Episode # 2 | Looking Back, Moving Forward: CVA's 2025 Review and 2026 Outlook

Transcript of Podcast Video

Transcripts have been lightly edited for clarity and readability. 

Intro: Welcome to At the Table with Central Valley Ag, we bring transparent leadership perspectives, innovative strategies and actionable insights to help you grow your operation and strengthen your foundation for long-term success. Whether you're in the field, in the office, or thinking about what's next, this is where ideas become action. Pull up a seat - let's get started. 

Nic McCarthy: Welcome to At the Table with Central Valley Ag. I'm your host, Nic McCarthy. This is the podcast where we bring people together to talk about ideas, conversations that keep your cooperative growing stronger. As we kick off a brand new year, we're taking a look back at 2025 and what's ahead for our members and our cooperative in 2026. Joining me today is our Chief Financial Officer, Ryan Steffen, and our board chairman, Luke Carlson. Welcome to the podcast, gentlemen. 

Ryan Steffen: Thank you, Nic. 

Nic McCarthy: Let's kick it off with some introductions so the listeners know a little bit better about who we got here today. So let's start with Ryan. Tell us a little bit about yourself. 

Ryan Steffen: Yeah, Chief Financial Officer. I've been with Central Valley Ag for about eight years, had different roles. Loved my time here. Grew up in Southwest Minnesota on a corn and soybean farm. Had some beef cattle. Had about maybe a couple hundred farrow to finish hogs, and then I went to the Twin Cities to school. I didn't want anything to do with the farm anymore. I told my dad, I'm done. See you later. But you know what? The farm is in me. Here I am, back at the co-op working again. 

Nic McCarthy: You had said it was your dad's, what year of harvest this year? 

Ryan Steffen: Yeah, this was probably will be (my dad's) last harvest. He's 77, but I'm pretty sure he'll get back on that John Deere next year. My mom and I will be like, what are you doing? I thought we were done. 

Nic McCarthy: That's good. That's good that he's still going. That's a fun story. Well next up, we got Luke Carlson, board chairman at CVA, and owner operator of LTC Farms. Welcome, Luke. Why don't you give us a bit of your background. 

Luke Carlson: Sure. Glad to be here. Yeah, Luke Carlson. I've got the opportunity and the pleasure to serve as the chairman of the boards for CVA. Been on the board since about 2016. I farm in Northwestern Polk County, irrigated corn and soybeans. I have three kids with my wife, Teri, and we live here in York. So it's a little bit of a commuting farmer, but it works out all right. So I'm glad to be here. Glad to serve on the board of CVA. It's been a wonderful experience and gives me opportunities to do things like this. 

Nic McCarthy: And a hobby pilot on the side. 

Luke Carlson: Right. A little bit of that too. That's where I go to relax. Clear my mind. 

Nic McCarthy: Yeah, well, we all need that. Well, I did get a positive feedback from one of our board members about our first podcast, and I guess I did kind of forget to introduce myself in the first one. But I'm Nic McCarthy, CEO and president of Central Valley Ag, thanks to the board's confidence in me. I've been 25 years with the company. And after Carl Dickinson's retirement, I'm excited to lead this cooperative into the next chapter in the future. I did start as an applicator at CVA, so I've held about, I think, just about every role there is. Maybe not on a full-time basis, but in a fill-in basis. 

Ryan Steffen: You did accounting too? 

Nic McCarthy: Well, not really. Ok you got me on that one. But you could say that I've been involved in P&L's a lot, so been able to see a lot of things in the cooperative and just so excited that this company invests in its people and invest in its customers, and reinvestments into assets, and it's really fun to tell the story. And we've got a lot of internal promotions that happen here. So just really excited that we can continue to be successful. And we've got the company that we do, here today. - So we'll jump into what we're talking about. We just finished the Annual Meeting Monday. I want to thank everyone who came to the annual meeting. We'd put that invite out there for next year that if you haven't been to one, we'd sure love to see you as a patron. We like mingling with our owners and in sharing the success that your company had, the year that we finished and where we're going in the future. And that's where we start today's conversation at, is where did we land last year, Ryan? 

