University of Wisconsin Center for Wisconsin Rural Cooperatives, November/December 1999, pp. 28-29.
Published by the Rural Business and Cooperative Development Service 

Plains co-ops experience ups and downs in 1998

By David Cummins

Ag Economist
USDA Rural Development



Record-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 23-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 23 percent of the medium-sized co-ops had losses, averaging over $114,000 per co-opt 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-1990s.

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.

Table 3 - Compare your wheat-barley-oats cooperative with averages for similar cooperative operations
Total sales group (million dollars)

Group/Item Unit 5-14.9
(1997 Data)
15 or more
(1997 data)
5-14.9
(1998 Data)
15 or more
(1998 Data)
Your
Cooperative
Storage capacity Million Bu. .613 1.772 .661 1.843
Grain marketed Million Bu. 1.814 6.423 1.888 6.768
Turnover rate Times 2.96 3.62 2.86 3.67
Proportion grain Percent 79.4 82.1 79.0 84.6
Total assets Million $ 2.776 11.941 3.068 12.611
Long-term debt 1/ Percent 4.4 6.5 7.5 6.9
Member equity 1/ Percent 49.1 40.4 46.5 41.6
Total sales Million $ 8.704 28.798 8.430 26.573
Margins on sales Million $ .415 1.690 .436 1.740
Total expenses Million $ .522 1.850 .593 1.940
Net savings(losses) Million $ .097 .555 .070 .462
Labor of total expenses Percent 43.8 45.4 43.7 45.3
Net savings paid in cash 2/ Percent 34.5 28.3 36.9 29.0
Current ratio Number 1.35 1.18 1.33 1.17
Debt/assets Ratio .09 .13 .11 .11
Net savings(loss)/total sales Percent 1.1 1.9 0.8 1.7
Gross margins/total sales Percent 4.8 5.9 5.2 6.5
1/ Of total liabilities and member equity.
2/ Of total patronage allocations.


Table 4 - Compare your wheat-sorghum cooperative with averages for similar cooperative operations
Total sales group (million dollars)

Group/Item Unit 5-14.9
(1997 Data)
15 or more
(1997 data)
5-14.9
(1998 Data)
15 or more
(1998 Data)
Your
Cooperative
Storage capacity Million Bu. 1.691 4.019 1.782 4.478
Grain marketed Million Bu. 1.883 5.972 2.098 6.672
Turnover rate Times 1.11 1.49 1.18 1.49
Proportion grain Percent 67.9 68.8 67.6 67.3
Total assets Million $ 3.355 9.837 3.585 11.225
Long-term debt 1/ Percent 6.3 6.2 6.6 8.0
Member equity 1/ Percent 64.3 53.3 63.0 54.8
Total sales Million $ 9.207 30.199 9.385 30.018
Margins on sales Million $ .763 2.306 .847 2.634
Total expenses Million $ .994 3.3064 1.151 3.401
Net savings(losses) Million $ .191 .661 .262 .842
Labor of total expenses Percent 47.0 46.5 47.8 46.8
Net savings paid in cash 2/ Percent 37.1 32.6 38.4 34.5
Current ratio Number 1.69 1.31 1.60 1.41
Debt/assets Ratio .19 .24 .17 .24
Net savings (loss)/total sales Percent 2.1 2.2 2.8 2.8
Gross margins/total sales Percent 8.3 7.6 9.0 8.8
1/ Of total liabilities and member equity.
2/ Of total patronage allocations.

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