CHS Visits CRMER Student Fellows

CHS FoundationOn Monday, February 16th the Risk Management Fellowship played host to Patrick Hessini, Vice President of Transportation and Distribution for CHS, Inc. Hessini, a K-State graduate of Industrial Manufacturing and Systems Engineering, oversees 600 employees for the international commodity cooperative based out of the Minneapolis area. With over 11,000 employees across 24 countries and customers in 65 countries, CHS deals in the production and distribution of energy, grains, and foods on a global scale. Specifically, Hessini and the Risk Management Fellows discussed the business structure of CHS and how the company manages the risk and volatility associated with supply chains.

CHS takes pride in its cooperative status; with farmers, ranchers, and local co-ops making up the company’s owners and customers. A major goal of CHS is to help grow the businesses of their customers. CHS itself is comprised of 14 business units from agriculture and energy, to finance and transportation that collaborate to better accomplish the objectives of the company and its customers. This business structure also helps spread the company’s risk over multiple industries and economic environments. CHS also uses forward contracting and futures strategies, along with a fiscally conservative business model to handle its global risk.

CHS Speaker

Hessini explained that transportation and distribution contributes a great deal of volatility and risk for continued business success. Designing logistical plans to cope with infrastructure issues pose a major challenge for ensuring timely and efficient movement of goods. He went on to add that U.S. manufacturing growth; changes in international trade balance and routes; and political issues have had a major impact on transportation demand. A few examples of current events that have had, and will have, a major impact on the dynamics of the distribution industry include the Ukraine-Russia crisis; the updating of the Panama Canal; China’s slowing economic growth; and labor disputes in west coast ports. All of these events have altered the cost, demand, or efficiency of transportation routes enough for distribution companies like CHS to reevaluate how goods are moved from place to place.

To deal with this ever-changing environment Hessini described how important it is for CHS to forecast before high demand seasons; analyze all elements of the supply chain; and create options with business partnerships before they’re needed. Furthermore, CHS implements what-if analysis and scenario planning to develop strategies to deal with potential challenges. CHS also utilizes optimization models to determine the best solution to these challenges. The Transportation and Distribution department of CHS is comparable to a “supply chain control tower,” concludes Hessini.

I’m sure I speak for all of the Risk Management Fellows when I say that it was a pleasure to hear how a K-State graduate manages such a major component of a leading company like CHS, Inc. We all look forward to meeting with CHS again.

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Chris Haverkamp–Paragon Investments

This past Friday, February 13th, the student fellows of CRMER had the privilege to spend a small portion of the afternoon with a hardworking and insightful man—Chris Haverkamp founder of Paragon Investments. He is a K-State alumnus with a feed science degree. As founder of Paragon Investments he has built a very successful and multi-faceted company in the investment and risk management arena. We are all thankful that he has taken time out of his demanding schedule to visit with us.

Chris Haverkamp, began the event by educating the CRMER group on his personal methods for success, including his risk management techniques. Located in Silver Lake, Kansas Paragon Investment’s is driven by the purpose to teach their customers by equipping them in the area of risk management and providing them with valued suggestions to make decisions as a business or producer.

Chris Haverkamp shared with us a little bit about himself and how he made his first trade at the age of sixteen which compelled him to pursue a career in a field that included his passion for agriculture, financing, and business. His first experience with commodities at a commission based firm largely affected the way he would pursue business in the future. Realizing his desire was to consult, Chris Haverkamp founded Paragon through the lens of what he “did not want to do.” The premise behind this was generated by the previous experiences he had been a part of in trading. He felt that commodities and futures operated with a stigma, or expressed by the analogy, “used car salesman” feel. From there, Haverkamp started Paragon by strengthening the standards of business through consulting and building personal relationship that would prove his desire was to genuinely be a friend to his customers. As a company, they operate to do all the record keeping for a business, equip them with tools of the market, and strive to help customers become good investors.

A couple of the most compelling lessons Haverkamp stressed to the CRMER students was the importance of hard work, doing the right thing for his customers, and maintaining good ethics within his business. If one is to be successful, he stated, “you must set customers expectation right the first time…if not it will be futile to your success.” He emphasized the importance of focusing on the customer’s wellbeing instead of being solely driven by profit, and in turn, he has found that a company’s success will follow.

