Subscribe
Share
Share
Embed
Eggheads is for people who want to better understand the egg industry and the world surrounding it. Host Greg Schonefeld shares the stories of the people and companies that have shaped agriculture while connecting the different pieces of the industry, from where an egg begins to how it ends up on your plate.
Along the way, you’ll hear from producers, suppliers, and industry leaders, while gaining context for the economic, regulatory, and consumer forces shaping the industry. We look at where the industry has been, where it is today, and where its headed next. Our goal is not only that you gain a broader perspective, but that you gain a broader sense of connection.
Greg Schonefeld:
I'm Greg Schonefeld and this is Eggheads. Where I live in Iowa, grain bins are everywhere, to the point where you don't even really notice them, they're just part of the landscape. But if you did take the time to stop and take a good look at one of those bins along the highway, there's a good chance that written on the side, you'd see the name Sukup.
Steve Sukup:
As soon as the grain's harvested off the combine and onto the grain cart and put into the bucket elevator to go into the grain bins or the grain drying process, we start touching every kernel of the grain.
Greg Schonefeld:
That's Steve Sukup, the Chairman of Sukup Manufacturing, founded in Sheffield, Iowa back in 1963 by Steve's dad, Eugene. Today, Sukup is one of the world's largest manufacturers of grain storage, drying, and handling equipment. And one of their end users, the egg industry.
Steve Sukup:
The egg producers, they need good quality grain every day of the year to feed to the layers, and that's what our grain storage products can do.
Greg Schonefeld:
As we all know, layer operations have gotten bigger and bigger over the last few decades, and that's a trend that goes beyond the eggs to the agriculture industry in general. And so, Sukup has had to adapt.
Steve Sukup:
15, 20 years ago, we would've called a 20,000 bushel bin a, "Boy, that's a good size bin." Now at the facilities, the commercial sites, the egg laying sites, it's 300, 500,000 bushel bins that they're storing the grain at because they need the good quality every day of the year.
Greg Schonefeld:
And while three to 500,000 may seem mind-blowing, that's not even close to the biggest bin Sukup's manufactured.
Steve Sukup:
The ethanol plants, they're putting up a million bushel bins now. And in one of our, actually a two million bushel bin, you can fit a Boeing 737 airplane inside the grain bin. The landing's a little difficult, Greg, but they will fit.
Greg Schonefeld:
Today, through Sukup's story, we're going to get a glimpse into the world behind feed, an input that makes up more than half the cost of producing an egg. And we'll explain how a company who started selling grain stirs to go inside grain bins in the '60s managed to dominate the market for bins themselves. We'll also get into why it made strategic sense to turn one of their biggest customers into one of their main competitors, and how a deep understanding of the ag business aided them on that journey.
It all started with basically one product and maybe over 50 years ago. Could you take us back to that time?
Steve Sukup:
Well, my dad started the company 63 years ago and got a patent on a stirring auger to mix the grain up. Because when grain bins came out in the mid '60s, they'd bring the grain in wet, put it in the grain bin and put some heat and air on it, but it went dry evenly, and so you'd have wet spots in there. And so my dad got a patent on a stirring machine to mix up some of those hot spots in the bin, and so it would dry faster.
I remember he used to have dealer meetings in our basements, and so I remember the stories he says, "Well, it's like a kettle of beans on a stove. If you turn up the heat, the bottom beans will fry and the top ones would still be cold. You got to stir it."
Greg Schonefeld:
That's great salesmanship to talk about the beans, because it makes it super visual and simple.
Steve Sukup:
Yeah. And then in the '80s and '90s, we still were doing the stirring machines. At that point, you can dry like 300 bushels an hour and our customers were wanting 1,000 bushels an hour, and drying it inside the grain bin, that wasn't possible. And so in '98, went out with one of our research engineers and just said, "Hey, our customers moved to portable dryers, which can do the 1,000, 2,000 bushels per hour, and we need to match up to that." And so we went out, took a fresh look at it. We came up with a quad metering roll, patented item on our portable dryers that just set it apart from our competition. It gave a more consistent dried quality grain coming out of the portable dryers at 1,000, 1,500 bushels per hour.
Greg Schonefeld:
I guess one thing I'm gathering is the stirring was about drying, and then of course, the dryers were about drying. And why is that important? Is it for the smooth movement to not have jams, or is it about quality of the product and not getting mold? What's that about?
