Leaders of Modern Finance Ep. 18 – Cooperative Finance ft. Fran Swain
On this episode of the Leaders of Modern Finance podcast, host Ken Boyd is joined by Fran Swain, Chief Financial Officer at Central Valley Ag Cooperative.
The Cooperative Structure
Fran has been working in agriculture for several decades. He began at a single-producer operation in Iowa before eventually moving to a regional farm cooperative based in Minneapolis. This experience prepared him well to take over as the CFO for Central Valley Ag Cooperative. Central Valley Ag began almost 100 years ago as a much smaller, local co-op. Over time, this small organization merged with other similar co-ops until it became the sprawling collective that Fran is a part of now.
Agricultural cooperatives are a unique organizational structure. To maximize access to resources, multiple producers will pool their assets together. These agreements can span massive geographic areas. Fran’s organization includes producers from Iowa, Kansas, and Nebraska. Such a structure is of immense value to both the individual farms and the organization as a whole.
The pooling of resources allows smaller farms to have access to assets they otherwise could never acquire on their own. This makes each member of the co-op a more sustainable and profitable business. This, in turn, means each farm can create more value for the collective and the pool of resources can grow further.
On the organizational level, the cooperative structure also affects the board of advisors. To be elected to the board, a member has to themselves be a farmer or producer. Because of this, the executive leadership of the co-op is by definition a part of daily operations. The co-op is in the truest sense made by, of, and for farmers.
The Challenges of Agribusiness
As the CFO of an agricultural co-op, Fran is frequently confronted with a unique set of challenges not often seen in other industries. The most obvious comes from the structure of the co-op itself. While there is a central pool of resources, there are still individual farms with their own needs. In a sense, Fran is managing the finances of several organizations at once. The large scale means that Fran is regularly dealing with huge financial numbers spread across a host of producers. Central Valley Ag processes tens of thousands of invoices a month and is managing hundreds of millions of dollars per year. Such a large volume of activity in the cooperative structure could quickly devolve into a decentralized, incomprehensible mess if not handled properly.
The environment and geography pose an additional challenge to Fran’s industry. Not only is the production output of the agriculture industry directly affected by environmental changes, but customers often view the industry as itself responsible for some of those changes. Fran’s role includes reporting the social and ecological impact of his organization to his customers at their request. Since the land itself can have such an effect on his company’s finances, Fran’s resource analysis also has to include an understanding of land as a resource. This means understanding the relationships between certain geographical locations, how supply chains affect those relationships, how certain locations can produce more than others, and similar metrics.
In responding to these particular obstacles, Fran and his team have to make the most out of the technological assets available to them.
Leveraging Technology
To succeed, Fran has made his agricultural business into a technology business of sorts. To cope with the massive scale and complicated structural challenges, Fran has kept his finger on the pulse of all available technological tools.
To address the most obvious complexity, the co-op structure, Fran has adopted an ERP system that meets his specific needs. Merchant Ag is an ERP designed specifically for use in farmer-owned cooperatives like Central Valley Ag. It allows Fran to take an otherwise disjointed financial system and integrate it into a central platform. This alleviates many of the structural issues inherent in a multi-organizational system. It also helps account for the cyclical nature of the agricultural industry. Unlike other industries, agriculture is dependent on seasonal rhythms. Merchant Ag has these cycles built into its system, tailoring its services to agronomy sales and management.
To manage the complex analytics of land management, Fran has built out a robust IT team. Encompassing over 20 team members, Fran’s IT department allows him to adopt more complex technological systems. Such technologies include systems such as Precision Ag. This, in particular, allows Fran to engage the geographical and supply chain analysis that has become so crucial to his organization’s success.
Sufficient IT infrastructure has not only led to more detailed and accurate analytics, but also more detailed and accurate reporting. By understanding the relationships between geography, supply chain, and productivity, Fran has moved his industry towards better reporting of its impact on the environment. This satisfies his customers’ concerns and adds to the data pool he can work from.
Looking Forward
Fran attributes his success to a forward-thinking mentality. CFOs are often called on to forecast future financial models. But Fran’s version of looking to the horizon is about more than predicting numbers. It’s about creating concrete action steps in response to those predictions. To him, no business can succeed without steady growth. A successful CFO anticipates that growth and implements systems and strategies to account for it.
This mentality can be seen in Fran’s approach during his time with Central Valley Ag. While he started at a much smaller co-op, Fran was prepared for the steadily increasing scale at his current position. He implemented industry-specific technology systems to centralize an otherwise decentralized organization. The increased complexity that came with this growth was then mitigated. By investing in a more comprehensive IT structure and organizing a leadership team that accounted for greater IT needs, Fran was able to leverage the latest technologies as well as any Big Tech business.
For Fran, this forward-thinking mentality and resourcefulness in the face of future modeling should not be a unique trait among CFOs. His approach to the CFO position has proved successful and applicable, not only in agribusiness but across all industries.
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