Ryan Steffen: So our fiscal year end is August 31st. I know it's been a little while, but it takes a little while to get all the numbers, but we ended up a little over $19 million, which was shy of our forecast. We forecasted about $24.5 million, but it's still quite impressive number. It was a pretty tough fall last fall - dry, fall fertilizer application was tough. Corn was dry, didn't get a lot of propane usage. We were behind shipments. I think there at one time we were probably negative about $34 million, but we are a third quarter company. Actually, last year, it was probably more of a fourth quarter company where we got $19 million. So again, it is still an impressive number, but when on-farm economics are tough, it's tough for the co-op, too. But $19 million and then total net income was $35 million which includes our regional patronage. Local income was $19 million, and then our total income was $35 million. 

Nic McCarthy: Good. Who would fall into that regional patronage bucket? I mean, we hear that from a lot of companies and who are some of the big ones that we receive patronage from like a grower would?

Ryan Steffen: That's a great question. So some of the regional patronage that we get come from CHS, come from AGP from the soybeans that we sell them, and CoBank who we do our financing with, and then Land O'Lakes. And that was about $15 million that we got in patronage like we give patronage out to our owners. 

Nic McCarthy: With good financial results, there's always the opportunity to reward those that supported the business and got us there. Luke, walk us through what the patronage payout and equity redemptions looked like this year. 

Luke Carlson: This year the board has approved roughly $15 million of equity revolvement, estate payouts and patronage. Of course, a portion of that patronage will be retained and then a portion of it paid in cash. So the board is happy that we are able to build assets and invest back in the cooperative, maintain a strong balance sheet with good working capital behind it, and then also be able to return equity, revolve equity and pay patronage to our members. One of the huge benefits obviously of doing business with a company that you own versus multi-national or private company, is that there profits are sent elsewhere. The board is very proud of the fact that we're able to remain current on our equity revolving. We just paid out 2013 equity so there is about 12 years of retained equity, which has been managed to the point where I believe it puts us in a position to continue to revolve that equity without putting the balance sheet or the co-op straining the balance sheet, or the finances of the co-op. So we're solid and moving forward. 

Nic McCarthy: One number that jumped out to me that I think is truly amazing, and obviously we've seen it with projects like Courtland Hub, the investment to buy out the 81-20 JV and Specialty Ag Formulations that we bought into that JV over in Aurora, Neb. is $106 million in capital expenditures last year. Reinvested into this company and the ability for us to serve the growers is just truly amazing. The questions that often come, 'why is that portion of equity deferred?' and really that's kind of the investment back into the assets that we hope we get to return over our five or seven year ROI. 

Luke Carlson: It goes even a little bit deeper than that. We've had the conversation in the past. It is a farmer owned business. if the farmer's held no equity in the co-op, who owns the co-op? So it's a little bit of that skin in the game. What's the word I'm looking for? It's intentional that we have retained equity, we are owners of the co-op and that's our skin in the game. So yeah, all of the above is what makes a co-op work. 

Nic McCarthy: Well, Ryan, as you shared with us the results from 2025, what does that do to the strength of the balance sheet of Central Valley Ag?

Ryan Steffen: The strength we had on a balance sheet, it remains strong with equity or with a net profit of $19 million that just goes right back to the owners. We did have to take out some debt this last year, an additional $60 million. Predominantly to finance some of the investments of the $106 million. but even with that said, our long-term debt to our equity is still really low. It's about 15.7% and based on industry standards we are on the lower end, so still very, very strong. We have a lot of equity built up and to keep on going. 

Nic McCarthy: I think this is the first time in a few years that we've had long-term debt. We had operated quite a few years, but obviously with the opportunities that came with the projects that we had needed to step in - $106 million spent, take $65 million out, it is understandable that we needed to step out there a little bit. 

Luke Carlson: And don't forget, we spent $106 million this year, but $90 and some change the year before, and we were investing the year before that, which has all been paid basically out of our working capital. 

Ryan Steffen: $264 million over the last three years. I had to double check this year. I thought last year was a big year, but $264 million with just taking $60 million in debt. That's pretty good. 

Luke Carlson: And a lot of times when you think you buy a farm, and it's a 30-year and, in my farmer mind, when it comes to the co-op world. How many years did we stretch that out, the $60 million?

