Outstanding in the Field Podcast

Summary:

Listen in as host Mike Terning spends time with Kirk Bonniwell, Senior Managing Director of Hrvyst, a business line of R.J. O’Brien’s commercial agriculture division. Learn what led Kirk to R.J. O’Brien, the oldest and largest independent futures brokerage firm in the U.S., and what led his team to develop Hrvyst and ultimately connect with Team Greenstone.

What you will learn in this episode:

  • The background and history of R.J. O’Brien
  • What led them to create Hrvyst, an automated hedging application
  • Why working with Greenstone’s AGRIS and MyGrower to bring full connectivity to the hedging process made sense

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Transcription:

Mike:   Hello, welcome to another episode of Outstanding in the Field, a podcast by Greenstone Systems. My name is Mike Terning. I am the host, and today I am excited to introduce a guest who I’ve known for about a year. His name is Kirk Bonniwell. Kirk, could you please introduce yourself to our listening audience today?

Kirk:   You bet. Well, thank you Mike. I’m excited to be on the podcast. This is my first podcast. So I’m nervous and excited all at the same time. I’m senior managing director of Harvest. This is a new business line spun out of R.J. O’Brien’s commercial ag division, which I had been running since I guess late 2012. R.J. O’Brien, as many people in the ag industry know, is a family run hundred-year-old brokerage that really got its roots in ag. I would say that that is probably one of the commodities that extinguishes us the most is in our agricultural presence. Everything from grains and oil seeds to cattle and other livestock.

Mike:   Okay, great. So Kirk, today I’m in central Minnesota. I’m about 50 miles west of Minneapolis. I’m sitting in a vehicle because two reasons. Number one, my parents don’t have broadband internet at home. My parents don’t even have a smart phone believe it or not. So I’m parked on a hill here in Wright County, Minnesota overlooking farm ground that’s been planted and sun shining. Pretty nice day. It’s probably about 55 degrees. Nice wind. Where are you at?

Kirk:    I’m coming to you from my home in La Grange, Illinois. La Grange is a suburb just outside of Chicago. We’ve been working remotely as a team I guess since mid-part of March like many other companies out there.

Mike:   Yep, so are we. Mid-March is when we closed our office. So yeah. Well, Kirk let’s talk a little bit about where you came from. Where’d you grow up and how’d you make your way to RJO?

Kirk:   Sure. Well, that’s a long story. I will try to make it brief. I’m a Midwest kid. I was born in Omaha, Nebraska and spent most of my life in Omaha and some suburbs of Des Moines, Iowa. I went to the University of Iowa where I entered the business college and eventually got a degree in accounting. I don’t know that I ever really wanted to be an accountant, but it was a good job and would offer a career with a solid company. So that’s kind of where I started. My first job out of school was with Price Waterhouse Cooper. So I worked in the Silicon Valley office and was really there for a good junk of the tech boom in the late 90s. Then my wife and I decided in 2003 that we wanted to come back to the Midwest and start a family and did that. I joined R.J. O’Brien in 2007.

Mike:   Okay, great. So you made it through the dot bomb era in Silicon Valley. That was quite an experience.

Kirk:   Yeah, that was quite an experience. I mean—I can tell you. So my wife and I got married pretty young. We dated in college and got married right after college. So we were both working in San Jose at the time, and I was in the audit and transaction services at PwC. That was when anybody that had dot com in their name was going public. So I’ll be honest. The first probably two or three years of our marriage we barely saw each other with all of the work that was going on out there during those days. It was totally crazy. The energy was absolutely infectious. The fact that you’re seeing young people out there starting companies and bringing products to market that were really changing how people did a lot of things, quite frankly. It was kind of intoxicating. I don’t think that that energy and that excitement around technology ever really left me. So funny that I had to come all the way back to Chicago and work for a hundred-year-old brokerage company to fully immerse myself in technology, but that’s how it worked out for me.

Mike:   Okay, alright. So you said 2007 you joined RJO. What attracted you to R.J. O’Brien?

Kirk:   Well a couple things. So first, our CEO who is still our CEO today was the former CFO and eventually went on to be Chief Operating Officer and has been CEO, I guess, for the better part of 20 years. He’s a really dynamic and compelling guy. When I met Gerry I just really clicked right away. The fact that he had come up through the accounting ranks like I had and had moved over onto the business side was exciting. He’s a guy that really gives us a lot of flexibility and autonomy to explore different business initiatives. The opportunity to have that level of autonomy was pretty exciting for a young kid.

Mike:   Great, super. I don’t know if I ever mentioned to you that I guess we have two common degrees. I was an accounting major as well. My wife went to the University of Iowa, believe it or not. Got her master’s in music there.

Kirk:   No kidding?

Mike:   Yep.

Kirk:   Well, small world. Mike, what attracted you to the accounting world?

