Abstract

Wheat Grain Cooperatives Adjust to Challenges

of 198Os, Poised for 1990s

David E. Cummins

Rural Development Administration - Cooperative Services

U.S. Department of Agriculture

This report presents information for 1983 through 1991 on the physical and

financial structure adjustments made by local first-handlers-of-grain cooperatives in three major wheat areas-Northern Plains, Southern Plains, and Pacific

Northwest. They had annual total sales of at least $5 million, more than half in

grain. Most associations also handled farm supplies and all provided related

services.

Local cooperative grain handlers faced abrupt changes in export markets

for grains and oilseeds, shifts in Government policy, and occasional drought,

accompanied by wide swings in grain prices. Most associations represented in

this report adjusted successfully to changing economic conditions through

sound financial management of particularly long-term debt and operating capital. The economic position of most locals improved in the latter half of the period

due in part to increased patronage from their regional cooperatives.

Keywords: cooperative, grain, adjustment, expenses, debt, patronage

Research Report 132

June 1994
Preface

This report is based on balance sheet and operating statement data from

cooperatives’ annual reports requested for an annual survey of grain marketing

cooperatives by USDA/RDA- Cooperative Services. Grain cooperatives are

defined as those whose sales of grains and oilseeds account for more than half

of total sales. Other types of information, such as volume of grain handled and

storage capacity, were obtained directly from first-handler cooperatives.

Report information is for two sizes of local first-handler associations in the

Southern Plains (SP), Northern Plains (NP), and Pacific Northwest (PNW).

Large cooperatives had $15 million or more in total sales. Medium-sized ones

ranged from $5 million to $14.9 million. In fiscal 1991, both groups combined

accounted for an estimated 85, 72, and 92 percent of total grains and oilseeds

sales by local grain cooperatives in their respective areas.

These cooperatives specialized in handling wheat and sorghum (Southern

Plains); wheat, barley, and oats (Northern Plains); and wheat and barley

(Pacific Northwest). Most cooperatives were diversified, also handling farm supplies. All provided related services.

Information for this report is based on condensed balance sheets and

operating statements. Financial report adjustments were made to ensure data

comparability because of variations in accounting, auditing practices, and terminology. Some detail was lost in the process. Data reported are averages per,

not totals for, first-handler grain associations.

This report may help cooperative managers and boards make sound business decisions as they adjust to variations of old problems and consider the

need for increased capital for improved or new facilities and/or services.

Information can be used to compare your cooperative with others of similar

size.
Glossary of Terms

Current assets- Value of assets readily converted into cash without interfering with normal business operations.

Investments- Dollar value of investments in other businesses, mainly cooperative associations, and deferred patronage.

Fixed assets- Dollar value of property, structures and equipment (less depreciation), land, construction in progress, and capital leases.

Other assets- All other assets such as bond cost amortization and deferred

and prepaid expenses.

Current liabilities- Dollar value of liabilities, including that portion of longterm debt due in a year or less and patronage refunds payable.

Long-term liabilities- Value of all debts with a maturity of more than 1 year,

such as debentures, notes, industrial revenue bonds, and mortgage notes.

Total debt- Dollar value of all long-term liabilities plus the current portion of

those liabilities, seasonal loans, and debenture notes.

Net worth or equity capital- Dollar value of owners’ equity listed in the equity sections. Includes common/capital/preferred stock, allocated/unallocated

earnings, per-unit retains, and certificates of indebtedness and membership.

Unallocated reserves- Equity capital generally, but not exclusively, viewed

as available for investment in facility expansion or growth. Comparable terminology includes capital and general reserve; unallocated patronage; retained

savings, earnings, margins, and income; and surplus.

Gross margins- Dollar value of sales of grains and oilseeds and farm supplies less cost of goods sold.

Other operating income- Dollar value of storage and handling fees, service

revenue, load-out fees, cleaning, drying, mixing, commissions, finance charges,

etc.

Nonoperating income- Dollar value of net interest income/expenses, gain or

loss from sale of assets, dividends on stock, and patronage refunds from other

cooperatives.

Gross income- Dollar value of gross margins plus other operating and nonoperating income.
Glossary of Terms

Total expenses- Dollar value of labor, administrative, and other general

expenses such as depreciation, repairs, utilities, and property taxes.

Labor expense Dollar value of salaries and wages and fringe benefits,

including Social Security, workers’ compensation, unemployment, retirement,

hospitalization, bonuses, and other expenses directly related to labor.

Net savings (lossesk Dollar value of gross income minus total expenses

before income taxes.

Allocation of net savings- Dollar value (1) paid in cash as patronage

refunds, (2) paid in cash as dividends or interest on stock, (3) allocated to

patrons on the book, (4) retained as equity or unallocated retained earnings, (5)

allocated to an educational fund, and (6) set aside for Federal and State income

taxes.

. . . 111
Contents

Highlights and Conclusions ............................................................................. vi

First-Handier Characteristics ........................................................................... 1

Net Savings ..................................................................................................... 2

Income and Expenses ..................................................................................... 7

Sales and Margins ................................................................................... 10

Grain Marketings and Prices Received ................................................... 18

Other Income Sources ............................................................................. 22

Patronage Refunds .......................................................................... 22

Operating Expenses ................................................................................ 28

Role of Labor ................................................................................... 28

Other Expenses ............................................................................... 30

Snapshot of Cost Structure ............................................................. 33

Grain Storage Capacity and Turnover Rate ............................................ 33

Balance Sheet ................................................................................................. 33

Assets ...................................................................................................... 33

Equity Capital .......................................................................................... 38

Debt Structure ......................................................................................... 41

Financial Statement Analysis .......................................................................... 41

References ...................................................................................................... 52

Appendix A ...................................................................................................... 53

Appendix B ...................................................................................................... 57

”
Highlights

This report presents information for 1983 through 1991, except for 1984, on the

physical and financial structure of local first-handlers-of-grain cooperatives in

three major wheat areas with total sales of at least $5 million. Annual survey

and cooperatives’ annual records for their operations revealed:

l Average net savings per association were lowest for wheat-barley-oats

(Northern Plains) cooperatives and highest for wheat-barley (Pacific Northwest)

firms. The net savings spread among the three types was relatively uniform during the period for medium-sized firms and narrowed significantly the latter half

of the period for large ones.

l Net savings per association for both large and mid-sized cooperatives generally edged downward in the early 198Os, rose and averaged highest during

1986-87, then sharply dropped during 1989-91.

l Early declines in net savings were largely related to the sharp dropoff in grain

exports and falling prices after expansion in the late 1970s; mid-period rises to

the Government storage program and rising prices; and latter declines due

lzrgely to falling prices, drought, and producer participation in the Conservation

Reserve Program.

l Although almost nonexistent in the early 198Os, except in the Southern Plains

(wheat-sorghum), patronage refunds received from largely regional cooperatives rose sharply in the late 1980s and early 1990s. This income source was

significantly more important for medium-sized firms than for large ones, contributing up to 55 percent to total net savings during 1989-91.

l Grain sales were a stabilizing factor throughout the period and contributed

significantly more to total sales on wheat-barley-oats and wheat-barley cooperatives than on wheat-sorghum ones.

l Grain averaged at least 82 percent of total sales for wheat-barley-oats and

wheat-barley cooperatives, considerably higher than the 68 percent for the

medium-sized and 63 percent for the large wheat-sorghum firms.

l Total margins on total sales were consistently higher for wheat-sorghum than

for wheat-barley-oats and wheat-barley cooperatives, due mainly to their higher

proportion of farm supply sales. Grain margins were low throughout the period

and, except for the wheat-barley cooperatives in the Pacific Northwest, varied

considerably more than farm supply margins.

l In general, cooperatives in both size groups had sharply reduced long-term

debt to manageable levels by the late 1980s. Exceptions were medium-sized

wheat-barley-oats and large wheat-barley firms.

vi
Highlights

l Medium-sized wheat grain associations owned more of their assets than their

counterparts. Beginning in the mid-l 980s member ownership improved for

medium-sized firms while leveling off for large ones.

l For most size-location situations, local grain-handling wheat cooperatives not

only paid out more earnings as patronage during the latter years, but also

retained more as unallocated reserves for investment in the business.

l Despite closer management of operations in the 1980s labor costs generally

increased in dollar terms for firms in all three areas. Except for medium-sized

wheat-barley-oats cooperatives, labor as a proportion of total expenses generally declined until the latter 1980s and then rose entering the 1990s.

l Internal and external expansion of grain storage capacity occurred during the

latter part of the study period. Except for the large wheat-sorghum cooperatives,

grain storage capacity per association averaged larger during 1989-91 than during 1983-85-g to 12 percent for medium-sized firms and 5 and 8 percent for

large firms.

Substantial change occurred during the 1980s. First-handlers in the three major

wheat areas adjusted to abrupt changes in export markets for grains and

oilseeds, Government policy shifts, and drought conditions, all accompanied by

wide swings in grain prices. The key to cooperatives adjusting to such conditions is sound financial management, particularly of debt and operating capital.

Considerable effort is still needed to manage debt and operating capital and

grain merchandising. Financial management is probably the most important,

complex, and yet rewarding managerial activity in operating grain-handling

cooperatives. Grain merchandising probably is a close second. Financial planning should include (1) generation of more permanent capital to replace or supplement revolving types, (2) equitable membership participation in financing,

and (3) making maximum use of financial leverage.

Traditionally, much operating capital of cooperatives was provided by members,

even though this is a more restrictive way to finance operations. During the

197Os, many grain-handling cooperatives discovered they could not expand

operations solely on internal (or equity) financing. They found it increasingly

necessary to borrow capital to meet growing financial needs and realize

economies of scale.

Creative approaches to financing investment and grain merchandising are

needed if cooperatives are to grow and be economically sound. Cooperatives

experience of the 1980s should contribute significantly to meeting the challenges of the 1990s and beyond.

vii
Wheat Grain Cooperatives Adjust to

Challenges of 198Os, Poised for 1990s

David E. Cummins

Agricultural Economist

RDA-Cooperative Services

FIRST-HANDLER CHARACTERISTICS

This study analyzes changes in the financial

structure and related operating characteristics of

Southern Plains (SP), Northern Plains (NT’), and

Pacific Northwest (PNW) local cooperatives that

are first-handlers of grain (also referred to as firsthandlers, grain cooperatives, or associations).

Annual sales were at least $5 million, more than

half from grain. Most cooperatives were diversified, handling both farm supplies and grain.

These cooperatives are concentrated in Kansas

and Oklahoma (SF’), North and South Dakota (NT’),

and Washington and Oregon (PNW) and specialize

in handling wheat and sorghum (ST’); wheat, barley, and oats (NP); and wheat and barley @‘NW)

(fig. 1).

Figure l- Location of Selected Types of First-Handler Grain Cooperatives

1
Fiaure 2 NET SAVINGS

Net Savings Realized

Wheat First-Handler Co-ops

Medium

$ Thous.

Large

1000

900

800

600

-Wheat-Barley

m Wheat-Barley-Oats

-Wheat-Sorghum

I983 85 86 87 88 89 90 91

Fiscal year

Fiscal year 1984 not available.

Medium = $5-14.9 million total sales. Large = $15 million plus total sales.

Net savings per association for both mediumsized and large grain cooperatives generally edged

downward in the early 198Os, rose slightly and

averaged highest in the mid-1980s, then dropped

sharply and averaged lowest during 1989-91 (fig.

2). Early period declines were largely related to the

sharp dropoff in grain exports and falling prices.

This was followed by a recovery period featuring a

Government storage program and generally rising

prices. The subsequent sharp drop in savings was

partially due to generally lower prices, drought,

and participation in particularly the Conservation

Reserve Program (CRP). Wheat-sorghum (SP)

cooperatives were least impacted while large

wheat-barley-oats (NP) and wheat-barley @‘NW)

cooperatives were affected most by the CRT’.

Local net savings reveals interesting patterns

for the period. The influence on total net savings of

other sources of income had a substantial “worse

off” effect on local wheat-sorghum (ST’) grain handlers in the mid-1980s (fig. 3). For wheat-barleyoats (NP) and wheat-barley (PNW) cooperatives,

nonoperating income sources hurt total net savings

throughout the period, particularly on the wheatbarley cooperatives. The relative contribution of

the various sources of nonoperating income

(adjustments to local net savings) varied considerably during the period (fig. 4) and is discussed

later.

Allocations of total net savings revealed a

mixed pattern. The proportion of net savings allocated as patronage increased during the period

while unallocated reserves declined for wheat-barley-oats and medium-sized wheat-barley cooperatives (fig. 5 and table 1).

