Bill Davisson
GROWMARK Annual Meeting
September 5, 2008
"The Best Moments"
For nearly 11,000 athletes representing 205 countries,
August in Beijing was the culmination of dreams come true.
As Olympic team members competed for gold, silver, and
bronze medals, years of practice, commitment, and drive were
expressed in mere moments – moments of excellence for those
athletes.
Who will ever forget the performance of Michael Phelps? He
swam 17 races in eight days—earning eight gold medals. Each
race was a moment of excellence. The collective experience
of witnessing this superhuman feat unfold was a moment of
excellence for all of us.
But the Beijing Olympics also gave light to compelling human
drama – to stories of individuals and teams overcoming
challenges to compete and to succeed. For example, there was
Dara Torres. At age 41, this mother of a two-year-old
daughter swam in the 50 meter freestyle and two relays,
earning three silver medals. She missed Gold in her
individual event by one one-hundredth of a second. But
perhaps more impressive was her display of sportsmanship
before the 50-meter semifinal race when she insisted that
the referee and other competitors hold the race while a
Swedish swimmer who had ripped her swimsuit changed into a
different one. Olympic heroes are made by results – and by
character.
Character and courage were what Natalie Du Toit brought of
South Africa to China. She competed in the 6-mile open swim
event and finished 16th. But what you need to know about
Natalie is that her left leg was removed below the knee
after a motorcycle accident. She didn’t go home with gold –
but she is an Olympic hero.
Bloomington, Illinois, native Christin Wurth-Thomas made her
Olympic debut in Beijing, competing in the women's
1,500-meter run. Christin is the daughter of Mike Wurth, a
former GROWMARK employee and current COUNTRY Financial
employee. Although she didn’t medal in China, it was great
to see a home-town girl achieve her goal of competing in the
Olympics.
All of those stories were of moments of excellence, but how
would you define “the best” moments of the Olympic Games? By
records broken? By challenges overcome? By heroic acts of
sportsmanship? I would suggest the correct answer is: “All
of the Above.”
What is it that makes an Olympic athlete – any one of us –
or this cooperative system -- excellent? Certainly, elite
skills are required. But researchers have found that in
addition to skill, top performers have high degrees of:
discipline and long-term focus; training tolerance, risk
management ability, mental toughness, and the ability to see
and seize opportunity.
Those same attributes apply to our business success!
Those characteristics, combined with our employees’ skills
and our physical assets, work together to yield the fruits
of the GROWMARK System’s efforts.
I’m very pleased to say that our moments of excellence this
past year included financial records, operational and
“behind the scenes” successes, and relationships that
demonstrate the best of the human spirit.
The Best Financial Moments
Chief Financial Officer Jeff Solberg presented the complete
financial report to shareholder representatives earlier this
morning. The highlights from that report are the estimated
results for the fiscal year that ended August 31. Sales are
projected at $6.3 billion. Total after-tax net income is
estimated at $312 million. Patronage refunds of
approximately $121 million will be returned to your member
cooperatives.
Fiscal 2008 surpassed last year’s record sales by $1.8
billion, and income after tax was twice the $150 million
last year.
These are System results, based on all of us working
together. It was an excellent year!
Thank you for your business.
GROWMARK’s Energy Division posted gross income exceeding $100
million for the third year. We received $72 million in
patronage from the National Cooperative Refinery
Association. GROWMARK owns nearly 19 percent of NCRA. The
refinery operation is a strategic investment for the
GROWMARK System, and it is a significant link in our refined
fuels supply chain. NCRA serves our business by supplying
energy products and in returning patronage refunds. That
reinforces the value of cooperative ownership. A special
“thank you” goes to Jim Loving, NCRA’s CEO, and his staff
for those excellent operating results.
It was another record year for Dieselex Gold and propane
sold by GROWMARK.
GROWMARK Lubricants contributed to our System’s success with
FS branded products, as well as the United and Archer
brands, in spite of price volatility never seen before in
this industry. Our ability to blend and store our own
lubricants has offered real and sustained growth in
lubricant sales.
I’m proud of our System’s long-term commitment to marketing
renewable fuels. We have promoted the benefits of homegrown
energy products for more than 30 years, and we believe in
their positive impact on the farm economy and the
environment.
In February, the GROWMARK System was awarded the Eye on
Biodiesel Impact Award from the National Biodiesel Board. We
were honored for our quality assurance program which has set
the industry standard for product performance. We have
earned the reputation as THE most trusted supplier of
biodiesel in the Midwest and beyond, largely because of our
quality standards. We were also recognized for our training,
education and promotional efforts.