Steve Sukup:
So if you harvest grain at 25%, you need to dry it down to 15% within the next couple of days or have air on it. Otherwise, it's going to spoil practically immediately. A 30 foot, 10,000 bushel bin, what was the standard back in the '80s, you have to take 10,000 gallons of water out of that bin in order to dry it from 25% to 15%. So, that's when in the old days you'd see all the steam just rolling out of those grain bins because there was so much water you had to take out of that grain in order to dry it and to store it properly.
Greg Schonefeld:
On those initial stirs, was there some other process going on at the same time? Was heat being applied or something of that nature?
Steve Sukup:
Yeah.
Greg Schonefeld:
Okay.
Steve Sukup:
And that's where you'd have false floors at the bottom of the bins, usually about 12, 13 inches, and you'd have a fan and a heater, propane heater, generally, blowing hot air up through the grain bin. And so it would blow it through, you would eventually dry the grain, but that's where you get hot and cold spots and that's where the stirring worked to mix it all together to dry evenly. That was the standard for grain drying in the '70s and '80s.
Greg Schonefeld:
Okay. So then were there other products along the way or was it basically 30 years of this stir and then you jump into the dryer?
Steve Sukup:
Oh, there was some progression with it. The stirring machine was the first ones. And then in the early '70s, we came out with fans and heaters to push the air up through the grain. And so we had the stirring machine, the fan and heater that you had to have with each grain bin to dry.
And then, oh, probably mid '70s, my dad and I flew out and purchased a grain bin floor roll former. And so that got us into the grain bin floors. So we had the fans and heaters, the floors and the stirring machine. So that was one of the things for that 30 years if you looked at our products, all you'd see is a fan on somebody's drying set up. You wouldn't see much else of our other equipment because it was all inside. So you'd see the fan on the outside. We also made unloading equipment power sweeps, so you'd see the power head on the outside, but the rest of it was other people's equipment.
And that's when that 1998 or the 2000 when we said, "Hey, we got to start doing more of the market." It's like, we have to control our own destiny. So I went down with another one of our other engineers and started purchasing the equipment to make grain bins, corrugated steel and the roofs. And so we got started with grain bins.
Greg Schonefeld:
Sukup was already making all of these different pieces of grain processing machinery, and a lot of that was custom-made to fit different size bins. And so it made sense for them to move into that market, but by the time they got there, it was already pretty crowded.
Steve Sukup:
Yeah. At one time there was 20 different grain bin manufacturers, and so there was lots of them out there. So you were faced with the question, do we really need another one? In fact, one of our largest customers was also our largest competitor. That's not going to last long. There's too many chances to butt heads, and we did, but we had to control our destiny and that's what we've done with the grain bins.
Greg Schonefeld:
Before I spoke to Steve, I honestly just thought a grain bin is a grain bin. Throw a rounded roof on some corrugated steel and there you go. I think a lot of people make that same assumption, but Steve made me realize how wrongheaded that is.
Steve Sukup:
We basically design grain bins by zip codes, sort of like we do steel buildings. I mean, it's wind loads, snow loads, seismic. We have to take all those conditions into factor when we design a grain bin. It's like our portable dryers, we average two alike. I mean, everything's designed for our customers' needs out there, whether it's electrical, gas needs, size, voltage. There's decisions to be made that there was two styles of grain bins out there, what they called a 2.66 corrugation, and then a four-inch corrugation that you had to evaluate, where's grain bin manufacturing going? What's the most efficient method for either installation or storage on it? And so we ended up with a four-inch corrugation, which is still our standard out there. The roof panels, what angle you're going to design your roof for and thicknesses on it. And then when you go into the commercial lines, the stiffener aspect of it to stiffen the grain bins and wind rings in order to make them as strong as possible.
Greg Schonefeld:
Was that a good time to get into the grain bin fabrication? I install equipment in my day job and I got in right when it was cage free, which wasn't by design, it was by luck. It was lucky, one, because the market grew, but it was also lucky because I didn't have such a learning curve disadvantage because all the other installers were trying to learn this new system at the same time. Was there some sort of market shift there where the game was changing for everybody and it was a good time for a new entrant to come in?
Steve Sukup:
Well, I think your hard work creates more luck, and we did have some luck in there because the market was shifting. We started going after the grain bin market in 2000 or going after the equipment, but then in 2002, 2004 is when ethanol started taking off, and that was one of the market shifts. We're located out in North Central Iowa, so it was always, what's the basis to get our grain from Franklin County over to the river? Now with ethanol plants, we have a customer every day of the year here.
Greg Schonefeld:
Yeah. So there's a bit of a tailwind there, but did also the nature of these bins change? They were getting bigger and the engineering challenges changed? And your engineering background, I mean, did that play together during that time as well?