This proportion for wheat-sorghum associations, particularly large locals, decreased after the

mid-1980s. The proportion of patronage retained

during the later years of the period was about the

same as during the earlier years for most size-location situations (fig. 6). This proportion rose in the

early 1990s for wheat-barley-oats and wheat-barley

cooperatives. Retained patronage is an important

source of capital for investment in cooperatives.

2
Fiaure 3

Local and Total Net Savings, First-Handler Co-ops

Wheat-Sorghum

Medium

$ Thous.

300

Wheat-Barley-Oats Wheat-Barley

Large

lootI-

)-

II

lll-

-

I-

)-

9oc

8OC

7oc

60C

500

400

300

200

1oc

C

- Local Net Savings

tzz Total Net Savings

J I I I I I I I I

1983 85 86 87 88 89 90 91

Fiscal year

lOOO900 -

800 -

700 -

600 -

500 -

400 -

-I

300 -

200 -

loonl

-1983 85 86 87 88 89 90 91

Fiscal year

lOOO900-

w

800-

- n

700-

600-

500-

400-

300-

200-

loo01

1983 85 86 87 88 89 90 91

Fiscal year

Fiscal year 1984 not available

Medium = $5-14.9 million total sales. Large = $15 million plus total sales

3
Figure 4

Local Net Savings and Adjustments, First-Handler Co-ops

Wheat-Sorghum

Medium

$ Thous.

300 r -300 r

Wheat-Barley-Oats Wheat-Barley

- Local Net Savings

Large

1100 r

- Patronage Refund

Other Nonoperating Income

1000

900

800

700

600

500

400

300

200

100

0

-100

-300

I

c

-400 L

1983 85 86 87 88 89 90 91 1983 85 86 87 88 89 90 91 1983 85 86 87 88 89 90 91

Fiscal year Fiscal year Fiscal year

1100 -

1000 -

900 -

800 -

700 -

600 -

500 -

400 -

300

200

100

0

-100

-200

-300

-400 t

Fiscal year 1984 not available

Medium = $5-14.9 million total sales. Large = $15 million PIUS total sales

A

900

800

700

600

500

400

300

200

100

0

-100

-300 F

-400 t
Allocation of Net Savings, First-Handler Co-ops

Wheat-Sorghum

Medium

Percent

80

70

60

50

40

30

20

10

0

Large

100

90

80

70

60

50

40

30

20

IO

0

- Patronage

L

1983 85 86 87 88 89 90 91 1983 85 86 87 88 89 90 91 1983 85 86 87 88 89 90 91

Fiscal year Fiscal year Fiscal year

30

20

10

0

L

Wheat-Barley-Oats Wheat-Barley

100

90

80

70

60

50

40

30

20

10

0

L

- Other Unallocated Reserve

Fiscal year 1984 not available.

Medium = $5-14.9 million total sales. Large = $15 million plus total sales

5
Table l-Allocation of net savings(loss) of wheat-sorghum first-handlers-of-grain cooperatives, by total

sales group, 1983-91*

Item Unit 1983 1985 1986 1987 1988 1989 1990 1991

NET SAVINGS ’ Dollars 206,237 177,406 168,862 182,355 202,296 124,105 99,194 132,889

Patronage, total Percent 84.5 95.2 91.1 70.0 71.1 89.3 84.4 86.7

Paid in cash Percent 35 37 39 43 39 4 1 42 47

Retained Percent 65 63 61 57 61 59 58 53

Other 2 Percent 3.6 3.9 8.9 10.9 6.7 4.7 3.0 1.1

Unallocated reserves Percent 11.9 .9 - 19.1 22.2 6.0 12.6 12.2

NET SAVINGS ’ Dollars 777,792

Patronage, total Percent 79.8

Paid in cash Percent 29

Retained Percent 71

Other * Percent 1.5

Unallocated reserves Percent 18.7

295,551

96.4

32

68

3.6

-

$5- 14.9 million

$15 million or more

172,611 490,790 634,949 491,903 498,384 525,632

93.6 74.9 73.5 72.1 62.4 77.4

38 45 31 49 29 31

62 55 69 51 71 69

6.4 8.0 6.7 5.1 4.9 5.8

- 17.1 19.8 22.8 32.7 16.8

*1984 data not available.

1 Savings before income taxes and allocations.

2 Includes dividends/interest on equity capital, an educational provision, and Federal and State income taxes.

Table l-Allocation of net savings(loss) of wheat-barley-oats first-handlers-of-grain cooperatives, by total

sales group, 1983-91*

Item Unit 1983 1985 1986 1987 1988 1989 1990 1991

$5-74.9 million

NET SAVINGS ’ Dollars 126,840 120,604 139,297 165,567 129,205 38,763 39,447 45,449

Patronage, total Percent 35.7 38.0 14.3 50.9 60.3 77.6 63.5 62.0

Paid in cash Percent 33 27 36 26 24 34 33 30

Retained Percent 67 73 64 74 76 66 67 70

Other 2 Percent 3.6 5.8 4.8 12.8 18.2 15.8 6.9 12.9

Unallocated reserves Percent 60.7 56.2 80.9 36.3 21.5 6.6 29.6 25.1

$15 million or more

NET SAVINGS ’ Dollars 342,725 467,102 699,848 672,362 455,735 433,697 219,432 388,047

Patronage, total Percent 14.4 8.9 22.8 28.2 55.3 61.7 63.8 62.7

Paid in cash Percent 20 25 35 24 27 34 27 24

Retained Percent 80 75 65 76 73 66 73 76

Other 2 Percent .O .4 25.3 6.6 7.5 5.3 8.8 6.2

Unallocated reserves Percent 85.6 90.7 51.9 65.2 37.2 33.0 27.4 31.1

l 1 984 data not available.

’ Savings before income taxes and allocations.

2 Includes dividends/interest on equity capital, an educational provision, and Federal and State income taxes.
Table l-Allocation of net savings(loss) of wheat-barley first-handlers-of-grain cooperatives, by total sales

group, 1983-91’

Item Unit 1983 1985 1986 1987 1988 1989 1990 1991

$5- 14.9 million

NET SAVINGS ’ Dollars 278,468 167,060 271,473 192,881 268,850 82,421 134,419 118,485

Patronage, total Percent 29.2 47.0 29.2 61.7 68.4 82.5 82.6 82.5

Paid in cash Percent 33 20 20 30 33 44 37 32

Retained Percent 67 80 80 70 67 56 63 68

Other 2 Percent 4.9 4.2 4.6 6.7 4.9 5.3 6.6 3.8

Unallocated reserves Percent 65.9 48.8 66.2 31.6 26.7 12.2 10.8 13.7

$15 million or more

NET SAVINGS 1 Dollars 744,873 812,595 531,412 932,482 744,262 376,574 264,662 514,395

Patronage, total Percent 57.7 45.7 19.7 67.2 38.9 45.6 38.6 67.7

Paid in cash Percent 20 23 38 34 24 23 38 28

Retained Percent 80 77 62 66 76 77 62 72

Other 2 Percent 12.3 10.4 8.0 7.8 12.1 8.3 6.4 10.0

Unallocated reserves Percent 30.0 43.9 72.3 25.0 49.0 46.1 55.0 22.3

*1984 data not available.

1 Savings before income taxes and allocations.

* Includes dividends/interest on equity capital, an educational provision, and Federal and State income taxes.

The highest incidence of losses reported by

wheat-sorghum (SP) grain cooperatives coincided

with low grain prices and wheat harvested acreage

in 1985437. Loss rates for wheat-barley-oats (NE’)

cooperatives were highest in 1988-91 for mediumsized ones and 1988-89 for large ones, attributed to

period-low yields and production (drought) and

low wheat and barley prices.

Highest incidence of losses for wheat-barley

@‘NW) cooperatives was in 1987-89, associated

with low harvested acres and production of wheat

and barley. Low grain prices in 1987 were a contributing factor. Net savings for wheat-barley-oats

and wheat-barley grain cooperatives that reported

a savings tended to average lowest during their

periods of high losses (figs. 7 and 8). Participation

in the Government grain storage program in the

mid-1980s boosted net savings for wheat cooperatives, particularly for wheat-sorghum cooperatives

that reported a savings, despite the high incidence

of losses.

INCOME AND EXPENSES

Key factors underlying the 1983-91 changes in

net savings were grain prices and sales volumes,

drought, regional cooperative relationships, and

Government program impacts on the income side

and labor expenses on the cost side. Income-related

factors varied considerably more than cost-related

factors.

Gross income for most wheat cooperative situations rose steadily to its peak during 1986-87, with

increases from the early 1980s noticeably steeper

for the large ones than for the medium-sized ones

(table 2 and fig. 9). Gross incomes and total operating costs generally averaged lower following their

respective peaks, and were rising entering the

1990s. This was particularly true for the large

wheat cooperatives in the Southern Plains and

Pacific Northwest.

When viewing the relationship of gross

income to total expenses as an efficiency measure,

large wheat cooperatives tended to be more efficient than the medium-sized ones (fig. 10). This

tendency doesn’t appear to be strong enough to

suggest that there is pressure on wheat cooperatives to increase scale of operations. Operating efficiency improved through 1988 driven largely by

Government grain storage income. Operating efficiency dropped during 1989-91 with the sale of

large volumes of Commodity Credit Corporation

7
Figure 6

Allocation of Patronage Earned, First-Handler Co-ops

Wheat-Sorghum

Medium

Percent

100

90

80

70

60

50

40

30

20

10

0

Large

1oc

90

80

70

60

50

40

30

20

L

i 983 85 86 87 88 89 90 91 1983 85 86 87 88 89 90 91 1983 85 86 87 88 89 90 91

Fiscal year Fiscal year Fiscal year

Fiscal year 1984 not available.

Medium = $5-14.9 million total sales. Large = $15 million plus total sales

100

90

80

70

60

50

40

Wheat-Barley-Oats Wheat-Barley

100

90

80

70

60

50

40

30

20

10

0

==;1 Retained - Paid in Cash

100

90

80

70

60

50

40

30

20

IO

0

L

L

30

20

10

0

100

90

80

70

60

50

40

30

L

8
Fiaure 7

Co-ops Repot-ted Savings and Average Savings, First-Handler Co-ops

Wheat-Sorghum Wheat-Barley-Oats Wheat-Barley

Medium

ent $ m

100 2

90 1.8

80 1.6

70 1.4

60 1.2

50 1

40 .8

30 .6

20 .4

IO .2

0 0

- Average Savings (dollars)

Large

m Prop. Reported Savings (percent)

ent

100

90

80

70

60

50

40

30

20

10

0

2

1.8

1.6

1.4

100

90

80

70

60

2 100

1.8 90

1.6 80

1.4 70

1.2 60

.8 n 40 .8 40

.6 30

.4 20 .4 20

.2 10 .2 10

o:o

1983 85 86 87 88 89 90 91

o:o

1983 85 86 87 88 89 90 91

Fiscal year Fiscal year

Fiscal year 1984 not available.

Medium = $5-14.9 million total sales. Large = $15 million plus total sales.

2 100

1.8 90

1.6 80

1.4 70

1.2 60

1 50

.8 40

.6 30

.4 20

.2 10

0-o

1983 85 86 87 88 89 90 91

Fiscal year
Fioure 8

Prices Received Per Bushel Grains Sold

Wheat First-Handler Co-ops

Medium

Dollars

4.5 -

4 -

2.5 -

Wheat-Barley

(Wheat-Barley-Oats

-Wheat-Sorghum

2L ’

I I I I I I I I

Large

4.5

2.5

2 I I I I I I I I I

1983 85 86 87 88 89 90 91

Fiscal year

Fiscal year 1984, 1988, and part of 1987 not available.

Medium = $5-14.9 million total sales. Large = $15 million plus total sales

(CCC) grain as the Government withdrew from the

grain storage business.

Sales and Margins

Total sales per association largely mirrored

farm supply sales for all wheat cooperatives. Grain

sales provided stability and contributed significantly more to total sales for wheat-barley-oats and

wheat-barley cooperatives than for wheat-sorghum

ones (fig. 11 and table 2). The coefficients of variation (CV) 1 for grain sales ranged from 3.9 percent

to 8.7 percent for the medium-sized wheat cooperatives and from 8.6 percent to 11.1 percent for large

wheat cooperatives. The variation in farm supply

sales was much greater during the period, with

comparable CV ranges of 7.8 percent to 33.6 percent and 10.5 to 30.9 percent, respectively.

Yearly variation in total gross margins was relatively large, similar to farm supply sales, particularly for large wheat cooperatives and all wheatbarley cooperatives (fig. 12). Annual average grain

and farm supply gross margins CVs were similar

for medium-sized and large wheat-sorghum cooperatives (11.2 percent to 14.2 percent). For both the

medium-sized and large associations, farm supply

margins CVs were larger than grain margins CVs

in the other two areas, particularly for wheat-barley cooperatives.

