Cooperatives: What We’ve Seen in 2014

By Dave Thomsen
  • Sales were lower, steady and higher depending on year end – grain volumes rebounded for the most part but grain and agronomy commodity prices were lower.
  • Lower grain margins; inverses and less opportunity to capture carries in the market.
  • Drying revenues up based on 2013 harvest, more agronomy acres covered.
  • Expenses continue to grow – including payroll and depreciation.
  • Local savings continued to decline compared to earnings reported in previous years.
  • Local losses. We did not see a lot of them, but due to reduced grain margins, a number of cooperatives did not have operating incomes in 2014.
  • Some uncertainty in tax planning with Congress’ inability to act timely.
  • Plenty of cash. Many of you had less debt, with more cash in the bank.
  • Continued investments in capital expenditures, increased investment in agronomy facilities.
  • Mergers, mergers, mergers. More cooperatives merged or entered into merger discussions in 2014 than we have seen in a number of years.
  • Fraud continued to rear its head in cooperatives over the last year. As companies continue to grow, and personal issues affecting personnel grow, fraud becomes an avenue that is turned to.
  • Safety has become a greater focus of our cooperative clients. More efforts and dollars are being invested into providing a safe workplace for personnel.
  • Aging workforce. Many of our cooperatives are facing an aging workforce with no succession plans being considered or in place to fill these future openings.
  • Retained earnings continue to grow. Even with increased efforts to put more equity in the member’s hands, equity revolvement, bonus depreciation and Section 199 (DPAD) continue to drive a greater percentage of total equity into retained earnings. Discussions about slowing down the pace at which retained earnings has grown were had, contemplating the increased use of qualified and non-qualified patronage.
  • Non-qualified patronage keeps coming up in discussions, with some greater use. This has varied by size of cooperative and the mix of equity; named and un-named (retained earnings).
  • Maximization of the benefit of the Section 199 deduction. The deduction continues to be a very important and valuable deduction as it is retained to mitigate taxable income, or allocated to the patron members.
  • We saw a significant volume of corn bushels bypassing cooperative elevators this fall, going to ethanol plants that have had very aggressive bids or to the farm with a drier 2014 harvest and large investments by farmers into on-farm storage.
  • Investments into technology. As our cooperative clients strive to keep up with the demands of the member, more investments into mobility and technology were made over the last year.