Name: How Climate and Trade Wars Are Affecting the Heartland
Uploaded: 2019-10-22
Duration: 19 min 8 s
Description: Land O’ Lakes’ Beth Ford and Caterpillar’s Denise Johnson discuss.

So let's get right to it here. So, lambda lakes is a farmer owned Co Op .>> Yeah. It's an extremely challenging time for farmers. I think farmer medium income is negative at this point. Yeah, I think the average was $ 43, 000 for the median is minus 1500. So everybody's living on loans, have been for multiple years. It is a challenging environment and this year, especially, has been, frankly, has been devastating for many because of the flooding. The weather has been unbelievably challenging. Many farmers didn't get planted and right now, if they did, we're starting on to a hard frost. In the upper Midwest. And so the yields, if even if they got planted, won't be good, and that's on the grain side. And then on the dairy side, it's been five years where they've been losing money. And so This is the first year I just started to see milk price pop up a little bit, where a couple of them are actually going to make money and that's great cuz they've been living on their balance sheets. So it's extreme weather one factor. What are some of the other issues at play? Well, I always get the question of trade. Certainly that's not been helpful. And that volatility means that a farmer doesn't know when to pull the contract what to hedge, and then you can understand how to invest. So soy beans have been shipping to China for the last number of years. And this year, and really the last two years this has been part of the trade war, the tariff issues. So that has been devastating for many bean growers. And then n the dairy side it's been the disruption with US MCA. The Mexico is the largest stereo market for export and exports are critical for again the most productive farmers in the world the American farmer. So you seem to view though your role as not just improving the business but really improving the communities where these farmers live why is that so important. You know we are member owned so we touch half the harvested acres 25 % of the farmers in America With our federated model. The realities, I thought one of the most profound things one of the board members said when they named me CEO, and they said Beth, please do something to change this narrative. Please make sure that you leverage this moment to do something bigger. And I thought, that's a great challenge. So I've spent a lot of my time before my predecessor was focused on that grand challenge of feeding a growing world population ten billion people by 2015. We have to almost double food production in that time. I decided to pivot into push back into rural America. Because we are seeing just devastation in rural America as people stop and say, it's the trade, or it's farming. but understand if they don't make money, the towns around them have no investment. We have, what is it 24 million people in America that don't have access to technology, to broadband, 19 million are in rural America. There's a shortage of 40, 000 Doctors in rural America, 78 % of the counties in America that index has food and secure are in rural America. These kids are being driven to Mcdonalds or Dairy Queen parking lots to finish their homework. There's an opioid crisis, three of four farmers or farm workers have been directly impacted by the opioid crisis. So I've been pushing back and trying to invest my time on addressing challenges, which I think fundamentally means that we have to get investment in technology in these communities, otherwise entrepreneurs aren't going to be there. So I focus a lot of my work on broadband access and pushing policy and Around broadband and these [ UNKNOWN ]. Right. So Denise for you, you took on yoru current role of [ UNKNOWN ] dream at a similarly challenged time. I think the business I don't know, all time well for you. First, why did you take the job then and walk us through what was happening. > Sure. So I took over as Group President in 2016 so we definitely were at a low point In the cycles and you know, Caterpillar serves not only customers in mining markets but also in construction and energy and transportation. So at that point, certainly the opportunity came with where the job came open and I had a pretty steep background in. Engineering and manufacturing and just had the opportunity. Two decades at GM. At GM, that's correct. And so I had the opportunity to take the role and it was really a time where we needed to do some major restructuring of the business. And so we had to take a lot of cost out and I had a good background in doing that. So it was a great opportunity for me. To really take the business to the next level, decide what we needed to invest on for the future and what we needed to cut and sometimes during those difficult times, the best decision you can make is what you're gonna choose not to do versus what you're gonna choose to do. So, we had to make some really difficult decisions had to cut a lot of things. But it really ended up working out and the the business has improved dramatically. We've really taken our cost structure and flattened it out and been able to grow sales and as a result are in a much better position now than we were in 2016. So how did going through that painful period, change the company and also change those communities where you operate Yeah, I mean, we, you know, during 2016, we also had to transition of our CEO. And so during that time, we really took a step back to look at the strategy of the company and decide what we wanted to focus on. And, you know, we're in a cyclical business, so really trying to focus on what areas. Can we grow that are less cyclical, so that we can really create momentum and grow the company overall. And so moving towards a services business is really what we wanted to do. And we've really chosen to take that on head on and double our services, overall sales. So that's been pivotal in kind of our whole trajectory of where we wanted to go with the business and I think looking at Taking that chance, a step back, is oftentimes really important, as you start to really navigate the business, moving forward, and we chose to do that. The services side, that's one of the things that we're trying to figure out. Cuz again, in our model, we probably have 4, 000 to 5, 000 retail Outlets in rural communities. And so the