Grain cooperatives routinely deal with unpredictable annual variations in market prices and volumes. Thin grain merchandising margins (margin

rates) typified 1983-91. This placed considerable

pressure on the grain marketing activity for volumes sufficient to offset the low per-unit margins.

This was particularly true for wheat-barley cooperatives in the Pacific Northwest. Grain margin rates

of 1.5 percent to 3.5 percent were common. Partially

offsetting the low grain margins were favorable

farm supply margin rates (17-20 percent). Sufficient

grain volume origination during this period was

difficult due to declining exports, selected

1 The coefficient of variation expresses the standard deviation of a set of data as a percentage of its mean or average.

This statistic is used in determining the relative variation of

two or more sets of data.

10
Operating Cost of Gross Income, First-Handler Co-ops

Wheat-Sorghum

Medium

$ million

1.5 r

Wheat-Barley-Oats Wheat-Barley

Large

5

[=7 Net Savings - Total Operating Cost Net Savings + Total Operating Cost = Gross

4.5

4

3.5

5

4.5

4

3.5

3 3 - n

5

4.5

4

3.5

3

2.5 2.5 - 2.5

2

1.5

1

.5

0

1983 85 86 87 88 89 90 91 1983 85 86 87 88 89 90 91 1983 85 86 87 88 89 90

Fiscal year Fiscal year Fiscal year

Fiscal year 1984 not available

Medium = $5-14.9 million total sales. Large = $15 millton plus total sales.

11
Table P-Selected physical facility and income statement data for wheat-sorghum first-handlers-of-grain

cooperatives, by size, 1983-91*

Item Unit

1983 1985

Total sales group (million dollars)

$5-14.9

1986 1987 1988 1989 1990 1991

Size characteristics:

Locations

Storage capacity

Grain sold

Turnover rate

Unit-trains

Employees 2

Income statement items:

Grain sales

Farm supply sales

Number

Bushels

Bushels

Times

Percent

Number

2.17 2.34

1,769,969 1,949,167

1,762,481 2,038,244

1.00 1.05

- 18.75

(‘)-

-

2,155,415

-

-

-

- 2.20 2.13 2.25

- 1,979,055 2,193,607 2,072,150

- 1,493,713 1,976,034 2,113,740

- 0.75 0.9 1.02

12.00 15.15 16.67

- 17.04 18.38 16.36

Dollars 5,762,502 6,004,800 5327,616 5,898,098 5,970,912 5,778,934 5,474,206 5,619,766

Dollars 2,589,697 2,742,264 2,608,938 2,384,048 2,380,526 2,651,408 3,020,462 2,880,456

Total Dollars 8,352,199 8,747,064 7,936,554 8,282,146 8,351,438 8,430,342 8,494,668 8,500,222

Cost of sales Dollars 7,715,632 8,072,353 7,265,516 7,595,904 7,691,276 7,788,776 7,780,280 7,781,767

Margins on sales Dollars 636,567 674,711 671,038 686,242 660,162 641,566

Other oper. income Dollars 490,575 540,261 782,166 677,667 445,022 376,542

Nonoperating income Dollars 73,549 42,078 (75,550) (24,276) 43,842 56,279

Gross income Dollars 1,200,691 1,257,050 1,377,654 1,339,633 1,149,026 1,074,387

714,388 718,455

421,461 396,956

37,038 30,296

1,172,887 1,145,707

Labor expenses Dollars 440,313 478,652 510,672 512,313

Other expenses Dollars 554,141 600,992 698,120 644,965

Total Dollars 994,454 1,079,644 1,208,792 1,157,278

442,607 453,623 531,311 493,717

504,123 496,659 542,382 519,101

946,730 950,282 1,073,693 1,012,818

NET SAVINGS’ Dollars 206,237 177,406 168,862 182,355 202,296 124,105 99,194 132,889

Relationships:

Gross income/$ expense

Total sales/$ assets

Total sales/$ labor exp.

Total sales/employee

Dollars 1.21 1.16

Dollars 2.29 2.28

Dollars 18.97 18.27

Dollars - 466,510

1.14 1.16

1.80 2.05

15.54 16.17

- -

1.21 1.13 1.09 1.13

2.43 2.44 2.41 2.34

18.87 18.58 15.99 17.22

- 494.738 462,158 519,538

Margins of total sales Percent 7.62 7.71 8.46 8.29 7.90 7.61 8.41 8.45

Net savings of equity Percent 9.00 7.12 6.22 7.12 8.95 5.13 3.93 5.13

Grain of total sales Percent 69.0 68.6 67.1 71.2 71.5 68.5 64.4 66.1

Labor of total expenses Percent 44.3 44.3 42.2 44.3 46.8 47.7 49.5 48.71

Continued

12
Table 2-Selected physical facility and income statement data for wheat-sorghum first-handlers-of-grain

cooperatives, by size, 1983-91* (continued)

Item Unit

1983 1985

Total sales group (million dollars)

$15 or more

1986 1987 1988 1989 1990 1991

Size characteristics:

Locations

Storage capacity

Grain sold

Turnover rate

Unit-trains

Employees 2

Income statement items:

Grain sales

Farm supply sales

Number 6.47 5.13

Bushels 5816,614 4,090,401

Bushels 4,817,412 4,498,007

Times 0.83 1.10

Percent -

Number - 47.48

P)- - 5.55 5.92 5.86

-

- - 3,697,959 4,328,244 4,477,995

4,411,964 - - 4,283,738 5,419,783 5,623,305

-

- - 1.16 1.25 1.26

-

- - 10.00 16.67 14.29

-

- -

50.16 54.23 52.45

Dollars 16,075,385 13,378,618 10,836,858 15,925,751 15,510,342 15,200,839 14,616,883 14,765,814

Dollars 8,370,039 8,648,843 7,839,811 9,349,403 7,143,723 7,990,733 9,376,186 10,086,541

Total

Cost of sales

22,027,461 18,676,669 25,275,154 22,654,065 23,191,572 23,993,069 24,852,355

20,169,492 16,945,456 23,081,032 20,744,945 21,262,512 21,897,925 22,469,919

Margins on sales

Other oper. income

Nonoperating income

1,857,969 1,731,213 2,194,122 1,909,120

1,297,474 1,735,737 1,769,184 1,168,139

(52,045) (341,064) (217,426) 97,529

Gross income

Dollars 249445,424

Dollars 22,224,826

Dollars 2,220,598

Dollars 1,793,658

Dollars 40,604

Dollars 4,054,860 3,103,398 3,125,886 3,745,880 3,174,788

1,929,060 2,095,144 2,382,436

1,043,539 1,072,791 1,194,548

150,511 226,735 184,723

3,123,110 3,394,670 3,761,707

Labor expenses

Other expenses

1,245,275 1,311,916 1,473,994 1,192,765 1,236,348 1,413,552 1,563,500

1,562,572 1,641,359 1,781,096 1,347,074 1,394,859 1,482,734 1,672,575

Total

Dollars 1,439,665

Dollars 13837,403

Dollars 3,277,068 2,807,847 2,953,275 3,255,090 2,539,839 2,631,207 2,896,286 3,236,075

NET SAVINGS 3 Dollars 777,792 295,551 172,611 490,790 634,949 491,903 498,384 525,632

Relationships:

Gross income/$ expense

Total sales/$ assets

Total sales/$ labor exp.

Total sales/employee

Dollars

Dollars

Dollars

Dollars

1.24 1.11 1.06 1.15 1.25

2.07 2.37 1.99 2.41 2.84

16.98 17.69 14.24 17.15 18.99

463,931 - -

1.19 1.17 1.16

2.77 2.52 2.46

18.76 16.97 15.9

462,352 442,438 473.862

Margins of total sales Percent 9.08 8.43 9.27 8.68 8.43 8.32 8.73 9.59

Net savings of equity Percent 11.68 5.03 3.26 6.92 11.68 8.86 7.83 8.11

Grain of total sales Percent 65.8 60.7 58 63 68.5 65.5 60.9 59.4

Labor of total expenses Percent 43.9 44.3 44.4 45.3 47 47 48.8 48.3

l 1 984 data not available.

1 Cells with -- means data not available.

2 Full-time equivalent.

3 Savings before income taxes and allocations.

13
Table P-Selected physical facility and income statement data for wheat-barley-oats first-handlers-of-grain

cooperatives, by size, 1983-91*

Item Unit

-

1983 1985

Total sales group (million dollars)

$5-14.9

1986 1987 1988 1989 1990 1991

Size characteristics:

Locations

Storage capacity

Grain sold

Turnover rate

Unit-trains

Employees 2

Income statement items:

Grain sales

Farm supply sales

Number

Bushels

Bushels

Times

Percent

Number

1.54

610,479

2,065,546

3.38

1.50

822,176

2,207,417

2.68

-

9.50

(‘)-

2,475,804

-

2,693,163

-

-

-

-

1.40 1.77 1.81

691,395 802,000 844,741

2,267,369 2,295,540 2,678,840

3.28 2.86 3.17

73.33 69.23 70.83

6.64 7.81 7.13

Dollars 6,474,710 6,626,757 6,253,998 6,934,405 7,197,861 7,828,989

Dollars 1,083,829 1,447,965 885,999 1,283,839 1,324,740 897,926

Total Dollars 7,558,539 8,074,722 7,139,997 8,218,244 8,522,601 8,726,915

Cost of sales Dollars 7,163,200 7,662,571 6,726,576 7,769,502 8,171,760 8,369,202

6,542,288 7,027,784

1,376,453 910,127

7,918,741 7,937,911

7,537,359 7,501,792

Margins on sales Dollars 395,339 412,151 413,421 448,742 350,841 357,713 381,382 436,119

Other oper. income Dollars 162,578 285,512 376,885 357,797 154,708 154,268 188,811 135,148

Nonoperating income Dollars (8,872) (15,646) (58,610) (33,337) 4,633 2,413 (20,928) (11,425)

Gross income Dollars 549,045 682,017 731,696 773,202 510,182 514,394 549,265 559,842

Labor expenses Dollars 178,068 251,904 247,814 243,646 165,176

Other expenses Dollars 244,137 309,509 344,585 363,989 215,801

Total Dollars 422,205 561,413 592,399 607,635 380,977

193,153 220,570 205,376

282,478 289,248 309,017

475,631 509,818 514,393

NET SAVINGS 4 Dollars 126,840 120,604 139,297 165,567 129,205 38,763 39,447 45,449

Relationships:

Gross income/$ expense Dollars

Total sales/$ assets Dollars

Total sales/$ labor exp. Dollars

Total sales/employee Dollars

Margins of total sales Percent 5.23 5.10 5.79 5.46

Net savings of equity Percent 9.56 7.47 9.13 11.63

Grain of total sales Percent 85.7 82.1 87.6 84.4

Labor of total expenses Percent 42.2 44.9 41.8 40.1

1.3

2.87

42.45

1.21 1.24

2.53 2.32

32.05 28.81

849,971 -

1.27

2.61

33.73

1.34 1.08 1.08 1.09

3.12 3.05 3.30 2.73

51.60 45.18 35.90 38.65

- 1,314,294 1,014,223 1 ,113,369

4.12 4.10

9.42 2.81

84.5 89.7

43.4 40.6

4.82 5.49

3.45 3.63

82.6 88.5

43.3 39.9

Continued

14
Table 2--Selected physical facility and income statement data for wheat-barley-oats first-handlers-of-grain

cooperatives, by size, 1983-91* (continued)

Item Unit

1983 1985

Total sales group (million dollars)

$15 or more

1986 1987 1988 1989 1990 1991

Size characteristics:

Locations

Storage capacity

Grain sold

Turnover rate

Unit-trains

Employees *

Income statement items:

Grain sales

Farm supply sales

Number

Bushels

Bushels

Times

Percent

Number

3.71 5.00 (‘)- - 5.47 6.40 6.38

2,295,857 1,919,550 - - 2,410,217 1,901,600 2,318,015

8,372,166 7,040,326 11,394,159 - - 8,974,695 8,883,049 10,909,623

3.65 3.67 - - 3.72 4.67 4.71

-

- - 100.00 100.00 100.00

26.38 - - 30.91 27.40 27.50

Dollars 24,903,062 21,428,038 28,621,520 33,723,271 30,314,671 30,677,483 25,583,182 28,415,246

Dollars 2,386,901 3,278,163 3,346,134 5,515,493 5,943,984 6,438,257 4,774,459 3,635,234

Total Dollars 27,289,963 24,706,201 31,967,654 39,238,764 36,258,655 37,115,740 30,357,641 32,050,480

Cost of sales Dollars 26,084,769 23,648,107 30,469,509 37,048,512 34,410,104 35,372,396 28,850,451 30,266,808

Margins on sales Dollars 1,205,194 1,058,094

Other oper. income Dollars 357,714 643,801

Nonoperating income Dollars (4,388) (“) 158,858

Gross income Dollars 1,558,520 1,860,753

1,498,145 2,190,252 1,848,551 1,743,344 1,507,190 1,783,672

1,195,623 1,192,636 637,198 646,893 400,510 438,511

(161,315) (40,864) 20,715 94,537 41,435 64,301

2,532,453 3,342,024 2,506,464 2,484,774 1,949,135 2,286,484

Labor expenses

Other expenses

Dollars

Dollars

Total Dollars

506,392 613,273 842,710 1,187,833 838,466 844,802 754,980 849,409

709,403 780,378 989,895 1,481,829 1,212,263 1,206,275 974,723 1,049,028

1,215,795 1,393,651 1,832,605 2,669,662 2,050,729 2,051,077 1,729,703 1,898,437

NET SAVINGS 4 Dollars 342,725 467,102 699,848 672,362 455,735 433,697 219,432 388,047

Relationships:

Gross income/$ expense

Total sales/$ assets

Total sales/$ labor exp.

