Analysis of Financial

Statements: Local Farm

Supply, Marketing

Cooperatives

United States

Department of

Agriculture

Rural Business–

Cooperative

Service

RBS Research

Report 182
Abstract This report analyzes the balance sheets and income statements of local farm supply

and marketing cooperatives, comparing 1999 and 1998 and trends over the past 10

years. The data represent four cooperative sizes and types. Common-size income

statements and balance sheets compare different cooperative sizes and types. Trends

for major balance sheet and income statement items and ratio analysis compare and

contrast cooperatives by size and type.

Key words: Cooperatives, balance sheet, income statement, farm supply, marketing,

sales, and financial ratios.

Analysis of Financial Statments: Local Farm Supply, Marketing Cooperatives

Beverly L. Rotan

U.S. Department of Agriculture

Rural Development

Rural Business-Cooperative Service

W ashington, DC 20250

RBS Research Report 182

April 2001

Price: domestic--$4.50;

foreign--$5.00
Preface This report studied the financial statements of local cooperatives, comparing 1999,

1998, and the past 10 years. Trends of major balance sheet and income statement

items as well as financial ratios are presented for four cooperative sizes and types.

The information provides cooperative managers and boards of directors with a basis to

compare their cooperatives' historical performance with representative cooperative

data.

The author thanks the cooperatives that provided their financial statements to RBS

staffers who helped make this report possible.

i
Contents Contents ..........................................................i

Highlights .........................................................v

Profile of Respondent Cooperatives .....................................1

Balance Sheet Analysis ..............................................2

Income Statement Analysis ...........................................5

Financial Ratio Analysis .............................................14

Conclusions ......................................................20

Appendix Tables ...................................................22

i
Highlights Financial statements of 512 local farm supply and marketing cooperatives were used

for this report. The statements of 291 cooperatives were used to compare 1999 to

1998, while those of 512 cooperatives looked at trends over the past 10 years.

Cooperatives were divided into four groups based on their mix of net sales between

supplies sold and farm products marketed. They were also divided into four size categories, based on their total sales volume.

From 1998 to 1999, average net income and net sales for all cooperatives decreased

13 percent and 6 percent, respectively. In 1999, average net sales for all cooperatives

studied was $13.1 million. More than 42 percent of the cooperatives studied were

small cooperatives--sales of less than $5 million.

In some instances, cooperatives were probably one of the community's larger employers, employing an average 26 full-time and 14 part-time employees with an average

annual payroll of $856,541.

Total sales were down 6 percent. Although petroleum products and fertilizer were the

two principal farm supplies sold, total farm supply sales were down 3 percent.

Marketing activities (mainly grains and oilseeds) provided 43 percent of sales but was

also down 14 percent for these cooperatives.

Average total assets grew about 5 percent between 1998 and 1999, fueled by "other"

farm supplies. To finance the growth in assets (mainly inventories), total liabilities grew

14 percent while owner equities increased only about 1 percent.

Interest expenses, although less than 1 percent of net sales, increased by 7

percent–the same percentage increase as short-term debt used to finance inventory

buildup. Even with an increase of 372 percent in patronage refunds received, local

savings and net income were still down 11 percent and 13 percent, respectively.

Financial ratio analysis was used to look at 10-year trends for the 512 cooperatives in

the data base. The financial ratio analysis revealed these findings:

● The current ratio (current assets/current liabilities) was fairly steady at around

1.5 between 1990 and 1999, with a slight downturn in 1995. The quick ratio

(current assets-inventory/current liabilities) mimicked the current ratio’s trend.

● Total debt ratio peaked at 0.47 in 1996, but then plummeted in 1997.

● The fixed-asset-turnover ratio, a measure of asset use, averaged at least 8

between 1991 and 1995 (i.e., net sales were at least eight times the property,

plant, and equipment levels). This ratio was at its lowest in 1999 at 6.53.

● Return on total assets measures the rate of return on total investments. The

ratio was at its lowest point (6.86) of the 10 year-period in 1999.

● Return on total equity before taxes grew from 1995 to 1997, but declined to its

lowest point at 8.32 in 1999.

iii
Analysis of Financial Statements:

Local Farm Supply, Marketing Cooperatives

Beverly L. Rotan

Rural Business-Cooperative Service

U.S. Department of Agriculture

This report analyzes the financial statements of

291 local cooperatives for use as a measuring tool by

cooperative managers, directors, and members for

their local’s operation. Ratio analysis and trends are

discussed. The information is sub-divided into four

cooperative sizes and types.

Farm supply sales (petroleum, fertilizer, feed,

etc.) of local cooperatives averaged $7.4 million in 1999

while marketing sales averaged $5.7 million. Grain

(corn, wheat, soybeans, etc.) made up of 98 percent of

total marketing sales. Income from services (product

delivery, fertilizer application, grains and oilseeds

hauling and storage, etc.) averaged $0.5 million.

Local agricultural cooperatives played a vital role

in providing goods and services to their memberpatrons and the rural community. These cooperatives

paid an average of $48,000 in annual property taxes,

averaged 26 full-time and 14 part-time employees, and

had an average annual payroll of $856,000.

This study focuses on the balance sheet, income

statement, and financial ratios derived from these

statements.

Profile of Respondent Cooperatives

U S D A’s Rural Business-Cooperative Service

(RBS) annually surveys farmer cooperatives and use

the data for reports such as this. For this report, a

cooperative had to sell some farm supplies, those that

exclusively marketed members' products were not

included. In addition to selling farm supplies, cooperatives also had to provide an annual report that had a

detailed income statement.

The RBS database has 512 cooperatives. This

report focused on the 291 that provided information

for both 1998 and 1999. When looking at long-term

trends (1990 through 1999) in the financial ratio analysis section, all 512 cooperatives were used to obtain a

more complete understanding of the local cooperatives' business.

Cooperative Size—Cooperatives were grouped into

four sizes by sales volume, using actual figures. Sales

groupings in this report were the same as in prior

reports. Product mix was ignored in classifying size--

small, medium, large and super--because size may be

related to the cooperative’s product mix. For example,

a cooperative with $10 million in sales that exclusively

marketed grains and oilseeds could be considered

small compared with similar marketing organizations.

But, a strictly farm supply cooperative with sales of

$10 million could be quite substantial.

Cooperative Type—To account for differences in

operations and orientation based on product mix,

cooperatives were placed in four descriptive

categories: 1) farm supply; 2) mixed farm supply; 3)

mixed marketing; and 4) marketing. They closely

represent business operations of these cooperatives as

summarized in table 1.

This report focuses on cooperatives handling

farm supplies–62 percent in 1999 sold only farm supplies; 17 percent offered mixed farm supplies; 16 percent were mixed marketing; and 5 percent were purely

marketing (table 2). Of the respondents, 42 percent

were small; 26 percent, medium; 20 percent, large; and

12 percent, super. Both types of marketing cooperatives tended to be larger while most farm supply cooperatives were small.

The first part of this report focuses on the 291

cooperatives. In the financial ratio analysis sections,

data between the years were not completely comparable in that the same cooperatives did not respond to

the CS survey every year and may not be statistically

1
valid to draw industry-wide conclusions. However,

the samples arelarge and do represent a cross section

of cooperatives selling farm supplies and marketing

grains and oilseeds throughout the United States.

Sales Mix–Responding cooperatives fell in to

five major farm supply and two marketing categories

(table 3). Petroleum was the dominant production

supply item sold by small and medium-sized

cooperatives. Sales of small cooperatives, the most

numerous, averaged $2.6 million in 1999. Farm

production supplies represented the bulk (87 percent)

of their sales. As cooperatives grew in size, the

importance of farm supplies declined (77 percent for

medium-sized cooperatives, 73 percent for large, and

43 percent for super).

Sales of mixed farm supply cooperatives averaged $15 million, with $11 million in exclusively farm

supplies. Petroleum was the most important farm supply item sold, with feed second. Feed sales, however,

decreased 6 percent from 1998. Grain sales decreased 9

percent. Average sales of marketing and mixed marketing cooperatives were $26 million and $24 million,

respectively, and much larger than both categories of

farm supply cooperatives.

Balance Sheet Analysis

The balance sheet of a local cooperative states its

financial position at the end of a 12-month fiscal year.

The balance sheet represents the cooperative's assets,

liabilities, member equity, and their mutual relationship. The balance sheets of these 291 local cooperatives

shows typical levels for assets, liabilities, and member

equities for different sizes and types.

Table 4 compares common-size balance sheets for

allrespondents for 1999 and 1998. Appendix tables 1-4

show common-size balance sheets by size and type for

1999. Each account is listed as a percentage of total

assets. The dollar amount of total assets is listed at the

bottom of the table. By cooperative size, total assets

ranged from $1.7 million for small to $18.5 million for

super-size cooperatives. By type, total assets were $4

million for farm supply, $8.8 million for mixed farm

supply,$11 million for mixed marketing, and $10.6

million for marketing.

2

Table 2—Respondent cooperatives by size and type

Cooperative size

Cooperative type Small Medium Large Super Total

Number Percent

Farm supply 104 45 24 7 61.86

MIxed farm supply 7 14 14 14 16.84

Mixed marketing 6 12 6 14 16.49

Marketing 5 4 5 0 4.81

Percent of total 41.93 25.77 20.27 12.03 100.00

Table 1—Size and type definitions used for respondent cooperatives

Cooperative size Definition Number

Small up to $5 million in total sales 122

Medium $5 million to $10 million 75

Large $10 million to $20 million 59

Super $20 million and more 35

Cooperative type

Farm supply total net sales from farm supplies 180

Mixed farm supply from 50 to 99 percent 49

Mixed marketing from 25 to 49 percent 48

Marketing less than 25 percent 14
Current Assets—Cash and cash equivalents as a

percent of total assets decreased as cooperative size

increased. Cash was 13.3 percent of total assets for

small cooperatives, but dropped to 3.2 percent for

super cooperatives. Mixed marketing cooperatives

held the most cash by type (25.5 percent), followed by

farm supply cooperatives (13.5 percent).