Ryan Steffen: About 5 years. 

Luke Carlson: We'll have that paid in five years. It's not a bad thing.

Ryan Steffen: These assets will be here for a long time. Courtland Hub will be here 30, 50 some years. 

Luke Carlson: Right, and investing in communities and places that otherwise might not be invested in. We're building some of these assets in areas that you might not have a private or a multinational putting these assets in for the benefit of the farmers in those areas. And if we place them right, they'll be there. Like you said, Ryan, they'll be there for a long time. 

Nic McCarthy: It's hard when we look at the landscape and a lot of times we talk about the companies that are not cooperatives and the hurdle rates for publicly traded companies are a lot higher than what our cooperative board and farmers hold us to. And a big part of that is the co-op takes a stance of, and Carl Dickinson always said, there's an economic and social responsibility that your cooperative has to play. And I think we saw that this harvest. We were taking grain when other companies had decided to shrink hours or not be open at all. And that's kind of a social side to it. We had the responsibility to the farmer to let him continue harvest, and we put a lot of grain on the ground. But when you look at building and reinvesting in business, a lot of companies see the rural areas shrinking, and it's hard for them to say I'm going to get that economic return for putting a facility in a Courtland, Kansas or a facility in Narka, Kansas. And it's really the reinvestment into what your owners want and what we can service them. And that's the true power of the co-op. So it is really neat to see it at work. Well, let's dive into the annual meeting recap. Luke, we had board election updates that we should inform the membership. 

Luke Carlson: Absolutely. We did have an opposed race in Region 5. Chris Luethji ran to retain his seat on the board and then Andrew Holtorf also ran in Region 5 for the board of directors as well. Chris Luethji was successful in his run for reelection. So I'd love to congratulate Chris. I look forward to working with him for the next several years. And I thank Andrew for running for the board. It's a difficult task to get people to commit to run for the board of directors. It's a very rewarding experience. I would encourage anybody who's thought about it to reach out to a director and ask about it. It's a wonderful experience. And then also Julie Ruhter from Ainsworth has served on the board for several years. She came by way of merger with the Farmers and Ranchers and then continued to serve on the Central Valley Ag board. She decided that she was not going to rerun. So Paige McNeill from Valentine ran to represent Region 10. And so I look forward to working with Paige. Want to say congratulations to him. I got a chance to meet him and get to know him a little bit the last couple of days and I think he'll do a fantastic job. 

Nic McCarthy: He'll represent that region well. He seemed like he was pretty engaged in the cow-calf operation out there so it'll be a good transition. 

Luke Carlson: We definitely want diversity on our board geographically and practice wise. A cow-calf ranch out in western Nebraska is a lot different than a wheat farmer in Kansas or a corn farmer feeder in Northwest Iowa. That's very important in a board room that we have good representation from all areas of our territory. I think we do a good job of that and we have a fantastic board. 

Nic McCarthy: I would tell you the power of having representation from each one of those regions is oftentimes the worry or the question that we get that we're getting too big, and we don't have that local feel. And really we want to continue to have that local voice. And CVA's board is a big board when you look at our structure, but I don't think for the voice of our farmers and our voice of our ranchers and the voice of our livestock producers, we would want any smaller because we have 10 regions and we need local representation to let us know where are the gaps. Where do you want to see us reinvest, where do we see the puck going to next that we need to skate to? So I would agree with you. 

Ryan Steffen: There's 22 directors, right? 

Luke Carlson: Correct. There are 19 elected directors and then we have three associate directors. So it works very well. 

Nic McCarthy: And good representation of voices. Luke, as you look back at your experience on the board, what's been the most surprising thing?  

Luke Carlson: Oh boy. Well, the first couple years you're there, you're just trying to comprehend the size of it. But really what the board of directors is and what I envisioned it to be are completely different. We deal a lot with financial end of things, employee benefit packages, health insurance and retirement. And we don't get down into the day-to-day operations of the cooperative. Of course, we want to make sure that everything's going smoothly that way, but so the biggest surprise to me is really the breadth of stuff that this board handles and deals with, which just as a farmer, you don't realize how much stuff is going on and how many moving parts there are to this business. 