Total sales/employee

Dollars

Dollars

Dollars

Dollars

1.28 1.34 1.38 1.25 1.22 1.21 1.13 1.2

2.20 2.48 2.30 2.67 3.16 3.06 3.06 2.4

53.89 40.29 37.93 33.03 43.24 43.93 40.21 37.73

- 936,550 - - 1,200,768 1,107,943 1,165,472

Margins of total sales Percent 4.42 4.28 4.69 5.58 5.10 4.70 4.96 5.57

Net savings of equity Percent 8.50 11.79 14.96 9.68 8.47 7.99 4.65 7.19

Grain of total sales Percent 91.3 86.7 89.5 84.4 83.6 82.7 84.3 88.7

Labor of total expenses Percent 41.7 44.0 46.0 44.5 40.9 41.2 43.6 44.7

‘1984 data not available.

1 Cells with - means data not available.

* Full-time equivalent.

3 Reflects gains in assets value related to unexpected natural occurrences; figure would have been -$29,787 otherwise

4 Savings before income taxes and allocations.

15
Table 2-Selected physical facility and income statement data for wheat-barley first-handlers-of-grain

cooperatives, by size, 1983-91*

Item Unit

1983 1985

Total sales group (million dollars)

$5-14.9

1986 1987 1988 1989 1990 1991

Size characteristics:

Locations

Storage capacity

Grain sold

Turnover rate

Unit-trains

Employees2

Income statement items:

Grain sales

Farm supply sales

Number

Bushels

Bushels

Times

Percent

Number

3.22 3.31

3,555,ooo 3,789,028

2,313,292 2,373,766

0.65 0.63

- -

- 14.25

(‘I-

-

3,081,940

-

-

-

3.46 5.75 6.46

- - 3,381,840 4,288,119 4,643,920

- - 2,476,636 2,720,389 3,044,905

-

-

0.73 0.71 0.66

-

-

53.85 55.56 53.85

- 17.27 14.14 13.88

Dollars 8,386,118 7,488,821 8,694,854

Dollars 1,034,275 1,103,491 753,729

Total Dollars 9,420,393 8,592,312 9,448,583

Cost of sales Dollars 9,052,855 8,198,619 9,050,761

7,409,005 9,214,166 9,253,856 9,523,880 8,964,095

1,225,571 1,154,919 1,363,657 2,107,006 2,057,451

8,634,576 10,369,085 10,617,513 11,630,886 11,021,546

8,277,461 9,833,520 10,007,660 10,970,699 10,429,583

Margins on sales Dollars 367,538 393,693 397,822 357,115 535,565

Other oper. income Dollars 654,016 791,176 1,126,860 1,006,900 972,920

Nonoperating income Dollars (33,169) (87,510) (43,812) (31,892) (46,229)

609,853 660,187

451,893 570,287

(2,517) (31,034)

591,963

616,733

33,550

Gross income Dollars 988,385 1,097,359 1,480,870 1,332,123 1,462,256 1,059,229 1,199,440 1,242,246

Labor expenses Dollars 260,666 412,914 510,048 462,814 447,338 455,034 504,068 509,972

Other expenses Dollars 449,251 517,385 699,349 676,428 746,068 521,774 560,953 613,789

Total Dollars 709,917 930,299 1,209,397 1,139,242 11193,406 976,808 1,065,021 1,123,761

NET SAVINGS 3 Dollars 278,468 167,060 271,473 192,881 268,850 82,421 134,419 118,485

Relationships:

Gross income/$ expense Dollars

Total sales/$ assets Dollars

Total sales/$ labor exp. Dollars

Total sales/employee Dollars

Margins of total sales Percent

Net savings of equity Percent

Grain of total sales Percent

Labor of total expense Percent

1.39 1.18

2.87 2.53

36.14 20.81

- 602,969

1.22 1.17

2.32 2.61

18.52 18.66

- -

1.23 1.08 1.13 1.11

3.12 3.05 3.27 2.66

23.18 23.33 23.07 21.61

- 600,410 822,617 793,796

3.9 4.58 4.21 4.14 5.04 5.88 5.68 5.37

13.54 7.59 8.87 6.84 8.96 3.67 5.35 3.83

89 87.2 92 85.8 86.8 89.2 81.9 81.3

36.7 44.4 42.2 40.6 37.5 46.6 47.3 45.4

Continued

1 6
Table P-Selected physical facility and income statement data for wheat-barley first-handlers-of-grain

cooperatives, by size, 1983-91* (continued)

Item Unit

1983 1985

Total sales group (million dollars)

$15 or more

1986 1987 1988 1989 1990 1991

Size characteristics:

Locations

Storage capacity

Grain sold

Turnover rate

Unit-trains

Employees 2

Income statement items:

Grain sales

Farm supply sales

Number

Bushels

Bushels

Times

Percent

Number

12.00 10.27 (‘)- - 8.71 10.30 10.88

7,265,857 6,777,545 - - 7,370,854 7,505,OOO 7,779,600

7,552,196 8,430,961 7,593,262 - - 6,342,402 7,896,109 8,733,234

1.04 1.24 - - 0.86 1.05 1.12

-

- - - 47.06 40.00 50.00

- 47.75 - - 40.05 47.25 46.45

Dollars 27,034,843 27,687,403

Dollars 2,914,445 5,083,479

Total Dollars 29,949,288 32,770,882

Cost of sales Dollars 28,812,678 31,415,908

Margins on sales

Other oper. income

Nonoperating income

Dollars 1,136,610 1,354,974

Dollars 1,523,259 2,156,558

Dollars (126,450) (35,742)

Gross income Dollars 2,533,419 3,475,790

Labor expenses

Other expenses

Dollars

Dollars

Total Dollars

700,822 1,253,799 1,660,253 1,634,790 927,036 1,002,776 1,431,487 1,533,675

1,087,724 1,409,396 2,092,815 1,998,077 1,214,395 1,357,820 1,749,595 1,814,839

1,788,546 2,663,195 3,753,068 3,632,867 2,141,431 2,360,596 3,181,082 3,348,514

NET SAVINGS 3 Dollars 744,873 812,595 531,412 932,482 744,262 376,574 264,662 514,395

Relationships:

Gross income/$ expense

Total sales/$ assets

Total sales/$ labor exp.

Total sales/employee

Dollars

Dollars

Dollars

Dollars

1.42 1.31 1.14 1.26 1.35 1.16 1.08 1.15

3.56 3.25 2.17 2.54 2.59 3.73 3.00 2.77

42.73 26.14 19.07 20.47 28.06 33.09 24.92 22.07

- 686,301 - - - 828,538 755,022 728,691

Margins of total sales

Net savings of equity

Grain of total sales

Labor of total expenses

Percent 3.80 4.13 6.27 5.66 5.73 4.47 4.76 5.96

Percent 16.42 15.12 6.77 11.58 13.51 6.70 3.81 7.37

Percent 90.3 84.5 75.2 83.0 82.9 83.4 80.8 77.9

Percent 39.2 47.1 44.2 45.0 43.3 42.5 45.0 45.8

23,820,572 27,776,075 21,568,644 27,660,042 28,820,798 26,350,555

7,835,420 5,689,646 4,442,621 5,522,904 6,854,015 7,497,133

31,655,992 33,465,721 26,011,265 33,182,946 35,674,813 33,847,688

29,670,596 31,570,036 24,522,115 31,699,914 33,976,727 31,830,879

1,985,396 1,895,685 1,489,150 1,483,032 1,698,086 2,016,809

2,431,258 2,740,439 1,359,103 1,303,lll 1,734,299 1,870,463

(132,174) (70,775) 37,440 (48,973) 13,359 (24,363)

4,284,480 4,565,349 2,885,693 2,737,170 3,445,744 3,862,909

‘1984 data not available.

1 Cells with - means data not available.

* Full-time equivalent.

3 Savings before income taxes and allocations.

17
Figure 10

Gross Income Per Dollar of Operating Cost

Wheat First-Handler Co-ops

Medium

Dollars

1.5

1.45

Wheat-Barley

m Wheat-Barley-Oats

-Wheat-Sorghum

1.05

t

11 ’ I I I I I I I I

Large

1.5

1.35

1.3

1.25

I I I I I I I I I

1983 85 86 87 88 89 90 91

Fiscal year

Fiscal year 1984 not available.

Medium = $5-14.9 million total sales. Large = $15 million plus total sales

Government programs, and increasing worldwide

competition. Both farm supply (9-12 percent) and

grain margins (3-5 percent) were thin for Northern

Plains wheat-barley-oats cooperatives.

Total margins as a percentage of total sales

was generally higher for large than for mediumsized associations for the wheat-sorghum and

wheat-barley cooperatives. This reflects their generally higher proportion of farm supply sales (table

2). This relationship was mixed during the period

for the wheat-barley-oats associations, largely

because farm supply margins rates were not only

low but also were low relative to grain margins

rates.

Grain Marketings and Prices Received

Grain marketings by medium-sized and large

cooperatives were generally higher per cooperative

during 1983-86 than during 1989-91, and were on

the rise in all three areas entering the 1990s (table

3). It is speculated that declines from 1986 levels

typified marketings during the years of missing

data (1987-88), related to low prices, the high level

of Government storage program activity, and

drought for wheat-barley-oats cooperatives. Wheat

accounted for a rising proportion of total marketings, at the expense of barley, during the study

period for all wheat-barley cooperatives (fig. 13).

In the other two areas, wheat’s proportion

rose for medium-sized cooperatives and declined

for the large associations. In the Northern Plains,

the barley proportion was generally up, but the

“other small grains” proportion, principally oats,

was down. In the Southern Plains, the grain

sorghum proportion was down for the mediumsized cooperatives, but up for larger ones.

Seasonal average prices received for wheat

marketings fell steadily during 1983-86 and peaked

in 1988-89 (fig. 14 and appendix A). Price swings

for grain sorghum were even more dramatic.

Barley price swings, while similar, were less dramatic. Most grain price variation was related to

Government program effects on production-and

on ending stocks and CCC grain storage operations-and on exports, principally drawdowns of

CCC-stored grain to satisfy other Government pro18
Grains and Farm Supply Sales, First-Handler Co-ops

Wheat-Sorghum Wheat-Barley-Oats Wheat-Barley

Medium

m Farm Supply GraindOilseeds

Large

40 -

35 -

30 -

40-

35-

30-

-L 1

1983 85 86 87 88 89 90 91 1983 85 86 87 88 89 90 91

Fiscal year Fiscal year

1983 85 86 87 88 89 90 91

Fiscal year

Fiscal year 1984 not available.

Medium = $5-14.9 million total sales. Large = $15 million plus total sales.

1 9
Grain and Farm Supply Margins, First-Handler Co-ops

Wheat-Sorghum Wheat-Barley-Oats

Medium

1 .o

Wheat-Barley

Large

2.5

1983 85 86 87 88 89 90 9 1 1983 85 86 87 88 89 90 91 1983 85 86 87 88 89 90 91

Fiscal year Fiscal year Fiscal year

Fiscal year 1984 not available.

