Cooperatives–what we’ve seen in 2015

By Dave Thomsen
  • Sales dollars decreased considerably with lower grain and energy prices.
  • Better corn and bean margins on steady to lower volumes. Agronomy margins down on steady to lower tons. Energy margins up slightly on steady to lower volumes – propane volumes down considerably with drier 2014 harvest. Feed divisions showed improved results.
  • The drier harvest led to much lower drying revenues this past year as well. Steady to lower grain volumes meant steady to lower storage revenues. Fertilizer service income steady to lower, consistent with volumes.
  • Payroll expenses higher even though year-end bonuses were down. Hours and overtime increased, with a stronger emphasis in sales personnel. Personnel costs became a bigger share of gross revenue. Depreciation expense increased – significantly for many, a result of all the new construction the past several years. Construction continues.
  • Accounts receivable balances were lower based on lower sales prices, but ageings deteriorated and bad debt losses increased. Some places saw significant write-offs – something we haven’t seen for a while.
  • With steady to lower revenues and increased expenses, local earnings decreased compared to 2014. We saw a few more local losses.
  • Equity redemption remains a priority.
  • Not much change in allocation philosophy – most companies are still taking advantage of the Section 199 deduction internally, so allocations are still reduced. A few more considering non-qualified patronage as a part of allocations.
  • Large amounts of earnings still being added to retained savings. Combined with equity redemptions, the ratio of allocated to unallocated portions of member’s equity continues to widen in favor of unallocated.
  • Continued investment in capital expenditures, considerable emphasis in agronomy facilities.
  • Many mergers occurred – many mergers still being considered.
  • Several long time managers retired this past year. Increased interest in succession planning.
  • For our Nebraska cooperatives, the end of an era. A change in leadership at the Nebraska Cooperative Council. After more than 42 years, Bob Andersen announced his retirement effective in early 2016. Thanks Bob!