As the afternoon wrapped up, we ended with several intriguing question as Chris shared with us his management strategies as he operates over many different locations. He revealed that as a business you need to prove your keeping up, utilize today’s technology, remain personally connected (through visits and handshakes), and keep everything on record to control risk within the company. This was an insightful way of thinking as CRMER students look to pursue business opportunities in the future.

Overall, our time was extremely valuable as we listened and learned about Paragon and the foundation it was created on. Thank you, Christ Haverkamp, for your willingness and generosity toward the Risk Management Center. For us Student Fellows, we are tremendously thankful for people and companies like this that give us an opportunity to learn and grow while we are still in the classroom.

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Lee Borck-An Innovative Cattleman

On Thursday, January 29 the CRMER group had the opportunity to meet with Lee Borck one of the giants within the livestock industry. Lee is the Chairman and founder of Innovative Livestock Services, a company that has grown into a diversified and well structured corporation. We sat down with Lee and listened to his insight on risk management and how he began working in the livestock industry.

As the evening began Lee spoke about his experience working as a credit agent and how he became involved with Ward Feeders marking his first partnership. One of the things he emphasized about the success of his endeavors was the quality of people he surrounded himself with, not completely due to any special gift he had. He emphasized the importance of how having highly skilled, intelligent, and driven partners allowed him to grow and expand ILS into industries as foreign to him as organic pet food. Time and time again during our conversation he stressed the importance of human capital and how having partners can bring in fresh perspectives to a company.

Over the period of two hours the group received an informal audience with him allowing us the opportunity to interact and ask questions. After Thursday night its easy see that Lee is much more than meets the eyes. The humility and sincerity that Lee conveyed truly showed his character and had everyone engaged in the conversation.  Throughout the evening he took time to answer any and all questions that we had for him, ranging from current environmental projects, such as the phosphorus reduction machine that refines cattle waste into a uniform fertilizer source; to his opinion of how the recent change in daily trading limits for Feeder cattle and Live cattle contracts impacts the industry as whole.

Lee also gave the group a first person account of how he put together the Beef Marketing Group and developed a new and innovative relationship with the meat processing companies. Ward Feeders along with 9 other feedlots formed the BMG to use their collective bargaining strength to increase the selling price of their cattle. Traditionally, large feeder operations in western Kansas were able to market their larger cattle numbers and get an additional 25 cents per hundred weights. This left small feeders like Ward Feeders out in the rain, in a manner of speaking. Lee saw an opportunity to change the entire structure of the Kansas beef market and he did, but he didn’t stop there. He brokered a system for forward contracting his cattle allowing him to focus on one of the true plagues in the cattle industry. RISK! The cattle industry was notorious for its boom and bust cycles throughout the 80s and 90s creating and destroying countless fortunes. Lee took his ability to contract his customers’ cattle and combined that with the futures markets and implemented a strict hedging program minimizing his risk.  Today risk management has become a cornerstone of Lee’s operation.

The evening concluded with Lee stressing the importance of Kansas State University and the role that it has played in his life. He explained his motives for giving back to the university as an alumni and spoke to us about the importance of family. His love for K-State and his love for helping others was evident in the way that he spoke about family. It’s not often in this world that a man as successful as Lee, someone who has literally built a company from the ground up, believes that the greatest achievements in his life have been a direct result of giving back to others.

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CRMER Student Fellows Attend the 2015 Van Trump Winter Conference

Last week, CRMER student fellows Lacey Ward and Mario Ortez had the opportunity to attend the 2015 Van Trump Winter Conference at the Madrid Theater in Kansas City, MO. The conference covered a variety of topics including the overall direction of agricultural markets, an energy outlook, transportation systems, big data in agriculture, and weather. This blog encompasses some of the main thoughts presented by the speakers.

