Ag Innovator
FarmEquip.org
Official Magazine Of The Farm Equipment Manufacturers Association SPRING 2014
2014 Farm Bill Forecast: Which Way Will the Wind Blow? New Minimum Wage for Government Contractors Paying It Forward Pays Off
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SPRIN G Volume 4 | Issue 2
AGI
2014
Contents
Page 4
Executive Vice President’s Message Representing All Members’ Interests
Page 6
Guest Writer Series How Might the Ethanol Debate Affect the Equipment Industry?
p. 10
Page 10
Legal Focus Obama’s Plan B Raises Minimum Wage for Government Contractors
Page 14
Feature Story 2014 Farm Bill Forecast: Which Way Will the Wind Blow?
p. 14
Page 18
Industry Focus Paying It Forward Pays Off
A Wisconsin manufacturer’s workforce development efforts benefit an entire region
p. 18
Page 24
Feature Story Spring Conference: Wrapping Up 2014 and Ramping Up for 2015 Spring 2014 | FarmEquip.org
3
AGI
Executive Vice President’s Message
Association Board Of Directors
REPRESENTING ALL MEMBERS’ INTERESTS
President: Marc McConnell Art’s Way Manufacturing Co. 1st Vice President: Mike Kloster Worksaver Inc. 2nd Vice President: Richard Kirby Kirby Manufacturing Inc. Treasurer: Robert Atkinson W & A Manufacturing Co. Secretary: Paul Jeffrey MacDon, Inc. Ex Officio: Andrew Cummings T. G. Schmeiser Company, Inc. Tony Bakker Monosem Inc. Nick Jensen Thurston Mfg. Co./Blu-Jet Products, Circle R Side Donny Jones Belltec Industries, Inc. Mike Lessiter Farm Equipment/Ag Equipment Intelligence Stanley McFarlane McFarlane Manufacturing Co., Inc. Arlon Rahn A&R Marketing Ron Roglis HCC, Inc. Bob Sonntag Rem Enterprises Inc. Tom Taylor Alamo Group Jacqueline Vassar Vassar Manufacturing Company Ag Innovator Staff Executive Vice President Vernon Schmidt Publications Editor Marlene Weeks Ag Innovator, a quarterly publication, is published, edited & copyrighted by the Farm Equipment Manufacturers Association to serve and promote the interests of its members who bring choice, value & innovation to the world’s farmers. Unsolicited manuscripts & photographs are welcome. The editor reserves the right to edit all items. Address all mail to Ag Innovator, 1000 Executive Parkway, Suite 100, St. Louis, MO 63141-6369 & emails to AgInnovator@FarmEquip.org. Submit all advertising inquires for future publications to Ads@FarmEquip.org.
4
O
ur readers know that the Association takes pride in representing a membership diverse in size and in nature. Our annual dues categories start at $285 (for startups with sales under $500,000) and cover seven levels, topping out with companies whose sales exceed $12 million. We value them and do our best to represent them all equally. Yes, at times we face situations in which we cannot advance the interests of all of our members on a particular issue. Over the last few months, Wisconsin’s legislation dealing with the movement of farm equipment on public roads became one of those issues tough for us to balance. It was clear from the start that certain types of large hauling equipment had been targeted not only by the state’s department of transportation, but, more importantly, also by the Wisconsin Towns Association. As is often the case, the more meetings the “study group” held, the more subgroups and committees formed, and the larger their net was cast, until they regularly and boldly spoke of taking their case against large ag equipment to a regional or national level. No longer was the focus solely on overloaded hauling equipment; the use of the federal bridge formula in their calculations also caught up single-axle tillage and planting equipment. Using the threat of aggressive enforcement of state laws already on the books but rarely enforced on farm equipment, sponsors made the case that something had to be passed and their “compromise” worked out by the study group was the
Farm Equipment Manufacturers Association | Spring 2014
only option. They insisted that all ag groups line up and support the bill. The question for our Association was what impact could we have on this unfolding mess. We decided to work to limit the immediate damage, carve as much equipment as possible out of the targeted class, and continue to work with a coalition of like-minded industry friends for better solutions. We achieved some of those goals. Wisconsin’s Gov. Walker signed a bill that represents an important first step in providing higher weight limits for farm equipment, making it, in some cases, easier to legally move equipment from field to field. During the first year of implementation, we encourage state and local governments to focus their efforts on educating farmers and other agribusinesses regarding the new weight limits and other regulations. As with any new law, this is a work in progress, and we expect to address any issues that arise in legislation next session. These efforts will continue to require Association resources, but if we are to ultimately prevail, we need the involvement of all our members, from startups with limited sales and resources to our largest members. Let’s all join the fight for a fair and level playing field in all states and provinces. AGI
Vernon Schmidt Executive Vice President Vernon@FarmEquip.org
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Guest Writer Series
AGI
MY POINT OF VIEW:
HOW MIGHT THE ETHANOL DEBATE AFFECT THE EQUIPMENT INDUSTRY? By Paul Kindinger
S
ome may recall when, in the 1970’s, gasoline was rationed and OPEC rose to international prominence. The member countries took control of their domestic petroleum industries and influenced crude oil pricing on world markets. Twice, oil prices rose steeply in a volatile market, triggered first by the Arab oil embargo in 1973 and then by the outbreak of the Iranian Revolution in 1979. Our country clamored for answers. Politicians strugged with domestic economic issues and began to examine the need for a comprehensive energy policy. Consumers were eligible to fill their vehicles’ gas tanks on either odd or even days of the month, depending on their license plate numbers, and waited in long lines at gas stations to do so. During this era, older technology was updated to make fuel from readily available “renewable” sources, such as corn. First dubbed “gasahol,” the product now is better known as “ethanol.”
