Cooperatives- What We’ve Seen, What We Expect

By: Dennis Gardiner, Partner email

What an extraordinary year! This year’s audits were some of the most interesting we have seen in a long time.  Many of you enjoyed extremely successful years by capitalizing on all of the positives in the short list above.  While others not so fortunate were negatively affected by some of the events, a few managed to successfully straddle their ups and downs and come out even. We foresee some substantial challenges for you as the upside of many of last year’s events turn the other direction.  When taking all of this into consideration, we need to emphasize the significance of risk management.  Unfortunately, finding a means of achieving that is the greatest challenge.  Further, these times illustrate the importance of building a strong balance sheet, which has been a goal of GT for all of our cooperative clients.  We wish you the best as you navigate your companies through these challenging times and as always, are here to assist you.

Interesting Events of 2008

  • $7 Corn, $14 Soybeans and $25 Wheat
  • $1,000 Fertilizer prices
  • Fuel prices that came just short of $5 per gallon
  • Margin calls stretching the availability of credit beyond the limit
  • Regulatory concerns over a never-used Equity to Total Debt Ratio (Iowa)
  • Sales of FC Stone stock buoying the earning
  • High regional earning
  • Wet Spring and Flooding
  • Several ethanol plant and bio-diesel plant closures/failures
  • Return of Bonus Depreciation for certain assets
  • A timely and significant tax savings, utilizing Section 199 (Qualified Domestic Production Activities Deduction)

Challenges for the Future

  • Volatile grain markets
  • Falling fertilizer prices and potentially soft demand
  • Fast dropping fuel prices
  • Large grain harvests
  • Return to normal hedging activity
  • FC Stone stock price dropping
  • Stock market decline challenging pension plans’ funding
  • Tightening credit availability