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NW Illinois | So in the thread you bounced through several points. I’m responding as a former 23 year coop employee. Last 12 I was an agronomy facility manager and last year there, I took on management of a second agronomy location with 3 grain sites and a feedmill. I left the system at the end of 2016 under my own will because I disagreed with mid management decisions negatively effecting it customers (owners).
Value of an owning storage vs. coop.
While money is a unit of measurement it can’t be used to value between the two easily. Reason is every farmer has a different cost per bushel throughput on their own setups so you really can’t measure it against coop cost.
How I judged if my coop was providing value. Intake during harvest, if a truck was in line more than 15 minutes lot in to lot out, we were likely slowing our customers(owners) harvest. This is corn and soybean only territory. How much “margin” is made should cover cost to do this and maintain storage, including labor and equipment/facilities. There’s no definitive margin number but real cost to assign, measured over years of known data and budgeting. Outbound grain. My opinion a good run coop should mirror the best bid within say 50 miles minus cost of transportation. How I measure transportation is what I would pay an outside sourced truck to haul it(known cost). If a coop’s board wants to make a couple extra pennies a bushel to be directed to meet future member needs, I am fine with it as long as those monies actually get used for that purpose.
Worst version of a coop to me is one that takes good grain in from its members, handles it badly after. Letting it spoil, then takes more margin to cover the loss.
Should a coop diversify, like offering health insurance.
I have no problem with it, as long as it’s not robbing monies from other business units to support it. Example is, the original coop (pre merger) I worked for had a decorating center(carpet, window treatments, paints, etc.). It was used heavily by members and nonmembers in the community. Non member income was profit retained within the coop. It was as profitable as any agronomy location within our organization.
Should a coop pay patronage.
Patronage is a return of excess profit made during the fiscal year. I would prefer a coop pay as little patronage as possible and do a better job pricing up front. I prefer a coop that frequently repays retained members equity instead of one that just keeps it virtually till payout at death.
Contractual agreements.
I’m going to bring up a point about anhydrous ammonia specifically that most farmers don’t understand, whether at the coop or private retail.Fall anhydrous is bought at summer fill time(July timeframe). Contracts are signed by agronomy companies to suppliers. These contracts almost always carry a December 31 pull date, not a contract cancellation date but pull date. Anhydrous is unique in the US farm community because unlike many other fertilizers, our ability to hold in country storage is today probably still less than 1/3 of what is used in the fall in total. This is important because if a fall doesn’t go as planned and AA contracts are not pulled by December 31 the seller to the retailer gets to choose the next action. 3 things can happen. 1. Nothing happens and the contract becomes valid for spring use at the contracted price. 2. Contracted price stays valid, but seller charges monthly storage fees. 3. Contracts are terminated. 3 happens when sellers know they can resell it Jan 1 for spring for more money than it was wrote for in the previous July period. 1.happens when spring price looks to be softer than fall price, essentially sticking the retailer with higher priced tons to move versus a better positioned competitor.
I am a diehard coop guy, from the era of operation in 70-80’s, because I started there at 19 in 1994, working under 50-60 year olds who were running them. I don’t fit in the modern systems most have in place today. | |
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Margins