Current assets declined by 1.59 percent from 1998

to 1999. Most occurred in cash and cash equivalents.

Grain and oilseed inventories increased 4.4 percent.

Those inventories increased more than 60 percent for

medium-sized cooperatives.

Farm supplies were up from 1998 by about 1 percent. By size, farm supply inventories increased about

11 percent more for large. Surprisingly, super cooperatives’ farm supply inventories were down by 0.6 percent from the previous year. Marketing cooperatives

(11.7 percent) had higher inventories than farm supply

cooperatives (5.9 percent).

Accounts receivable in this study were farm supply trade accounts, not grains and oilseeds trade

receivables. Farm supply and grains and oilseeds trade

receivables ("other" current assets) were separated to

allow ratio analysis elsewhere in this study. Accounts

receivable for farm supply sales increased only 0.7 percent while farm supply sales decreased 2.7 percent.

The age of accounts receivable refers to how long

ago the sale that started this receivable was made.

Most cooperatives offercredit sale discounts to promote prompt payment. Terms might be 2 percent-10

days, net 30 days (no discount). Discounts might be

offered on all farm supply sales or on certain products.

While terms and specific products discounts were not

known, 43 cooperatives listed their discounts on sales.

The rate was 10.2 percent on total farm supply sales.

The age of accounts receivable was known for 43

cooperatives for both years (table 5)–51 percent current

and 14 percent from 31 to 60 daysf old. The largest difference between the 2 years was nearly 8 percent for

account of receivables that were more than 6 months

old.

Investments and Other Assets—About 24.2

percent of cooperative’s total assets was invested in

the Bank for Cooperatives, other cooperatives, and/or

CoBank. Both large and super cooperatives investment

amounted to 24 and 22 percent, respectively,oftotal

assets (table 6). Overall, the marketing cooperatives

had less invested than the farm supply cooperatives

(table 7).

Property, Plant, and Equipment—Net property,

plant, and equipment (PP&E) as a percent of total

3

Table 3—Average farm supplies sold and products marketed as a percent of total sales, 

and change from 1998 to 1999

Change

1998 1999 1998 to 1999

Percent

Farm supplies sold:

Feed 10.07 10.00 -6.40

Seed 1.32 1.55 10.20

Fertilizer 10.74 10.57 -7.18

Crop protectants 9.05 9.19 -4.20

Petroleum products 16.78 17.66 -0.74

Other 6.62 7.36 -4.76 ____ ____ ____

Total 54.58 56.33 -2.73

Products marketed:

Grains and oilseeds 44.47 42.80 -9.25

Other .95 .87 -13.45 ____ ____ ____

Total 45.42 43.67 -9.33 _____ _____ ____

Total sales 100.00 100.00

Based on sales of: $13,947,282 $13,150,989
4

Table 4—Common-size balance sheet and change in accounts, 1998 to 1999

1998 1999 Percentage change

Percent

Assets

Current assets

Cash and cash equivalants 6.32 4.66 -22.80

Accounts receivable 10.61 10.22 0.74

Inventories--grains and oilseeds 9.00 8.99 4.44

--farm supplies 13.95 13.47 1.06

Prepaid expenses 0.87 0.81 -2.45

Other current assets 6.45 6.25 1.34 _____ _____ _____

Total current assets 47.20 44.40 -1.59

Investments and other asssets

Investments 23.00 24.19 10.43

Other assets 1.80 2.05 8.82

Net property, plant, and equipment 28.00 29.36 10.01

_____ _____ _____

Total assets 100.00 100.00 4.61

Liabilities and owner equities

Current liabilities

Current portion of long-term debt 2.48 2.82 18.74

Notes payable-seasonal 7.36 8.83 25.51

Accounts payable 6.34 6.29 3.69

Patrons credit balances & other liabilities 14.61 11.31 -29.51

Accrued taxes 0.57 0.59 9.00

Accrued expenses 1.65 1.67 5.72

Patronage refunds (cash) 1.33 1.11 -12.40

_____ _____ _____

Total current liabilities 34.34 32.62 -0.64

Long-term debt 9.65 10.20 10.56

Total liabilities 43.99 42.82 1.82

Owner equities

Allocated equity 41.06 41.66 6.13

Unallocated equity 14.95 15.52 8.67 _____ _____ ___

Total owner equities 56.01 57.18 6.80 _____ _____ ___

Total liabilities and owner eqities 100.00 100.00 4.61

Based on total assets of: $6,568,827 $6,871,656
assets ranged between 21 percent and 33 percent for all

cooperative sizes. Large cooperatives had the largest

percent. Net PP&E increased 10 percent from 1998.

Marketing and mixed farm supply cooperatives

handling grains and oilseeds had higher dollar

amounts of PP&E, probably due to extensive storage

and handling facilities. Farm supply and mixed

marketing cooperatives had growth in net PP&E of at

least 7 percent.

Current Liabilities—They declined 0.6 percent

between 1998 and 1999. The largest decrease was in

patron’s credit balances and other liabilities and the

largest increase in notes payable (seasonal). At 41

percent of total assets,\ allocated equity remained

almost constant between the 2 years. Farm supply and

marketing cooperatives had largest change while

mixed farm supply and mixed marketing were down 6

and 0.5 percent, respectively.

Patrons’ credit balances and other liabilities

decreased 19 percent. Current-term and seasonalshort-term debt used for financing operating expenses

grew in double digits. Accrued expenses grew 6 percent and were a slightly larger percentage of total

assets for large and for both types of farm supply

cooperatives. Cash patronage refunds and dividends

grew 5.7 percent, less than 2 percent of total assets for

all sizes and types of cooperatives.

Long-term Debt—Long-term debt increased 10

percent from 1998 to 1999. As a percent of total assets

by size, large cooperatives and by type, mixed farm

supply cooperatives werelarger.Twenty-six percent of

the cooperatives had no long-term debt. The Bank for

Cooperatives and CoBank were the most frequent

source of debt capital. Regional cooperatives as well as

commercial banks also supplied debt capital.

Member Equities—Comparing this to total assets

represents the percent of the cooperative's assets

owned by the members, with creditors claiming the

rest. Over all sizes and types of cooperatives, members

averaged at least 56 percent ownership for both years.

Members of small cooperatives had the highest

percentage of ownership (77.5 percent) while those in

of super-size cooperatives had the lowest (51.4 percent). By type, members of farm supply cooperatives

owned at least 65 percent of the assets while those in

mixed farm supply cooperatives owned 58 percent.

Both types of marketing cooperatives had lower member ownership–49 percent for marketing and 52 percent for mixed marketing.

Member equities consisted of both allocated (preferred, common, and other kinds of ownership certificates) and unallocated equity. Allocated equity as a

percentage of total assets was highest for small cooperatives at 57 percent and more than 45 percent for both

farm supply cooperatives.

Unallocated equity averaged more than 6 percent

of total assets for all types except mixed farm supply

cooperatives. By size, unallocated equity as a percent

of total assets fell as cooperative size increased.

Income Statement Analysis

This shows the net results of cooperative operations. Because most managers' performance is judged

by net income, members attach great importance to the

income statement. The underlining values of the

income statement are studied. Table 8 presents a common-size income statement for 291 cooperatives and