Adapting to Ethanol At first, it was difficult for this new “alternative” fuel source to gain a solid foothold. Although Americans were tired of waiting in lines for gas pumps and feeling manipulated by oil producers in far-away places, they initially resisted. Auto companies refused to cover ethanol-blended gasoline under their warranties. I personally engaged in discussions with auto companies to persuade them to alter their warranties and change some vehicles’ parts to accommodate ethanol. Major oil companies, refiners and blenders also found fault with ethanol. For instance, they claimed the net energy balance was more favorable for crude oil/gasoline conversion versus corn/ethanol production, and that they would have to build expensive blending facilities. Thus, for many years, a “blender’s tax credit” encouraged the use of alternative energy (ethanol) in our domestic fuel supply. Many people viewed this as a subsidy for agriculture, when in fact it was a tax credit that applied to handlers and processors. The credit was later reduced, and then eliminated altogether. Even politicians were leery, claiming that ethanol would reduce the gas tax collections critical for road construction, maintenance and other transportation issues. Overall, it was a tough uphill battle for acceptance. Slowly but surely, the consuming public, many environmentalists, politicians and others began to accept ethanol as a home-grown alternative to crude oil from OPEC. It also became obvious that our national security interests were threatened by armed conflicts in regions from which we imported oil. 6
Farm Equipment Manufacturers Association | Spring 2014
Renewable Fuel Standard Thus, in 2005, President George W. Bush signed into law the federal Renewable Fuel Standard (RFS) under the Energy Policy Act of 2005. Later, the Energy Independence and Security Act of 2007 (EISA) expanded the RFS. The law’s original intent was to enhance U.S. energy security by mandating the replacement of some imported petroleum with domestically produced ethanol. Congress also sought to drive investment in the development and production of cellulosic and advanced biofuels that yield significantly less carbon pollution than conventional ethanol, gasoline and diesel fuels. The RFS program requires renewable fuel to be blended into motor-vehicle fuels in increasing amounts each year. The 2005 law, referred to as RFS1, required blending 4 billion gallons of ethanol in 2006 and increasing that amount to 7.5 billion gallons in 2012. The 2007 RFS, or RFS2, raised the annual blending obligations for 2008 through 2012 and also extended the annual renewable fuel requirements through 2022. RFS2 requires the production of 36 billion gallons of renewable fuel annually by 2022, while setting an annual cap of 15 billion gallons of corn ethanol starting in 2015. The remaining 21 billion gallons are slated to come from advanced and cellulosic biofuels. To ensure RFS compliance, gasoline and diesel-fuel refiners must annually purchase a set amount of renewable fuels.
Taking Root Since 2007, corn ethanol production has dou-
bled, keeping pace with the rising annual blending obligations set in RFS2 and making the United States the world’s No. 1 corn ethanol producer. In 2012, corn ethanol accounted for nearly 7% of U.S. gasoline consumption. However, due to technology scaleup difficulties and the economic downturn in 2008, advanced and cellulosic biofuels have not ramped up as quickly as expected. Commercial production of cellulosic biofuel began in 2012 but delivered just 20,000 gallons, compared to the RFS2 target of 500 million gallons. However, by June 30, 2014, actual production is expected to reach 6 million gallons. The Environmental Protection Agency (EPA) estimates that, by 2022, renewable fuels will replace 13.6 billion gallons of gasoline and diesel consumption, saving motorists nearly $12 billion each year. According to the Center for American Progress, corn prices in the U.S. have increased since implementation of RFS and are expected to exceed business-as-usual projections in 2022. Some contend that higher corn prices raise animal feed costs and dramatically affect overall food costs. One estimate of the annual increase in food cost due to the RFS is $10 per person by 2022.
Guest Writer Writer Series Series Guest
AGI AGI
Continued from page 6
Environmental Impact A recent investigation by the Associated Press also suggests that the corn-ethanol mandate has taken a heavy environmental toll in the Midwest, as millions of acres of grasslands have been converted to cropland to make ethanol. The AP report found that this shift in land use has led to more soil erosion, greater use of fertilizers that run off into rivers and streams, and the release of carbon dioxide from newly plowed fields—all of which can reduce the purported environmental advantages that corn ethanol has over conventional gasoline. Because of these concerns, many environmental groups, such as Friends of the Earth and the Clean Air Task Force, are calling for reform or repeal of the RFS. But according to a peer-reviewed study by Argonne National Laboratory, corn ethanol, on average, lowers greenhouse gas emissions by 34% compared to conventional gasoline. The study took into account corn ethanol’s full production lifecycle, including fertilizer production, diesel used for farming, the transport of corn to the ethanol plant, the energy used to produce ethanol at the plant, the transport of ethanol to the market, and land-use changes.
