Cooperatives – What We Expect To See in 2013

By: Dennis Gardiner, CPA, Partner|  email

• Short crop and free storage programs will have an impact on future operating results.
• Reduced local income; possibly some local losses. Regional income even higher than last year. Tightening of belts, particularly for expenses.
• Continued investments in grain storage, fertilizer plants and feedmills, but a tempering of asset additions if the drought continues.
• Continued use of 50% bonus depreciation.
• Maximizing the benefit of the domestic production activities deduction (Section 199), which will have many different applications. Several will still retain the benefits, but more will allocate the benefit to the patron members.
• Continued growth in the use of non-qualified patronage allocations.
• Returning more earnings to the patron-owners than what has been done in the past few years; revisiting the question: “how much retained savings is enough?”
• More conversions to “limited cooperatives” (501A in Iowa/308B in Minnesota), or finding other avenues through the articles of incorporation and by-laws to allow for preferred stock, and potentially, outside equity.
• Cooperatives will look to outside equity to maintain a strong balance sheet; provide more borrowing ability or to fund capital expenditures.
• Greater use of technology in delivering services and communicating with patrons.
• More merger and joint venture discussions; leveraging the strengths of each cooperative for the benefit of both.
• Continued struggles in finding and retaining experienced staff.
• Changes to the audit opinion report – stay tuned!