Cooperative Trends of 2010 – What We Have Seen

By: Dave Thomsen, Partner |  email

• Clients were more profitable in 2010 compared to 2009. Depending on year end, local savings was much better in 2010 than 2009, but not back to record 2008 levels.
• Increased grain and agronomy volumes, lower prices.
• Agronomy margins improved and were closer to historical averages, prices stabilized.
• Wet 2009 harvest led to substantially higher grain drying revenues in 2010, however grain quality became an issue.
• Clients with November 2010 through January 2011 year ends saw an excellent fall fertilizer season that will increase local savings.
• With lower prices, borrowing was down, and with low interest rates, interest expense was down, sometimes less than half of 2009 totals.
• Accounts receivable ageing generally improved.
• Build, build, build! Many clients spent substantial dollars for fixed asset additions, primarily grain and liquid fertilizer storage facilities. It appears these additions have been good investments.
• The recent trend to build retained savings and the company’s balance sheet continued, aided by the benefits of the gross domestic production deduction (Section 199).
• More clients began to allocate the benefits of Section 199 to their patrons. This was largely caused by the cooperative’s inability to use all of the benefit due to lower earnings.
• Some clients have begun to allocate a mix of patronage and Section 199.