MANAGEMENT TIP

Net savings dipped in 1999 for most corn-soybean and wheat-barley co-ops

By David Cummins,
Agricultural Economist
USDA Rural Development

et savings averages were generally lower in 1999 than in 1998 for local grain cooperatives in the Corn Belt and Pacific co-ops in the Corn Belt. This was primarily because of continuing declines in grain prices and higher operating expenses. Lower net savings in 1999 was reported by 64 percent and 62 percent of the large and medium-sized grain co-ops, respectively, in the Corn Belt. Comparable percentages for die Pacific Northwest were 70 percent and 25 percent. For medium-sized local grain cooperatives in the Pacific Northwest, the plunge in average net savings that occurred in 1998 was reversed in 1999, largely because of poorly performing co-ops going out of business. Positive factors on the grain income side were increased grain volumes marketed and improved grain margins and margin rates.

Farm supply sales and farm supply margins and margin rates were higher in 1999. Except for the slight increase for the medium-sized grain co-ops in the Corn Belt (where corn-soybean co-ops predominate), total sales averages were lower there and in the Pacific Northwest, where wheat-barley co-ops are most common. The most damaging negative factor was the sharp drop in commodity prices in 1999. The weighted averages of prices received by large and medium-sized local grain co-ops in the Corn Belt were 21 percent and 23 percent, respectively, lower than in 1998. Corn, oats, wheat and soybean prices ranged from 19 percent to 26 percent lower. Comparable lower weighted averages for grain co-ops in the Pacific Northwest were 15 percent and 13 percent. In fact, weighted average prices received by local grain co-ops in both areas in 1999 were the lowest since the mid-1980s. Loss rates for the medium-sized co-ops in 1999 were about the same (about 12 percent) as in 1998 in the Corn Belt and sharply lower in the Pacific Northwest (29 percent to 12.5 percent). In contrast, no losses were reported in both years by the large co-ops in the Pacific Northwest and the rate rose only slightly (from less than 3 percent to over 4.5 percent) in the Corn Belt. Total assets and member equity averages were higher in the Corn Belt. For wheat-barley co-ops in the Pacific Northwest, total assets and member equity averages were higher for medium-sized co-ops, but lower for large co-ops. Total debt averaged higher across the board in 1999, and represented a significantly higher proportion of total assets for corn-soybean co-ops than for wheat-barley co-ops.

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 1999 are available below. Tables 1and 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.

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