The conference was opened by Kevin Van Trump, CEO and founder of Farm Direction and the Van Trump Report—entities both focused on improving farmer’s knowledge about the markets and marketing strategies. Kevin covered a host of topics that are influencing the markets’ directions these days, both domestically and globally. Among the most pressing topics was the decrease in oil prices, which is believed to increase consumer spending in other goods, but could instead increase savings which might not boost the economy as it is conceived. The Fed’s actions regarding the interest rates are most definitely a topic of discussion this year as it is believed that Ms. Janet Yellen, the Yale-educated economist that is leading the Fed, is going to place the economic outlook at the center of policy making in this regard.

Student fellows, Mario Ortez and Lacey Ward, pictured with former CIA Chief of Counterintelligence, James Olson.

Student fellows, Mario Ortez and Lacey Ward, pictured with former CIA Chief of Counterintelligence, James Olson.

The European Union situation is uncertain. Greece’s elections are coming this year with the socialist candidate proposal of re-negotiating their bailout terms and there is increasing discontent among Germans regarding German’s support not only to Greece, but other weakening economies among the European Unions. Different scenarios have been discussed among the media; some of them speculate that Germany won’t let Greece fail because this would hurt the EU’s economy by decreasing confidence among consumers and for other reasons. But, what is going to happen is not yet known.

The political environment in Russia is raising concerns in the wheat market with Russia being the 4th largest exporter and producer of wheat in the world, according to the USDA (2014). Other major globally-important economic issues include the strengthening U.S dollar, change in demographics, changes in government actions towards social issues, and the decrease in the speed of growth in China’s economy.

Tom Williamson, President of Transportation Consultants Company, shared his perspectives on the U.S infrastructure situation. He emphasized that there is a big need to invest in infrastructure, especially bridges. Ocean freight costs are potentially decreasing in the future due to big investments in the expansion of the Panama Canal and the just-started construction of the Nicaragua Interoceanic Grand Canal, which is expected to allow bigger ships to sail from the Caribbean Sea to the Pacific Ocean.

Joe Jennings, Managing Partner of Jordan River Advisors, shared his knowledge regarding the changes in commodity trading since the beginning of his career when the majority of trading was related to supply and demand. New players have come into the markets, so now commercial hedgers trade with portfolio managers, proprietary trading firms, hedge funds, and market makers. The effects of these new players in the market is widely believed to be beneficial for the markets, given their role in increasing liquidity (get in and out of a position easily), but since 2005 there has been an increase in the demand for speed and a new series of traders that use algorithms has come into play. The presence of noncommercial traders in the markets is believed to have introduced non-fundamental factors that affect movements in prices. We believe that this assessment is debatable, ill-informed trading can come not only from non-commercial trading but from commercial trading too and for every player in the market is on their best interest to have their best assessment of supply and demand to be effective. As a final general advice Mr. Jennings suggested that players understand clearly the time frame of their actions, and not only understand the risk of the exposure, but quantify it.

Following Joe Jennings’ talk, Bill Krueger of Lansing Trade Group, Andy Daniels of Daniels Trading, and Kevin Van Trump joined as an expert panel for conference attendees to ask any questions they had to get the expert’s take on what was going on in the markets.  The first topic of interest was whether they would recommend planting more corn or soybean acres.  Kevin Van Trump made an interesting analogy for farmers saying that they have all their chips on the table when their grain isn’t priced, and when they have the chance to pull back those chips at a profitable level they should.  Other topics that were touched on were frac sand and the impact of lower gas prices on the ethanol industry.  Conference attendees inquired about the feeder cattle industry as well as the future prospects of the European Union.  This part of the conference was interesting because attendees could get an expert opinion on any question they might have involving the agriculture and energy markets.

After an amazing KC-style barbeque lunch, Drew Lerner, President of World Weather, gave a weather outlook for the major commodity-producing parts of the world.  Major points of interest was the size of South America’s crop as well as El Nino (ENSO).  Another interesting point he mentioned is how the weather is determined by the ocean water temperature 300 meters below the surface.  Later in the presentation, Mr. Lerner discussed the upcoming weather conditions for the upcoming planting season in the United States.

Steve Cubbage, President of Prime Meridian and Record Harvest, then took the stage for his presentation entitled “Big Data and What You Need to Know.”  He emphasized the need to make sure that one is getting good data out of his/her yield monitors.  Bad data only yields bad recommendations, and producers can find lost bushels by looking at big data.  Mr. Cubbage emphasized that yield data is a producer’s report card, and you can’t get better unless you measure what you are doing.