Steve Sukup:
Yes. We had to be efficient on it. You have to be efficient with the steel, the bolt sizing, the testing to go in to make sure you had the right amount of steel per bushel that you wanted to store. And when we started into the grain bin business, five or 10,000 bushel bin, which would be like a 24-foot diameter or a 30-foot diameter bin was probably the standard. And then just about every other year it went from a 30 to a 36 to a 42 to 48 to a 60. And right now, we're probably averaging somewhere between the 60 and the 72, 75-foot diameter bins as your average size bin.
We go up to 100,000 or 150,000 pound peak loads on our grain bins so that you can put the conveying equipment on top and then wind rings for the Derechos and all the other.... What, six years ago we didn't know what COVID was and we didn't know what a Derecho was, and now it seems like we hear about them a couple times a year, and so we try and design around that. And we do feel we put in a little bit more steel than some of our competitors with design, that we don't want to see the problems out there, and that's helped us. We are the number one grain bin manufacturer in the world right now.
Greg Schonefeld:
And why is that? Why is it so customized? Is it just that every farm is a different size, or yeah, what leads to that?
Steve Sukup:
It's just the size of the farms. Sometimes it's actually how much space they have. Okay, I can only fit in a 48-foot diameter bin, but I can go taller, or if I've got a bucket elevator already, that sets the height of the grain bins, or maybe they have an air system to deliver the grain to. And the power companies at one time, it limited a little bit how much power you can use to start up some of the dryers, and that's where the soft starts came into play, or whether they had propane availability or if there was maybe some natural gas on larger commercial sites, they'd go with the natural gas.
At one time, you'd make product for nine months out of the year and then ship it for three months was the old days. Now, fortunately, our customers are ordering specifically for their operations, and that probably took me a little bit. There's a little bit of transformation for me. Industrial engineering, you like to have product coming all the time and constant flow, production line. And now our customers needed their dryers very specific to their operations, the grain bins, the conveyors. And so we try and make some commonality in our parts, but at the same time, when that customer orders that specific 15,000K conveyor with a 72-foot grain bin, it's going to be very specific to his needs.
Greg Schonefeld:
Places-
Steve Sukup:
And not to forget about budget. Budgets might have been in there too, so.
Greg Schonefeld:
As they always are. So, why did grain bins allow you to control your own destiny? How did that work?
Steve Sukup:
It's always been the thing, people ask for, "I want this grain bin," the size or if they have a particular brand that they want, and then the dealer would do it and then add everything else onto it. And so it was always a grain bin they would ask for first, and then the accessories would come to it before dealers might handle three or four different bin lines when there was so many out there. And now, fortunately for us, the dealers have generally locked onto one major grain bin and the ones that they like to sell. And if a customer comes in there and they might be asking for a competitor's, we believe if he comes into a Sukup dealer, there's that 80, 90% chance he's going out with a Sukup grain bin. Because our dealers are sold on, we've listened to them, we've put in the features that they like and what they think is best for their customers or long-term for their customers.
Greg Schonefeld:
This move into grain bins turned out to be a really lucrative decision for Sukup, driving 12 times growth from the year 2000. But at the time, with all the companies already operating in the space and the complications of turning your main customer into your main competitor, there were legitimate reasons why it might not have seemed like a smart bet. But the thing that made Steve go forward despite the inherent risks was a specific mindset that he brings to all of his business decisions.
Steve Sukup:
As you go into business, you see people that are afraid that they could lose, and then other folks, they're afraid that they're not going to win. But if you're playing to win, you're going to be swinging the bat, you're going to be taking chances. Occasionally you miss. I mean, that's... but you have to, okay, we're going to get a couple more strikes at us, so let's keep swinging away. And that's why I want to put us into positions and keep taking a look at it. And that's where, going back to 2000, 80% of the products we're making now we weren't making back then. It's like, okay, we got to move here, we got to move here. The ball's moving, where do we got to go to next?
Greg Schonefeld:
Well, it sounds like the grain bin then was the major domino. And did you feel like you had an edge or were you just like, we just have to do this and I don't know if we have an edge, but we have to find one?
Steve Sukup:
We didn't quite have the edge yet.
Greg Schonefeld:
Okay.
Steve Sukup:
The grain bin stored it, but we did the fans and heaters, the unload equipment, the grain bin floor. And so by taking our accessories along with the grain bin, we made it one package, one place to go. And if there was difficulties or something that didn't work right, there's only one person to go to say, "Hey, what are you going to do to make it right with us?" Now when you go to a million bushel grain bin site, everything on that grain bin site, we're manufacturing or capable to give them the whole project, and so that's been critical.