Mike:   Similar to what you said. Kind of left college with a skill that could be put into a job right away. I did four years of public accounting with at the time was McGladrey & Pullen, now is RSM in Davenport, Iowa.

Kirk:   Oh, no kidding?

Mike:   Yeah. That’s where I cut my teeth. While we were there, we married young too. My wife finished her senior year of college at Augustana College in Rock Island, Illinois then took a year off, worked, and then went to University of Iowa. Got her masters there while I was working 60 to 70-hour weeks as you’re familiar with.

Kirk:   Oh yeah. That’s right.

Mike:   So anyways. That’s interesting. Well, as I mentioned we’ve known each other for about a year. I think you saw some things happening in the industry that caused you to reach out to us. What were you seeing at the time? What trends were you beginning to see? You mentioned you have lots of autonomy to explore business opportunities within the R.J. O’Brien family. So share with the audience what sort of trends you were beginning to see take place and shape.

Kirk:  Well, yeah sure. So let me take a little bit of a step back and I’ll kind of lay a little bit of the landscape here. What a lot of people don’t know if that RJO has been building and licensing technology for decades actually. Technology that we develop is typically stuff that we use for our own internal purposes that we then white label and will license to banks and other brokerages so that they can get the same functions and automation that is important to us as an independent in building a scalable brokerage business. Honestly when I took over the commercial grain business and we went around to elevators and cooperative customers who had been our partners for years, you could sit behind some of the merchandisers and kind of watch them do their job. You saw how manual some of the processes are and how disconnected the systems are that they have to cobble together to run their business. With that, the concept of one-touch straight through processing where you have multiple systems connected together is not a very novel concept in the financial services world, but it’s certainly important to us being able to survive in today’s world and build a scalable business. We thought, gosh. We’d really like to take some of the core technology that we have at RJO and see if we can augment it and extend it into the ag world. So that’s really how Hrvyst got it’s start. At the time, we were really just looking to build an automated hedging application, but now we’re working with you guys on connectivity. We see more broad scale connectivity as being an important concept for the ag markets in the future.

Mike:   Well, fantastic. Yeah. So for all the experience that you’ve had, seeing companies take flight with changing the way that others do business with some of the tools they use and such. You saw that opportunity in the grain trading space and here we are.

Kirk:   Yeah, absolutely. I think that we always have to push ourselves to look for new ways to add value to our customers. You guys do a great job of that. What we’re doing with Hrvyst I think is a natural extension to services that we provide to our customer base on the brokerage side. We recognize that for this to be a scalable line of business, it really has to be broker agnostic and give our customers the opportunity to work with whatever broker they choose.

Mike:   Okay. They don’t have to use RJO exclusively for the brokerage services.

Kirk:   They do not. They do not. After the MF global crisis in 2012, I think everybody for the most part understands that it’s good risk management to have more than one broker. So the idea of trying to use technology to create a captive audience was probably going to be misplaced a little bit.

Mike:   Okay. Well, so it was about a year ago that we met for the first time, Kirk, and you were seeing certain trends that you mentioned a little bit there. Why don’t you share with the audience what prompted you to reach out to Greenstone Systems and our AGRIS team specifically?

Kirk:   Sure, absolutely. I wanted to reach out to you and your team because we recognized that we can’t do it all well. We don’t think that that’s a good business model for us. There are areas where we feel that we can add value, but we need partners who can handle other elements of the transaction. The things that you’re doing with MyGrower and the ideas of connecting Hrvyst to AGRIS so that transactions can flow seamlessly to the Future’s Exchange, from the Hrvyst platform into AGRIS, from AGRIS into Hrvyst, that interconnectivity is what I believe that the market really needs. As we went out—you and I—and did road shows and asked the market for feedback to validate that, I think we got pretty overwhelmingly positive feedback from the market that that is where they want things to go. The idea that I have to touch transactions multiple times and reconcile systems and manage errors because of duplicative manual interfaces, that felt like something that we could solve together. That’s what we’re doing.

Mike:  Yeah. Well, we just pushed out a press release earlier this morning as a matter of fact. We announced the relationship we have together on the integration between the systems you just mentioned. So why don’t you just kind of integrate in your mind your vision of what it means for a farmer, what it means for a merchandiser or a grain originator, and what it means for someone in the back office dealing with contracts coming into their ERP system, their AGRIS system?

Kirk:   Absolutely. So let’s start with the farmer. Everything starts with the farmer. The ability for the farmer to have a real time view into their account or accounts with their elevator or cooperative is, like that’s the table stake now that the market has generally accepted. So then what that mobile platform does for the elevator and the cooperative is that it really allows that mobile platform to expand the origination team’s reach. It really becomes an integral part of their origination strategy. So by giving the farmer’s an opportunity to see their positions, to look at current bids and market prices and then execute offers on that mobile platform, that allows them to implement a more structured and systematic grain marketing plan which the industry frankly really needs. The farmers really need that. The fact that they can self-service more—Time will show, but I think that that’s going to be a popular venue for bushel origination.