5

Table 5—Age of accounts receivab le, 1999 and 1998

Accounts receivable age 1999 1998

Percent

Current, 0 to 30 days 51.42 46.29

31 to 60 days 13.91 10.21

61 to 90 days 10.98 7.73

91 to 120 days 2.10 2.55

121 to 180 days 8.39 9.86

Greater than 6 months 12.87 20.60

Accounts writtten off this period 0.33 2.76

Based on accounts receivable of: $26,586,496 $29,598,705
6

Table 6—Common-size balance sheets by cooperative size, 1999

Small Medium Large Super

Percent of total assets

Assets

Current assets

Cash and cash equivalants 13.27 6.49 3.48 3.24

Accounts receivable 11.12 10.65 12.21 9.12

Inventories--grains and oilseeds 1.12 2.71 3.63 14.07

--farm supplies 17.34 16.33 16.09 11.14

Prepaid expenses 1.63 1.47 0.72 0.53

Other current assets 3.12 3.96 3.13 8.71 _____ _____ _____ _____

Total current assets 47.60 41.61 39.26

Investments and other asssets

Investments 29.70 27.95 24.46 22.14

Other assets 1.13 2.17 3.12 1.71

Net propert, plant, and equipment 21.57 28.27 33.16 29.34

_____ _____ _____ _____

Total assets 100.00 100.00 100.00 100.00

Liabilities and owner equities

Current liabilities

Current portion of long-term debt 1.14 1.75 2.03 3.73

Notes payable-seasonal 3.31 5.84 7.37 11.19

Accounts payable 6.48 7.30 7.29 5.55

Other liabilities 5.03 8.78 9.12 13.96

Accrued taxes 0.25 0.42 0.64 0.67

Accrued expenses 1.49 1.41 1.95 1.65

Patronage refunds (cash) 1.00 1.16 1.12 1.12

_____ _____ _____ _____

Total current liabilities 18.70 26.66 29.52 37.87

Long-term debt 3.80 8.92 12.20 10.77

Total liabilities 22.50 35.58 41.72 48.64

Owner equities

Allocated equity 56.63 46.42 43.02 37.30

Unallocated equity 20.87 18.00 15.26 14.06

_____ _____ _____ _____

Total owner equities 77.50 64.42 58.28 51.36

_____ _____ _____ _____

Total liabilities and owner eqities 100.00 100.00 100.00 100.00

Based on total assets of: $1,700,780 $4,310,058 $7,529,933 $18,510,012
7

Table 7—Common-size balance sheets by coperative type, 1999

Farm Mixed farm Mixed

supply supply marketing Marketing

Percent of total assets

Assets

Current assets

Cash and cash equivalants 6.83 3.85 3.78 3.18

Accounts receivable 11.12 11.87 9.58 6.56

Inventories--grains and oilseeds 0.09 6.93 15.35 17.33

--farm supplies 18.76 12.96 10.82 9.30

Prepaid expenses 1.29 0.55 0.63 0.58

Other current assets 2.89 4.03 9.18 11.07 _____ _____ _____ _____

Total current assets 41.07 40.19 49.34 48.02

Investments and other assets

Investments 27.36 26.01 21.55 19.88

Other assets 2.47 3.18 1.32 0.78

Net, property, plant, and equipment 29.10 30.62 27.79 31.32

_____ _____ _____ _____

Total assets 100.00 100.00 100.00 100.00

Liabilities and owner equities

Current liabilities

Current portion of long-term debt 1.52 2.02 3.93 4.62

Notes payable-seasonal 6.35 7.43 13.24 6.89

Accounts payable 7.67 6.86 4.80 5.57

Patrons credit balances & other

liabilities 6.57 8.62 14.61 19.17

Accrued taxes 0.48 0.47 0.81 0.56

Accrued expenses 1.80 2.14 1.34 1.28

Patronage refunds (cash) 1.12 1.05 1.22 0.97 _____ _____ _____ _____

Total current liabilities 25.51 28.59 39.95 39.06

Long-term debt 9.17 13.52 7.73 12.35

Total liabilities 34.68 42.11 47.68 51.41

Owner equities

Allocated equity 48.75 45.07 35.84 32.94

Unallocated equity 16.57 12.82 16.48 15.65

_____ _____ _____ _____

Total owner equities 65.32 57.89 52.32 48.59

_____ _____ _____ _____

Total liabilities and owner eqities 100.00 100.00 100.00 100.00

Based on total assets of: $4,040,072 $8,844,195 $10,961,917 $18,579,418
the change between 1998 and 1999. Appendix tables 5

to 8 show common-size income statements by size and

type for 1999.

Net Sales—Is obtained by subtracting sales discounts

and returns and allowances from gross sales. Average

net sales for the 291 cooperatives in 1999 was $13.1

million, down $0.8 million or 5.7 percent from 1998.

Table 9 shows net sales by cooperative size and table

10 by type. Net sales of all sizes and types of 

8

Table 8—Income statement and change in accounts, 1998 to 1999

1998 1999 Percent change

Percent of net sales

Net sales 100.00 100.00 -5.71

Cost of goods sold 88.81 87.69 -6.91 _____ _____ ____

Gross margin 11.19 12.31 3.79 

Service and other income 4.30 4.98 13.26 ____ ____ ____

Gross revenue 15.49 17.29 7.85

Operating expenses

Salaries and wages1 6.86 7.83 7.64 

Administrative2 0.64 0.72 6.22

General3 3.94 4.41 5.72

Depreciation 1.88 2.19 9.55 

Interest expense 0.81 0.87 2.28 

Bad debts 0.14 0.11 -27.54

____ ____ _____

Total expenses 14.27 16.13 6.64 

Local savings 1.23 1.16 -10.55 

Patronage refunds received 1.68 1.55 -13.22 ____ ____ _____

Savings before income taxes 2.91 2.71 -12.09

Less income taxes 0.21 0.22 -0.39 ___ ___ _____

Net income 2.70 2.49 -13.02

Based on sales of: $13,947,282 $13,150,989

1 Includes salaries and wages, employee insurance, payroll taxes, and pension expense.

2 Includes professional services, office supplies (includes postage), telephone, markets, meetings and travel, donations, dues and

subscriptions, directors' fees and expense, and annual meetings expense.

3 Advertising and promotion, delivery (auto & truck) expense, insurance, property & business taxes, other taxes and licenses, rent and lease

expense, plant supplies & repairs, repairs and maintenance, utilities (includes dryer expense), miscellaneous expenses, patronage refunds

payed out, and other expenses.
9

Table 9—Abbreviated income statement as a percent of net sales for cooperatives by size, 1999

Small Medium Large Super

Percent of net sales

Net sales 100.00 100.00 100.00 100.00

Cost of goods sold 84.19 84.85 84.62 89.80

____ ____ ____ ____

Gross margin 15.81 15.15 15.38 10.20

Service and other income 4.57 5.21 4.64 5.10

____ ____ ____ ____

Gross revenue 20.38 21.02 20.02 15.30

Expenses

Employee1 10.25 9.59 9.79 6.46

Administrative2 1.24 .99 0.88 0.54

General3 4.56 4.74 4.92 4.15

Depreciation 2.50 2.70 2.38 1.98

Interest 0.50 0.85 0.96 0.89

Bad debts 0.30 0.20 0.11 0.06

____ ____ ____ ____

Total expenses 19.35 19.07 19.04 14.08

Local savings 1.03 1.29 0.97 1.22

Patronage refunds received 2.09 2.09 1.78 1.28

____ ____ ____ ____

Savings before income taxes 3.12 3.38 2.75 2.50

Less income taxes 0.21 0.26 0.21 0.22

___ ___ ___ ___

Net income 2.91 3.12 2.54 2.28

Based on total sales of: $2,636,995 $6,929,384 $13,420,641 $39,126,280

1 Employee expenses include salaries and wages, payroll taxes, employee insurance, unemployment compensation, and pension expense.

2 Administrative costs include professional services, office supplies, telephone, meetings and travel, donations, dues and subscriptions,

directors' fees and expense, and annual meetings.

3 General expenses include advertising and promotion, delivery (auto and truck), insurance, property, business and other taxes and licenses,

rent and lease expenses, plant supplies and repairs, repairs and maintenance, utilities, miscellaneous, and other.
cooperatives (except medium and marketing) dropped

from 1998 to 1999. If assets from tables 6 and 7 are

compared to net sales in tables 9 and 10, sales for all

types (except farm supplies) are about twice the level

of assets. Only super cooperatives fit that category.

Cost of Goods Sold (COGS)—This represented the

largest single expense component expressed as a

percent of net sales. For this study, COGS includes the

beginning inventory plus purchases and freight costs,

minus purchase returns and allowances, purchase

discounts, and ending inventory. COGS, therefore, was

the purchase price of the farm supplies sold or

products marketed. Table 10 shows COGS as a percent

of net sales for different cooperative types. Both types

of marketing cooperatives had a relatively high COGS

compared with farm supply cooperatives. This was

expected because they were generally marketing

grains and oilseeds for their patrons with only a few

cents-per-bushel margin. COGS were down for all but

10

Table 10—Abbreviated income statement as a percent of net sales for cooperatives by type, 1999

Farm Mixed farm Mixed

supply supply marketing Marketing

Percent of net sales

Net sales 100.00 100.00 100.00 100.00

Cost of goods sold 80.70 84.14 91.76 93.30

_____ _____ _____ _____

Gross margin 19.30 15.86 8.24 6.70

Service and other income 4.07 5.95 5.42 4.15

____ ____ ____ ____

Gross revenue 23.37 21.81 13.66 10.85

Expenses

Employee1 11.84 10.35 5.49 4.03

Administrative2 1.12 0.98 0.48 0.33

General3 5.13 5.52 3.85 3.21

Depreciation 2.82 2.57 1.81 1.61

Interest 0.92 1.12 0.75 0.77

Bad debts 0.21 0.11 0.07 0.05

____ ____ ____ ____

Total expenses 22.04 20.65 12.45 10.00

Local savings 1.33 1.16 1.21 0.86

Patronage refunds received 2.30 1.76 1.22 0.94

___ ___ ___ ___

Savings before income taxes 3.63 2.92 2.43 1.80

Less income taxes 0.28 0.22 0.21 0.18

____ ____ ____ ____

Net income 3.35 2.70 2.22 1.62

Based on sales of: $6,036,422 $15,493,319 $23,971,441 $26,704,514

1 Employee expenses include salaries and wages, payroll taxes, employee insurance, unemployment compensation, and pension expense.

2 Administrative costs include professional services, office supplies, telephone, meetings and travel, donations, dues and subscriptions,

directors' fees and expense, and annual meetings.

3 General expenses include advertising and promotion, delivery (auto and truck), insurance, property, business and other taxes and licenses,

rent and lease expenses, plant supplies and repairs, repairs and maintenance, utilities, miscellaneous, and other.
medium-size cooperatives and all types except

marketing.

Gross Margins—The excess of net sales over the

cost of goods sold averaged 17.3 percent of sales for all

cooperatives, up 3.8 percent from 1998. The gross

margin or gross margin percentage is an important

operating ratio. A small change in the gross margin

can tremendously impact local savings. A cooperative

manager must maintain a gross margin near industry

averages. Thus, least cost sources of supplies need to

be developed and marketing cooperatives must pay

market rates on the products they purchase.

Cooperatives are often characterized as businesses that provide goods and services "at cost." However,

a cooperative cannot operate at cost on a daily basis.