And one of the things I've enjoyed doing along the way is that not only being able to sell those products, and we've designed them for the customer, but to manufacture them. And so here in Sheffield, we've got a million square feet of manufacturing capabilities, so we had to grow manufacturing along the way. We do almost all of our own CNC machining and lathe work. We have 20 welding robotic cells for welding. We've got our own certified welding program to make the rafters for those 150,000 pound loads for the top of the peak of the grain bins. We've got half a million parts that we manufacture in our company, and so there is some coordination involved along the way as well. So we like balancing out the manufacturing, the engineering, and the sales, and they're all generally located all here in Sheffield so that we can coordinate it on a daily basis, so.
Greg Schonefeld:
Yeah, that's really interesting because I guess you've noted, I mean, how the egg world can be cost conscious. So I'm always interested and curious how companies can create edge and margin and those kind of things within that world. And I'm starting to get a picture. I mean, what you guys have put together is incredibly complex and difficult to duplicate.
Steve Sukup:
We've had great people to work with. I mean, whether it was manufacturing folks that were just on the same page with me to how can we make things more efficiently and quicker, the sales group that wants to be able to solve a customer's needs out there, engineering to be able to plug in the places of what we got to do differently. I mean, we've had two of the world's largest grain bins up to Golden Grain Energy, and we've got a new world's largest going up in Minnesota. We bring in over a million pounds of steel a week.
But along the way, 10 years ago, Andy, one of my son-in-laws, we're coming back from Minneapolis and stopped in Manly, Iowa, which is a railroad town. I go, "Man, I think we need to get some railroad for our huge coils that we bring in from the steel mills." We bring in all from United States steel mills, and so we have our own steel facility, Andy's son-in-law, my daughter Emily's an attorney and business orientated, another son-in-law, Matt's an electrical engineer, son Nick, a project manager. So it's one that have worked closely with our third generation, and then we've had key people in all our areas to keep everything flowing good.
And we've kept our dealer organization and then distribution centers. We've got distribution centers in six different states, so they stay close to the dealer and have product available for them, because when you're in that buying mode, we all go through it. When you're ready to buy something, you want it now, and who can take care of you? You've got that window to satisfy them, and that's where between our in-house sales or territory managers or distribution centers, we can generally make it happen.
Greg Schonefeld:
So, Sukup's built this huge ecosystem of manufacturing that allows them to satisfy virtually all their customers' grain storage and drying needs, and to get the equipment to them in a timely fashion. And as we spoke, one thing that was confusing to me was the scale of these bins they've been contracted to build. Why would anyone need a building to store a million bushels of grain? Well, a big part of the answer lies in the volatility of the grain business itself.
Steve Sukup:
During the course of a year, you'll get probably a 25 to 50% fluctuation in the grain price. Grain storage or grain drying on the farm gives you the capabilities to make those decisions, the marketing decisions, or when to bring in the grain. I mean, if you're a feed mill, you want to bring in lots of grain at the lowest prices, so you want capabilities that way to bring in lots of grain. If you're trying to sell it to the market, you want to have some capabilities that you can sell it in January, February or July 1st if the market breaks there. The last couple years, our marketing cycles have been a little bit out of normal, but it does give you the capabilities. And the prices have moved about 25% this past year, so that's the normal range that it will do.
Greg Schonefeld:
So that leads me to what I'm curious about next is, I guess, operating an ag business and exposure to ag, I mean, there's so much cyclicality, and your world is no different. I mean, I would imagine there's years where farmers are buying all the time. Like in the egg world a year ago, I could hardly get quotes out the door fast enough, and then the price of eggs, all time highs last year, all time lows this year, and it changes people's building habits. How do you manage that? Are there certain markets you're paying attention to or do you just have to build to be able to adapt? How do you think about that?
Steve Sukup:
Well, we do try and provide flexibility in our manufacturing to adjust, and that's why we've always tried to do most of the manufacturing of our products in-house, that we can control the quality and quantity or if we have to speed up or slow down on it.
Generally, the number one factor we watch is the amount of bushels that are going to be harvested. If we're having a big harvest year, that's generally good for our business. The type of fall we're having, if we have a dry fall, people aren't as interested in dryers for the next six months. If we have a wet fall, they're a lot more interested in dryers over the next six months, so we watch that pattern. And then the pricing pattern, and I farm as well, so with one of those, I keep track of the price of... are guys feeling like they're getting their money's worth for all the work that they're putting into the farm? Or is it the past 18 months have been a little on the tough side on the pricing and marketing, and so we're all waiting for a little bit of a jump up here, which we'll see what the carryovers are. So I'll be watching a little bit of the carryovers to see. I think we're eating up some of the carryovers. So anyway, I'm slightly bullish for some market later on this fall, but we'll see.