Mike:   Yeah, certainly. You also mentioned too then the merchandisers, they can see and have a view of what’s going on with the offers that have been made. Your rule engine in Harvest can manage those then—those offers—to either expiration or execution, correct?

Kirk:   Yeah, absolutely. So as a merchandiser it’s looking at that offer deck. They can execute a wide range of transactions and quickly update bids. When they update a bid, all of those flat price offers that are affected by that bid change, they’re automatically cancelled and replaced in the market. There’s no manual intervention there. So it takes away that execution risk for the elevator. They can update bids across their whole organization in really a couple of minutes. That allows the merchandisers to be more proactive in managing their bids so they’re not overpaying for grain and they can bring in more bushels when they need them. Harvest also has a functionality that will allow them to look at their offer deck. If they’re loading up a train, they can grab up offers that are within a certain level of the market and sweep those offers and bring in the bushels. Again, everything on the hedging side is taken care of. Then, of course, as those contracts fill, they immediately update AGRIS. The contract is created, the DPR is updated, and they get a real-time view of what their flat price risk is for the organization. So from that standpoint, collecting these various elements is really important for up to the minute management of their positions.

Mike:   Yeah. I think that’s a pretty nice summation. That’s what customers were telling us when we started with the tour that we did last year about this potential project. They wanted all of the dots connected. They wanted a loop that would start with the farmer or a merchandiser entering an agreement with the grower via the Harvest platform and then it just all flows all the way from Harvest into AGRIS. The contracts come out of AGRIS, flow to the farmer so the farmer can see them and see the tickets that are being applied to the contracts and the settlements and all of that. So it’s been fun to see our teams work together on this project. There’s been a lot of collaboration and cooperation as we’ve launched the project and are deep into testing right now. What’s been your view of the project thus far Kirk?

Kirk: Well, we were of course very excited to work with you guys. Also, quite frankly, somewhat nervous. Nervous in the sense that getting the teams to work together. Would they be willing on both sides to collaborate? That ego wouldn’t get in the way. I’ve got to tell you. The DNA of your team and ours, it’s so similar. Very customer focused, very collaborative, willing to listen to each other and bounce ideas off of one another. When in doubt, bring customers into it and get their feedback. It’s been a great process. Yeah. Really excited to see this come to life. It’s been a lot of work for our development teams, but the product that our customers are going to see is something that I think we’re all going to be very proud of.

Mike:   Yes. Yeah, I would agree. Now, earlier you said too that your company R.J. O’Brien wasn’t going to try to do everything well and admitted that they couldn’t do all things to the exceptional level that they want. Quite frankly on the Greenstone side, we admitted the same thing. We do have a platform that allows merchandisers and originators to get the contracts in very quickly. It’s mobile and all of that. Then we started into the offer management side and auto hedging and realized there’s no way we’re going to be best in class in this space. It made a lot of sense for us to partner with the R.J. O’Brien team on this integration. So we’re excited about what it’s going to bring in terms of value of automating this stuff to our mutual clients. So we too are very excited about it. So yeah. As we kind of wrap up here Kirk, is there anything else you’d like to mention to the audience as we kind of think of things going forward?

Kirk:   Well, I don’t know. I think these are really challenging times. They were challenging times before we were dealing with the COVID pandemic and it’s more challenging now. Giving the employees tools and customers tools to where they can safely do their job and interact with customers and customers can interact with companies and do that from safer locations, I think, it’s important to everybody. I think what we’re doing together goes a long way to enabling our customers to do that. What you’re doing with MyGrower then, by extension, enables the farmer to do more remotely. So I think that that is one of the benefits of the technology for lots of reasons. I can’t even imagine going through what we’re going through now ten years ago when connectivity wasn’t what it is today. For some of our customers who still don’t have the level of connectivity that they would like and would maximize their efficiency during this work from home time, this is definitely something that I think can benefit those teams.

Mike:   Yep.

Kirk:   And those companies.

Mike:   Certainly, certainly. Well, super. Kirk, I really want to thank you for not only being a guest today on our podcast but also the great partnership that we’ve been enjoying here as we’ve launched this project and are bringing it to market. I really appreciate the values that you and your RJO team hold up in doing business. It’s been a real pleasure working with you and we look forward to continuing that as we go forward.

Kirk:   I appreciate it Mike. The feeling is mutual. Yeah, I look forward to being able to get back together one of these days in person soon.

Mike:   Yes. Yeah, I agree. It will be nice to meet again. Hopefully sooner than later.

Kirk:   Yeah. That’s right. That’s right.

Mike:   Well, alright Kirk. Thank you very much again for your time. I wish you and your team continued safety and health as we move through this. Looking forward to collaborating with you more as we go forward and release this to the market and meet with customers on it.

Kirk:   I appreciate that Mike. Same to you. Thanks.

Mike:   Alright. Take care. Bye.

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