“Moments of Excellence” for our Energy business also focused
on adding supply and put-through agreements to enhance our
ability to meet our customers’ needs. In addition, GROWMARK
purchased a refined fuel storage terminal near Petersburg,
Illinois. This facility enables us to store 9 million
gallons of gasoline and burner fuels – plus biodiesel -- as
we move toward BQ9000 status. BQ9000 is the biodiesel
industry’s “Good Housekeeping” seal of approval for
biodiesel production and distribution companies and covers
manufacturing, sampling, testing, blending, storage and
distribution.
In response to members’ needs for efficiency of processes,
procedures, and systems, GROWMARK personnel worked to
automate the transfer of bills of lading and provide
electronic access for members to view product availability
at the various supply points. These changes may sound
simple, but they are important “moments of excellence” that
make life better or easier for our customers – and that is a
top priority.
Farm profitability is heavily vested in seed selection. To
provide sound recommendations for producers into the future,
we are committed to being a reliable supplier of high
quality, high value seed. Seed sales will approach $200
million. With strategic and intense focus on our seed
business over the past four years, we have earned 1.3
million new planted seed acres. That additional business
represents a 55 percent increase in acres planted with our
System-supported brands.
The value of seed to a farmer’s operation continues to
increase -- and the complexity of recommending and
delivering the right traits in the right hybrids and the
right varieties -- to individual customers -- is also
increasing. Our marketing campaign, “Farming Smart” is more
than a marketing campaign for the Seed Division; it truly
summarizes our approach to improving our customers’
profitability.
Among the moments of excellence for the Seed Division was
the release of eight new elite FS hybrids. Dr. Dennis
Garzonio, seed corn product manger, worked diligently to
secure the latest genetics and traits into our FS Seed
brand, and right now there are more than 500 side-by-side
plots that will prove our performance advantage over our
competitors. Results of these trials, enhanced supply plans,
and new marketing programs will position us well to continue
our growth in sales of FS Seed products.
Our Agronomy Division achieved record sales and record
earnings for plant food and crop protection products in
2008.
One of the ongoing moments of excellence for the Agronomy
Division is the development of a proactive facility plan to
ensure that plant food products are located where you need
them – when you need them. The strategic location of
fertilizer facilities is essential to maximize our
logistical advantage. We plan to fill any gaps with
facilities that have rail and/or water access. As this plan
is put into action, it will help to improve service to your
organizations. The Agronomy Division is focused on meeting
and exceeding the needs of members and other customers.
To support local sales efforts, our Agronomy Services team
provides scientific expertise that enables our System to
respond to individual farmer’s concerns and field issues. In
every product area and support division, we deliver
solutions through high caliber people. One example is Dr.
Jeff Bunting who tests crop protection products and who
helped develop what is arguably the best crop protection
handbook in the industry. Other examples are the plant food
Market Alerts prepared by Joe Dillier and his staff that
assist member cooperatives in making purchase decisions.
GROWMARK -- and committed member cooperatives -- continue to
work together as a task force to approach crop protection
product manufacturers as a single wholesale and retail
market force; and the value of this approach has been
proven. The Crop Protection Task Force is in its third year,
and we will continue to expand our efforts.
This is the third consecutive year of profitability for the
Facility Planning and Supply Division.
In June, GROWMARK purchased Waterloo Service Company of
Waterloo, Iowa. This facility will soon serve as a second
Tank and Truck Center -- building fuel and LP-gas trucks,
performing Department of Transportation inspections, and
selling facility equipment. Adding a second tank and truck
center for the System will improve our ability to serve
members in Iowa and grow non-member business.
This acquisition also enables the Energy Division to
relocate a bulk lubricant distribution facility and provides
a fuel distribution outlet for AgVantage FS. This purchase
was another moment of excellence, as we quickly acted upon
the opportunity and partnered among divisions and subsidiary
businesses for the best interests of all.
In December of 2007, the ADM/GROWMARK agreement was mutually
terminated. This led to the adoption of a new strategic plan
for the Grain Division. Strategies for Grain are centered on
five key areas:
First, we have re-defined the services available to grain
member cooperatives with emphasis on local profitability,
risk management tools, market opportunities, and the
building of grain facilities where the need and opportunity
exist.
Second is the development of programs to create an expanded
pool of member cooperative personnel who want to specialize
in the grain business. Initiatives include a Grain Associate
Manager Training Program and a college intern program for
grain member cooperatives.