The Blend Wall So, what does the future hold for
corn-based ethanol? For one thing, the sluggish production of advanced, competing biofuels is set to change within the next
8
Farm Equipment Manufacturers Association | Spring 2014
few years. In July 2013, INEOS Bio announced that its BioEnergy Center in Vero Beach, FL, began producing cellulosic ethanol at commercial scale. Also, last year, DuPont broke ground on its cellulosic ethanol facility in Nevada, IA, which will be among the largest commercial-scale cellulosic bio-refineries in the world when it is completed in late 2014. The U.S. Energy Information Administration (EIA) estimated that new cellulosic-biofuel-plant capacity could reach 250 million gallons by as early as 2015. However, the expected progress could be undermined by what is known as “the blend wall” and the policy uncertainty that it could create. The blend wall is the maximum amount of ethanol that can feasibly be blended with each gallon of gasoline. This limit is currently set at 10% ethanol—known as E10—because higher blends, such as 15% ethanol, or E15, are more corrosive and not approved for use in most existing fuel infrastructures or in cars built before 2001. When the RFS was created, gasoline consumption was forecast to continue rising each year, and the EIA predicted in its 2007 Annual Energy Outlook that the blend wall would not be an issue until 2015. But the decline in gasoline consumption means that refiners must purchase more biofuels than the total supply of gasoline can absorb at concentrations of just 10% ethanol. With the blend wall deadline fast approaching, the ethanol industry has pushed for the expansion of fuel pumps that can handle higher blends of ethanol, including 85% Continued on page 26
Legal Focus
AGI
OBAMA’S PLAN B RAISES MINIMUM WAGE FOR GOVERNMENT CONTRACTORS By Joseph G. Schmitt & David A. James
P
resident Obama and the Democrats in Congress have been largely unsuccessful in passing workplace legislation throughout his two terms. As a result, the President JOSEPH G. SCHMITT recently bypassed DAVID A. JAMES Congress altogether with Executive Orders directed at government contractors— that is, companies that do business with the federal government, including all executive agencies. For example, in 2009, President Obama signed an Executive Order requiring contractors to display a poster advising employees of their labor right, such as the right to form a union. Notably, the National Labor Relations Board attempted to require the same poster for non-contractors, but was rebuffed by courts. Most recently, President Obama and Democrats introduced the Fair Minimum Wage Act of 2013 into Congress. Following the pattern, the bill received little traction and appears dead. Turning to plan B, on February 14, 2014, President Obama signed an Executive Order raising the minimum wage for contractor employees. Beginning on Jan. 1, 2015, the minimum wage for employees of federal contractors will rise to $10.10 from $7.25. On Jan. 1, 2016 and annually thereafter, the minimum wage for contractor employees will increase in step with the consumer price index for labor. The new minimum wage applies to both prime contractors and downstream subcontractors—companies providing services or supplies to the federal government indirectly through another organization. For example, imagine the federal government contracts with Company A to purchase machinery. Company B manufacturers the motors that Company B inserts into its machinery. The minimum wage Executive Order applies to both Company A as a prime contractor and Company B as a subcontractor. 10
Farm Equipment Manufacturers Association | Spring 2014
The President’s Executive Order raises the minimum wage not only for primary contractors, but also for downstream subcontractors. The minimum wage Executive Order does not apply to preexisting government contracts; only contracts executed after Jan. 1, 2015, require employers to pay the heightened minimum wage. Thus, companies contracting with the federal government should consider completing contracts (or re-negotiating expiring contracts) in 2014 to avoid a labor hit in 2015 and beyond. To that end, depending on how impactful the new minimum wage is, employers might consider entering into contracts longer than those they have negotiated historically. In March 2014, President Obama announced that he asked the Department of Labor to revise its regulations on the whitecollar exemptions to the Fair Labor Standards Act. These exemptions form the basis of employers’ right to pay certain managerial, administrative and professional employees on a salary basis, as opposed to an hourly basis with mandatory overtime. Certainly the President’s objective is to reduce the scope of the exemptions and push many workers from exempt to non-exempt, notwithstanding the fact that nearly all exempt employees prefer a salary over an hourly wage, even with overtime available. While not as blatant as the minimum wage Executive Order, revisiting and ultimately narrowing the white-collar exemptions represents another effort to bypass Congress in making sweeping changes to labor law. Employers will want to stay abreast of various regulatory changes and Executive Orders through the remainder of President Obama’s second term. We can expect additional movement on this front as his time in the Oval Office winds down. AGI Joseph G. Schmitt & David A. James are shareholders in the labor and employment group at Nilan Johnson Lewis in Minneapolis, Minnesota. Members are entitled to thirty minutes of free legal advice, per issue, with either attorney, as a membership benefit. For more information go to FarmEquip.org.
