Interview with Joe Michaels, Senior Director of Forage Solutions, Vermeer Corp., Pella, Iowa

When 'all distribution is local,' good equipment dealers are demanding the best in training and technology to serve a new generation of growers.

"Vermeer Corp. was founded in 1948 to make equipment for the farm community and has evolved into a manufacturer of a wide range of off-road equipment. One of the mantras of the late founder Gary Vermeer was "There's got to be a better way." That philosophy is still alive and well today. In addition to the forage segment, Vermeer markets and manufactures a range of industrial products for tree, construction, environmental and underground utility work. Even though most folks in the ag industry think of us as a hay tool manufacturer, we are actually part of a much larger corporation.

"Today, our ag products include forage equipment such as round balers, mowers and tedders. Biomass harvesting is a big segment of our farm equipment business as well.

"We have a small-company attitude when working with ag dealers and their customers, but we support them with the resources of a much larger company. That support is important to the forage division and its dealers when it comes to business technology and financial stability."

Dealership Culture & Values

"It's important that the dealers we partner with have the same culture in their business as we do. Here, customer support is everything. Our dealers need to be aligned with that philosophy or we're not going to work well together. We also look for dealers who know their customers' expectations and understand what they're dealing with on a daily basis. Many of our employees have farms, and know what's happening with input and commodity prices. A dealer who knows his customers well, whether that's a rural lifestyler or a cow-calf operation, is a good partner for us.

"We look for dealerships that provide value for customers. They must be responsive to customer needs.

"Even though we are a privately held specialty manufacturer, we have Fortune 500 companies as competitors. We need to provide the support dealers have grown accustomed to, such as competitive floorplans. We also offer an in-house retail financing for dealers to provide to their customers."

Better Communications

"Farm equipment distribution is changing rapidly. With consolidation in some areas and expansion in others, our distribution network isn't any different. There's an increasing need to provide information to our dealers in a more usable form and to help their employees become more knowledgeable faster. We need to play a bigger role in that than we have in the past.

"For 2012, one of my goals for the forage division is to enhance our dealer communication. The industry is evolving as the expectations of our customers change. Those changes are being driven by the strong financial position of ag in last few years, which is driving a resurgence of young people into farming.

"When I graduated in 1983, there weren't as many options in the ag business as there are today. Now, we're seeing young people entering the farm sector after college, not only into support businesses, but also returning to the family farm. They have different expectations from older, more conservative farmers that dominated farming decisions after the 1980s."

New Generation of Farmers

"In a lot of ways, we skipped a generation because agriculture wasn't the place to be if you wanted a sustainable career. Kids didn't return to the family farm, which is why the median age kept climbing. Now, young chargers are getting degrees and returning to the farm.

"We have to work closely with our dealers to ensure they're seeing the same thing we are. The good ones are — they're telling us about trends like this.

"Some of the big differences we're seeing at the dealer level include the way technology is adopted and utilized. It's in how young farmers communicate, before and after the sale. And it's the technology found in the solutions that Vermeer and the dealership can provide. They're used to living with technology. They've grown up with it. The young farmers are more receptive to the enhancements new technology can bring to their day-to-day work, as well. We've seen this in row-crop farming, and I look for it to become more common in forage harvesting, too.

"My work for the next year includes finding the best way to meet the new expectations of dealers and their customers. We have a long tradition of working closely with dealers, and we'll push that even harder going forward."

All Distribution is Local

"I always keep certain bedrocks of business in mind. One is, 'all distribution is local.' There must be local representation for successful distribution to occur. We are in a number of different market segments and regions, and having dealers represent us keeps us relevant.

"We have fewer dealers today than we did 5 years ago. Part of that is realigning our distribution channel with current and future needs of the marketplace. Even though we have fewer today, we have an initiative to grow that dealer network to match future needs.

"Over last 25 years, I've learned you're known by the company you keep. We've worked to improve the current dealer network and other dealers are noticing that. We've upgraded our network and how we work with them.

"One thing we've done in rebuilding our network is establishing an alliance with Kubota Tractor that allows Kubota tractors and Vermeer implements to be marketed together. Our arrangement with Kubota is only for dealers who are selling both Kubota and Vermeer equipment. The alliance has added to our distribution network, but it's a process through which we will continue to work at improving and growing the number of our dealers.

"We may be out here in the middle of the Iowa cornfields, but we also have a global presence through Lely Corp. We work together to ensure we're staying abreast of the global trends in forage harvesting."

A Few Good Employees

"Dealers tell us they need help from us to secure and train employees. We're playing a larger role with our dealers and distribution network to provide information to their employees to make sure they're up to date on the latest technology. We've concentrated on training the people dealers bring on board, but going forward I think we'll have opportunities to help with recruitment, too.

"We offer a great deal of online training, which allows a shop tech or sales person to spend an afternoon going through interactive training modules to enhance their skill set. We've also launched a new certification program for service technicians that will turn those positions into long-term careers rather than just a job. A lot of pride will go along with the certification."

Promising Ag Future

"I'm cautiously optimistic about the future. Globally, farming is the strongest I've seen it in my adult life. It seems to be more than a cyclical swing, as this strength is due to some strong global underpinnings. One of those is the fact that there are 7 billion people on Earth today. As one can quickly deduce, that's a lot of mouths to feed.

"Other global underpinnings that are strengthening the ag market include the number of developing nations that have an expanded middle-class population. As that develops, people want an improved diet including more meat and dairy.

"These days farming means not only food and fiber, but fuel as well. We're excited about the diversification that the biomass market brings to agriculture.

"We're in a unique position in today's marketplace as our industrial distribution network is providing equipment such as horizontal grinders that can process biomass materials to be used in power generation around the world. With our forage harvesting equipment, Vermeer is the only company out there to provide a bundled solution to biomass-powered plants or test operations globally. "

Growing Quality Demands

"These changes mean we must accelerate the speed at which innovation enters the marketplace. There is a limited amount of land in North America that can be used for food, fiber and fuel. We realize we have to help dealers offer solutions to customers so they can make the most of their land. In years past, when the competition for land wasn't as great, forage quality didn't have to be as high.

"Dealers are asking us to provide solutions that improve the quality of the forage and maximize the volume they get from each acre. We will continue to be one of the innovators in providing those solutions to our dealers and their customers.

"In the past, farmers have looked to universities and government agencies to supply the latest agronomic research, which we would support with our products. Because of the economic realities of today, farmers need other sources to accelerate innovation in the forage market.

"We will be working closely with dealers to identify and promote these innovations, even if they're not directly associated with a piece of equipment.

"I can see us doing more of that work in-house, as well as partnering with the right people in the marketplace to conduct research and bring solutions to the marketplace. Customers want to know if they're harvesting forage at the right stage to provide maximum value to their livestock."

Higher Volume Products

"The new products we introduced at our dealer meeting last September reflect the needs of a growing population, and help the grower produce higher quality, higher volume forages on fewer acres.

"We introduced a 49 foot wide hay tedder that allows the operator to travel quickly over ground to allow him to get forages in before the rain and in better condition. Our new line of high-capacity rakes will be of interest to the biomass harvesting market, because of the large amount feedstock they need to produce ethanol. Our 28 foot rake is the first in a series of large wheel rakes.

"We also introduced a family of high capacity silage wrappers. Our dealers are seeing a growing interest in silage wrapping. Farmers are using it for higher quality forages on their farm, or selling it to drought-affected regions.

"We work with production agriculture folks and rural lifestyle customers alike. This fall we introduced the next generation of our Rebel Series balers. This new generation provides a nice value-priced option and comes at a time when the rural lifestyle customer needs it most due to the weak economy."