Medium = $5-14.9 million total sales. Large = $15 million plus total sales.

c=x Farm Supply Margins Grain Margins

2.5

2

1.5

1

.5

2.5

2

1.5

20
Table 3-Types of grains marketed by wheat-sorghum first-handlers-of-grain cooperatives, by total sales

group, 1983-91 l

Item Unit 1983 1985 1986 1987 1988 1989 1990 1991

$5- 14.9 million

Grain marketed, total Bushels 1,762,481 2,038,244 2,155,415 (‘)- - 1,493,713 1,976,034 2,113,740

Wheat Bushels 1,307,239 1,278,797 1,354,907 - -

1,078,408 1,488,111 1,513,154

Corn Bushels 85,275 112,925 133,689 - -

65,356 102,676 161,165

Soybeans Bushels 40,397 39,771 52,118 47,512 38,528 34,468

Sorghum Bushels 310,951 564,711 576,004 - - 291,642 334,595 392,163

Barley Bushels 5,198 20,784 10,546 - - 1,906 2,053 2,042

Other 2 Bushels 13,421 21,256 28,151 -

8,889 10,071 10,748

$15 million or more

Grain marketed, total Bushels 4,817,412 4,498,007 4,411,964 - - 4,283,738 5,419,783 5,623,305

Wheat Bushels 3,462,621 2,634,926 2,431,162 - -

2,337,621 3,146,491 2,982,700

Corn Bushels 220,347 360,780 487,735 376,635 513,836 708,230

Soybeans Bushels 88,184 76,251 123,369 - - 163,396 179,568 202,517

Sorghum Bushels 1,005,506 1,351,636 1,274,533 - 1,341,753 1,551,724 1,701 ,114

Barley Bushels 10,450 29,119 73,876 - 7,080 2,815 2,510

Other 2 Bushels 30,304 45,295 21,289 - 57,253 25,349 26,234

‘1984 data not available.

1 Cells with - means data not available.

2 Includes oats, sunflowers, rye, and flaxseed.

Table 3-Types of grains marketed by wheat-barley-oats first-handlers-of-grain cooperatives, by total sales

group, 1983-91*

Item Unit 1983 1985 1986 1987 1988 1989 1990 1991

$5- 14.9 million

Grain marketed, total Bushels 2,065,546 2,207,417 2,475,804 2,693,163 (‘)- 2,267,369 2,295,540 2,678,840

Wheat Bushels 1,049,034 1,159,518 1,366,754 1,496,151 - 1,327,411 1,356,894 1,747,530

Corn Bushels 62,391 60,353 135,307 83,174 - 62,899 82,937 88,220

Soybeans Bushels 66,945 93,427 80,761 160,745 - 75,296 122,971 54,643

Sorghum Bushels 2,491 1,441 1,217 25,208 - 0 0 3,418

Barley Bushels 461,060 540,742 567,330 585,644 - 588,672 561,987 571 ,011

Other 2 Bushels 423,625 351,936 324,435 342,241 - 213,091 170,751 214,018

$15 million or more

Grain marketed, total Bushels 8,372,166 7,040,326 11,394,159 -

8,974,695 8,883,049 10,909,623

Wheat Bushels 4,016,538 4,855,312 6,950,752 - -

5,355,381 4,522,090 6,303,084

Corn Bushels 171,309 31,474 159,982 - -

493,217 362,979 396,376

Soybeans Bushels 120,589 5,000 17,246 - 335,110 162,718 195,106

Sorghum Bushels 0 0 0 - 35,118 0 0

Barley Bushels 2,111,833 1,308,060 2,485,589 - - 2,010,114 2,592,694 2,651,577

Other* Bushels 1,951,897 840,480 1,780,590 -

745,755 1,242,568 1,363,480

‘1984 data not available.

1 Cells with - means data not available

2 Includes oats, sunflowers, rye, and flaxseed.

21
Table 3-Types of grains marketed by wheat-barley first-handlers-of-grain cooperatives, by total sales

group, 1983-91*

Item Unit 1983 1985 1986 1987 1988 1989 1990 1991

$5- 14.9 million

Grain marketed, total Bushels 2,313,292 2,373,766 3,081,940 P- - 2,476,636 2,720,389 3,044,905

Wheat Bushels 1,690,923 1,573,924 2,177,390 - 1,784,435 2,067,496 2,477,695

Corn Bushels 31,736 0 57,344 - 0 0 11,093

Soybeans Bushels 0 0 0 - 0 0 0

Sorghum Bushels 0 0 0 - - 0 0 0

Barley Bushels 523,637 745,909 826,702 - - 581,618 489,670 466,222

Other p Bushels 66,996 53,933 20,504 - 110,583 163,223 89,895

$15 million or more

Grain marketed, total Bushels 7552,196 8,430,961 7,593,262 - - 6,342,402 7,896,109 8,733,234

Wheat Bushels 6,088,455 6,412,654 6,025,276 - - 5,092,032 6,316,887 7,849,890

Corn Bushels 78,101 115,267 21,667 - 25,440 0 0

Soybeans Bushels 0 191,088 0 - - 0 0 0

Sorghum Bushels 0 0 0 - 117 0 0

Barley Bushels 1,339,569 1,654,577 1,546,319 - 1,080,495 1,263,378 848,161

Other* Bushels 46,071 57,375 0 144,318 315,844 35,183

‘1984 data not available.

1 Cells with - means data not available.

* Includes oats, sunflowers, rye, and flaxseed.

gram needs. CRP enrollment in the Northern Plains

and Pacific Northwest and drought in the Northern

Plains in 1988-89 also were factors.

Other Income Sources

Operating income from sources other than

margins on sales was largely from the grain storage

function and related services (e.g., drying, cleaning, and treating). This income source normally

contributes no more than 30 to 40 percent to total

operating income for wheat-sorghum and wheatbarley-oats cooperatives and 50 to 55 percent for

wheat-barley cooperatives (fig. 15).

These percentages were noticeably higher

when wheat grain cooperatives prospered under

the Federal Government’s grain storage program in

1986 and 1987 (fig. 16 and table 2). Medium-sized

cooperatives benefitted proportionally more than

22

their large counterparts. The program’s short-term

effect was dramatic.

Nonoperating income-largely the combined

effect of small patronage refunds received from

other cooperatives and a net interest adjustmentgenerally was a relatively minor factor during the

period (fig. 17 and table 2). In earlier years, cooperatives were burdened with paying off substantial

debt with associated interest costs plus having to

absorb writeoffs of investments in their respective

regional cooperatives. This situation subsequently

turned around. Considerable debt was repaid and

regionals increased patronage refunds to locals.

Patronage Refunds

Patronage refunds from regional cooperatives

were an important and even “saving” source of
Fiaure 13

Breakdown of Total Grains Sold, First-Handler Co-ops

Wheat-Sorghum Wheat-Barley-Oats

Medium

Million bushels

3

2

1

0

Wheat-Barley

12

11

10

9

8

7

6

-Wheat - Grain Sorghum

L

12

11

10

9

8

Barley - Oats * EIII All Other

1983 85 86 87 88 89 90 9 1 1983 85 86 87 88 89 90 9 1

Fiscal year Fiscal year

Fiscal year 1984 not available.

Medium = $5-14.9 million total sales. Large = $15 million plus total sales.

* Oats, sunflowers, flaxseed, rye.

8

6

L

1983 85 86 87 88 89 90 9 1

Fiscal year

23
Figure 14

Seasonal Average Prices Received, by Commodity

Southern Plains Northern Plains

Dollars Der bushel

01’

1982 83 84 85 86 87 88 89 90 91

Marketing year*

Oats

1982 83 84 85 86 87 88 89 90 91

Marketing year*

* Wheat, barley, oats - 6/i-5/31 Grain sorghum - 10/l-9/30

Source: USDA, N.A.S.S., Agricultural Prices, Washington, D.C., Annual summary issues.

income for local grain cooperatives, particularly in

the latter 1980s (fig. 18).

For wheat-barley-oats and wheat-barley cooperatives, patronage from other cooperatives went

from meager dividends in the early 1980s to almost

nonexistent in the mid-1980s. Several regional

cooperatives had substantial losses in the form of

investment writedowns and writeoffs. In turn,

many locals were forced to take similar measures.

Wheat-sorghum cooperatives in the Southern

Plains fared much better than their cooperative

counterparts in other areas of the country through

the mid-1980s.

The grain industry began an upswing in the

latter 1980s. Patronage refunds became an increasing proportion of the locals’ profits (figs. 19 and

20). Patronage refunds became relatively more

important for medium-sized than for large cooperPacific Northwest

Wheat

Barley

1982 83 84 85 86 87 88 89 90 91

0-

Marketing year*

atives in all three areas, accounting for about 50

percent of net savings entering the 1990s. This

income source continues to be sizeable, largely

because of regional cooperative activity in valueadded products. Regionals, largely through joint

ventures, mergers, and acquisitions involving other

cooperatives and investor-owned firms (IOFs),

have been shifting resources to the production of

larger-margin, value-added commodities.

This situation is likely to typify the 1990s. The

regionals continue to position themselves to be

competitive in the production of value-added

products. While these margins may weaken somewhat as competition intensifies, they will continue

to far exceed grain merchandising margins in the

foreseeable future and generate significant patronage dividends for medium-sized member locals.

24
Fiaure 15

Nonmargin of Total Operating Income, First-Handler Co-ops

Wheat-Sorghum

Medium

Percent

Wheat-Barley-Oats

80 - 80 -

70 - 70 - 70

60 - 60 - 60

50 - 50

40

30

20

10

0

Large

80

70

60

50 - 50

40 40 40

30 30 30

20 20 20

10 10 10

0 0 0

80

60

Wheat-Barley

80 -

70 -

60 -

1983 85 86 87 88 89 90 91 1983 85 86 87 88 89 90 91 1983 85 86 87 88 89 90 91

Fiscal year Fiscal year Fiscal year

Fiscal year 1984 not available.

Medium = $5-14.9 million total sales. Large = $15 milllon plus total sales.

25
Figure 16

Other Operating Income, First-Handler Co-ops

Wheat-Sorghum

Medium

$ million

1.5

1

1.5

1

Wheat-Barley-Oats Wheat-Barley

1.5

1

Large

3 3

2.5 2.5 2.5

2

1.5

1

.5

0

2

1.5

1

2

.5 -

0L_l Ill-l !_L

1983 85 86 87 88 89 90 91 1983 85 86 87 88 89 90 91

Fiscal year Fiscal year

1983 85 86 87 88 89 90 91

Fiscal year

Flscal year 1984 not available.

Medium = $5-14.9 million total sales. Large = $15 million plus total sales.

26
Gross Income Sources, First-Handler Co-ops

Wheat-Sorghum

Medium

$ million

Wheat-Barley-Oats Wheat-Barley

-.5 L

Large

5

4

3.5

3

2.5

2

1.5

1

.5

0

-.5 L -.5 L

Nonmargin Operating 0 Margins on Sales - Nonoperating

-.5 L

1983 85 86 87 88 89 90 91

Fiscal year

2

1.5

1

.5

0

-.5

1983

Fiscal year 1984 not available.

Medium = $5-14.9 million total sales. Large = $15 million plus total sales

5

4.5

4

3.5

3

2.5 2.5

2

1.5

1

.5

0 L

85 86 87 88 89 90 91

Fiscal year

-.5 L

1983 85 86 87 88 89 90 91

Fiscal year

27
Figure 18

Patronage Refunds Received

Wheat First-Handier Co-ops

Medium

$ thousand

70

F

1

60

30

20

10

0

Large

200 -

190 -

180 -

170 -

160 -

150 -

140 -

130 -

120 -

110 -

100 -,

90 -

80 -

70 -

60 -

50 -

40 -

30 -

20 - 0

10 -

0. ’

Wheat-Barley

I=X Wheat-Barley-Oats

- Wheat-Soruhum

-30

-40

-50

1983 85 86 87 88 89 90 91

Fiscal year

Fiscal year 1984 not available.

Medium = $5-14.9 million total sales. Large = $15 million plus total sales.

Operating Expenses

Total operating expenses (TOE) for both sizes

of grain-handling cooperatives peaked during

1986-87, subsequently sharply declined, and were

on the rise again entering the 1990s. This held true

for both sizes of grain-handling cooperatives (fig. 9

and table 2). TOES averaged significantly higher in

1986-87 than for the pre- and post-periods, corresponding to that period’s substantially greater

grain storage activity.

Role of Labor

Labor cost (including benefits), except for

1986-87, gradually increased for both sized cooperatives. Efforts to curb rising labor costs, particularly the benefits portion, proved difficult. Labor cost

as a proportion of total expenses generally rose

steadily for wheat-sorghum cooperatives during

the period (fig. 21). Except for medium-sized

wheat-barley-oats cooperatives, the proportion for

wheat-barley-oats and wheat-barley associations

fell until the latter 1980s and then began to climb

entering the 1990s.

Total sales per dollar of labor expenses, a measure of labor efficiency, varied considerably from

year to year. Variation was considerably greater

among the three wheat areas for each size of cooperative than between the two sizes (fig. 22). Labor

efficiency declined from 1983 to 1987 largely

because of rising labor costs. For medium-sized

wheat cooperatives, labor costs rose more than

sales declined. For large wheat-barley-oats and

wheat-barley cooperatives, costs grew faster than

sales.