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Feature Story
AGI
2014 FARM BILL FORECAST: WHICH WAY WILL THE WIND BLOW? By Matthew D. Ernst, Independent Agriculture Analyst
F
arm Bills affect how farmers feel. After the 2008 farm bill passed, an Iowa State University survey found that 70% of Iowa farmers worried about how the legislation’s changes would impact their operation. So how will farmers react to the Agricultural Act of 2014 (Farm Bill)—especially when it comes MATTHEW ERNST to new equipment spending? While it’s impossible to pinpoint the nearly 1000-page law’s future impact on farmers’ outlooks, here are some possible implications of the farm act on farmer attitudes regarding four sectors: row crops, dairy, specialty crops, and livestock/poultry.
Row Crops This farm bill is a game-changer for row crops, shifting the crop safety net from government payments to crop insurance. The bill allocates almost twice as much for spending on crop insurance programs as for mandatory commodity program spending during the next decade. “I would say this is the most significant change in the design of commodity program support since Freedom to Farm in 1996,” said John Anderson, Deputy Chief Economist of the American Farm Bureau Federation. Row crop farmers will face a learning curve as they decide between the Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) programs. Their irrevocable decision, to be made this year, will affect crops harvested from 201418. The PLC complements crop insurance, with payments made if the average price for the crop year is less than the crop reference price. The ARC is revenue insurance—somewhat similar to the old ACRE program, but with the twist that producers must choose either a county-based or a farm-level program. Deciding between those two ARC programs will demand analysis, especially for the farm-level program. “These are not minor variations on the same design. These are two very different designs,” said Farm Bureau’s Anderson of the two ARC programs. Farmers also get the opportunity to reallocate their base acres this spring. “If you have a record of your plantings from 2009 to 2012, you can adopt that as your new base,” said Roman Keeney, a Purdue University agricultural economist. Selecting 14
Farm Equipment Manufacturers Association | Spring 2014
“This is the most significant change in the design of commodity program support since Freedom to Farm in 1996.” between the county and individual ARC programs will come later this fall. “Farmers are going to enroll in one of these two programs, sometime...and that’s all that we can say at this point,” said Keeney in early March. “The only suggestion that I’ve heard about sign-up is that it could come in fiscal 2015,” he said, which means sometime after Oct. 1, 2014. Rather than creating unease among crop farmers, the delay could aid decision-making, especially if the sign-up deadline is after harvest, thus allowing them to incorporate this year’s actual yields. “From that standpoint, it means farmers could actually build in a lot of information about how the current year—which will include commodity payments under the new programs—plays out in terms of harvest,” said Purdue’s Keeney. But that also means producers will begin planting before knowing which program they will selected for the next five years, which could create some muttering as they wait for USDA to release final crop insurance program regulations. Cotton producers will have their own program, a new group-risk crop insurance policy called STAX. The sugar program remains unchanged, despite continued attempts by some farm state senators to repeal it. Row Crop Farmer Forecast Cloudy row crop farmer attitudes are likely this spring as producers work through updating base acres and anticipating new program intricacies. Still, a row crop safety net remains intact, and some even predict it will be more robust than past programs. And, as crop prices track lower than in the recent grain boom years, the new program could help row crop equipment customer confidence.
Specialty Crops Land receiving commodity program payments remains ineligible for fruit and vegetable production, but produce industry groups still counted themselves big farm bill winners. “The 2014 Farm Bill contains provisions that are the most
AGI
Feature Story
continue to dominate specialty crop producer thoughts, especially in the South and West. Processing produce growers in the Midwest could feel good about the bill’s school initiatives, especially if those pilot programs expand. Some parts of the farm bill are seen as more favorable to small and beginning farmers, and that could help boost specialty equipment sales targeting smaller producers.
Dairy Dairy farmers should be able to breathe—and maybe spend—easier under this farm bill. The new Margin Protection Program, coming into effect by Sept. 1, allows milk producers to pay a $100 enrollment fee that guarantees payments if the difference between average milk price and feed price is less than $4/cwt over a two-month period. “The Margin Protection Program supports producer margins and not milk prices,” explained James Dunn, a Penn State University agricultural economist. “It’s designed to help farmers deal with catastrophic conditions, such as weather extremes, and prolonged periods of low margins.” Dunn said the program would have delivered payments to Pennsylvania’s milk producers in 11 months of 2009, when the old price support programs did not deliver subsidies, and feed costs were high.