Cooperatives must have adequate gross margins to be

profitable and afford to finance essential future-directed discretionary expenditures such as expansion and

advertising.

Gross margin equals net sales less cost of goods

sold, so cooperatives with higher COGS had lower

gross margins. COGS were higher for marketing and

larger cooperatives, so gross margins as a percent of

net sales were highest for farm supply and small cooperatives. As a percent of sales, farm supply cooperatives–19.3 percent--had the highest gross margin.

Although both types of farm supply cooperatives generally had less business volume than those of their

marketing counterparts, gross margin percentage was

from 9 to 11 percentage points higher. Small cooperatives that mostly sold farm supplies had the highest

gross margin by size (15.8 percent).

Gross margins vary not only by cooperative, but

also by farm supplies sold or products marketed.

Cooperatives have different margins for different

products. Forty cooperatives provided their individual

product gross margins (table 11). Margins vary due to

product type and competition. For instance, fertilizer

sold by the truckload has a different margin than a single-bag sale. The services offered in conjunction with a

sale (e.g., fertilizer spread by a cooperative truck) also

have an impact on margins. Margins are also subject to

competition. The gross margin represents a blended

margin derived from all products the cooperative sold,

services rendered, and products marketed.

The highest weighted (by volume) gross margin

for the five main farm supplies (feed, seed, fertilizer,

crop protectants, and petroleum products) was for feed

at 20 percent. The maximum margin on seed of 89 percent was for a small amount, probably a speciality seed

sold by the bag. Margins for other farm supplies

ranged from 16 to 19 percent. Grains and oilseeds were

the only products marketed where gross margins were

known, low at around 5 percent.

Service and Other Income—This mostly consisted

oftrucking services (delivery of purchases and transfer

of products to market), custom application of

fertilizers and crop protectants, and drying and storing

of grains and oilseeds. While local cooperatives

11

Table 11—Gross margin on farm supplies sold and grains and oilseeds marketed, 1999

Weighted Number of

Farm supply margin Maximum Minimum observations

Percent Number

Feed 20.55 43.30 2.96 41

Seed 17.23 89.52 (2.34) 40

Fertilizer 19.22 44.12 5.96 43

Crop protectants 16.08 28.45 3.42 42

Petroleum products 18.36 35.02 1.33 35

Tires, batteries, & auto accessories 22.40 36.76 (155.03) 28

Machinery (17.96) (17.96) (17.96) 1

Building materials 18.36 30.68 (21.96) 9

Hardware 28.55 37.27 (32.33) 9

Food 24.07 32.51 10.56 9

Other farm supplies 2.67 5.28 (.007) 43

Grains and oilseeds 5.28 13.33 2.12 24
provided many other services to their patrons, these

were the primary ones. This income averaged between

4 percent and 6 percent of net sales for all sizes and

types of cooperatives.

Other income was derived from non-operating

sources such as interest and finance charges on cash

equivalents and interest charged on credit sales. Other

income also came from the sale of property, plant, and

equipment, rentals, and extraordinary items.

Sometimes property, plant, and equipment were sold

to generate income, but usually fully depreciated and

the market value was greater than the book value. In

some cases, disposal of a fully depreciated asset may

mean a loss. Rental income from unused facilities or

equipment provided income flows. Extraordinary

items might be either a gain or a loss. A gain could

result from a fire loss where the insurance settlement

was greater than the book value. A loss might occur

from flood damage for which the cooperative had no

coverage.

Operating Expenses—These were divided into four

main categories--employee; administrative; general;

and depreciation, interest, and bad debts. Employee

expenses wererelated to labor costs. Administrative

expenses included overhead costs associated with a

cooperative and indirectly related to revenue

production. General expenses were directly related to

revenue production. The bulk were in employee,

general, and depreciation categories.

Employee Expenses—These costs included

salaries, wages, and benefits (payroll taxes, employee

insurance, unemployment compensation, and pension

expense) and averaged 7.8 percent of net sales.

Employee expenses were up 7.6 percent from 1998.

As a percent of net sales, employee expenses

ranged from 10.2 to 6.5 percent–small, 10.2; medium,

9.6;large, 9.8; and super, 6.5 percent. By type, employee expenses as a percent of net sales were11.8 percent

for farm supply cooperatives; 10.3, mixed farm supply;

5.5 mixed marketing; and 4 percent for marketing

cooperatives.

Cooperatives surveyed had both part-time and

full-time employees. For study purposes, four parttime employees were considered equivalent to a fulltime employee. The expense for a single employee

averaged $34,493 for an average 29 employees, up

about 4 percent from 1998. By size, those expenses

ranged from $30,045 for small to $36,133 for super

cooperatives and by type from $31,754 for those selling

only farm supplies to $36,028 for mixed marketing

cooperatives (table 12). Small cooperatives averaged 8

full-time employees (excludes part-time); medium, 17;

large, 33; and super, 64. Farm supply cooperatives

averaged 19 employees; mixed farm supply, 39; mixed

marketing, 33; and marketing, 27.

Cooperatives with significant farm supply sales

tended to be more labor intensive. Operating a feed

mill or service station, applying chemicals and fertilizers, and selling hardwarerequired the use of several

employees. For instance, a small farm supply cooperative had nine full-time employees while a small marketing cooperative used fewer employees--often only a

manager, bookkeeper, and two others.

Administrative Expenses—These were indirectly

related to generating income. Managers usually had

more control over administrative expenses than any

other cost. In years when revenues were down,

managers could reduce expenses here more easily than

elsewhere. Administrative costs include professional

services, donations, dues and subscriptions, directors’

fees and expenses, annual meetings, meetings and

travel, office supplies, and telephone and market

information.

Office supplies, the largest administrative

expense, comprised 0.25 percent of net sales. Total

administrative expenses were 0.72 percent of net sales.

They ranged from 1.2 percent for small cooperatives to

0.54 percent for super cooperatives.

Although directors’ fees and expenses werea

small part of total costs, director compensation was

important to many cooperatives. This fee was a small

incentive for farmers to sacrifice time normally spent

on their own operations devoting several hours of service each month to guiding their cooperative. Table 13

shows the number of directors and their compensation

for 244 cooperatives in 1999. Expenses for a 10-member board were rather modest, averaging $896 per

director annually. Small cooperatives paid directors

the least ($685) and super paid the most ($1,817) while

by type, mixed farm supply cooperatives paid the

most at $1,365 per director.

General Expenses—Those were usually fixed in the

short run and associated with income production--

advertising and promotion, delivery (auto and truck),

general insurance, property, business and other taxes

and licenses, rent and lease expenses, plant supplies

and repairs, repairs and maintenance, utilities

(including dryer expenses), miscellaneous, and other.

Most expenses (except of advertising and promotion)

12
were not under direct management control.

General expenses averaged 4.4 percent of net

sales in 1999. Repairs and maintenance at 0.97 and

delivery expenses at 0.82 percent of net sales were the

largest in the general category, followed by insurance

and utilities, 0.54 percent each. For all sizes except

super cooperatives, general expenses were about 5 percent. By type, expenses were around 3 percent of net

sales for both marketing cooperatives and around 4

percent for both farm supply cooperatives.

Depreciation, Interest, and Bad Debts—

Depreciation expense averaged 2.2 percent of net sales;

interest, 0.87 percent; and bad debts, 0.11 percent. By

size, depreciation expense as a percent of net sales was

2.5 percent for small cooperatives and 1.9 percent for

super cooperatives. By type, depreciation expense was

2.8 percent of net sales for farm supply cooperatives,

2.6 percent for mixed farm supply cooperatives, 1.8

percent for mixed marketing, and 1.6 percent for

marketing cooperatives.

Interest expenses–long- and short-term debt

financing--increased slightly from 0.81 percent of net

sales in 1998 to 0.87 percent in 1999. Interest expenses

were lowest among small cooperatives at 0.5 and highest among large cooperatives at 0.96. For medium and

super cooperatives, interest expense was about the

same at 0.85 and 0.89 percent, respectively. By type,

interest expenses were about 0.8 percent for both marketing cooperatives and around 1 percent for both

farm supply cooperatives.

Bad debts as a percent of net sales fell as size

increased--0.3 for small cooperatives and 0.06 for super

cooperatives. By type, bad debts was 0.05 for marketing, 0.07 for mixed marketing, 0.11 for mixed farm

supply and 0.21 for farm supply cooperatives.

Local Savings—This was generated from operations

(before taxes and patronage refunds from other

cooperatives). Local savings as a percent of net sales

13

Table 12—Calculated salaries (using both full- and part-time employee expenses) and actual number of fulltime employees, 1999

Small Medium Large Super All

Farm supply salaries $32,204 $39,733 $37,755 $40,333 $37,603

Number of employees 9 19 44 67 19

Mixed farm supply salaries 31,502 38,076 46,975 40,718 41,117

Number of employees 7 18 31 79 39

Mixed marketing salaries 31,036 37,591 34,832 39,855 39,849

Number of employees 6 12 20 60 33

Marketing salaries 34,384 34,040 40,279 38,989 39,812

Number of employees 4 10 11 48 27

All salaries 33,801 39,090 41,066 40,148 39,588

Number of employees 8 17 32 63 26

Table 13—Board member salaries, 1999

Cooperative type Salaries Cooperative size Salaries

Farm supply $819 Small $685

Mixed farm supply 1,365 Medium 479

Mixed marketing 716 Large 1,262

Marketing 699 Super 1,817

Average of all 896
was around 1 percent for all sizes of cooperatives. By

type, it was the highest for farm supply cooperatives

(1.33 percent) and the lowest for marketing

cooperatives (0.86 percent).