Nic McCarthy: Probably didn't realize you were going to stamp $106 million of spending in capital expenditures? 

Luke Carlson: Right. You got to go to a different place. You got to put your mind in a different mindset when you're dealing with those kinds of numbers. And I know, Nic, I've made this comment to you as the farm economy tightens, I've noticed, so does the cooperative business. They follow hand in hand. So as a farmer sitting on a board of directors where maybe in your own operation you're little pinched up a little bit and you're in conservation mode, you're not spending money, you're trying to pinch every penny, and then you go into a boardroom where you've got to keep moving forward and it gets a little bit uneasy because you're talking about making these big investments and on your own operation things are pretty tight. So you really have to be conscious of what is best for the cooperative, where the money is best spent, and realize that with the strength of our balance sheet, we have the luxury really of being able to make these investments even when times aren't as good. Ryan, you alluded to it, it was a grind last year and from the top to the bottom of the co-op, everybody worked to get to that $19 million last year number.  So just the overall scope and scale I would say was the biggest surprise to me. 

Nic McCarthy: One question I think that comes up a lot is around the forecast and how do you guys come up with the forecast an all that. And really, without getting too deep and too far into the weeds. We think about three core things and that's paying back our debt back to CoBank and equity to our farmers, returning cash in patronage and really reinvesting in the business. And that's replacing assets, replacing equipment, doing those things. And really that's how the forecast comes about. So when we talk about, and you Luke, talked about pinching up a bit on what we spent, but with us missing last year's forecast, we may not be able to reinvest as much this year into assets. We've got an approach to your point, every opportunity and really put the ROI to it to continue to pay dividends and continue to pay growers back. So well, I'm going to try to get us on the descend here. Any closing comments that you guys had that really stick out from 2025 as we close the books and move into 2026? 

Luke Carlson: I'll start by thanking our members, our patrons for the business they do with the co-op. Remind them that ag is a cycle and we're obviously in a downturn in ag. Things will turn around, things will get, I hope, things turn around and things will get better. They always do. You just got to know your numbers, know where you're at, make smart decisions, and we will get through it. So just everybody's kind of in the same boat. And I think, Nic, you will talk a little about some help we have available for people who might be struggling so we'll get to that. 

Ryan Steffen: I wanted to thank our people too at CVA for all their hard work. We shipped a lot of bushels this last year and the hard work that our employees have, their innovative spirit of saying 'how can we do things better? how can we do things cheaper?' Always just kind of putting CVA first. These are the group of people that I like to work with, that we like to work with. So I just want to say again, thank you for our people and we are ready for this next year. 

Nic McCarthy: For sure. I would like to thank both our members, our patrons and our people. It was a testament to a tough 2025, but we got through it together. I think this harvest was a really good snapshot of the culture and the spirit of your cooperative here , and we just wanted to do everything we can. Grower-wise, we knew we had a crop to get out, and as far as your co-op, we knew we needed to take the grain and a lot of hard work went into that from our employees. As Luke mentioned, we are extending out and launched a program called Solid Ground. We are extending our employee assistance program, basically making it into a patron assistance program. What this involves is if you're having some challenges on the farm, whether it be mental, financial and need to talk to somebody in total confidentiality, you can reach out to our EAP program, which is employee assistance program, but this would be from the grower side, totally confidential. It's complimentary. Three hours of counseling that can be used. If you need more, they'll help set that up. But definitely we've had some challenges in some areas and we just want to open that up. We were able to negotiate a deal with our partner that provides it for the employees, and we're opening it up to our patrons. Don't be afraid to use it. Solid Ground - it's on the website, and if you need to use it, feel more than welcome to do it. So that's going to wrap us up for today. I want to thank everybody for joining us at the table with Central Valley Ag. I want to thank my two guests, Ryan Steffan and Luke Carlson, for joining me to discuss the cooperative as it continues to grow stronger together through sound, financial performance, member returns and shared return commitment to serving our producers as we move into 2026, we're excited about the opportunities ahead and grateful for your trust and partnership. I want to tell you have a Happy Thanksgiving, a Merry Christmas and thanks for listening. 

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