question is in addition to solving some of the problems, and normally those are servicing farmers with crop protection items or things like that. The question is can we use those platforms to solve bigger problems in those communities. That's what we're looking on including the technology access or fresh food delivery cuz places they don't have fresh food deliveries anymore. The maternity desert, so when we set up little clinics, we're gonna look at all of those things to expand the utilization of that rural footprint in a different way and a services model that I think will have a direct ability to impact some of these challenges because there's just no services in these communities. Right, and you've talked a lot about how we need to start listening To the voices in the heartland and sort of the shared destiny between urban and rural communities. Why are we missing that connection? When I speak in urban areas about this the optimistic side me says people come up to me and said we just didn't know We just didn't know. And unfortunately, this kind of fraught, political environment makes us seem like this is a red blue discussion and it just isn't. We do have a shared destiny between the urban and the rural areas. And the rural communities need investment and they are the ones growing our food and the thing is, they don't wanna move to the coast. They want to be in their towns. They want a vibrant economy, they want the same thing all of us want education for their children, they want healthcare access they want, they want investment. So why are we Why are we focused on this shared destiny because I think people forget To me, it's a food security issue, it's a national security issue because we have one of the most efficient cost- effective food supplies in the world. And if we don't invest, these towns are rolling up. Three farmers a day are going out of business in Wisconsin dairy farmers. I mean that's a heritage dairy [ UNKNOWN ] three a day. And if you go out in the country, it's painful. I mean, it is painful. And as I always say when we're not getting back on the wagon and resettling the land for goodness sake, I mean, we've got to invest now and make sure that we have vibrant economies. And so I talked about the shared destiny because there is a shared destiny. And when I talk about that I'm encouraged because people say I just didn't know and how can I help? We're trying to have a convening of unusual constituents so, you know, Jamie Diamond from JP Morgan or, you know, Doug McMillan from Walmart or other major business leaders. And people in urban areas who will advocate on behalf of rural communities as well. Because it can't ba an either [ UNKNOWN ] It has to a both end. And I'd like to bring other voices in that are unusual not in, are really focused on inner city investment and I keep saying well America is the new inner city, we should be very clear about that, and that is what is happening, and so we have to get investment immediately. So Denise, your business is very international or are you seeing some of these conversations happen to you and some of the communities where you operate? Absolutely. I mean I think right now, it's a very uncertain time. There's a lot happening in the world as far as investment for The future but a lot of businesses are really uncertain about making those investments. And so they're taking a pause and really making a decision on what to do and what not to do. And as a result there definitely is a wall and just a feeling of uncertainty around the world. And I think that really has impacted a lot of end businesses, especially in the industrial space. Right. So talk a little bit about that. How do you manage through uncertainty, right? Because if Business is good or bad, it's probably easier to make decisions than when you have no idea what's gonna happen. Yeah, I think it's really interesting as you think about uncertainity and I think as we navigate through the biggest piece of advice that I give is to be as transparent as possible. As you are talking to your employees or you are talking to customers It's being open and honest about what's happening in the environment, how that's impacting the business. And then also, not only being transparent but also being very clear about what your intentions are. And where you're going for the future is is also important. So what you're going to do, what you're not going to do and how you how you communicate, that becomes really important. And I'll tell you it so tough because right now, even before we had these, this difficult cycle, agriculture in general couldn't attract talent. So talent. I'd say everybody in the room would say, Jeez, what's your biggest challenge is attracting the right players. And now it's especially difficult and I keep saying, Jeez, my observation is a lot of these things. People that came in to start working in the sector, were doing it when everything was bright and shiny, and everything was up and right. And they have not been through a down cycle. So this transparency is so important, but also do it being realistically or pragmatically optimistic. To get them enthusiastic about solving these problems and that life Is full of challenges, and that is part of the journey. But it's very difficult. Sometimes we keep everybody positive. And I think I spent a lot of my time have lunch with Beth, or breakfast with Beth. We're trying to encourage the team to get out in the playing field, they're saying, the game is underway And you need to be out there and it doesn't mean that we're not gonna take some hit, so that's gonna be okay. And I think having people see through, I mean you're in a down cycle but you will be back in an up cycle. So it will end, it's a matter of time and you can make it through. That resilience becomes really important. To be so young that you didn't have to see a down cycle. [ LAUGH ] [ LAUGH ] I remember that. But it does seem like for both of you, you are trying to figure out how to change the business so it is not such a boom and bust cycle and part of that feels like that is services are a big piece. What else are you doing to try to make sure it is not, you don't see such extreme ups and downs. But for me I keep talking to my team about driving variability in our course structure because we have a cyclical business as well, maybe not as heavy on infrastructure as you. But trying to drive