significant government investment ever in the competitiveness of the fruit and vegetable industry,” said Tom Stenzel, President & CEO of United Fresh, the fresh produce industry group. He said the 2014 bill will increase produce program spending by 55%, mainly for research and pest prevention initiatives of value to growers. It also maintains funding for the Market Access Program (MAP) that promotes U.S. farm exports and is popular with both commodity and specialty crop growers. This farm bill also promotes government policy designed to boost fruit and vegetable consumption. According to the American Frozen Food Institute, the farm bill expands a pilot program that allows elementary schools to “test the efficacy of serving canned, dried and frozen fruits and vegetables as snacks to low-income school children in five states during 2014-15.” Closer to the field, the new bill expands crop insurance options available to growers of fresh and processing produce crops; options for organic crop insurance will also increase. But some of those changes were already in the works, as the USDA Risk Management Agency was expanding specialty crop insurance options before this farm bill passed. Specialty Crop Farmer Forecast Despite the policy win, water and labor issues will
Dairy producers should like the certainty of knowing just what kind of programs they can now access, as the debate over dairy policy was among the most contentious in regard to the farm bill. “We didn’t wind up precisely where we wanted in terms of the dairy program, but the milk glass is more than half-full,” said Jim Mulhern, President and CEO of the National Milk Producers Federation. “Because it is designed to protect against periods of low milk prices, as well as high feed costs, margin insurance is a better risk management tool to help farmers deal with global volatility in commodity prices in the 21st century,” he said. Dairy Farmer Forecast Sunny, for the near future. Dairy farmer mood flows up and down depending on the milk price, and producers are enjoying high milk prices in the shortterm. The new program could kick in more support if milk prices plummet or feed prices spike, but more clarity on program specifics will come when the USDA releases the final regulations later this year.
Livestock and Poultry Livestock interests, especially cattle farmers and ranchers, sought disaster support in this farm bill, and they got it in the form of permanent authorization for three programs providing emergency, indemnity and disaster relief for livestock losses. Some of that assistance will be retroactive, back to 2012. That is good news for cattlemen in places like South Dakota, whose congresswoman, Kristi Noem (R-SD), authored the Spring 2014 | FarmEquip.org
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Feature Story
AGI
Livestock Indemnity Program language included in the final bill. The program will reimburse producers for up to 75% of fair market value for their losses due to animal deaths from adverse weather conditions. In addition, the Livestock Forage Disaster Program will compensate producers for grazing losses, also retroactive to 2012. The bill also includes funds for research into the possibility of future insurance programs for catastrophic broiler and turkey losses. Livestock and Poultry Farmer Forecast Mixed. Drought-stricken cattle farmers undoubtedly will welcome the weather-related disaster payments, but beef breeders remaining in business likely will replace cows, not equipment. Possible sleepers here are broilers and turkeys; both poultry sectors benefit when pork and beef prices rise, and that is a probability this year. In the pork industry, hog farmers are presently occupied with guarding against porcine epidemic diarrhea virus (PEDv), a catastrophe not linked to the weather. AGI Matthew D. Ernst is a writer and analyst who focuses on agricultural and horticultural issues. Currently based near St. Louis, MO, he has written for several land grant universities, Farm World, and other national and regional agriculture, gardening and business publications. To reach Mr. Ernst, call him at (636) 751-0231 or email him at matthew@matthewdernst.com.
New Crop Insurance Terms Changes in the way crop insurance will operate have yielded new terms for row crop farmers this spring, said Keith Coble, the Mississippi State University agricultural economist who helped design the 2014 Farm Bill as a staff economist for Sen. Thad Cochran (R-MS). With direct and countercyclical payments now largely in the past, here are three terms certain to dominate future discussion about crop insurance: • Deep loss programs include farm level coverage crop insurance that protects against infrequentbut-catastrophic events. This is essentially unchanged from the previous farm bill. • Shallow loss programs are new programs providing additional coverage in addition to what deep loss crop insurance allows. • Layering is stacking a shallow loss program on top of a deep loss program. “You might have two or three subsidized programs protecting revenue on the same acre,” said Coble.