The third area of focus is creating marketing alliances that
benefit both member cooperatives and GROWMARK, such as the
Central States Enterprises rail agreements.
Fourth is joint investment by GROWMARK and member
cooperatives where projects require more capital than a
member can handle alone. Total Grain Marketing, Ag View
Grain, and WESTERN GRAIN MARKETING are examples of such
ventures.
WESTERN GRAIN MARKETING is building a state-of-the-art
shuttle train loader next to the Burlington Northern Santa
Fe Railroad near Adair, Illinois. The facility will load
60-80 trains each year with more than 25 million bushels of
corn going to Hereford, Texas. The facility will have 4.6
million bushels of grain storage and rapid dumping and load
out capacity. Area farmers will benefit with improved grain
prices.
The fifth area of focus for the Grain Division is risk
management. GROWMARK and Illinois Farm Bureau have worked
together to strengthen the service capabilities of AgriVisor.
This risk management subsidiary has created a complete menu
of marketing products and services for farmers that reduce
risk and help improve profitability. These include new grain
contracts that give farmers upside price potential while
protecting the downside.
GROWMARK has increased its ownership in Decision
Commodities, a computerized farmer grain marketing
organization that assists producers in taking the emotion
out of pricing grain contracts through a sophisticated
software program. Decision Commodities has been selected as
the exclusive marketing arm for AgriVisor products.
This past year could be summarized by our members as one of
“extraordinary need for capital.” Nearly every product we
sell had record high prices, and margin calls skyrocketed.
Members had to increase operating loans 2-3 times previous
levels. Record high corn and soybean prices caused grain
managers to revise their standard merchandising procedures,
and MID-CO COMMODITIES worked to assist them in managing the
capital demands.
MID-CO is an integral part of the GROWMARK Grain Division’s
strategy to help grain member cooperatives plan for the
future and optimize income. MID-CO had another record income
year. The grain merchandising industry is highly
competitive, and MID-CO continues to meet and exceed the
demands of the large commercial elevator and tailor services
to rural elevators that are the critical to Midwest
agriculture.
MID-CO is focused on strategies that enable grain
merchandisers to manage interest costs, utilize storage
space, and maximize the use of futures and options contracts
in order to improve profitability. Advisors help
merchandisers move from one crop to the next, and branch
office operations help farmers merchandise their production
for maximum returns.
Across the board, GROWMARK’s retail operations contributed
strongly to our overall success in 2008.
GROWMARK FS and SEEDWAY in the eastern U.S. both had record
results. SEEDWAY celebrated its 45th anniversary this year.
Our retail operations in the Midwest had outstanding results
as well. AgVantage FS, New Century FS, STAR Energy, and
Illini FS all report excellent earnings.
Our 2008 financial results are truly outstanding. They are
excellent. But, I know there are significant opportunities
and challenges ahead of us. Like an athlete over the span of
his or her career, our business will encounter head winds
and tail winds – times when everything “clicks” and times
when producing another personal best is a real struggle.
What doesn’t change are the disciplines in place.
The Best Operational Moments
The disciplines behind the results are not often celebrated
in the same way the bottom line is – but it’s the “behind
the scenes” operational disciplines that are largely
responsible for our results
For GROWMARK, these disciplines include a commitment to
fiscal conservatism. We live in volatile times. Many
economic factors are good for agriculture right now, but we
must prepare and adapt to changes in markets, changes in
weather, changes in the political climate across the world,
and a host of other variables. We adjust to changing
conditions by staying informed and by remaining committed to
always improving efficiency. During times like these,
GROWMARK’s support of member cooperative profitability
through price risk management expertise delivers real value.
We are committed to securing agreements that ensure our
members and customers have a reliable supply of product when
they need it. This is a challenging task, but an important
one -- the same way it was when our cooperative System was
founded. Our ability to deliver product to your local
outlets in a timely and efficient manner is critical to the
success of our businesses. GROWMARK’s Logistics Division
delivered more than 100,000 truckloads for member
cooperatives and their customers. That equates to one load
being delivered every five minutes throughout the year.
Logistics also embarked on a project to streamline
GROWMARK’s supply chains, with a goal of minimizing System
costs from vendor to farm gate. Though we are very early in
the process, logistics costs were reduced by more than $1
million in the first year.
Also enhancing efficiency and effectiveness is the
conversion of member cooperatives’ “back office” software to
Microsoft Dynamics GP. That process has taken time and
effort, but there are significant benefits to this computer
system which has been highly customized to serve the
business needs of your organizations. It provides needed
flexibility in accessing information essential to making
effective management decisions. The Microsoft platform upon
which it was designed helps ensure that we can stay current
as technology changes – and technology is always changing!