The next presentation was by Jeff Dema, President of Grower Services at Farm Link.  Farm Link has collected data from many combines across the United States, and now uses that data to estimate a field’s yield potential based on soil topography, weather conditions, etc.  Producer fields are divided into 150 square feet micro fields, and then the micro fields are benchmarked against the fields where data has been collected.  Subscribers are presented a “gap” map that shows the gap between the actual yield and the yield potential for each of the micro fields.  This presentation showed how important technology is in agriculture today.  Mr. Dema concluded with saying, “Farmers don’t have to adopt new technology.  They just have to compete with those farmers that do.”

At the end of the afternoon, keynote speaker, James Olson, came to the stage.  Mr. Olsen is a former CIA Chief of Counterintelligence.  He and his wife Meredith, worked a dangerous career as spies for the CIA.  Mr. Olson fascinated the audience with a recall of what life was like as a spy on overseas operations.  Later in his presentation, he took the crowd on a “mission” to Russia that left the audience with a feeling of patriotism and gratitude for his service to our country.

Overall, the 2015 Van Trump Winter Conference was an excellent opportunity full of network working and industry insight.   Thank you to Farm Direction for hosting this great event and allowing us to be a part of it and thanks to the Department of Ag Economics here at K-State for their support in making the trip possible. Companies like these allow students to gain valuable real-life experience while they are still in the classroom.

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December 2014 E-Newsletter from the K-State Center for Risk Management Education and Research

View this e-newsletter online.

In addition to the Center update from Ted Schroeder, this e-newsletter includes:

Foundation update from Emilie Fink
Student Fellow spotlight – Gerald Mashange
Student activity update – Kassie Curran
Alumni spotlight – Claire Hilscher
Advisory council spotlight – Ed Prosser

A Center update from Ted Schroeder

An absolutely phenomenal journey are the best words I can think of to describe the development of the Center for Risk Management Education and Research.

What started as an idea to enhance risk management educational opportunities for Kansas State University students three years ago, today has developed into a Center that is becoming recognized as the place to go to find the most talented and best prepared graduates with a broad understanding and appreciation for risk management.

Our first class of student fellows has graduated and launched productive and lucrative career paths. Our second class is finishing this next spring, many having already accepted jobs well in advance of graduation. Our third class of student fellows begins the program in January. Indeed, we are already enjoying the fruits of visionary leadership and valuable investments of industry supporters, the K-State Foundation, academic and administrative leadership, and the student fellows who have taken ownership of the Center to help foster the successes we are enjoying today and will well into the future.

It has been nothing short of amazing to see how everyone involved with the Center from industry leaders and friends, faculty members, university administration, the K-State Foundation, and most importantly, the student fellows, have stepped up to help champion, engage with and support the Center.

The student fellows have been very busy immersed in a wide array of hands-on practical educational experiences including participating in several company visits across the country and numerous guest lectures from risk management experts. Students have been exposed to risk management across a wide array of industries spanning branded food companies, industrial products and energy companies, primary producers and manufacturers, financial institutions, market exchanges, government regulatory agencies, risk consultants, and commodity trading companies. Emphasis has been on learning about how companies with varied risk exposures identify, characterize, measure, pursue, avoid, optimize, and manage risk. As one of our major financial supporters put it, we are “turbo charging” student knowledge in integrated risk management.

Indeed the future of the Center shines brightly. In what started as an agricultural economics, finance, and industrial and manufacturing systems engineering joint initiative, we are now attracting student fellows from majors that span several colleges and academic majors across campus in what is truly a model program for interdisciplinary education.

Thank you for all of your support of our program. Please let me know if we can be of any assistance. We look forward to continuing to work with each of you as we build a world class Center for Risk Management Education and Research.

I wish you all the very best for the Christmas and New Year season!

Ted Schroeder, Director | Center for Risk Management Education and Research | | 785.532.4488

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CHS Foundation supports Risk Management Center

The CHS Foundation, St. Paul, Minnesota, has made a gift of $250,000 to the College of Agriculture at Kansas State University to support the Center for Risk Management Education and Research.

