have to look at what’s happening in the retail space and where that ends up is another interesting change in our business.

Mike:   Yep, yep. Do you foresee more pressure on making sure that the product is traceable all the way from the farm to the fork?  From the inputs through the animals to the shelves?

Joel:   Yeah. I think in our business, certainly in the past in our supply chain we’ve talked about ingredients, right? So corn, soybean, meal. I think we’re going to go more and more to talking about nutrients. So how do we optimize at the nutrient level and sell nutrients rather than ingredients. So that just puts additional pressure on data. So which supplier is supplying what nutrient density today? How do I get that to my animal at the right stage and life in their diet? I don’t know if that’s so much a traceability from consumer perspective, but it’s really about optimizing that whole life cycle of the animal is kind of what we see.

Mike:   Sounds cool.

Joel:   So you take a silo of corn, right. Optimizing that back to the field gets kind of expensive, right? You’ve been thinking about that probably for 15 years, right?

Mike:   Yeah. Well, we have methods of doing it. Yep.

Joel:   So in our world it’s really about testing the nutrients that are coming out today and optimizing that to the animal’s life cycle and getting that nutrient density right in the feed.

Mike:   Okay. So as you look forward, what excites you about being in this industry providing solutions that help optimize or deoptimize recipes for animals, livestock?

Joel:   Well, we really are in the food business, right? I mean agriculture’s really about feeding people. If you look at any of the trends on population and land availability, it’s just a pretty exciting world to live in where you’re going to have to optimize this whole process for—I don’t know what numbers you’re seeing Mike but a lot more people with B at the end. Several billion more people. Sure there’s some parts of the world like Africa where there is some land that can be brought into production that’s not in production, but in general we’re going to have to feed those people off the current or less footprint than we currently have today. So that’s a pretty exciting place. Technology’s going to be the forefront of that, and we get to participate in a pretty noble cause if you think about it.

Mike:   Yeah, I agree. I concur with that as well. So if you were just to roll the clock back again and think about graduating from South Dakota State University and looking back and standing on the graduation platform there looking to where you’re at now, what would you say would be one of the largest surprises that you wouldn’t have foreseen back then? That’s kind of looking back is like wow, that is wild. I didn’t anticipate that in the ag space.

Joel:   So you’ve got to remember when I was on that stage, we were using punch cards. I guess that you would have to—Some of your listeners would have to get a dictionary out or have to go back and Google what a punch card is, right? So it’s really hard to imagine how far this technology has come. You think about—I still remember my first experiencing the GPS pinpoint a location, and now that’s just something that my kids take for granted. So it’s pretty exciting to see how far the technology has come. I grew up on a far where 100 bushels an acre was a successful year, and now that’s a crop failure. Financially that’s a crop failure. So you look at how this production agriculture has fed a lot of people with less resources, less people, and they have really embraced technology. It’s pretty amazing.

Mike:   Yeah. Yeah, I could of not have predicted that. We used to do papers in a computer lab. You probably had this thing. We had this Wang system, right, where you write your paper on this word processor basically. It was a network situation. Well, now there’s far more power in my iPhone than could have ever been dreamed at that point.

Joel:   If you think back, I think Bill Gates once said when they first came out with the 10 megabyte hard drive, nobody would ever need more storage than that. It was either 10 or 20 megabytes. Now my iPhone is 128 gigabytes and I’m wasting most of that space with something.

Mike:   Yep, yep. Yeah, it’s crazy. Well, good. Well, is there anything else you’d like to mention to our listening audience today before I let you go and get back to your normal job?

Joel:   No, I just think as a business I’ve been working since probably ’98 with our companies have collaborated to help customers. I appreciate the approach of let’s help customers, even sometimes if it feels like it could have been a competitive situation. Whatever is best for the customer, let’s make that happen. I’ve appreciated the ability to do that with your group and your people for years. I would expect that I don’t see anything changing in the future. So thank you for this opportunity and the chance to cooperate. It’s competition cooperating. It’s an interesting world. Really as long as we’re helping customers help customers and serve consumers, there’s a place for us in this interesting world of agriculture.

Mike:   Yep, I agree. Well, again it’s a pleasure having you on this episode Joel. Thanks for your relationship with Greenstone and our different product lines. I think we’ve built some pretty cool together, and hopefully we get to do that going forward.

Joel:   Enjoy your time in Minnesota.

Mike:   Well thank you very much. Early summer in Minnesota’s usually pretty good. I haven’t seen a mosquito yet.

Joel:   Oh you haven’t looked pretty hard. You’ll find them.

Mike:   Well I just landed last night. So.

Joel:   They’re there. Anyways, good talking to you Mike.

Mike:   Alright. Thank you Joel.

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