Labor efficiency improved during 1988-89 for

all wheat grain cooperatives. Increased sales, particularly of farm supplies, were accompanied by

lower labor costs.

Labor efficiency declined entering the 1990s.

Except for wheat-barley cooperatives, sales were

flat (medium-sized firms) or up slightly (large

firms) and labor costs were rising. Grain sales were

off and labor costs increasing for wheat-barley

first-handlers.

28
Fioure 19

Patronage Refunds Received and Total Net Savings, First-Handler Co-ops

Wheat-Sorghum Wheat-Barley-Oats Wheat-Barley

Medium

$ thousand

300 300 300

250 250 250

200 200 200

150 150 150

100 100 100

50 50 50

0 0 0

Large - Patronage Refunds - Other Net Savings Patronage Refunds + Other Net Savings = Total Net Savings

950 -

900 -

850 -

800 -

-50 L

1983 85 86 87 88 89 90 91

Fiscal year

950

900

850

800

750

700

650

600

550

500

450

400

350

300

250

200 -

150.

loo50 -

-50

0F

L

1983 85 86 87 88 89 90 91

Fiscal year

950

900

850

800

750

700

650

600

550

500

450

400

350

300

250

200

150

100

50

0

-50 L

1983 85 86 87 88 89 90 91

Fiscal year

Fiscal year 1984 not available

Medium = $5-14.9 million total sales. Large = $15 million plus total sales.

29
Fiaure 20 Other Expenses

Proportion Patronage Refunds Received

Wheat First-Handler Co-ops

Percent of net savings

70

65 c

Large

40 r

- Wheat-Barley

[==J Wheat-Barley-Oats -Wheat-Sorghum

25

t

20

15

10 L

5-Q

n. ’ I I I I

” H

-5 L

1983 85 86 87 88 89 90 91

Fiscal year

Fiscal year 1984 not available.

Medium = $5-14.9 million total sales. Large = $15 million plus total sales

Other operating expenses generally followed

the same pattern of ups and downs heading into the

early 1990s. This pattern was considerably more

pronounced for the large than the medium-sized

cooperatives. Nonlabor operating cost increases

prior to and during 198687 were largely associated

with the storage buildup due to substantial participation in the Government grain storage program.

Nonlabor operating costs per association and

as a proportion of total operating costs generally

averaged lower during the latter half of the period,

largely due to ongoing efforts to reduce overhead

costs. Many wheat grain associations had to adjust

to operating more efficiently and generating higher

profits given the excess fast-loading, unit-train

shipping capacity acquired and/or constructed in

the latter 1970s and early 1980s. This was particularly true for wheat grain cooperatives in the

Northern and Southern Plains. (See references (1)

and (3) for detailed information on cooperatives

operating with unit-train capability.)

Expansion was in response to grain export

growth in the late 1970s and expectations of its continuation into the 1980s. U.S. wheat exports peaked

in 1981 at about 1.6 billion bushels and dropped to

about 0.9 billion bushels in 1985 and 1986. Under

the Export Enhancement Program (EEP) initiated in

FY 1985, wheat exports climbed in FY 1987 and

1988. Sales, however, were largely CCC stocks

being stored for the Government under contract,

much of it by wheat grain cooperatives. Such sales

sharply reduced the cooperatives’ storage income

base. This was followed by participation in the

Conservation Reserve Program (CRT’) 2/ beginning

in FY 1987 and drought in the Northern Plains in

1988 -89.

Both CRT’ and drought reduced volumes of

wheat and other grains available to cooperatives.

This translated into a significant change in operating efficiency and profitability in grain merchandising.

2At the national level, CRP reduced the wheat base acreage

available for production alone by more than 10 million acres

during 1987-91.

30
Labor Cost and Proportion of Total Cost, First-Handler Co-ops

Medium

$ million

1.5

1.4

1.3

1.2

1.1

1

.9

.8

.7

Wheat-Sorghum

Perceni

50

45

.6

1;

a

‘--d-p

.3-

.2

.l

01’

I

I

 I I I I I I I II35

Wheat-Barley-Oats Wheat-Barley

$ million Percent $ million Percent

1.5

1.4

1.3

1.2

1.1

1

.9

.8

.7

.6

.5

.4

.3

.2

.l

0

P50

45

40

z35

1.5

1.4

1.3

1.2

1.1

1

.9

.8

.7

.6

.5

.4

.3

.2

.l

0

I5o

- Labor Expenses - Labor of Total Cost

Large

2.0

1.9

1.8

1.7

1.6

1.5

1.4

1.3

1.2

1.1

1 .o

.9

.8

.7

.6

.5

50 2.0

1.9

1.8

1.7

1.6

45 1.5

1.4

1.3

1.2

P50

1.7

1.6

1.5

1.1

40 1 .o

.9

.8

.7

.6

I I I I I I I I I 35 .5

1 .o

.9 n

.8

.7 :

.6

.5’ I I ” ’ I I I

1983 85 86 87 88 89 90 9 1 1983 85 86 87 88 89 90 91 1983 85 86 87 88 89 90 9 1

Fiscal year Fiscal year Fiscal year

50

45

40

35

Fiscal year 1984 not available.

Medium = $5-14.9 million total sales. Large = $15 million plus total sales.

31
Fioure 22

Total Labor Cost and Sales Per Dollar Labor, First-Handler Co-ops

Medium

Dollars

50

Wheat-Sorghum

$ million Do

2.5 50

Large

5or----

0 :

1983 85 86 87 88 89 90 91

Fiscal year

Wheat-Barley-Oats Wheat-Barley

IJ I I I I I I I I

nil1

I :

1

I

lion Dollars

1’5 ,O-------

.5 lO~+---$~

0 oL

iilllion

2.5

2.0

1.5

1.0

.5

3

0 Sales Per Dollar Labor (dollars)

w - Labor Expenses (mil. dollars)

2.5 50 2.5 50 2.5

0 0 0 0 0

1983 85 86 87 88 89 90 91 1983 85 86 87 88 89 90 91

Fiscal year Fiscal year

Fiscal year 1984 not available

Medium = $5-14.9 million total sales. Large = $15 million plus total sales.

32
Snapshot of Cost Structure

Time series operating cost data exist for only

the labor and other operating expenses. See the

detailed breakdown of costs for wheat-barley-oats

cooperatives prepared for 1989 under three major

categories-labor, facility, and general/administrative-in appendix B 3. Cost distributions are similar, yet different, for both medium-sized and large

cooperatives.

Labor and general/administrative expenses

were about the same proportion of total operating

cost for both medium-sized and large local wheatbarley-oats cooperatives. Facility costs and income

taxes were higher for medium-sized cooperatives

while interest cost was higher for large cooperatives. Labor cost percentages were similar for both

size groups for wages/salaries (83 percent), fringe

benefits (10 percent), and taxes (7 percent).

Grain Storage Capacity

Grain storage capacity data were not available

for local wheat grain cooperatives for 1986-88, but

data available for the remaining years largely mirror the national pattern. The decline in U.S. grain

exports in the early 1980s was accompanied by a

buildup in U.S. grain stocks, which peaked in 1986-

87 at 8.4 billion bushels. This buildup, accompanied by Government agricultural program incentives, in turn, led to increased U.S. grain storage

capacity. It reached a record 22.9 billion bushels on

Dec. 1, 1988. Since then, grain storage capacity has

been declining and grain stocks have dropped

sharply, resulting in considerable excess grain storage capacity and reduced storage income.

Cooperative grain storage capacity (and grain

marketings) for medium-sized cooperatives

increased early in the period, while the situation

for large cooperatives was mixed (table 2). Grain

storage capacity (and grain marketings) per association generally averaged lower for all three types

3 A comparable breakdown of wheat-sorghum and wheatbarley association costs was not possible because of insufficient data.

of wheat grain cooperatives the next 2 to 3 years,

and then increased during 1989-91.

Storage capacity levels for 1989-91 averaged 9

to 12 percent higher than for 1983-85 for mediumsized wheat associations in all three areas. Storage

capacity averaged 5 and 8 percent higher in 1989-91

for large wheat-barley-oats and wheat-barley associations, respectively. Storage levels for large

wheat-sorghum cooperatives averaged lower.

Rising turnover rates in the 1990s largely reflected

the increased grain merchandising.

BALANCE SHEET

Assets

Total value of assets per association varied considerably among the three types of wheat grain

cooperatives. Assets of medium-sized wheatsorghum and wheat-barley firms were similar and

significantly larger (30 to 34 percent) than the wheatbarley-oats firms. Large wheat-barley-oats cooperatives in the Northern Plains were largest among the

three wheat areas studied, averaging 10 percent and

27 percent larger than in the Pacific Northwest and

Southern Plains, respectively (table 4).

Total assets per association increased prior to

the mid-1980s (1986-87), decreased for a year or

two, and then rose steadily into the 1990s (fig. 23).

Except for medium-sized wheat-barley cooperatives, total value of assets of wheat grain cooperatives averaged 7 to 12 percent lower during 1988-91

than during 1983-87.

Net book value of fixed assets-physical facility and related equipment-generally increased

through 1987, declined until the early 199Os, and

averaged 7 to more than 18 percent lower during

1988-91 than during 1983-87 (fig. 23). Net fixed

assets averaged highest in value and was the highest proportion of total assets for wheat-barley

cooperatives, reflecting their significantly larger

physical plants.

Current assets per association increased

through 1986-87, subsequently declined, and then

climbed again into the 1990s. This pattern was pronounced for the large cooperatives in all areas and

coincides with similar grain industry patterns.

33
Table 4-Selected balance sheet data for wheat-sorghum first-handlers-of-grain cooperatives, by total sales

group, 1983-91*

Item Unit 1983 1985 1986 1987 1988 1989 1990 1991

-

$5- 14.9 million

Current assets Dollars 1,507,334 1,564,815

Investments Dollars 868,707 975,069

Fixed assets Dollars 1,252,291 1,274,716

Other assets Dollars 19,762 23,775

Total Dollars 3,648,094 3,838,375

1,928,939 1,869,235 1,649,678 1579,136 1,564,154 1,567,536

971,694 871,278 721,698 802,937 888,585 917,134

1,477,750 1,274,757 1,043,979 1,058,678 1,059,541 1 ,138,064

19,451 17,544 16,752 14,976 13,910 11,128

4,397,834 4,032,814 3,432,107 33455,727 3,526,190 3,633,862

Current liabilities Dollars 949,337 904,885 1,170,918 1,144,134 959,799 859,538 823,860 875,427

Long-term liab. Dollars 407,788 441,600 510,581 329,302 211,081 175,698 177,859 169,626

Equity Dollars 2,290,969 2,491,890 2,716,335 2,559,378 2,261,227 2,420,491 2,524,471 2,588,809

Total Dollars 3,648,094 3,838,375 4,397,834 4,032,814 3,432,107 3,455,727 3,526,190 3,633,862

Working capital 1 Dollars 557,997 659,930 758,021 725,101 689,879 719,598 740,294 692,109

Total debt Dollars 823,266 789,442 927,210 804,761 623,326 587,689 594,133 523,386

Ratios:

Current

Liab./equity

Equity/total assets

Debt/total assets

Debt/equity

Number 1.59 1.73 1.65 1.63 1.72 1.84 1.90 1.79

Number 0.59 0.54 0.62 0.58 0.52 0.43 0.40 0.40

Number 0.63 0.65 0.62 0.63 0.66 0.70 0.72 0.71

Number 0.23 0.21 0.21 0.20 0.18 0.17 0.17 0.14

Number 0.36 0.32 0.34 0.31 0.28 0.24 0.24 0.20

$15 million or more

Current assets Dollars 5,121,655 3,768,752

Investments Dollars 2,601,056 2,214,588

Fixed assets Dollars 4,019,131 3,265,061

Other assets Dollars 51,458 39,903

Total Dollars 11,793,300 9,288,304

3,873,804 4,776,757 3,537,758 3,884,338 4,566,112 5,174,422

2,148,449 2,244,206 1,684,978 1,606,470 1,819,637 1,854,193

3,305,656 3,442,707 2,737,753 2,867,200 3,102,062 3,045,774

43,579 45,549 27,423 28,573 17,408 47,262

9,371,488 10,509,219 7,987,912 8,386,581 9,505,219 10,121,651

Current liabilities Dollars 3,787,044 2,320,349 2,816,344 2,862,934 2,029,101 2,287,168 2,649,118 3,083,793

Long-term liab. Dollars 1,348,401 1,093,794 1,266,481 553,169 520,554 546,390 491,509 553,827

Equity Dollars 6,657,855 5,874,161 5,288,663 7,093,116 5,438,257 5,553,023 6,364,592 6,484,031

Total Dollars 11,793,300 9,288,304 9,371,488 10,509,219 7,987,912 8,386,581 9,505,219 10,121,651

Working capital 1 Dollars 1,334,611 1,448,403 1,057,460 1,913,823 1,508,657 1,597,170 1,916,994 2,090,629

Total debt Dollars 2,732,593 2,308,206 2,609,245 1,445,600 1,289,052 1,531,162 1,871,134 2,184,294

Ratios:

Current

Liab./equity

Equity/total assets

Debt/total assets

1.35 1.62 1.38 1.67 1.74 1.70 1.72 1.68

0.77 0.58 0.77 0.48 0.47 0.51 0.49 0.56

0.56 0.63 0.56 0.67 0.68 0.66 0.67 0.64

0.23 0.25 0.28 0.14 0.16 0.18 0.20 0.22

0.41 0.39 0.49 0.20 0.24 0.28 0.29 0.34

Number

Number

Number

Number

‘1984 data not available.

