Cooperatives – What we’ve seen in 2025

Cooperatives

Jim English, CPA, Partner

TOUGHER TIMES FOR COOPS!

2025 was down year for most coops. Those coops that managed to be profitable saw decreased earnings, while many coops recorded local or in some cases overall losses. Commodity prices continued trending downward leading to a noticeable drop in overall sales revenue.  Unlike in 2024, earnings seemed to follow revenues. For the most part, decrease in earnings came from increases in expenses and loss in service revenue particularly in grain sector.

Here are more 2025 highlights and trends:

Income Statement:

  • Sales Revenue: As anticipated, sales revenues continued to decline across key sectors—grain, feed, agronomy, and petroleum. Largely, a factor of declining prices as volumes stayed pretty consistent.  One area of volume decline was on crop inputs particularly dry fertilizer and chemicals. A result of lower commodity prices. Farmers had to find somewhere to cut back on costs. The higher grain prices in years past has afforded farmers the ability to be aggressive in applying dry fertilizer. Hopefully, that will help carry them through. 
  • Grain Margins: Grain margins remained consistent with the prior year, but gross revenue dropped substantially, as most areas suffered from very little drying revenue and a steep decline in storage revenue. Storage revenue was up significantly last year as farmers stored versus selling as commodity prices declined, but as commodity prices continue to be depressed, farmers couldn’t continue to this strategy and opted to make sales even with smallest of rallies in the market.
  • Agronomy Margins: Agronomy margins on a per unit basis remain fairly strong , but not nearly to the extent we saw when grain prices were higher. This trend reflects a return to more typical pricing after the spike seen in recent years.
  • Petroleum Margins: Gas, diesel and propane margins remained similar to the previous year, indicating stability in these sectors. However, gas and diesel volumes are trending down. Gas due to improved fuel efficiency and the increase in electric cars. Diesel down due to fuel efficiency and less passes across the field trying to cut costs. Despite decreased drying, propane volume rebounded in 2025 with winter not near as mild as prior year.
  • Operating Expenses: Operating expenses continue to climb. However, a transformation in expenses that increasing and those that are flattening. After several years of increases of 6-10% in personnel costs, finally seeing that slow down to half that pace. However, that being more than offset in increased interest costs and other fixed costs.
  • Fixed Costs: Fixed expenses, including depreciation, property taxes and insurance continue to rise at a rapid pace. A result of companies continuing  to invest resources in size and speed to enhance operational efficiency and competitiveness. Insurance premiums are trending upward despite higher deductibles and decreased coverages.  Captive insurance companies have become popular as coops look for ways to combat these rising insurance costs.  The positive impact of these capital improvements is that it appears that repair costs are flattening and even declining in some cases.
  • Interest Rates and Financing: Interest costs, despite rates starting to come down, were up significantly for most companies.  Combination of the capital projects being completed and farmers selling their crops in such a way that it took some time for coops to execute their own sales plans.
  • Patronage Income: Much like the local coops, the regional coops took a step back, as a result, patronage income was received was down substantially.  For some coops this can be very significant to their overall net savings.

Balance Sheet:

  • Cash Balances: Heading into the 2024 harvest, cash balances were higher than in previous years. In 2025, cash amounts were more typical and much more debt.
  • Fixed Assets: Property, plant, and equipment spending continues to be strong. Cooperatives have determined that they can ill afford to fall any further behind in their ability to stay efficient and competitive while adequately serving their members’ needs.
  • Liabilities: On the liabilities side, the increase in debt was notable. Prepaid sales are lower as farmers are holding off on prepaying next year’s inputs at a time with so much uncertainty on not only in their local environment but the global stage.
  • Earnings Retention vs. Allocation: Discussions around earnings allocation have shifted towards retaining more of the current year’s profits. This is largely due to the need to reinvest in facilities and systems that improve size, speed, and efficiency—key factors as farmers continue to scale up their operations. This is a repeat observation, but is even more true in 2025.
  • Working Capital: With declining income, comes less working capital. This impacts coop’s ability to continue its long-term capital expansion plans, amount of equity that can be allocated to members and old equity that can be redeemed.  Most coops have built up a strong balance sheet over the financially successful years and have the capacity to borrow long term money if necessary. 

Conclusion – For the first time in several years, we saw cooperative financial results take a collective step back. A by-product of low grain prices is tighter margins on crop inputs. Combine that with increased interest and fixed costs and sharp decline in service revenues related to grain and we have the results we have seen in 2025. Margin structures need to be revaluated and adjusted as expenses continue to rise.  As always it will continue to take the great, concerted efforts of employees, management and Boards of Directors to navigate these rapidly changing times.   As always, we remain committed to partnering with you to navigate these challenges and seize opportunities ahead. 

 

 

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