The center engages students and industry partners in innovative education and research, advancing their risk management skills and knowledge. Through undergraduate and graduate education, executive and professional education, and collaborative research, the center actively contributes to facilitating effective risk management practices among new and established professionals alike.

The center is a joint effort of faculty and students from Kansas State University’s colleges of Agriculture, Business Administration, Engineering, and Arts & Sciences. Additional partners from across campus also participate in the center.

CHS Foundation“The CHS Foundation is proud to partner with K-State on the Center for Risk Management Education and Research, which provides elevated, experiential learning opportunities for the next generation of leaders in agriculture, particularly those pursuing careers in risk management,” said William Nelson, president, CHS Foundation, and vice president, CHS Corporate Citizenship. “Our support will help K-State further its efforts in attracting promising new talent into the risk management field and providing enriched educational experiences for students.”

“The success of our center depends on support from organizations such as the CHS Foundation that so generously provide us with resources, time and expertise to enhance our mission of advancing student risk management skills and knowledge,” said Ted Schroeder, university distinguished professor of agricultural economics and director of the center. “We are so thankful for the confidence the CHS Foundation support demonstrates in our program.”

Philanthropic contributions to Kansas State University are coordinated by the Kansas State University Foundation. The foundation staff works with university partners to build lifelong relationships with alumni, friends, faculty, staff and students through involvement and investment in the university.

The CHS Foundation is the major giving entity of CHS Inc., the nation’s leading farmer-owned cooperative and a global energy, grains and foods company. As a part of the CHS stewardship focus, the CHS Foundation is committed to investing in the future of rural America, agriculture and cooperative business through education and leadership development.

Learn more about the Center for Risk Management Education and Research.
Learn more about the CHS Foundation.
Learn more about giving opportunities with the KSU Foundation.
Read the CHS article about this partnership with the center.

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Turning Science into Business, Lessons from Monsanto

On Monday, November 17, 2014 the Student Fellows of the Center for Risk Management  Education and Research had the opportunity to hear from Kevin C. Glenn, Ph.D. a Senior Science Fellow at Monsanto about the role that this company is playing in shaping the agriculture of the future around the globe.

Dr. Glenn’s talk named: “Bringing New Technologies to Agriculture” included different topics ranging from the current global security problem to the detailed process of research and development that Monsanto follows.

Our current agricultural outlook together with the population growth makes it evident that by 2050, 2 billion more people are joining us for dinner. Does that call for a bigger table? Probably more food would be the biggest concern in this context, with a key question being “How do we produce more food with our available land and resources?” Founded more than 100 years ago, St. Louis headquartered, Monsanto has a fascinating history of success that since the 1980s includes leading the research, development and production of genetically engineered crops with global outreach that has ultimately contributed to increase the efficiency in crops production.

Rising population, changing climate, declining arable land per person and changing economies and consumer trends are just some of the factors that motivate Monsanto’s role in our world, as well as scientists working for Monsanto, like Dr. Glenn. In the U.S and in other countries around the world, agriculture has evolved from labor intensive, small farms systems to a more sophisticated, highly productive and mechanized system where the number of farms is decreasing while size is increasing.

The scientific discoveries that create new products  is not a fast or easy process, but we were impressed to hear that in the initial phase of research at Monsanto, less than 1 of every 100 ideas makes it to be a final marketable product, and this process can take more than 10 years. This shows Monsanto’s high level of commitment and its efforts to contribute to the global food security and food safety challenge. One of the interesting topics that caught our attention during the presentation was the historical development of knowledge in the biotechnology area.  It was interesting that many of the discoveries needed for engineering plants was pioneered by European scientists and then brought here to the United States, yet now the European Union is hesitant to cultivate GMO’s for human consumption.

The Fellows at the Center for Risk Management, Education and Research greatly enjoyed and very much appreciate Dr. Glenn’s knowledge and openness to share his experiences with the center. This is surely a step in the right direction of educating the new generations about technology in agriculture.

Dr. Kevin Glenn from Monsanto talks to CRMER students at Waters Hall

Dr. Kevin Glenn from Monsanto talks to CRMER students at Waters Hall

Claire Newman and Mario Ortez

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