1 Current assets minus current liabilities.

34
Table 4-Selected balance sheet data for wheat-barley-oats first-handlers-of-grain cooperatives, by total

sales group, 1983-91*

Item Unit 1983 1985 1986 1987 1988 1989 1990 1991

Current assets

Investments

Fixed assets

Other assets

Dollars

Dollars

Dollars

Dollars

Total Dollars

1,465,609 1,722,980 1,611,906 1,832,928 1,611,413 1,743,981 1,365,732 1,878,604

410,402 453,715 427,323 306,991 264,178 281,414 308,562 272,703

727,323 994,206 1,021,061 982,323 836,926 809,407 699,597 743,087

30,951 20,403 15,832 21,920 21,515 26,216 29,234 17,948

2,634,285 3,191,304 3,076,122 3,144,162 2,734,032 2,861,018 2,403,125 2,912,342

Current liabilities

Long-term liab.

Equity

Dollars

Dollars

Dollars

1,149,676 1,360,392

158,303 216,389

1,326,306 1,614,523

2,634,285 3,191,304

1,319,670 1,516,604 1,255,294 1,368,195 1,060,488 1,459,578

230,155 203,952 106,443 111,253 199,208 200,998

1,526,297 1,423,606 1,372,295 1,381,570 1,143,429 1,251,766

Total Dollars 3,076,122 3,144,162 2,734,032 2,861,018 2,403,125 2,912,342

Working capital 1 Dollars 315,933 362,588 292,236 316,324 356,119 375,786 305,244 419,026

Total debt Dollars 328,909 335,616 356,240 358,270 334,185 319,888 356,405 286,802

Ratios:

Current

Liab./equity

Equity/total assets

Debt/total assets

Debt/equity

Number 1.27 1.27 1.22 1.21 1.28 1.27 1.29 1.29

Number 0.99 0.98 1.02 1.21 0.99 1.07 1.10 1.33

Number 0.50 0.51 0.50 0.45 0.50 0.48 0.48 0.43

Number 0.12 0.11 0.12 0.11 0.12 0.11 0.15 0.10

Number 0.25 0.21 0.23 0.25 0.24 0.23 0.31 0.23

Current assets

Investments

Fixed assets

Other assets

Total

Current liabilities

Long-term liab.

Equity

Total

Working capital'

Total debt

Ratios:

Current

Liab./equity

Equity/total assets

Debt/total assets

Debt/equity

Dollars

Dollars

Dollars

Dollars

Dollars

Dollars

Dollars

Dollars

Dollars

Dollars

817,285 909,169 525,142 994,866 722,188 638,360 662,488 837,178

993,243 1,450,350 1,509,579 13074,443 1,328,938 1,077,349 755,838 821,783

Number 1.11 1.18 1.07 1.14 1.13 1.10 1.14 1.11

Number 2.08 1.51 1.97 1.12 1.13 1.23 1.10 1.48

Number 0.32 0.40 0.34 0.47 0.47 0.45 0.48 0.40

Number 0.08 0.15 0.11 0.07 0.12 0.09 0.08 0.06

Number 0.25 0.37 0.32 0.15 0.25 0.20 0.16 0.15

8,378,873 5833,731 8,472,424 8,016,028 6,150,794 6,730,076 5,441,771 8,370,936

1,371,290 1,191,408 1,641,645 2,092,487 1,634,126 1,771,375 1,570,105 1,735,433

2,649,698 2,922,461 3,749,420 4,560,239 3,687,175 3,608,116 2,896,068 3,226,289

21,782 6,131 24,663 34,961 12,519 18,425 8,055 20,018

12,421,643 9,953,731 13,888,152 14,703,715 11,484,614 12,128,042 9,915,999 13,352,676

7,561,588 4,924,562

828,815 1,067,089

4,031,240 3,962,080

12,421,643 9,953,731

$5-14.9 million

$15 million or more

7,947,282 7,021,162 5,428,606 6,091,716 4,779,283 7,533,758

1,262,055 739,095 673,548 607,063 416,703 424,073

4,678,815 6,943,458 5,382,460 5,429,263 4,720,013 5,394,845

13,888,152 14,703,715 11,484,614 12,128,042 9,915,999 13,352,676

'1984 data not available.

1 Current assets minus current liabilities.

35
Table 4-Selected balance sheet data for wheat-barley first-handlers-of-grain cooperatives, by total sales

group, 1983-91*

Item Unit 1983 1985 1986 1987 1988 1989 1990 1991

Current assets

Investments

Fixed assets

Other assets

Total

Current liabilities

Long-term liab.

Equity

Total

Working capital 1

Total debt

Ratios:

Current

Liab./equity

Equity/total assets

Debt/total assets

Debt/equity

Current assets

Investments

Fixed assets

Other assets

Total

Current liabilities

Long-term liab.

Equity

Dollars

Dollars

Dollars

2,499,368 3,710,786 4,012,970

753,407 1,237,116 1,233,087

5,621,419 6,941,673 6,980,493

Total Dollars

2,734,148 3,554,241 5,428,780 3,922,323 3,654,561

1,137,116 1,144,110 1,293,225 1,210,888 887,327

4,536,642 5,373,018 7,854,022 8,055,711 5,508,317

8,407,906 10,071,369 14,576,027 13,188,922 10,050,205 8,874,194 11,889,575 12,226,550

Working capital 1 Dollars 736,517 1 ,011,875 928,168 1,276,120 1,002,707 1,252,429 1,352,047 1,550,234

Total debt Dollars 2,227,067 2,413,998 3,317,210 2,116,921 3,097,204 1,392,911 2,628,828 2,584,809

Ratios:

Current

Liab./equity

Equity/total assets

Debt/total assets

Debt/equity

Number 1.27 1.28 1.17 1.33 1.27 1.50 1.36 1.39

Number 0.85 0.87 0.86 0.64 0.82 0.58 0.71 0.75

Number 0.54 0.53 0.54 0.61 0.55 0.63 0.58 0.57

Number 0.26 0.24 0.23 0.16 0.31 0.16 0.22 0.21

Number 0.49 0.45 0.42 0.26 0.56 0.25 0.38 0.37

Dollars

Dollars

Dollars

Dollars

Dollars

Dollars

Dollars

782,264 734,862 1,307,151 825,628 820,034 885,276

609,234 377,063 435,922 307,809 226,443 164,195

3,059,685 2,820,692 3,001,684 2,245,744 2,510,851 3,092,532

Dollars 4,451,183 3,932,617 4,744,757 3,379,181 3,557,328 4,142,003

Dollars

Dollars

1,023,161 1,137,180

245,804 287,187

1,678,994 2,127,632

48,542 13,173

2,996,501 3,565,172

576,703 826,985

363,206 538,256

2,056,592 2,199,931

2,996,501 3,565,172

446,458 310,195

507,666 881,262

590,806 531,380 644,342 572,777 492,416 691,771

799,686 546,136 1,135,641 777,134 671,646 669,037

Number 1.77 1.38 1.76 1.72 1.49 1.69 1.60 1.78

Number 0.46 0.62 0.45 0.39 0.58 0.50 0.42 0.34

Number 0.69 0.62 0.69 0.72 0.63 0.66 0.71 0.75

Number 0.17 0.25 0.18 0.14 0.24 0.23 0.19 0.16

Number 0.25 0.40 0.26 0.19 0.38 0.35 0.27 0.22

$15 million or more

Dollars

Dollars

Dollars

Dollars

Dollars

3,470,665 4,566,116 6,356,948 5,198,443 4,657,268 3,751,797 5,062,833 5,563,204

831,626 1,081,194 1,441,428 1,395,162 699,198 684,520 1 ,011,424 1,088,055

3,943,659 49376,177 6,643,468 6,470,062 4,494,510 4,326,423 5,673,403 5,443,058

161,956 47,882 134,183 125,255 199,229 111,454 141,915 132,233

8,407,906 10,071,369 14,576,027 13,188,922 10,050,205 8,874,194 11,889,575 12,226,550

$5- 14.9 million

1,373,070 1,266,242 1,951,493 1,398,405 1,312,450 1,577,047

293,052 272,457 308,262 369,203 381,897 456,950

2,746,Oll 2,378,373 2,431,744 1,598,076 1,839,974 2,084,493

39,050 15,545 53,258 13,497 23,007 23,513

4,451,183 3,932,617 4,744,757 3,379,181 3,557,328 4,142,003

‘1984 data not available.

1 Current assets minus current liabilities.

36
Fioure 23

Total Assets Categories, First-Handler Co-ops

Wheat-Sorghum

Medium

$ million

Wheat-Barley-Oats Wheat-Barley

Large

15-

14 -

13 -

- Fixed Assets m Investments Current Assets

15

14

13

15-

14-

13-

12 -

11 -

IO9-

1983 85 86 87 88 89 90 91 1983 85 86 87 88 89 90 91 1983 85 86 87 88 89 90 91

Fiscal year Fiscal year Fiscal year

Fiscal year 1984 not available

Medium = $5-14.9 million total sales. Large = $15 million plus total sales

37
Drought in 1988-89 in the Northern Plains contributed to reduced inventories for wheat-barleyoats cooperatives. The variation in total current

asset value largely reflects changes in the inventory

value of crops.

Local first-handler investments, mostly in

other cooperatives, for most size/type groups slid

until turning and reversing the decline in the latter

1980s. Clear early-period exceptions were large

wheat-barley-oats and wheat-barley cooperatives.

Mid-period lows were related to the declines in the

asset value of their regionals.

Despite this pattern, the level of investments

by locals in the early 1990s had not returned to earlier levels. The extent of regional affiliation varied

significantly among the three areas. Locals’ investments in regionals varied from 21 to 23 percent of

total assets for the period for wheat-sorghum

locals, to 12 to 13 percent for wheat-barley-oats,

and to about 9 percent for wheat-barley firms.

Member ownership (equity) of total assets

varied between 63 and 73 percent for the mediumsized wheat-sorghum and wheat-barley cooperatives and rose beginning in the mid-1980s (fig. 24).

Medium-sized associations generally owned a

higher proportion of their assets than larger counterparts, particularly during the first half of the

period. Member ownership of assets for large firms

rose through 1987 and subsequently leveled off.

Equity Capital

Equity capital represents member ownership

and control of the cooperative. As a buffer for creditors, it absorbs operating losses and declining

asset values. Many cooperatives found themselves

adjusting to both during 1983-91.

Equity capital usually takes the form of stock

(common and preferred), the noncash portion of

patronage dividends declared (allocated), and

unallocated reserves. The relative importance of

these equity forms varied considerably among the

three types of wheat grain cooperatives and

between the two size groups (fig. 25).

Common stock, generally linked to voting or

membership by grain cooperatives, was an important source of equity capital for only wheatFinwe 74

Member Equity of Total Assets

Wheat First-Handler Co-ops

Medium

Percent

55 f

50 0

45

40 !

35

30

25

20

Wheat-Barley

D Wheat-Barley-Oats

-Wheat-Sorghum

15

10

5 I

Large

75 r

70

65

60

55

50 -

45 -

40 -

35 -

30 0-

25 -

20 -

15 -

10 -

5 c

01 ’

I I I I I I I I

1983 85 86 87 88 89 90 91

Fiscal year

Fiscal year 1984 not available.

Medium = $5-14.9 million total sales. Large = $15 million plus total sales

38
Fiwre 25

Breakdown of Member Equity, First-Handler Co-ops

Wheat-Sorghum

Medium

Percent

100

90

80

Large

100

90

80

70

60

50

40

30

20

10

0

L

- Allocated - Unallocated

L

1983 85 86 87 88 89 90 91

Fiscal year

70

60

50

40

30

20

10

0

100

90

80

70

60

50

40

30

20

IO

0

L

1983 85 86 87 88 89 90 91

Fiscal year

Wheat-Barley-Oats Wheat-Barley

-L

Stocks

Fiscal year 1984 not available.

Medium = $5-14.9 million total sales. Large = $15 million plus total sales.