About 26 percent of the cooperatives studied had

losses. While small cooperatives have higher returns

on net sales, 37 or about one-third lost money, table 14.

Thirty-seven percent of the mixed farm supply cooperatives lost money. In 1999, large mixed farm supply

cooperatives lost 43 percent.

Patronage Refunds Received—Refunds received

or income from other cooperatives resulted fro m

business locals generated with other cooperatives,

generally regionals, or cooperative banks such as

CoBank. The patronage refund from regionals was

based on business volume and consisted of cash

refunds and equity stock. Stock was usually revolved

back to the local cooperative on a set schedule. Many

cooperatives that borrowed funds from CoBank and

the Bank for Cooperatives received both cash and

noncash patronage income. The noncash patronage

from CoBank or the Bank for Cooperatives was fro m

investing in the bank which was usually required in

proportion to the funds borrowed.

Patronage refunds reflect the volume of business

with regional cooperatives, CoBank or the Bank for

Cooperatives. The dollar amount of patronage refunds

between 1998 and 1999 was down 13 percent, suggesting 1999 must not have been a good year for regional

cooperatives, CoBank, or the Bank for Cooperatives.

Patronage refunds received were 2.1 percent of net

sales for small and medium-sized cooperatives. By

type, patronage refunds as a percent of net sales were

higher for farm supply than for marketing cooperatives. These patronage refunds were an important

source of revenues and allowed 19 (out of 77) cooperatives that had local losses to show net income.

Income Taxes—Cooperatives paid income taxes on

earnings not allocated to members (retained earnings)

and on dividend payments. The board determined

what amounts of income were allocated to retained

earnings and to members. Nonmember business has

an impact on retained earnings because cooperatives

can allocate the earnings to nonmembers or retain the

income. In terms of net sales, income tax paid was 0.22

percent of net sales in 1999.

Income tax paid by cooperatives varied by size

and type. Small and large cooperatives paid income

taxes equal to 0.21 percent of their net sales, medium,

0.26; and super, 0.22. All cooperatives paid at least 0.2

percent.

Net Income—This appears on cooperative income

statements. In 1999, net income as a percent of net

sales was 2.5 percent. For large and super cooperatives

it was about 2 percent and 3 percent for small and

medium-sized cooperatives. By type, farm supply had

returns of 3.3 percent on net sales; mixed farm

supplies, 2.7 percent, mixed marketing cooperatives,

2.2 percent; and marketing cooperatives, 1.6 percent.

Pre-tax net income was generally distributed five

ways–as non-cash patronage allocations, cash patronage refunds, retained earnings, income taxes, and dividends on patron's equity (table 15). Fifty-four percent

of net income before taxes was held as non-cash

patronage allocations by the 291 cooperatives that provided income allocations. Cash patronage refunds

were 21 percent. Except for taxes, distributions of

income were basically close to those in 1998.

Financial Ratio Analysis

Looking beyond levels of assets, liabilities, member equities, sales, and expenses, managers and boards

of directors need comparative measures to evaluate

their cooperative’s financial performance.

14

Table 14—Respondent cooperatives that had losses, 1999

Cooperative size

Cooperative type Small Medium Large Super Average

Percent

Farm supply 31.73 15.56 29.17 0 26.12

Mixed farm supply 28.58 35.72 42.86 35.72 36.74

Mixed marketing 0 25.00 18.75 14.29 16.67

Marketing 40.00 25.00 20.00 0 28.58

Average 30.33 21.34 28.82 20.00 26.46
Standard ratios used in this report included

financial ratio analysis that allow performance comparisons between years and different cooperatives. No

single financial indicator provides enough information

to determine a cooperative’s financial health, so ratios

must be carefully interpreted. It is important to look at

a group of financial ratios over a period of time, evaluate other cooperatives with similar sales and functions,

and/or compare performance with others in the same

geographical area.

Most figures show ratios for the 10-year period

for all 512 cooperatives. Data for 1998 and 1999 reflect

information gathered from the same 291 cooperatives

that reported for both years. Performance ratios measure various levels of cooperative operations and generally have both a financial and operational impact.

Four categories were used--liquidity, leverage, activity,

and profitability. Many factors underlie each and

examining one ratio may not pinpoint problems.

Liquidity Ratios—Include current and quick ratios

and measure the cooperative's ability to meet shortterm obligations. They focus on its ability to remain

solvent. The current ratio is current assets divided by

current liabilities. However, this ratio does not

consider the degree of liquidity of each of current asset

components. If the current assets of a cooperative were

mainly cash, they would be much more liquid than if

comprised of mainly inventory.

If the ratio is less than 1, current liabilities exceed

current assets and the cooperative’s liquidity is threatened. Improvements can be achieved by selling additional capital stock, borrowing additional long-term

debt, or disposing of unproductive fixed assets and

retaining proceeds. Current liabilities may also be

reduced by retaining a greater portion of allocated savings (reducing the cash portion).

A high current ratio is a favorable condition

financially because it indicates the ability to pay current liabilities from the conversion of current assets

into cash. Operationally, this same high ratio tends to

increase operating freedom and reduce the probability

of bill-paying difficulty from write-downs of accounts

receivable or inventory.

Figure 1 shows the current and quick ratios for

the surveyed cooperatives. Current ratio was relatively

constant for the last 5 years. The total current assets

and liabilities decreased 1.6 and 0.64 percent, respectively.From 1998 to 1999, farm supply inventories,

accounts receivable, and other receivables were the

only elements of current assets that gre w. Lower grain

and oilseed inventories probably caused the 29-percent

decrease in other liabilities (which contains grain trade

payables).

The current ratio fell as cooperative size

increased. The ratio was highest for small cooperatives

(2.54) and lowest at 1.24 for super cooperatives (table

16). By type, the ratio was at least 1.20 for all types of

cooperatives (table 17).

Quick ratio is current assets minus inventories,

divided by current liabilities. Inventories--the least liquid of all current assets--are excluded. All elements of

this ratio have increased. Financially, a high ratio

allows little dependence on the salability of inventory

to meet current obligations. Operationally,theresults

are the same as with the current ratio.

The quick ratio mimicked the movement of the

current ratio. Small cooperatives (1.56) had the highest

ratio and it decreased as size increased to 0.57 for

super cooperatives (table 17). The quick ratio ranged

from 0.55 for marketing cooperatives to 0.87 for farm

supply cooperatives. This ratio was highest in 1990

and lowest in 1995 (figure1).

15

Table 15—Distribution of net income before taxes

Item 1999 1998

Percent

Non-cash patronage allocations 54.19 56.54

Cash patronage refunds 21.51 21.83

Retained earnings 15.73 14.23

Taxes 8.30 7.32

Dividends .27 .08

Net income before taxes: $356,366 $405,389

Number of cooperatives: 291 291
Leverage Ratios—These ratios look at the long-term

solvency of the cooperative and help analyze the use

of debt and the ability to meet obligations in times of

crisis. Debt ratio is defined as total debt divided by

total assets. Elements include long-term debt plus

short-term debt and total assets. Long-term debt

increased about half the same rate of total assets,

which may indicate some short-term obligations were

being carried and converted to long-term debt. With

inventories increasing in the short term, quick

financing is needed, usually through the use of shortterm debt.

In fact, between 1998 and 1999, short- and longterm debt increased 25 and 10 percent, respectively

(table 5). Lenders would rather see a low ratio indicating the cooperative's ability to repay the loan. Overall,

this ratio decreased slightly from .44 to .43 (figure2).

Reducing debt, increasing savings, or financing a

greater portion of assets with working capital may

improve this ratio.

Larger cooperatives were financing more assets

with debt, but the highest ratio for any size or type of

cooperative was still only 0.51 (tables 16 and 17). Small

cooperatives had the lowest use of debt at 0.22 and

marketing cooperatives the highest. By type, farm supply cooperatives had the lowest use of debt.

Debt-to-equity ratio is calculated by dividing

long-term debt by total member equity. This ratio

shows the financial flexibility and the long-term capitalstructure of the cooperative. High ratios indicate

inadequate borrowing power. Debt-to-total-equity

ratio decreased from 0.79 in 1998 to 0.75 in 1999 (figure

2 & table 18). A low ratio is more favorable and financially impacts the cooperative through independence

on outside sources of funds relative to owners’ equity.

A low ratio may indicate low return on equity.

Operationally, a low ratio tends to reduce interest cost.

Improvement may be gained by disposing of unproductive assets and using proceeds to liquidate debt, or

accelerating payments on long-term loans. Other ways

include increasing local equity by generating higher

levels of local savings, slowing down equity retirement

programs, selling additional capital stock, or retaining

more allocated savings.

As cooperatives’ size gre w, so did their use of

long-term debt. The ratio was 0.29 for small cooperatives and 0.95 for super cooperatives (table 16).

Marketing cooperatives had, at 1.06, the highest ratio

by type, while farm supply cooperatives were the lowest at 0.53. When looking at the trend, the ratio

increased slightly each year from 1990, except in 1999

(figure2).

16

Table 16—Financial analysis ratios by cooperative size, 1999

Ratio Small Medium Large Super

Liquidity

Current 2.54 1.56 1.33 1.24

Quick 1.56 .85 .66 .57

Leverage

Debt .22 .35 .42 .49

Debt-to-equity .29 .55 .71 .95

Times-interest-earned 7.26 4.95 3.87 3.80

Activity

Total-asset-turnover 1.55 1.61 1.78 2.11

Fixed-asset-turnover 7.19 5.68 5.37 7.20

Profitability

Gross profit margin 15.81 15.15 15.38 10.20

Return-on-total-assets

before interest & taxes 5.61 6.82 6.61 7.17

Return-on-total-equity 7.98 10.81 10.54 12.91
Times-interest-earned ratio is the number of

times interest expense is covered by earnings. It is calculated by dividing earnings before interest and taxes

by interest expense. A ratio of one or more indicates

the ability of current earnings to pay current interest

expenses. Lending institutions are more apt to loan to

cooperatives whose times-interest-earned ratio is more

than one (1) because it shows their ability to pay interest payments. Subsequently, a lending institution may

lend funds at lower rates morereadily for capital

improvements.