Another important behind-the-scenes effort was a broader,
more cohesive approach to strategic planning. Vice President
Jim Hoyt led 10 GROWMARK Divisions through a common planning
process that identified strategic issues facing each work
group. Then they defined actions to address the issues. The
divisions also shared their plans with each other to ensure
as much integration and synergy as possible. This discipline
will continue to pay dividends for the GROWMARK System.
The Best Relational Moments
No athlete gets to the medal platform alone. Family,
coaches, trainers, and other supporters all contribute to
the effort. In much the same way, our business success is
based on relationships. And in addition to financial and
operational “moments of excellence” in 2008, we experienced
a number of significant moments of relational excellence.
Over the winter, GROWMARK hosted 11 member cooperative
boards of directors and management teams at the corporate
office as a face-to-face opportunity to share information
about the strategic direction of our organizations and to
share questions and concerns. I came away from those
meetings with a strong sense of the value of working
together and some central themes about the needs your member
cooperatives have. For instance, the efficient placement of
fertilizer terminals for the system, expanding services that
help you manage risk, and helping you find and retain the
personnel you need for the future. And I also clearly heard
the need for continued financial return to your cooperatives
based on the business you do with GROWMARK.
The sharing of information face-to-face helps us help each
other -- focusing on existing and emerging needs. We plan to
host more member boards and management teams next winter. I
look forward to that. Those meetings were moments of
excellence for me – and I believe for our System.
Another one of the best moments of the year in terms of
relationships came with the graduation of the first class of
GROWMARK’s Leadership Education and Development program. The
LEAD class of 2008 was made up of 16 high-caliber employees
who invested much time and effort advancing their business
and leadership skills to prepare for additional
responsibility within the GROWMARK System.
My staff and I spent a good deal of time participating in
seminars with these individuals, and it is personally
gratifying for me to see the depth of dedication,
engagement, and ability within this organization. I know the
participants built strong relationships with each other over
their 18-month experience – and those relationships will
result in greater collaboration as their careers grow. They
are a sharp, young group with a strong personal desire to
succeed and to see the GROWMARK System succeed. This class,
and the classes that will follow them, holds great promise
for the future of GROWMARK. A new class will be selected
soon. I’m excited to keep the process going.
The performance and commitment of the employees of the
GROWMARK System are highlights of each year. Moments of
excellence take place every day as individual and team
efforts are made to support customers – to innovate – to add
efficiency – to serve.
For me, the best moments in terms of relationships take
place among the people of our System. The employees and
directors of the GROWMARK System are committed to each other
and to building better, stronger relationships for the
future. That is a huge competitive advantage.
In addition, we have built strong and strategic
relationships with vendors, alliance partners, industry
associations, Farm Bureau, FFA , 4-H and many, many other
organizations with which we share common goals. We will
continue to invest in those relationships and seek new ones.
All of the best moments of 2008 – financial, operational, and
relational – support our vision to be the best agricultural
cooperative system in North America. Achieving and
maintaining that status requires strategic direction for our
efforts; and our direction is clear:
First, we will foster a strong member system. If you,
our members, succeed, GROWMARK will succeed, and we want
to earn all of your business.
Second, we will grow and expand from our core
businesses.
Third, we will expand our marketing territory by
seeking new customers beyond our core geography.
Fourth, we will foster vertical integration
opportunities which create value for the GROWMARK
System.
And fifth, we will remain active in pursuing
acquisitions, mergers, or business alliances.
Those objectives provide the “game plan” for our actions.
Michael Phelps was a true hero of the recent Olympic Games.
He did it all. He delivered results. He focused on the
disciplines essential for “operational” and logistical
advantage. And, he was supported by deep and strong
relationships with family and friends that made the
discipline worthwhile and the results worth the sacrifice.
His example is a portrait of what we strive to be: The best.
The best is measured in results, in the “behind the scenes”
efforts, and in the quality of relationships. Michael Phelps
is the best. So is the GROWMARK System.
According to Dr. Jacques Rogge, who serves as president of
the International Olympic Committee, the cornerstones of the
Olympic movement are values, partnership, and legacy. I
think those cornerstones support our business as well. Our
values are articulated in aims and objectives that have
changed little throughout our history. Our partnership focus
within this cooperative system is what gives us our
strength. And our legacy is all about leaving the next
generation a business that is better, faster, and stronger
than the one we inherited.
By these standards, it has been a gold medal year for the
GROWMARK System.
Thank you.
