2017 Annual Report - Commercial AgriBusiness | UFA Co-operative Ltd.

Commercial AgriBusiness

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COMMERCIAL AGRIBUSINESS

COMMERCIAL SALES

$195.0m

In 2017, Commercial AgriBusiness sales increased by five per cent or $10.0 million over 2016.

GROSS MARGIN

$25.1m

The gross margin for Commercial AgriBusiness increased by two per cent from 2016.

Our Commercial AgriBusiness model is based on a farm-gate relationship with grain producers, mixed farmers, ranchers, colonies and commercial feedlots. We do this through a vast network of specialized Customer Account Managers. We know our members have countless options on where they do business, so why do they choose UFA? Every day we seek to earn the business from our valued members by offering competitive products that provide timely solutions with advice from a team of specialists who are deeply committed to our members’ business—that’s what sets us apart and it’s the reason farmers come back to UFA.

>Rob Giguere

Vice President, Commercial AgriBusiness

Performance

At UFA, we subscribe to the old adage that “you reap what you sow” and this past year, Commercial AgriBusiness reaped the benefits of rigorous pre-season planning, enabling our employees, staying focused on our core businesses, and remaining connected to the communities where our members and customers live and work. These efforts have allowed us to improve our business year-over-year, despite some very challenging weather in 2017. Adapting quickly to the ever-changing growing conditions in this dynamic and competitive market is critical to success and our efforts this past year have paid off. Despite unharvested acres from the previous year and a wet spring coupled with extreme dry conditions in southern Alberta, UFA grew almost all segments of its business and outpaced the market in the key product segments of seed, seed treatment, inoculant and commercial livestock in 2017.

From an operational perspective, the team continued to improve on our in-season availability of products through better forecasting, replenishment, inventory management and product movement processes. We also added capacity in our training and analytics areas. We continue to look for opportunities to build partnerships with like-minded vendors so that we can pass on vendor rebate programs to our members. These programs benefit the member and result in improved earnings for UFA. We are focused on remaining competitive in the market and building trust with our members as reliable partners on their farms.

In 2017 we implemented several integrated marketing campaigns that showcased UFA’s full breadth of offer, from our Partner Plus program to Deferred Credit. During Farmer’s Day we engaged our crop input vendors to celebrate with our members at several locations. We also showed our support for the beef industry with key sponsorships at the Canadian Industry Beef Conference and the Alberta Cattle Feeders Conference, among others. We support and remain active in Crop Life Canada, Cattlemen’s Young Leaders, and other provincial and national forums in our industry.

Commercial AgriBusiness

UFA grew almost all segments of its business and outpaced the market in the key product segments of seed, seed treatment, inoculant and commercial livestock in 2017.

Sourcing new products and technology is an important part of staying competitive in a quickly evolving agriculture industry. In August, we announced our exclusive partnership as the official Canadian distributor of automed®, a revolutionary cloud-based technology that gives livestock producers the ability to medicate, record, manage and integrate all in one single step. The new system provides a traceable, accurate, and tamper-proof way of administering and auditing drugs given to all animals from birth. The system means the end of under and over-dosing, as it integrates easily with existing livestock tools and farm management systems.

The Commercial AgriBusiness team added a new outlet for seed and crop protection products in Kindersley, Saskatchewan this past year. This provided a great opportunity to expand UFA’s offering by locating on the existing petroleum site. This model is proving to be advantageous in certain areas of our network and is one that we will continue to explore for the benefit of our members.

UFA’s Ag Structures business, which includes both structures and integrated bin projects, showed a tremendous recovery in 2017 by focusing on more standardized building packages and improving efficiency in the quoting and building processes. After more than 70 years in the construction business, UFA is well-positioned for the future for both farms and acreages.

Although UFA is primarily based in Alberta, we continue to explore opportunities to both grow geographically and champion progressive technology into new markets. UFA’s Micro Beef Technologies (MBT) does both. This production system, exclusive to UFA, is a real-time computerized beef feeding management system which facilitates individual animal information collection and management. It enables better decision-making and greater efficiency for feedlot operators from 5,000 to 30,000 head. With UFA serving many of the larger feedlots in western Canada, we are now promoting this technology in other Canadian markets. MBT is a real differentiator for UFA and for our members, and we look forward to its continued growth in the years to come.

In October, we publicly announced the acquisition of the assets that were formerly part of our joint venture with CHS Inc., known as Bridgeland. This acquisition is comprised of three fertilizer blending facilities and one Anhydrous Ammonia site in the Peace Region of Alberta. We have now completed the full integration of those sites and employees under the UFA umbrella.

Although UFA is primarily based in Alberta, we continue to explore opportunities to both grow geographically and champion progressive technologies into new markets.

Commercial AgriBusiness

> Driving Forward >>>

Looking ahead, the Commercial AgriBusiness team will embark on a number of new initiatives for 2018 that will continue to find efficiencies within our existing operations, all while looking for growth opportunities. We are executing a focused plan aimed at ensuring we have the right products and solutions in place that are supported by knowledgeable and committed local teams. We will continue to foster our key supplier relationships to ensure our members have what they need, when they need it, and that we remain competitive. We will keep investing in our sales and operations teams and ensure that they have the knowledge and support needed to help our members “drive” their business. We will remain visible in the communities that we operate in and be open to hearing how we can do better. 2017 has been an important year for Commercial AgriBusiness as we refine processes, build and develop our employees and promote our strategy. As we travel On the Road to Better we look forward to accelerating momentum and reaping greater results for 2018 to the benefit of our members. As Canada continues to lead the way with high quality crops and livestock on a global stage, the future for agriculture in western Canada has never been brighter. We are confident that UFA will remain an integral part of our members’ efforts to remain productive and profitable in this complex industry.

Meet KEN

And 30,000 of his four-legged friends.

Meet Ken Van RayyMeet Ken Van Rayy

Running a 30,000-head feedlot requires attention to detail like few other operations. Ken Van Raay’s southern Alberta feedlot is a testament to that.

For more than 30 years, Van Raay has called UFA his supplier for just about everything, from fuel to farm chemicals. In 2012, Van Raay began utilizing state-of-the-art Micro Beef Technologies (MBT) through UFA, the sole Canadian supplier.

“This system injects the Micro Ingredients [vitamins, minerals, supplements] into the load. It takes the place of ordering a pre-mix supplement from a feed company,” said Van Raay. “There is much better tracking with more accurate results. Every day it prints out reports and you can reconcile everything.”

In a capital-intensive operation like Van Raay’s, maximizing inventory, efficiency and time is critical. UFA has trained professionals on call 24/7 for Van Raay to remedy issues online or in-person, making sure that any interruptions to the feeding schedule are as short as possible. The MBT helps to monitor supplies in a way that Van Raay never had before and that has provided him with a greater ability to monitor what is happening at the feedlot.

“It tracks my inventory, tracks the pens, helps teach feed truck drivers how to feed, improves accuracy, schedules ration changes and saves time,” he says. “You need to feed cattle consistently, that’s the most important part of the whole thing and that consistency comes with the [MBT] system.”

Prior to using UFA’s MBT system, Van Raay’s staff could only monitor bunk history day to day. Now, the system allows users to go back months, even years and see a pen’s history and make comparisons to maintain animal health and productivity.

“I get more efficiency and performance out of cattle,” he says of the system’s benefits. “If my performance is better, I can add to my margin and bottom line. It’s not that I charge more, but the margins are higher because of the efficiency that results from using the technology. That’s a pretty big deal.”

Petroleum

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