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Industry Focus
AGI
PAYING IT FORWARD PAYS OFF A Wisconsin manufacturer’s workforce development efforts benefit an entire region By Marlene Weeks, Publications Editor Jim Wessing is a man of action. Within minutes of meeting him, it becomes clear that the President of Kondex Corporation is looking ahead and moving forward. His long-range vision, out-of-the-box thinking and willingness to take carefully calculated risks have served him well, first in growing the business he helms and more recently in ensuring its continued success. During the past few years, Wessing has helped plan, create, implement and promote school-to-work and student apprenticeship programs to attract workers to, and train them for, manufacturing careers. These programs have already yielded impressive dividends for Kondex, area school districts and businesses, students and parents, and their business model is one trade secret that Wessing wants to share with his industry colleagues. Kondex designs and manufactures products for agriculture, forestry, construction and lawn and turf at its 200,000-squarefoot facility located on 47 acres near the town of Lomira in Fond du Lac County, WI. The company employs over 200 people, the majority of whom hold middle-skill, or as Mike Frydryk, Vice President of Human Resources and Organizational Development, calls them, “gold-collar” positions. “They’re between white- and blue-collar professions,” according to Frydryk. “They require some higher education and skills, but not necessarily a four-year degree.” The Fond du Lac Area Association of Commerce (FDLAC), of which Kondex is a member, conducted a Retirement and Departure Intentions Study in 2008 to evaluate the local employment environment and provide the business community with an analysis of past, present, and future labor availability. In 2011, FDLAC conducted a follow-up study to identify any recent relevant changes and develop a course of action to respond to them. When the association published the results in a December 2011 report, the findings sounded a wake-up call for the region’s employers. The report revealed that the county had a labor participation rate of 72.1%, one of the highest in the state, and a high rate of manufacturing jobs per capita. However, a survey of area residents showed thata significant percentage of all employees planned to retire in 10 years, and the number of high school and college graduates entering the workforce was declining and may be insufficient to replace retiring Baby Boomers. The report predicted that, if these two trends continue as expected, with no intervention, by 2026, area businesses will face a significant labor shortage resulting in an estimated 12,000 unfilled positions, 18
Farm Equipment Manufacturers Association | Spring 2014
including many for such skilled laborers as technicians, engineers and draftsmen in the manufacturing segment. Also in 2011, the Harvard Graduate School of Education published a report on its Pathways to Prosperity Project, which emphasizes the importance of cultivating an American workforce of “middle-skill” occupations, such as electricians and construction managers. This report forecasted “a huge number of job openings in so-called blue-collar fields like construction, manufacturing and natural resources,” stating that these fields will provide nearly 8 million job openings, 2.7 million of which will require a post-secondary credential, and that these occupations—rather than those requiring a B.A. or B.S.—often are the ticket to a well-paying and rewarding career. The studies further found that most parents of middleschool and high-school students want their children to attend four-year colleges, earn B.A. and B.S. degrees, and embark on white-collar professions. Parents, along with educators and guidance counselors, tend to steer students into the college track because they believe it is the best path to stable employment, economic opportunity and overall fulfillment. They also associate manufacturing jobs with dark, dirty, dangerous working conditions, daily drudgery and low wages. In addition, they believe that American companies increasingly off-shore these types of jobs, so few of them are available anyway. As a result, many students enter the college track without even considering a career in the trades. While the dream of landing a prestigious office job might appeal to young people, reality doesn’t always align with it. When surveyed, 71% of parents said their children will attend four-year colleges, but only 26% of jobs require a bachelors degree. Also, only 25% of students who begin postsecondary education graduate with degrees. The rest fail or quit for a variety of reasons, and the experience often leaves young adults discouraged and burdened with tuition debt.
Industry Focus
AGI
In response to the retirement study, FDLAC launched the Forward Fond du Lac program, in which area businesses, including Kondex, partner to educate students about manufacturing career opportunities and encourage them to explore and choose from among their options. They also show influencers, such as parents and teachers, that middleskill jobs can offer safe and stimulating work and serve as the basis for a stable and economically sound career path. One way Kondex helps dispel negative perceptions of manufacturing facilities is by inviting guests to visit its own plant and see first-hand how clean, orderly, bright and worker-friendly an industrial workplace can be. At the plant, built in 2007 on land that once belonged to Wessing’s great-grandfather, visitors are supplied with safety goggles before entering the cavernous production space. It is well-lit and immaculate. Walkways painted blue and outlined in yellow guide pedestrians around the perimeter and between work areas, indicating the safest routes. Materials, including metal rods, cylinders and sheets, are labeled and stacked neatly on racks arranged in uniform rows. Work areas also are clearly labeled and defined—stamping, assembly, product development, packing, shipping, etc. Heat treating takes place in one room, and laser cladding in another. Welding is done in an area surrounded by a curtain of wide blue plastic strips that resemble large vertical blinds. In another area, products hang on racks, ready to be trolleyed into a structure resembling a carwash bay for painting, heating and curing. Many of the tasks performed in the production process involve
QUALITY COMPONENTS
BETTER LOOKING
MORE DURABLE
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Farm Equipment Manufacturers Association | Spring 2014
FEMA and the Future of Shortline Manufacturing Kondex Corporation was founded in 1974 and joined FEMA in 1979. President Jim Wessing stated that Association membership has helped the company prosper and grow. He has met prospective customers and participated in management discussions at Fall Conventions. He finds Spring Conferences especially useful for business skill development and networking. Wessing sees a bright future for shortline manufacturers, who play a vital role in feeding the world’s population and fueling its transportation and industry. He believes that real innovation comes from smaller companies, and they must continue to heed customer’s needs, create and develop new products that present solutions, bring those products to market, and position themselves for long-term growth and success.
electronic devices and corresponding software. Much of the mixing, measuring, moving, cutting, connecting, stamping, coating and testing of materials and products is performed by operators using computers, lasers, robotic arms and various machines, rather than by hand. Visiting students and parents often are surprised to learn how much advanced technology
YOUR POWDER COATED STEEL COMPONENTS WILL LOOK BETTER LONGER Haven Steel continues to invest in facility expansions that include a state-of-the-art powder coating facility.
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HAVEN STEEL PRODUCTS, INC.