and make sure that everything is variable as possible, is critically important to us. And then changing, as I said, the service model Is a focus but frankly, we have to innovate. We have a unique platform we really are farmer and we go right from the farm all the way to the retail shelf different businesses. So innovation is so critical and what we spend a lot of time on an investment in is insight analytics Technology, the things that will drive a different product portfolio or a different services portfolio and you have to have analytics for that. So we are kind of moving pretty aggressively into commercialization of different businesses driven by insights. Okay. And without a doubt it's investing in technology and if you look at where really the future is going and really trying to Skate to the puck, so to speak. It's investing in things that you know the customers are going to value and will help them be more productive with your equipment than they can be with a competitor's. And so the only way you can do that is to really invest in technology and look for The opportunity to be smarter about how you're doing that investment. And keeping your cost structure as well as possible is also the key .>> You know what's been fancinating, I've been watching your sector but what I hear on this. The services side is we're no longer an equipment manufacturer, we are a service provider. And I was thinking about this in agriculture, everybody has kind of equipment envy, they're asset envy. This guy's got a new combine, he's got whatever. So I'm wondering how you're gonna make a move on that direction because everybody's so attached To their stuff. And then the reality is, what you're saying is, I'll have a combine there for you, or a plant, or whatever whenever you need it. And here's the service, and we'll take care of that. Right, well, and you take the risk out of the Out of the equation when you do that, right? So you're kind of guaranteeing a certain level of productivity with a piece of equipment, whether you're going to license that for a period of time or whether they're going to keep that equipment. And you're going to help them be more productive. So there's lots of business model changes that you can reflect on and be able to participate in that you never could before. Yeah, all I'm saying is they'd like to, of course. Take their picture next to their big tractor. [ LAUGH ] They still like to [ CROSSTALK ] This is mine, you know. This is Bessy. [ LAUGH ] So I'm always wondering whether we can pull away from that and really go to something that is really more variable which I think is probably, definitely, the way to go. Yeah. I wanna see if there's questions in the room. But first I just wanna go back to Denise and ask Are you seeing this talent problem as well? Is this an issue in your sector or? Yeah, definitely, you know, I think the job market is so tight right now. And so to be able to hire the best and brightest and even, even to get individuals into some of our factories, we are really struggling with attracting talent. And so it is an interesting time even though the economy is uncertain and there's a lot of uncertainty in the business environment. On the talent end of things, we are definitely seeing a pinch. So we're having to market ourselves Really give people a reason to want to join Caterpillar as a company and be more compelling than we've ever been before. And to be attractive, especially in the female market is very challenging because you know, a lot of females don't identify themselves as being a part of a construction or mining company, provider. So. It's changing that value product position? Cuz it's fun. It is, it's a lot of fun, it is. [ LAUGH ] Cool. Do we have any questions in the room? No, okay. Well I want to actually touch on something you both have in common, which is that you're both from rural farming communities. I'm really curious how that's impacted What's your careers and your leadership? I don't know, Beth, if you want to start with that? Well, for me, I come from a very large family in the middle of eight children. And you star, I think the values that you get in smaller towns, the ability to kind of be free and kind of do your own thing now. With my own children, it feels everything is plan. Everything is kind of cultured and edited and here we're gonna make this playdate and things like that. And I think that there's a freedom and some lessons that you learn when you're in a smaller community that I think have been central to the way I think about working hard and trying to achieve different things. I'm lucky, I really feel that way. Even though I probably grew up as a lower middle class, working class family, I think it's a gift. I always concern myself about myself as a parent, because my job is to say no, right? That wasn't my mom's job. My mom was job was to say we don't have it. So you're gonna have to figure that out. My job is say, you can't have it, and that's just a different challenge. You'll know this, right? Yes, [ LAUGH ] Too. That's fair. No, I totally agree. I think there's huge value in growing up in a community where you don't have everything planned for you. And I remember growing up, and actually walking to school, in kindergarten and first grade, by myself. I didn't have anyone taking me to school And in the summers, in high school, babysitting to be able to have money to buy school clothes. Right. And that was normal. And that teaches you a lot about working hard, about your sense of community, and growing up and helping others. Right. I think that really makes a difference. Right, right So very quickly Beth 30 seconds, what's the outlook for the heartland? For having this conversation in five years what does it look like? I am an optimist, try to be a pragmatic optimist. I'm gonna believe that there's gonna be an aggressive 1930's rural electric Investment in technology in these communities that people are gonna understand the value on the coasts. And that we're gonna make a change, and that these communities will improve their vibrancy and others will move back. We are starting to see that, folks moving back into rural communities and I'm excited about that. Beth, Denise, thank you so much. Thank you. [ APPLAUSE ] [ BLANK_AUDIO ]

How Climate and Trade Wars Are Affecting the Heartland 

Politics

Land O’ Lakes’ Beth Ford and Caterpillar’s Denise Johnson discuss.