Amanda Marchesini & Rachel Zimmerman
On Thursday, February 18, the Center for Risk Management Education and Research Student Fellows visited Innovative Livestock Services, Inc. in Manhattan, Kansas. Lee Borck, Chairman of both ILS and the Beef Marketing Group Cooperative, provided dinner and lots of insight into risk management strategies for ILS and his experience in the cattle industry. Lee is a 1970 Kansas State University graduate with a degree in Agricultural Economics, and he has been inducted into the Cattle Feeders Hall of Fame and recognized as a K-State Outstanding Stockman and Kansas Stockman of the Year.
Innovative Livestock Services is a stocker cattle feeding company with feedyards across Kansas and Nebraska that have a capacity of 170,000 head, over 32,500 acres of cropland, and headquarters in Great Bend, Kansas. The Manhattan office is where the risk management portion of the company is located, and we started the evening with a tour. The lower level features a room of desktop computers where employees manage hedged positions, watch live cattle sales, and ensure that every transaction has a corresponding hedge.
A company like ILS that feeds cattle is subject not only to price risk in the cattle market, but also to price risk in inputs’ markets, like the corn that is used for feed. Lee told us that for his company, the most effective way to keep risk properly mitigated is telling the risk management vice president to not worry about the margin calls and only focus on keeping positions hedged. He emphasized the importance of having a strong risk management team and trust between those who make risk management decisions and those who manage the finances of the company.
To cap off the visit at ILS, Lee shared with the Student Fellows the story of how he got to the position that he is at today. Born and raised in Kansas, Lee attended college at Kansas State University. After college, Lee worked for a farm credit association before working for a feedyard in Larned, KS. Lee worked his way up the ranks in the feed yard to become the manager, and he developed partnerships with other feed yards. The partnership, called Beef Marketing Group, helped their group of smaller feed yards compete with larger feed yards. Lee has expanded ILS to be in control of a wide range of things, including a pet food company. ILS continues to be a driving force in agriculture and Lee has been the visionary behind it all.