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JOHN DEERE BUYS PLANTER DIVISION OF BAUER BUILT MANUFACTURING
Bauer Built Manufacturing of Paton, Iowa, has been co-building planters with John Deere since 2002. As sales started increasing over the years, Bauer realized a business transformation was needed in order to keep pace with demand and their vision of growth. As a mid-sized manufacturing company, Bauer had limited IT staff and budget. They did not believe a tier one solution, such as SAP, was an option for a company their size. In partnering with CONTAX, an SAP solution was affordable, and quick to implement. Building on a foundation of streamlined business processes and real-time data, Bauer exceeded growth expectations. With their planter division performing at the top of their industry, and running the same SAP platform as many top equipment manufactures, they were aligned for easier acquisition. SAP helped Bauer grow their business through: • Accurate inventory management and warehouse organization, which moved employees off manual tracking and spreadsheets • Real time data accessed through a single integrated system, which increased operational efficiency and reduced duplicate manual entries • Variant configuration in SAP which streamlined production planning and reduced hours spent building customized designs
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Industry Focus
AGI
Kondex employs in its manufacturing processes, and this revelation seems to shift their perception in favor of the industry. Another aspect of its workforce development program is Kondex’s tuition reimbursement program that allows students to work at its plant while attending school, thereby earning income and trying out various jobs before choosing which one to pursue. Through the program, 18 youth apprenticeship students have come to work here, and the company has offered permanent, full-time jobs to 10 of them. College students have served internships at Kondex while working toward engineering degrees, and parents have applied for jobs here after bringing their children in to tour the plant.
booths to highlight the benefits that manufacturing jobs offer and talked with students, parents and teachers about the options available in this field. The event was a resounding success. Today, the school continues to offer tech ed classes, and enrollment has increased dramatically. Another high school in northwest Wisconsin started a small manufacturing business in its tech ed department
When the Forward Fond du Lac program first launched, Wessing noted that high school technical education departments often suffered from neglect and disrepair. Tools and machines were outdated, workshops were dark and dingy, and the techniques and business principles they taught were left over from the 1960s and ‘70s. Enrollment was declining and funds were drying up. Wessing helped some local tech ed teachers write current curricula and obtain new welding, ventilation and other equipment. Now, workshops are cleaner, brighter, up-to-date and more appealing to prospective students. Wessing and Frydryk serve on the career technical education advisory board that guides Lomira High School in choosing which tech ed courses to offer. In 2011, the school district recorded 51 student hours completed
to give students hands-on, real-world work experience. Students must interview to be accepted into the program. Those who are “hired” write quotes, draft and fabricate components, assemble products, and handle all pricing, material purchasing and sales. They sell their goods to local companies, realize a profit, and re-invested some of it into the business. The rest is used to pay students for their work. As in a typical workplace, the student workers receive performance reviews that determine their pay rates. In recent years, Kondex and other area companies found it especially challenging to identify and attract female candidates for engineer positions. At nearby Kewaskum High School, an educator learned of this need and responded by creating a Women in Engineering class. In the spring 2014 semester, 18 girls enrolled in it. Female engineers from Kondex mentor the girls in these classes.
in its tech ed department. In 2013, that number reached 169. Previously, one part-time instructor taught a handful of tech ed classes; now, two full-time teachers manage a full curriculum, and one had to give up his study hall in order to teach a class every hour of the school day. Approximately $100,000 in new equipment has been installed in the school’s workshop, with Kondex providing a portion of the funding for it. Not long ago, Fond du Lac High School planned to cancel some of its vocational classes due to declining enrollment. Then business leaders met with educators and scheduled a trade-show-style orientation where employers set up 22
Farm Equipment Manufacturers Association | Spring 2014
“We need qualified workers, and the solution doesn’t lie in Washington, DC,” said Wessing. “You have to get engaged within your community and address the issue on a local level. Get kids and their parents to think of manufacturing as a viable career option.” He is pleased with the program’s success to date and optimistic about the number and quality of skilled workers it promises to yield in the coming years. “Soon Lomira will produce more qualified workers than we can hire,” Wessing predicts. “Other manufacturers, take note. You can recruit your workers from here, or you can take an active role in developing the workforce in your own communities.” AGI
Feature Story
AGI
SPRING CONFERENCE: WRAPPING UP 2014 AND RAMPING UP FOR 2015 T
he Association’s 2014 Spring Conference & Supplier Showcase, held in April in San Antonio, TX, drew the largest attendance at such an event in 20 years. Members might have come to attend the “Risk Management for the Workplace” panel discussion; or to hear breakout sessions featuring presentations on such topics as product safety, supplier relationship management, succession planning for small businesses, and innovation; to participate in the supplier showcase; or perhaps to check out the debut of a special purchasing track. Whatever the objective, conference attendees found plenty to do and to learn, and took full advantage of the business development and networking opportunities presented.
hospitable and well-prepared for our group, and they offered an exceptionally informative experience. Participants learned about various aspects of the plant’s operations before heading home with complimentary bottled water and gift bags. Now that we’ve wrapped up the 2014 Spring Conference, we’re delighted to announce our host city for the next one. March 18-21, 2015, Charlotte, NC, will welcome us with southern charm and cosmopolitan character. Our conference hotel, the Westin uptown, provides the area’s best accommodations, and a number of five-star restaurants are located within walking distance. Local attractions include the NASCAR Hall of Fame, the Billy Graham Library, Discovery Place,
The risk management panel featured an insurance executive, a doctor, a surveillance expert and our own human resources and labor attorney. It addressed a range of timely employment issues, drew a large audience and culminated in a lively Q&A session. The purchasing-track presentations also generated tremendous interest, and this year’s supplier showcase was one of our largest ever.
the Daniel Stowe Botanical Garden, the Bechtler Museum of Modern Art, NC Music Factory, the EpiCentre entertainent complex, and Carowinds Amusement and Water Park.