This ratio was higher for respondent cooperatives

in 1993 before starting a downward slide (figure3).

This ratio started a short-lived rebound in 1997 before

another downwardtrend. Collecting old receivables,

improving inventory turnover, disposing of assets and

reducing debt with proceeds, or reducing debt with

17

Figure 1—Current and Quick Ratios

0

0

2

1.5

1

0.5

0

Current

Quick

1990 91 92 93 94 95 96 97 98 99

Figure 2—Debt-to-Total-Equity and Debt atio

0

0.5

0.4

0.3

0.2

0.1

0

Debt

Debt-to-total-equity

1990 91 92 93 94 95 96 97 98 99

Table 17—Financial analysis ratios by cooperative type, 1999

Ratio Farm Mixed farm Mixed

supply supply Marketing marketing

Liquidity

Current 1.61 1.41 1.23 1.24

Quick 0.87 0.71 0.55 0.58

Leverage

Debt 0.35 0.42 0.51 0.48

Debt-to-equity 0.53 0.73 1.06 0.91

Times-interest-earned 4.95 3.61 3.34 4.25

Activity

Total-asset-turnover 1.49 1.75 2.52 2.19

Fixed-asset-turnover 5.13 5.72 8.06 7.87

Profitability

Gross profit margin 19.30 15.86 6.70 8.24

Return-on-total-assets

before interest & taxes 6.79 7.07 6.46 6.94

Return-on-total-equity 10.27 10.49 12.32 13.49
working capital may improve this ratio. Financially,a

high ratio affects the return on equity and tends to

increase it. Operationally, a high ratio reduces interest

cost.

Interest coverage was the greatest for smaller

cooperatives and generally fell as size increased to the

super category (table 16). By type, the ratio ranged

from 3.34 for marketing to 4.95 for farm supply cooperatives.

Activity Ratios—These ratios measure how well

cooperatives use assets. A low ratio could mean that

the cooperative was overcapitalized or carrying too

much inventory. A high ratio could be deceptive. A

cooperative with fully depreciated older assets could

have an artificially high ratio even though those assets

were no longer operating efficiently.

Total-asset-turnover ratio was found by dividing

net sales by total cooperative assets. This ratio went

down slightly from 2.13 in 1998 to 1.92 in 1999 (figure

4). The elements almost negated each other--total sales

decreased by 6 percent and total assets increased by 5

percent. A high ratio favorably influences finances

through the reduction of financial leverage and/or

increased return on equity. A high ratio operationally

tends to reduce interest costs.

The ratio was higher for larger cooperatives

(table 16). Super cooperatives had the highest ratio at

2.11, indicating the most efficient use of assets. By

cooperative type, the total asset turnover ratio was

higher for marketing than for farm supply. The total

asset turnover ratio was lowest in 1999 at 1.92 and

highest in 1990 and 1996 at 2.47.

Fixed-asset-turnover ratio represents net sales

divided by net property, plant, and equipment (PP&E).

This ratio is similar to the total-asset-turnover ratio

and shows how well the cooperative used its fixed

assets. This ratio by itself might not give a complete

picture of the cooperative's financial health. A cooperative with fully depreciated assets would have an artificially high ratio. A cooperative that invested heavily

in PP&E for future expansion will have a temporarily

low ratio.

After a high in 1996 of 9.78, this ratio remained

relatively level between 1991 and 1995 (figure 4). In

1999, the ratio was 6.53, a slight decrease from 1998

and the lowest for the 10-year period. Sales decreased

6 percent while investment in fixed assets increased 10

percent. The measure for this ratio may or may not

show favorable or unfavorable conditions, but merely

cooperative conditions. An abnormally high ratio usually indicates very old, nearly depreciated fixed assets

or the leasing of property and equipment.

18

Table 18—Financial analysis ratios for all cooperatives, 1999 and 1998

Ratio 1999 1998

Current 1.36 1.37

Quick 0.67 0.71

Debt 0.43 0.43

Debt-to-equity 0.75 0.79

Times interest earned 4.10 4.61

Total-asset-turnover 1.92 2.13

Fixed-asset-turnover 6.53 7.62

Gross profit margin 12.43 11.32

Return-on-total-assets before

interest & taxes 6.86 7.88

Return-on-total-equity 8.32 10.21

Figure 3—Times-Interest-Earned

0

0

0

60

5

4

3

1990 91 92 93 94 95 96 97 98 99
By size, a fixed-asset-turnover ratio of 7.20 was

greatest for super cooperatives and by type, the highest (8.06) for marketing cooperatives.

A high ratio financially favorably influences by

increasing asset use, reducing financial leverage,

and/or increasing return on equity. A high ratio, operationally, tends to reduce depreciation and interest

costs. It may also increase costs related to operating

leases, personnel and travel, or delivery expenses. This

ratio may be improved by restricting further investments in fixed assets; redesigning production, or office

facilities to increase the sales generating potential of

existing space and equipment; and/or selling idle

machinery and parts, unused vehicles, and unnecessary equipment.

Profitability Ratios—These ratios, such as gross

profit margin, indicate the efficiency of the

cooperative's operations. Because a cooperative is

owned by its user-members, many common industry

profitability ratios have little meaning. For instance,

profitability ratios measuring the return on common or

preferred stock of similar investor-oriented firms are

not appropriate because there is seldom an open

market for cooperative stock.

Gross profit margin–an important operating

ratio--is found by subtracting the cost of goods sold

from net sales and then dividing this amount (gross

margin) by net sales. A small change in the gross margin has a tremendous impact on local savings. It indicates the cooperative's pricing policy and cost of goods

offered for sale.

For all cooperatives, the gross profit margin averaged 12.4 percent in 1999, the highest for the 10-year

period (figure 5). By size, this margin was around 15

percent for all but the super cooperatives, which was

lowest at 10.2 percent. The gross margins were 19.3

and 15.8 percent, respectively, for farm supply and

mixed farm supply cooperatives (table 17).

Return-on-total-assets measures the rate of return

on total investment. It is determined by dividing net

income by total assets and usually calculated before

interest and taxes. This ratio is a measure of performance. It is not sensitive to the leverage position of the

cooperative. Although some assets were financed

through debt, the ratio measuresreturn to both members and lenders. This ratio declined by 1.02 percent to

6.86 percent from1998 and 1999 (table 18).

Net savings (before income taxes) declined 12

percent while interest expense increased only 2 percent

in the 2-year period (table 8). For the decade, this ratio

was highest in 1996 and 1997 and has been fairly constant (figure 6). Operationally, a high ratio tends to

reduce interest cost and financially indicates a comparatively high rate of return on assets employed.

19

Figure 4—Total and Fixed Asset Turnover

6 0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

11.0

11.5

3 12.0

2

1

0

12

11

10

9

8

7

6

1990 91 92 93 94 95 96 97 98 99

Total asset turnover

Fixed asset turnover
Super, medium, and large-sized cooperatives had

a higher return on total assets (table 16). Super-sized

cooperatives were slightly higher at 7.17 percent. By

cooperative type, return on total assets was highest for

mixed farm supply cooperatives, at 7.07 percent.

Return-on-total-equity is net income divided by

allocated equity. It was determined by subtracting

unallocated equity from total member equities. It represents member investment in their cooperative and is

an important measure of profitability.

This ratio decreased almost 2 percent in 1999

(table 18). This ratio is sensitive to the amount of debt

capital in the cooperative and best used in conjunction

with other measures such as the return-on-total-assets.

Net savings decreased 13 percent while total equity

increased about 5 percent from 1998 to 1999.

Financially, a high ratio is favorable and tends to

decrease financial leverage. However, a high ratio may

also be a symptom of insufficient investment.

Operationally, a high ratio tends to reduce interest cost

over time but may occur when both total debt and

interest costs are high.

By size, this ratio increased as the cooperative

grew in size. Super cooperatives had the highest return

on allocated equity (12.91 percent). Farm supply and

mixed farm supply cooperatives ratios were 10.27 percent and 10.49 percent and marketing and mixed marketing cooperatives were 12.32 percent and 13.49 percent (table 17).

Conclusions

Agricultural cooperatives continued to play a

vitalrole in supplying goods and services to farmers

and marketing their products. They were also important to rural communities, often one of the largest

employers, and provided considerable tax revenues.

There has been extensive consolidation of local cooperatives during the past two decades reflected an

attempt to maintain an adequate size from which to

provide their members with expanded products and

markets. In many consolidations, cooperatives maintained branch locations to better serve members.

Locals maintained strong ties to regional cooperatives, CoBank, or the Bank for Cooperatives through

which they obtained products, gained marketing

opportunities, or borrowed needed capital. Although

patronage refunds to local cooperatives decreased in

the 2-year period, they helped 19 cooperatives remain

profitable. Locals, however, can’t depend consistently

on large patronage refunds. This indicates further consolidation of locals is likely.

Although current assets declined, total assets

increased 7 percent from 1998 to 1999. Investment in

PP&E, grain and oilseed inventories, farm supply

inventories, and accounts receivable for farm supply

sales gre w. More than half of the accounts receivable

were less than 30 days old.

