MANAGEMENT TIP
Bottom line continued to rise in '98 for large corn-soybean and wheat-barley co-ops
By David Cummins,
Agricultural Economist
USDA Rural Development
et savings averaged higher in 1998 than a year earlier for large local grain co-ops in the Corn Belt and Pacific Northwest, despite substantially lower prices received and higher operating expenses.
Major income boosters included increased farm supply sales and margins, service revenue and non-operating income. The latter two income sources were particularly important in the Pacific Northwest (where wheat-barley co-ops predominate). Significantly larger grain volumes marketed by these large grain locals in 1998 more than offset 2 1 -percent lower grain prices.
This was not the situation for large grain locals in the Corn Belt, where corn-soybean co-ops are most common. In the Corn Belt, grain dollar sales were slightly lower, even though marketings averaged 15 percent higher.
For medium-sized grain locals, the bottom line was about 8 percent lower in the Corn Belt, still respectable, but plummeted nearly 80 percent in the Pacific Northwest. Grain marketings were up in both areas, but not nearly enough to compensate for lower prices. This was particularly the case for the medium-sized wheat-barley co-ops, where grain sales and grain margins were off 8 percent and 13 percent, respectively. Loss rates for the medium-sized co-ops in 1998 were about double 1997s rates, from 6 percent to 12 percent in the Corn Belt and from 12 percent to 29 percent in the Pacific Northwest. In contrast, comparable loss rates for the large locals were 7 percent to 3 percent and 6 percent to zero, respectively. Total assets and member equity averages were higher across the board. Except for the large wheat-barley co-ops, member equity was a larger percentage of total assets in 1998 than in 1997.
Benchmarking your co-op
Benchmarks are common in business management to measure how well your cooperative is performing. However, such figures don't reveal how your cooperative compares with others.
If your cooperative is primarily a first-handler of wheat and barley or of corn and soybeans, comparative data for 1998 are now available. Tables 1 and 2 contain average financial and structural data compiled from a survey of Pacific Northwest and Corn Belt cooperatives marketing wheat and barley and corn and soybeans, respectively.
Most cooperatives in the study were diversified, also handling farm supplies and providing related services. Fill in the blanks and see how yours measures up.
MANAGEMENT TIP
Plains co-ops experience ups and downs in 1998
By David Cummins,
Agricultural Economist
USDA Rural Development
ecord-high sales levels set in 1997 slipped in 1998 for first-handlers of grain in the Northern Plains, where wheat-barley-oats co-ops are prevalent. Grain volumes were up, but prices continued their downward slide, resulting in lower grain revenue. Farm supply sales also were lower, particularly for large grain co-ops.
Once again, large grain co-ops in the Northern Plains fared better in 1998 than did medium-sized co-ops. Despite declines in net savings of 17 percent and 27 percent, respectively, net savings in 1998 averaged 91 percent of the most recent five-year average for the large co-ops compared with 51 percent for the medium-sized co-ops. For the large grain co-ops, gross income was about the same in both years, but total operating expenses averaged about 5 percent higher. Increases in grain margins and non-operating income essentially offset decreases in farm supply margins and service income.
For medium-sized co-ops, gross income averaged over 7 percent higher in 1998, but total operating expenses were up nearly 14 percent. Increases in grain margins (31 percent), service revenue (15 percent) and non-operating income (6 percent) more than offset the 2 3 -percent-lower supply margins.
Eleven percent of the large grain co-ops reported small losses for 1998, while 17 percent would have incurred a loss (averaging nearly $60,000 per co-op) if it hadn't been for patronage income received from other co-ops. Nearly 2 3 percent of the medium-sized co-ops had losses, averaging over $114,000 per co-op. Another 23 percent would have had losses (averaging about $89,000 per co-op) if it hadn't been for patronage income.
Southern Plains co-ops
The Southern Plains wheat sorghum co-ops set record-highs in 1998. Net savings for the large grain co-ops averaged $842,467, nearly 28 percent higher than a year-earlier. Net savings for the medium-sized co-ops averaged $262,269, over 37 percent higher than in 1997. Increases in service revenue and grain margins were key factors for both large-and medium sized co-ops. Despite substantially lower grain prices in 1998, grain volumes marketed were up 11 to 12 percent. That resulted in grain sales averaging about three percent lower for large co-ops and about two percent higher for medium-sized co-ops.
The incidence of losses among wheat-sorghum co-ops was low (about 2 percent) compared with that in the Northern Plains (18 percent). No losses were reported by the large co-ops. Overall, fewer than 5 percent of the co-ops would have had losses if it had not been for patronage income received from other co-ops.
Adjustments by producers to weather conditions and changing relative prices in 1998 were reflected in the proportion of grains marketed by their co-ops. There was a general shift from grain sorghum to wheat by the medium-sized and large co-ops in the Southern Plains, and also to corn by the large co-ops. The major shift for the Northern Plains wheat-barley-oats co-ops was by the large ones, away from wheat and towards "other crops" (mainly oats, sunflowers and rye), a trend that began in the mid- I 990s.
How does your co-op measure up?
Benchmarks are common in business management to measure how well your cooperative is performing. However, such figures don't reveal how your cooperative compares with others.
If your cooperative is primarily a first-handler of wheat and sorghum or of wheat, barley and oats as its major function, comparative data for 1998 are now available. Tables 3 and 4 contain average financial and structural data compiled from a survey of Southern Plains and Northern Plains cooperatives marketing wheat and grain sorghum and wheat, barley and oats, respectively. Most cooperatives in the study were diversified, also handling farm supplies and providing related services. Fill in the blanks for your cooperative and see how it measures up.