The conference concluded with a tour of the Alamo Industrial Group’s plant in Seguin, TX. The Alamo staff were professional,
Conference registration will open on June 1, so save the date now and plan to join us next spring. AGI
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Farm Equipment Manufacturers Association | Spring 2014
Traveling to Charlotte is easy. Douglas International Airport, the nation’s eighth-busiest, is just seven miles from our hotel, and it serves more than 143 destinations with 700+ flights per day.
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Guest Writer Series
AGI
Continued from page 8 ethanol, or E85 blends, and for flex-fuel vehicles that can run on gasoline blended with either E10 or E85. Nearly 10 million flexfuel vehicles exist, but only 1,275 of the 160,000 U.S. service stations sell E85 fuel. The oil industry has asked the EPA to reduce the biofuels requirements to avoid the blend wall and now is pressing Congress to eliminate the program altogether.
API wants the standard completely repealed because of the cost to fuel refiners, the damage renewable fuels can cause to engines, the limited availability of the fuels, and other factors. But the group might also endorse significant changes to the rule that would reduce the annual volume mandates the EPA sets for refiners.
What could all this mean to equipment manufacturers or dealers? Obviously, the debate will play out over the next few years. Bestcase scenario: we actually develop a “comprehensive” energy policy Congress gave the EPA the authority to revise the annual RFS that supports development of renewable fuels at current levels or requirements under specific conditions, including severe ecoabove, as well as synthetic fuels, wind, solar, coal, natural gas, etc. nomic or environmental harm and inadequate domestic supply Worst case: we don’t have a comprehensive energy policy, lose the of renewable fuels. In November 2013, the EPA proposed its draft debate about mandating ethanol, and find ourselves with surplus blending volumes for 2014, which reduced the total annual target ethanol production capacity and surplus corn. That is too depressto 15.21 billion gallons, marking the first time that the EPA has ing to even contemplate! ever adjusted the target to a lower level than the previous year. I, for one, seriously doubt that Congress will abandon its supThe EPA acknowledged that the blend-wall concerns played into port for ethanol production altogether. More likely, they may its decision to lower the target. compromise and reduce the RFS requirements for corn ethanol. While the oil industry applauded the EPA’s proposal, ethanol Depending on the new levels, such a move could negatively affect supporters voiced their concerns about how the proposed volagriculture, especially in the Midwest corn-belt, for several growumes could affect future investment and growth in the biofuels ing seasons. And we all know how quickly farmers can rein in their industry. The ethanol industry also argued that the EPA reaches spending during “bad” times. Some farmers who invested heavily beyond its statutory authority by proposing reduced RFS-volume in ethanol plants could find that their investment is worth only requirements based on the blend wall. In response to the EPA pennies on the dollar. proposal, Renewable Fuels Association President and CEO Bob Over the past two or three decades, we transcended from food, Dinneen said, “By re-writing the statute and redefining the confeed and fiber as the market for corn to one of food, feed, fiber and ditions upon which a waiver from the RFS can be granted, EPA fuel. It is the market for corn as fuel that is most responsible for is proposing to place the nation’s renewable energy policy in the much greater demand and increased production. The result has hands of the oil companies.” nearly doubled the size of our corn crop in the past 25 years.
Looking ahead The American Petroleum Institute (API) is optimistic it can convince a majority in the House to endorse reforming or completely repealing the RFS. API has counted 205 representatives who have either signed letters or co-sponsored legislation to reduce the amount of renewable fuels that refiners must blend or to repeal the mandate altogether.
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Overall, I remain optimistic and confident that farmers, equipment manufacturers and dealers will emerge from this debate in relatively good condition. I don’t believe that the sky is falling, however, I do see reason for caution and concern. We need to keep our eye on this one. Whether we can maintain, or even expand, the market for corn-based ethanol fuel is the multi-billion dollar question. AGI
B&PImmagine
BONDIOLI & PAVESI INC. 10252 Sycamore Drive - ASHLAND VA 23005 - 8137 Tel.: (804) 550-2224 - Telefax: (804) 550-2837 - E-mail info@bypyusa.com
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BONDIOLI & PAVESI INC. 10252 Sycamore Drive - ASHLAND VA 23005 - 8137 - Tel.: (804) 550-2224 - Telefax: (804) 550-2837 - E-mail info@bypyusa.com
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