Current liabilities declined 0.6 percent in the 2-

year period, with patrons’ credit balances and "other"

liabilities having the largest decrease. Current term

and seasonal short-term debt used for financing operating expenses grew in double digits. Growth was also

experienced in accrued expenses, long-term debt, and

cash patronage refunds and dividends.

20

Figure 5—Gross Margin Percent

0

5

0

5

150

10

5

1990 91 92 93 94 95 96 97 98 99

Figure 6—Return on Total Assets and Total Equity

14

12

10

8

6

4

2

0

Total equity

Total assets

1990 91 92 93 94 95 96 97 98 99
Owner equities grew 6 percent. Through all size

and type categories, members averaged about 56 percent ownership in their cooperative for both years.

Members of small cooperatives had the highest percentage of ownership while those in super-size cooperatives had the lowest.

Net sales and cost of goods sold fell. Grain production and sales were low and affected feed sales,

which were also lower in 1999. Gross margins vary not

only by cooperative, but also by farm supplies sold or

products marketed. Margins increased about 4 percent.

The impact on ratio analysis follows:

1. Liquidity ratios--current ratio (current assets/current liabilities) was fairly steady at around 1.5

between 1990 and 1999. The quick ratio (current

assets-inventory/current liabilities) mimicked the

current ratio’s trend;

2. Leverage ratios--debt ratio was at a high of 0.47 in

1996. After 1996, the ratio started to decline, with the

sharpest downturn in 1997;

3. Activity ratios--total-asset-turnover ratio fell fro m

2.13 in 1998 to 1.92 in 1999 because total sales

decreased 6 percent while assets increased only 5

percent with much of the increase in inventories;

and finally

4. Profitability ratios--return on total assets ratio fell

from 7.88 in 1998 to 6.53 in 1999 because total assets

increased while net income decreased (13 percent).

Production and prices for most grains and

oilseeds decreased greatly in 1999 and most inventories are probably stored until the cooperative or producers can capture higher prices. Other pressing issues

are sure to arise in the coming years.

Cooperatives are owned by their farmer/member/patrons who want to own a business where they

can purchase supplies and market products. In the

interest of those member-owners, cooperatives will

continue to adapt to changing economic conditions.

21
22

Appendix table 1—Common-size balance sheets for farm supply cooperatives, 1999

Cooperative size

Item Small Medium Large Super

Percent of total assets

Current assets

Cash and cash equivalents 13.51 6.63 3.48 3.55

Accounts receivable 11.11 10.29 11.90 1.62

Inventories--grains and oilseeds 0.09 0.01 0.20 1

--farm supplies 18.07 18.59 20.12 16.60

Prepaid expenses 1.70 1.73 0.77 0.92

Other current assets 2.68 3.09 2.16 4.93 ____ ____ ____ ____

Total current assets 47.16 40.34 38.63 37.62

Investments and other assets

Investments 30.13 29.88 24.20 24.70

Other assets 1.20 2.39 3.37 2.66

Net property, plant, and equipment 21.51 27.39 33.79 35.02

_____ _____ _____ _____

Total assets 100.00 100.00 100.00 100.00

Liabilities and owner equities

Current liabilities

Current portion of long-term debt 1.17 1.33 1.90 1.61

Notes payable-seasonal 2.92 6.56 7.73 8.70

Accounts payable 6.75 7.36 8.50 7.82

Other liabilities 4.62 7.00 7.65 6.34

Accrued taxes 0.26 0.39 0.69 0.56

Accrued expenses 1.57 1.64 2.22 1.49

Patronage refunds (cash) 1.02 1.22 1.16 0.96

____ ____ ____ ____

Total current liabilities 18.31 25.50 29.85 27.47

Long-term debt 3.97 9.15 11.10 14.18

Total liabilities 22.29 34.66 40.95 41.65

Owner equities

Allocated equity 56.97 51.07 44.14 39.83

Unallocated equity 20.75 14.28 14.91 18.52

____ ____ ____ ____

Total owner equities 77.71 65.35 59.05 58.35

_____ _____ _____ _____

Total liabilities and owner equities 100.00 100.00 100.00 100.00

Based on total assets of: $1,767,633 $4,790,804 $8,284,667 $14,894,088

–Number 85 38 26 5

1 Less than 0.01 percent.
23

Appendix table 2—Common-size balance sheets for mixed farm supply cooperatives, 1999

Cooperative size

Item Small Medium Large Super

Percent of total assets

Assets

Current assets

Cash and cash equivalents 1.23 5.87 4.08 3.41

Accounts receivable 16.06 11.48 12.45 11.53

Inventories--grains and oilseeds 3.77 2.91 4.55 7.96

--farm supplies 18.41 14.70 13.19 13.37

Prepaid expenses 0.46 0.62 0.51 0.56

Other current assets 2.88 3.59 0.78 5.70

____ ____ ____ ____

Total current assets 42.81 39.17 35.56 42.53

Investments and other assets

Investments 36.29 26.28 26.57 25.36

Other assets 0.37 2.71 4.39 2.78

Net property, plant, and equipment 20.53 31.84 33.48 29.33

_____ _____ _____ _____

Total assets 100.00 100.00 100.00 100.00

Liabilities and owner equities

Current liabilities

Current portion of long-term debt 2.25 2.58 2.29 1.77

Notes payable-seasonal 9.32 4.52 5.88 8.70

Accounts payable 9.42 8.32 6.11 6.84

Patrons credit balances & other liabilities 1.31 7.10 7.50 9.70

Accrued taxes 0.00 0.40 0.52 0.47

Accrued expenses 1.86 1.18 2.26 2.29

Patronage refunds (cash) 0.82 1.02 1.03 1.07

____ ____ ____ ____

Total current liabilities 24.98 25.12 25.59 30.84

Long-term debt 4.97 11.58 17.05 12.51

Total liabilities 29.96 36.70 42.64 43.35

Owner equities

Allocated equity 49.74 41.64 45.29 45.51

Unallocated equity 20.31 21.66 12.07 11.14

____ ____ ____ ____

Total owner equities 70.05 63.30 57.36 56.65

Total liabilities and owner equities 100.00 100.00 100.00 100.00

Based on total assets of: $1,265,428 $3,789,366 $8,311,432 $17,431,572

–Number 7 15 16 16
24

Appendix table 3—Common-size balance sheets for mixed marketing cooperatives, 1999

Cooperative size

Item Small Medium Large Super

Percent of total assets

Assets

Current assets

Cash and cash equivalents 25.55 7.88 1.86 3.34

Accounts receivable 9.29 11.23 13.87 8.65

Inventories--grains and oilseeds 8.82 11.15 9.83 17.61

--farm supplies 9.11 11.09 9.34 10.37

Prepaid expenses 0.86 1.70 0.79 0.48

Other current assets 4.92 6.64 7.77 9.76

____ ____ ____ ____

Total current assets 58.55 49.69 43.46 50.21

Investments and other assets

Investments 22.82 24.54 24.64 20.67

Other assets 0.00 1.16 1.10 1.40

Net property, plant, and equipment 18.63 24.61 30.80 27.72

Total assets 100.00 100.00 100.00 100.00

Liabilities and owner equities

Current liabilities

Current portion of long-term debt 0.46 2.09 1.63 4.58

Notes payable-seasonal 2.67 4.51 9.85 14.92

Accounts payable 2.21 6.48 5.57 4.53

Patrons credit balances & other liabilities 7.98 17.42 12.67 14.79

Accrued taxes 0.22 0.54 0.78 0.86

Accrued expenses 0.79 0.92 1.03 1.45

Patronage refunds (cash) 0.97 1.03 1.15 1.26

____ ____ ____ ____

Total current liabilities 15.30 32.99 32.68 42.39

Long-term debt 0.23 4.38 7.13 8.30

Total liabilities 15.53 37.36 39.81 50.69

Owner equities

Allocated equity 55.56 38.22 39.15 34.66

Unallocated equity 28.91 24.42 21.04 14.65

____ ____ ____ ____

Total owner equities 84.47 62.64 60.19 49.31

_____ _____ _____ _____

Total liabilities and owner equities 100.00 100.00 100.00 100.00

Based on total assets of: $1,572,889 $3,718,720 $6,200,072 $20,056,164

–Number 6 13 14 24
25

Appendix table 4—Common-size balance sheets for marketing cooperatives, 1999

Cooperative size

Item Small Medium Large Super

Percent of total assets

Assets

Current assets

Cash and cash equivalents 9.89 0.88 7.09 2.75

Accounts receivable 8.32 9.82 5.57 6.42

Inventories--grains and oilseeds 13.88 14.29 17.56 18.12

--farm supplies 6.42 5.49 13.17 8.76

Prepaid expenses 2.34 0.26 1.51 0.46

Other current assets 8.58 8.96 10.28 11.31 ____ ____ ____ ____

Total current assets 49.43 39.70 55.18 47.82

Investments and other assets

Investments--other cooperatives 22.61 18.55 9.74 20.53

Other assets 1.87 0.05 0.30 0.80

Net property, plant, and equipment 26.09 41.70 34.78 30.85

____ ____ ____ ____

Total assets 100.00 100.00 100.00 100.00

Liabilities and owner equities

Current liabilities

Current Portion of long-term debt 0.19 3.14 3.57 4.94

Notes payable-seasonal 4.23 6.39 1.71 7.37

Accounts payable 3.26 4.52 10.31 5.37

Patrons credit balances & other liabilities 12.56 9.03 22.49 19.63

Accrued taxes 0.37 0.70 0.29 0.58

Accrued expenses 0.44 0.99 0.86 1.36

Patronage refunds (cash) 0.95 1.26 0.98 0.96

____ ____ ____ ____

Total current liabilities 22.00 26.03 40.21 40.21

Long-term debt 3.01 11.36 14.21 12.63

Total liabilities 25.01 37.39 54.42 52.84

Owner equities

Allocated equity 58.69 28.82 30.47 32.26

Unallocated equity 16.30 33.79 15.11 14.90

____ ____ ____ ____

Total owner equities 74.99 62.61 45.58 47.16

____ ____ ____ ____

Total liabilities and owner equities 100.00 100.00 100.00 100.00

Based on total assets of: $1,572,889 $3,386,535 $4,152,686 $18,373,629

–Number 6 3 4 13
26

Appendix table 5—Abbreviated income statement as a percent of net sales for farm supply cooperatives, 1999

