Tom Leiting bases many management decisions on a single belief: that his customers will continue to look for value beyond price, providing that value is high.

Leiting is general manager of the $60 million, 82-employee River Valley Cooperative in Walcott, IA. The grain, agronomy, feed manufacturing, seed and energy products company serves 1,200 farmer-owners (and several thousand consumer patrons) in Scott, Cedar, Clinton and Muscatine counties. The current company was formed through the mergers of four area grain, ag supply, feed and petroleum co-ops.

River Valley's producer base includes a few large operations in the 4,000- to 8,000-acre range, but smaller producers who earn off-farm income at Quad Cities industries, such as Deere & Company, are more typical. Many are financially stable, multigeneration farms running from 80 to 1,000 acres where the farmer is employed full-time off the farm, which Leiting sees as an opportunity. “These are important customers. The 80- to 1,000-acre grower might have a tractor and work with a neighbor for planting and harvest, but buy inputs and custom application from us.” Moreover, Leiting says off-farm employment has stabilized the area's farm economy and slowed farm consolidation.

“But as we look at the ag retail environment today, we also see similarities to the mid-'80s, when farmers and ag retailers had to make tough decisions to stay in the black,” notes Leiting. “And price buying is always a reality we have to deal with. Whenever times are tough, you face predatory pricing by companies that don't plan on making long-term commitments to the community,” he says.

Two managers reporting to Leiting are responsible for bringing added-value service to the agronomy division marketing mix. Operations manager Jim Gruenhagen and agronomy and feed sales marketing manager Dale Ford act as liaisons between the co-op's eight CCA-certified consultants, customers and basic crop protection, seed or feed ingredient suppliers. They follow a four-step procedure:

• River Valley agronomy consultants start on the following year's field planning at harvest time, taking weigh wagon samples of the current crop, based on a fee-based grid sampling program.

• Next, agronomy managers meet with consultants to write input packages and programs the co-op will recommend for the next season. Leiting says part of the co-op's inventory control strategy hinges on providing total agronomic packages, down to and including brand names. “For that reason, we don't sell everything that's out there,” he explains. “We currently handle ag chem product lines that, based on our determinations, give the best overall product performance and return value. We see ourselves continuing to narrow down the key providers with whom we want to have long-term relationships.”

• After harvest time weigh wagon samples have been analyzed and product lines to be inventoried have been selected, agronomists meet with customers to write input prescriptions. By midwinter, field-specific fertilizer, crop protection product and seed recommendations have been pinned down, and the consultants sit down with each customer to make sure they're in sync.

• Customer-approved orders are then entered into the co-op's information management system, and by the time spring work starts, a computerized field plan and application regimen are in place for each customer. All facility locations are tied together to minimize errors. “For example, if a farmer is scheduled for a spraying, his consultant can enter the order into the system and direct it to be printed out at any one of our liquid plants, to keep application on time and precise,” says Leiting.

Leiting says grid sampling services, a relatively new offering, have helped sustain customer loyalty. Having concluded that outsourcing would save training and equipment dollars, River Valley contracts with an independent consultant to perform grid sampling and other value-added field analysis, including GEO referencing, tile line mapping and soil compaction ratings.

For the past three years, the co-op has also offered variable-rate application of dry fertilizer in single-product spinner trucks, and last year it added an Ag-Chem Equipment twin-bed airflow unit, allowing simultaneous variable-rate application of two products.

“We're probably behind some retailers in our precision ag offerings,” Leiting admits, “but we wanted to be sure we had the acreage base to justify the investment, and I believe we're there. When we made the decision to offer these services, we had about 30,000 acres committed; I'm more comfortable with the 50,000 acres we have on the books for this year.”

The co-op provides segregated storage for grain identity preservation (IP) programs, while continuing to look for new opportunities. “We've been involved in some high-oil corn,” Leiting says, “but we're continuing to search for a value-added program that will add real dollars to the customer's bottom line. It's a hard search.”

The Internet is another business tool with opportunities — if you can find them, Leiting adds. The River Valley Web page, created three years ago, is under renovation while the co-op decides the best long-term e-strategy. During the rebuilding, customers can continue to log on to the site for current statements, grain contracts and storage inventories.

Leiting thinks now is a good time to sit back and watch the dot.com ag companies. “They're going through price discovery like any new technology does. Someone you thought might be a good e-partner last year may no longer exist. On the other hand, an Internet provider who seemed unaffordable may be offering a much better deal today, and prices are likely to keep dropping.”

A year ago, the co-op manager felt intimidated by e-commerce sites like Xsag.com, which sell directly to producers. “We don't today. We have a stronger belief in our company, its technical skills and ability to physically distribute product to the marketplace for the long term. The challenge is to tie together needed services within a cost structure our customers can afford.”

Want to use this article? Click here for options!
© 2007 Penton Media, Inc.