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Honored Advisor

Coop Financials

It`s hard to easily compare apples to apples of one year to the next with the elevator mergers and site acquisitions, but a cliche over the years has been "We`ve had a  record year!" and all 3 or 4 competing coops in the area make the same claim at their annual meetings.

Then these days you add farmers who as a side gig sell seed, chemicals and have gotten into fertilizer sales and applications.  They under cut the coop on price, if you spray your own you can`t afford to pay coop prices.  And those farmer/dealers also seem to have a "record year!" also every year.

I`m looking at a 2020 annual report from a local coop and fertilizer sales, seed sales were a recent year record as was "total sales" for the fiscal year.  Feed sales took a real hit, diesel gallons was down.  Propane up (with the wet 2019 crop). 

With seed they sell 2nd tier brands, but apparently they`re selling the hell out of them.  Fertilizer was cheaper and reportedly cheaper for next year, the early threat of $2 corn didn`t have anyone cutting rates.  

5 Replies
Veteran Advisor

Re: Coop Financials

BA, I used to sell seed for additional income. Selling seed saved me money on inputs and also put me in touch with other farmers. I ended up renting ground from 2 of my customers that were ready to retire. I sold seed for Brodbeck (Dow agriscience) before they merged with Dupont. I then sold Seed for Great Lakes Hybrids before the brand was retired. The last year I farmed I sold LG Seeds. It was a good experience (selling seed) for a while but it took a lot of my time. I worked full-time in a warehouse, farmed, and sold seed. I haul pigs for a living now and make more than I did in all three of those jobs combined. I miss farming though. 

Honored Advisor

Re: Coop Financials

Hi Blacksand, I think keep your powder dry and there may be opportunities to get back in farming for pennies on the dollar.  If there aren`t, you`re ahead of the game for not having thrown good money after bad.  

It feels like a paperclip being bent one way, then the other in farming.  We resign ourselves to low prices, then out of nowhere we get a $1 rally in beans and 50¢ in corn, but we say "yeah but, next week we`ll give it all back".

The thing always has been in farming is debt, if you don`t have it, farming is fun.  I remember the infamous 1980s, we had no debt and times were actually good.  Now low interest doesn`t matter if there`s no profit to service the debt.  This too shall change.  

I just don`t know if this is the "big one" where the independent farmer gets pushed out or if that happens decades down the road.

Stick with it, we`ll figure it all out.  We always win cause we never give up   Smiley Happy


Honored Advisor

Re: Coop Financials

BA.  The debt statements are right on with one issue.  If that debt creates Income beyond debt service why not.  For instance custom harvesting to own a combine etc etc. 

coops survived as a group of producers supporting business to supply a common need.   Once that management gets bigger than the local community the common needs are not the driving force.   It becomes stock ownership in a distant business like gmc .  Now if the stock isn’t proforming(providing the stock owner income) sell it or at least see it for what it is— gone. Or at best one of your business choices—-they usually are not competitive in the market and try to ride the old “loyalty” system.  But that system died when they merged. 

Point is financial reports of coops become very muddied by the merger process and comparisons of reports year to year become nearly impossible or very misleading   Assets reported, inventory reported - even sales and expenses can be shuffled.  Short— an auditor is always needed and seldom there.  

Most customers move on and they get run by their grain buyer. 

Honored Advisor

Re: Coop Financials

SW, there`s one coop that I`m a member that tries annually to merge to "get a better deal on inputs"  they have oh about 60 sites, but somehow merging up to 80 sites, they`ll sell us inputs cheaper?   Well, it didn`t work when they went from 5 sites to 10 to 20 to 60.  If I buy a Resicore chemical program from them it`s $35/acre plus application, if I buy from the rinky dink Titan farmer dealer down the road it`s under $25/acre...they can`t compete with a rinky dink farmer/dealer out of his machine shed!  But "let`s merge and grow our sites to 80 and boy we`ll save you money then!".  

With coops all "having record years" I don`t know perhaps fertilizer and chemical sales include application?  There are more & more older farmers that don`t want to mess with chemicals and don`t have the acres to justify a Miller Nitro with a 120 foot boom. 

The "Readers Digest" report to the members doesn`t tell the whole story   Smiley Happy

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Honored Advisor

Re: Coop Financials

Financials are hard to diagnose.. I know how good Arthur Anderson was and look what Enron was hiding from them.  

There is one advantage.  Excellent talent in herbicide/spray/agronomy and cost management is hard to find and when paid well, spread too thin is still a problem— they go where the money leads.  So often when you need services, size still matters- bigger needs bigger in more ways than one  

it will take us producers a few years to recover from the last 5 years —- if markets improve.  Farmer owned coops swim in the same financial waters we do.

they have followed the same size integration that farm numbers have . 

Less than ten years ago most coops were in severe stress when markets ramped up and hedges took much more funding—their recovery is not complete either — even if it is being shared by a bigger area. 

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