Greg Schonefeld:
Interesting. It sounds to me like you pay attention to the fundamentals. I guess I hear if Warren Buffet owns Coke stock, he's watching sugar prices. You're looking at all the underlying variables that a farmer's looking at, and that gives you some insight on what their needs are going to be and you can adapt accordingly.
Steve Sukup:
Yeah, no, I mean, I worry about the same things as the farmers do with the farming operation. But then on the other side, we buy lots of steel, and so we visit the steel mills. We watch the steel pricing right now, it's been staying fairly strong, and there's a good strong market for steel.
So there was a number of years ago, five years ago, steel prices tripled, but the supply and demand stayed the same, so there's no reason for it. It was some of it driven by tariffs, but this time around, steel prices have gone up about 25%, but that's generally because of fairly strong demand. So we're watching that as well as we go into next year's buying patterns of where we need to be at in the market. But everything we buy are from steel mills located in the United States, and we'll visit most of them throughout the course of the year at some point.
Greg Schonefeld:
Are you doing it all in-house or mostly in-house, on the manufacturing?
Steve Sukup:
Most of it in-house. 90% of the manufactured products we do in-house.
Greg Schonefeld:
Is that rare in your space, to hold the manufacturing like that?
Steve Sukup:
I think we're probably on the upper edge of percentage that does it in-house. We've changed a little bit along the lines with some growth and what we've had to do to add in to help some capacity. But again, fundamentally, if you can control the quality, control the quantity, you're in a pretty good situation.
Greg Schonefeld:
The story I'm learning today is, there's this period of time of the stirs and maybe three decades long of that world and picking up some other pieces in it, then the world where you jumped into the grain bins, you had the dryers, you had the grain handling and other products to fill that out. I understand there's maybe been some global expansion in there. I guess, what's next on the horizon? Is it seeing what the next major market shift is or is it just taking one step at a time?
Steve Sukup:
Well, over the last 20 plus years, we've grown 12 times larger. So we've really worked hard at that expansion and to grow between the sales and the manufacturing side of it. And we have expanded into the global markets. It hasn't been a huge shift for us. We've always done some global, we've expanded our percentage somewhat. We have a Denmark location and we actually have a partnership in the Ukraine that's still doing okay, but obviously they want the war over with.
But I see the focus with American agriculture is that we keep having to add value to our products. And so that's where, as we visit here at Sukup, what can we do next, is how can we help our customers add value? Because just to fight other countries on how many bushels you produce is okay, but how can we add value to those bushels before we export them? So, that's what I think is next for American agriculture.
Greg Schonefeld:
In the grain world, Sukup has played a major role in both drying and storage infrastructure. In the early years, Sukup was built around drying grain with stirers inside bins. But then just like the egg market, farms got bigger and demanded higher throughput, pushing beyond what the stirer could manage. Sukup saw the trend and responded first by producing their own portable dryer, and second, by making a big bet to enter the grain bin market, which was all the more complicated because it pitted them against one of their biggest customers at the time. The result, Sukup has since added products to compliment the grain bins, changing their product mix by 80% and increasing their revenue by 12 times. It's stories like these that remind me that sometimes markets move underneath you in agriculture. You have to see it and you have to be willing and ready to adapt, not only to take advantage of opportunity, but to avoid the often overlooked risk of standing still.
Steve showed what it really looks like when you're playing scared not to win. Of course, making those bets was only part of it. Sukup had to make it all work, including the engineering, the dealer network, the ability to customize for each farm, and putting together a whole lot of steel. I appreciate Steve inviting us into his world and giving us a whole new perspective on what happens to grain after it leaves the field.
So now having covered the transformation of Sukup from grain stirs to grain bins, just one question remains. Steve, how do you prefer your eggs?
Steve Sukup:
Omelets.
Greg Schonefeld:
All right. Great, solid choice. Do you have any special way you prepare that? Are you a bacon guy or a ham guy?
Steve Sukup:
Western omelets, ham and cheese and tomato and green peppers do it for me.
Greg Schonefeld:
That's a good old classic.
Steve Sukup:
That's the classic and yeah, love those.
Greg Schonefeld:
If you enjoyed this episode, please share it with a colleague or friend. Word of mouth really helps us to grow the show. And to make sure you don't miss an episode, follow us on Spotify or Apple Podcasts. Until next time, I'm Greg Schonefeld, and we'll talk to you soon.