Cooperative size

Item Small Medium Large Super

Percent of net assets

Net sales 100.00 100.00 100.00 100.00

Cost of goods sold 82.26 81.19 79.24 81.02

____ ____ ____ ____

Gross margin 17.74 18.81 20.76 18.98

Service and other income 4.51 4.39 3.62 3.84

____ ____ ____ ____

Gross revenue 22.25 23.20 24.38 22.82

Expenses

Employee1 11.43 11.36 12.57 11.46

Administrative2 1.34 1.16 1.08 0.79

General3 4.77 4.96 5.48 5.16

Depreciation 2.73 3.14 2.62 2.90

Interest 0.53 0.99 1.06 1.06

Bad debts 0.35 0.24 0.16 0.03

____ ____ ____ ____

Total expenses 21.13 21.85 22.97 21.40

Local savings 1.11 1.35 1.41 1.42

Patronage refunds received 2.41 2.62 2.08 2.06

____ ____ ____ ____

Savings before income taxes 3.52 3.97 3.49 3.48

Less income taxes 0.24 0.30 0.29 0.24

____ ____ ____ ____

Net income 3.28 3.67 3.20 3.24

Based on sales of: $2,536,616 $6,643,042 $13,216,636 $23,585,707

1 Employee expenses include salaries and wages, payroll taxes, employee insurance, unemployment compensation, and pension expense.

2 Administrative costs include professional services, office supplies, telephone, meetings and travel, donations, dues and subscriptions,

directors' fees and expense, and annual meetings.

3 General expenses include advertising and promotion, delivery (auto and truck), insurance, property, business and other taxes and licenses,

rent and lease expenses, plant supplies and repairs, repairs and maintenance, utilities, miscellaneous, and other.
27

Appendix table 6—Abbreviated income statement as a percent of net sales for mixed farm supply cooperatives, 

1999

Cooperative size

Item Small Medium Large Super

Percent of net assets

Net sales 100.00 100.00 100.00 100.00

Cost of goods sold 88.38 85.70 83.97 83.73

____ ____ ____ ____

Gross margin 11.62 14.30 16.03 16.27

Service and other income 4.05 7.26 5.89 5.78

____ ____ ____ ____

Gross revenue 15.67 21.56 21.92 22.05

Expenses

Employee1 8.05 9.88 10.92 10.29

Administrative2 1.22 0.98 1.07 0.94

General3 3.49 5.66 5.62 5.52

Depreciation 1.44 2.59 2.62 2.61

Interest 0.73 0.94 1.13 1.16

Bad debts 0.14 0.18 0.05 0.11

____ ____ ____ ____

Total expenses 15.08 20.23 21.43 20.63

Local savings 0.60 1.34 0.49 1.43

Patronage refunds received 1.26 1.58 1.90 1.75

____ ____ ____ ____

Savings before income taxes 1.86 2.92 2.39 3.18

Less income taxes 0.12 0.20 0.10 0.28

____ ____ ____ ____

Net income 1.74 2.72 2.29 2.90

Based on sales of: $2,738,617 $6,936,308 $13,332,550 $31,256,467

1 Employee expenses include salaries and wages, payroll taxes, employee insurance, unemployment compensation, and pension expense.

2 Administrative costs include professional services, office supplies, telephone, meetings and travel, donations, dues and subscriptions,

directors' fees and expense, and annual meetings.

3 General expenses include advertising and promotion, delivery (auto and truck), insurance, property, business and other taxes and licenses,

rent and lease expenses, plant supplies and repairs, repairs and maintenance, utilities, miscellaneous, and other.
28

Appendix table 7—Abbreviated income statement as a percent of net sales for mixed marketing cooperatives,

1999

Cooperative size

Item Small Medium Large Super

Percent of net assets

Net sales 100.00 100.00 100.00 100.00

Cost of goods sold 91.68 91.20 92.23 91.73

____ ____ ____ ____

Gross margin 8.32 8.80 7.77 8.27

Service and other income 6.40 4.98 5.25 5.49

____ ____ ____ ____

Gross revenue 14.72 13.78 13.02 13.76

Expenses

Employee1 6.14 5.89 5.36 5.46

Administrative2 0.81 0.64 0.50 0.45

General3 4.53 3.49 3.75 3.90

Depreciation 1.79 1.88 1.87 1.79

Interest 0.12 0.53 0.72 0.79

Bad debts 0.08 0.16 0.12 0.07

____ ____ ____ ____

Total expenses 13.47 12.59 12.32 12.45

Local savings 1.25 1.19 0.71 1.31

Patronage refunds received 0.42 1.45 1.45 1.16

____ ____ ____ ____

Savings before income taxes 1.67 2.64 2.16 2.47

Less income taxes 0.04 0.25 0.21 0.22

____ ____ ____ ____

Net income 1.63 2.39 1.95 2.25

Based on assets of: $3,031,967 $7,659,546 $14,099,985 $46,800,267

1 Employee expenses include salaries and wages, payroll taxes, employee insurance, unemployment compensation, and pension expense.

2 Administrative costs include professional services, office supplies, telephone, meetings and travel, donations, dues and subscriptions,

directors' fees and expense, and annual meetings.

3 General expenses include advertising and promotion, delivery (auto and truck), insurance, property, business and other taxes and licenses,

rent and lease expenses, plant supplies and repairs, repairs and maintenance, utilities, miscellaneous, and other.
29

Appendix table 8—Abbreviated income statement as a percent of net sales for marketing cooperatives, 1999

Cooperative size

Item Small Medium Large Super

Percent of net assets

Net sales 100.00 100.00 100.00 100.00

Cost of goods sold 93.51 93.93 94.14 93.19

____ ____ ____ ____

Gross margin 6.49 6.07 5.86 6.81

Service and other income 4.04 6.02 3.89 4.11

____ ____ ____ ____

Gross revenue 10.53 12.09 9.75 10.92

Expenses

Employee1 3.88 4.63 3.48 4.05

Administrative2 0.58 0.54 0.34 0.31

General3 3.47 3.40 2.72 3.25

Depreciation 1.77 2.13 1.57 1.58

Interest 0.31 0.40 0.47 0.82

Bad debts 0.08 0.02 0.07 0.05

____ ____ ____ ____

Total expenses 10.11 11.12 8.67 10.06

Local savings 0.41 0.97 1.07 0.85

Patronage refunds received 1.02 1.30 0.53 0.95

____ ____ ____ ____

Savings before income taxes 1.43 2.27 1.60 1.80

Less income taxes 0.05 0.21 0.14 0.19

____ ____ ____ ____

Net income 1.39 2.06 1.46 1.61

Based on sales of: $3,545,504 $7,357,734 $12,721,337 $46,160,446

1 Employee expenses include salaries and wages, payroll taxes, employee insurance, unemployment compensation, and pension expense.

2 Administrative costs include professional services, office supplies, telephone, meetings and travel, donations, dues and subscriptions,

directors' fees and expense, and annual meetings.

3 General expenses include advertising and promotion, delivery (auto and truck), insurance, property, business and other taxes and licenses,

rent and lease expenses, plant supplies and repairs, repairs and maintenance, utilities, miscellaneous, and other.
U.S. Department of Agriculture

Rural Business–Cooperative Service

Stop 3250

Washington, D.C. 20250-3250

Rural Business–Cooperative Service (RBS) provides research,

management, and educational assistance to cooperatives to

strengthen the economic position of farmers and other rural

residents. It works directly with cooperative leaders and

Federal and State agencies to improve organization,

leadership, and operation of cooperatives and to give guidance

to further development.

The cooperative segment of RBS (1) helps farmers and other

rural residents develop cooperatives to obtain supplies and

services at lower cost and to get better prices for products they

sell; (2) advises rural residents on developing existing

resources through cooperative action to enhance rural living;

(3) helps cooperatives improve services and operating

efficiency; (4) informs members, directors, employees, and the

public on how cooperatives work and benefit their members

and their communities; and (5) encourages international

cooperative programs. RBS also publishes research and

educational materials and issues Rural Cooperatives magazine.

The U.S. Department of Agriculture (USDA) prohibits

discrimination in all its programs and activities on the basis of

race, color, national origin, gender, religion, age, disability,

political beliefs, sexual orientation, and marital or family

status. (Not all prohibited bases apply to all programs.)

Persons with disabilities who require alternative means for

communication of program information (braille, large print,

audiotape, etc.) should contact USDA’s TARGET Center at

(202) 720-2600 (voice and TDD).

To file a complaint of discrimination, write USDA, Director,

Office of Civil Rights, Room 326-W, Whitten Building, 14th and

Independence Avenue, SW, Washington, D.C. 20250-9410 or

call (202) 720-5964 (voice or TDD). USDA is an equal

opportunity provider and employer.