100

90

80

70

60

50

40

30

I

20

10

0 L

1983 85 86 87 88 89 90 91

Fiscal year

39
sorghum firms in the Southern Plains. For them, rate for large wheat-sorghum firms averaged a litstock as a percent of total member equity was a rel- tle higher than for medium-sized firms early in the

atively steady 29 percent during the period for period, and then declined steadily beginning in

medium-sized firms (table 5). The stock proportion 1987 to about 10 percent in the early 1990s. This

gradually increased beginning in 1986, mostly at was accompanied by a corresponding increase in

the expense of a decline in allocated patronage. The allocated patronage refunds.

Table 5-Amount and types of member equity capital of wheat-sorghum first-handlers-of-grain

cooperatives, by total sales group, 1983-91*

Item Unit 1983 1985 1986 1987 1988 1989 1990 1991

MEMBER EQUITY

Stock ’

Allocated

Unallocated

MEMBER EQUITY

Stock ’

Allocated

Unallocated

$5- 14.9 million

Dollars 2,290,969 2,491,890 2,716,335 2,559,378 2,261,227 2,420,491 2,524,471 2,588,809

Percent 30.6 27.8 26.6 23.1 28.4 29.5 31.6 34.4

Percent 45.6 47.2 47.0 50.5 43.9 42.9 41.1 36.6

Percent 23.8 25.0 26.4 26.4 27.7 27.6 27.3 29.0

$15 million or more

Dollars 6,657,855 5,874,161 5,288,663 7,093,116 5,438,257 5,553,023 6,364,592 6,484,031

Percent 36.8 24.7 41.6 34.7 24.4 24.1 10.0 10.5

Percent 44.5 56.3 41.7 48.1 53.5 52.6 67.4 67.2

Percent 18.7 19.0 16.7 17.2 22.1 23.3 22.6 22.3

‘1984 data not available.

1 Common, capital, and preferred stock, plus stock credits and fractional shares.

Table 5-Amount and types of member equity capital of wheat-barley-oats first-handlers-of-grain

cooperatives, by total sales group,

Item Unit 1983 1985 1986 1987 1988 1989 1990 1991

MEMBER EQUITY

Stock ’

Allocated

Unallocated

MEMBER EQUITY

Stock ’

Allocated

Unallocated

$5- 14.9 million

Dollars 1,326,306 1,614,523 1,526,297 1,423,606 1,372,295 1,381,570 1,143,429 1,251,766

Percent 6.5 4.6 2.7 4.3 4.6 4.9 4.4 4.7

Percent 74.8 73.6 75.5 68.8 63.9 64.6 66.3 70.6

Percent 18.7 21.8 21.8 26.9 31.5 30.5 29.3 24.7

$15 million or more

Dollars 4,031,240 3,962,080 4,678,815 6,943,458 5,382,460 5,429,263 4,720,013 5,394,845

Percent 1.7 5.8 4.4 0.0 3.6 3.7 0.0 0.2

Percent 82.0 75.2 74.1 78.5 70.4 72.6 71 .o 76.0

Percent 16.3 19.0 21.5 21.5 26.0 23.7 29.0 23.8

‘1984 data not available.

1 Common, capital, and preferred stock, plus stock credits and fractional shares.

40
Table !&Amount and types of member equity capital of wheat-barley first-handlers-of-grain cooperatives,

by total sales group, 1983-91*

Item Unit 1983 1985 1986 1987 1988 1989 1990 1991

$5- 14.9 million

MEMBER EQUITY Dollars 2,056,592 2,199,931 3,059,685 2,820,692 3,001,684 2,245,744 2510,847 3,092,531

Stock ’ Percent 7.1 8.7 6.6 10.4 3.0 4.7 5.0 3.3

Allocated Percent 65.5 68.8 64.9 59.2 66.3 71 .l 67.5 64.5

Unallocated Percent 27.4 22.5 28.5 30.4 30.7 24.2 27.5 32.2

$15 million or more

MEMBER EQUITY Dollars 4,536,642 5,373,018 7,854,022 8,055,711 5,508,317 5,621,419 6,941,673 6,980,494

Stock ’ Percent 8.1 7.9 8.8 1.9 2.7 2.7 7.2 6.5

Allocated Percent 73.2 65.3 69.1 65.0 61.5 61.6 56.9 55.8

Unallocated Percent 18.7 26.8 22.1 33.1 35.8 35.7 35.9 37.7

‘1984 data not available.

1 Common, capital, and preferred stock, plus stock credits and fractional shares.

The other two areas shifted from allocated

capital credits, mostly patronage refunds, to unallocated reserves during the period for both medium- and large-sized wheat grain cooperatives.

Entering the 199Os, the proportion allocated as

patronage began increasing in the Northern Plains.

Debt Structure

Local wheat grain cooperatives reduced longterm debt during 1983-91. Medium- and large-sized

firms had generally attained manageable debt levels by the end of the period (fig. 26 and table 6).

Long-term debt in the early 1990s averaged less

than 45 percent of 1983-86 levels, except for medium-sized wheat-barley-oats and large wheat-barley

cooperatives. Long-term debt for both was up

sharply from their lows in 1988-89.

Short-term debt fluctuated widely throughout

the period, largely due to grain inventory value

changes. This was most noticeable in the Southern

Plains and Pacific Northwest, where wheat firms

have considerable storage capacity and low

turnover rates. An example is 1988, when shortterm debt increased sharply related to an unusually

large buildup of grain inventories by wheat-barleyoats and wheat-barley cooperatives. This was partitularly true for the large firms. Short-term debt

variation was far greater for large firms and greatest in the Pacific Northwest.

FINANCIAL STATEMENT ANALYSIS

Analysis of a financial statement entails isolating various factors and constructing key relationships (usually ratios) for evaluating overall economic condition. Important factors to consider are

an association’s ability to (1) meet current obligations, (2) earn a competitive return on investment,

(3) cope with external and internal financial problems, (4) raise needed capital, and (5) operate efficiently.

Ratios showing relationships between items in

the balance sheet and income statement of a business operation help analyze a cooperative’s economic and financial situation.

They are largely descriptive and may indicate

problem areas, but cannot be used to solve problems. Ratios are used as planning guides and aid in

formulating actions. Caution must be exercised in

their use because both items in a ratio are subject to

considerable variation. Their interpretation is

largely subjective in the absence of fixed standards

or hard and fast rules.

41
Breakdown of Debt, First-Handler Co-ops

Wheat-Sorghum

Medium

$ million

Large

3.5 -

3-

1983 85 86 87 88 89 90 91 1983 85 86 87 88 89 90 91 1983 85 86 87 88 89 90 91

Fiscal year Fiscal year Fiscal year

1.0

1

.5 -

0

- Long-term a Short-term

3.5

3

2.5

Wheat-Barley-Oats

1 .o

.5

0

3.5

3

2.5

Fiscal year 1984 not available

Medium = $5-14.9 million total sales. Large = $15 million plus total sales.

42
Table 6-Debt structure of wheat-sorghum first-handlers-of-grain cooperatives, by total sales group,

1983-91*

Item Unit 1983 1985 1986 1987 1988 1989 1990 1991

$5- 14.9 million

416,629 475,459 412,245

510,581 329,302 211,081

927,210 804,761 623,326

55.1 40.9 33.9

$15 million or more

1,342,764 892,431 768,498

1,266,481 553,169 520,554

2,609,245 1,445,600 1,289,052

48.5 38.3 40.4

411,991

175,698

Short-term

Long-term

Dollars 415,478

Dollars 407,788

347,842

441,600

416,274 353,761

177,859 169,625

594,133 523,386

29.9 32.4

Total

Long-term

Dollars 823,266 789,442

Percent 49.5 55.9

1,214,411

1,093,795

587,689

29.9

Short-term

Long-term

Dollars 1,384,192

Dollars 1,348,401

984,772

546,390

1,379,625 1,630,467

491,509 553,827

1,531,162 1,871,134 2,184,294

35.7 26.3 25.4

Total

Long-term

Dollars 2,732,593

Percent 49.3

2,308,206

47.4

'1984 data not available

Table 6-Debt structure of wheat-barley-oats first-handlers-of-grain cooperatives, by total sales group,

1983-91*

Item Unit 1983 1985 1986 1987 1988 1989 1990 1991

$5-74.9 million

126,085 154,318 227,742

230,155 203,952 106,443

~-

356,240 358,270 334,185

64.6 56.9 31.9

$15 million or more

247,524 335,348 655,390

1,262,055 739,095 673,548

1,509,579 1,074,443 1,328,938

83.6 68.8 50.7

Short-term Dollars

Long-term Dollars

170,606

158,303

208,635 157,197 85,804

111,253 199,208 200,998

119,227

216,389

Total Dollars 328,909 335,616

Long-term Percent 48.1 64.5

Short-term Dollars

Long-term Dollars

164,428

828,815

383,261

1,067,089

Total Dollars

Long-term Percent

993,243 1,450,350

83.4 73.6

319,888 356,405 286,802

34.8 44.1 29.9

470,286 339,135 397,710

607,063 416,703 424,073

1,077,349 755,838 821,783

56.3 44.9 48.4

43

'1984 data not available.
Table 6-Debt structure of wheat-barley first-handlers-of-grain cooperatives, by total sales group, 1983-91”

Item Unit 1983 1985 1986 1987 1988 1989 1990 1991

Short-term Dollars 144,460

Long-term Dollars 363,206

Total Dollars 507,666 881,262

Long-term Percent 71.5 61.1

Short-term Dollars 1,089,951 1,269,888

Long-term Dollars 1,137,116 1,144,110

343,006

538,256

Total Dollars 2,227,067 2,413,998

Long-term Percent 51.1 47.4

$5- 14.9 million

190,452 169,073 699,719 469,325 445,203 504,842

609,234 377,063 435,922 307,809 226,443 164,195

- - ~-~

799,686 546,136 1,135,641

76.2 69.0 38.4

$15 million or more

2,023,985 906,033 2,209,877

1,293,225 1,210,888 887,327

777,134 671,646 669,037

39.6 33.7 24.5

639,504 1,391,712 1,351,722

753,407 1,237,116 1,233,087

3,317,210 2,116,921 3,097,204

39.0 57.2 28.6

1,392,911 2,628,828 2,584,809

54.1 47.1 47.7

'1984 data not available.

The application of ratios is limited because of

differences attributed to factors like cooperative

size, time-of-year closing, different accounting procedures, and use of financial resources. Several

ratios have widely accepted value for the cooperatives represented in this study.

Probably the best ratio for measuring a cooperative’s ability to meet its current financial obligations is the current ratio. Except for the large

wheat-barley-oats firms in the Pacific Northwest,

the current ratio revealed general improvement in

the short-run liquidity situation during 1983-91 for

first-handlers-of-grain wheat cooperatives (fig. 27

and table 4). This accompanied generally rising levels of working capital. Medium-sized firms were in

a sounder liquidity situation than large ones.

Despite improvement, the current ratio for

large wheat-barley cooperatives still was comparatively low in the early 1990s. The current ratio for

large cooperatives in the Northern Plains remained

low at about 1.12:1 throughout the period. Such

ratios suggests that a number of cooperatives

might have been experiencing or heading for a

short-run liquidity problem. Although ratio values

greater than 1 technically mean short-run liquidity,

widely accepted guideline values are around 1.7:1

to 1.8:l.

The current ratio position can be misleading

in isolation. It should be interpreted with caution

regarding the overall financial health of an individual cooperative or group of cooperatives. A current

ratio should be analyzed in conjunction with other

information pertaining to the cooperative’s ability

to generate sufficient revenue to meet current debt

obligations.

The liabilities-to-net worth (equity) ratio measures the amount of money members owe creditors

in relation to how much they have invested. It varied significantly among the three areas and for the

two size groups. This ratio was mostly below 55

cents owed per $1 owned for medium-sized wheatsorghum and wheat-barley firms (fig. 28 and table

4). In contrast, wheat-barley-oats cooperatives in

the Northern Plains owed creditors at least as

44
Fiaure 27

Current Ratio and Working Capital, First-Handler Co-ops

Wheat-Sorghum

Medium

Number and million dollars

2r

Wheat-Barley-Oats Wheat-Barley

w

2 -

1.8 -

1.6 -

1.4 -

w

1.2 -

1 -

.8 -

.6 -

.4 -

-0

.2 -

O--L

1.4 1

1.2 -

l-

.8 -

1.2 F

1 I I I I I I I 0” ’ ’ ’ ’ ’ ’ ’ ’

- Current Ratio C=I Working Capital

Large

2 -

1.8 -

1.6 -

1.4 -

_I

1.2 -

1 -

.8 -

.6 -

.4 -

.2 -

2

F

2 -

1.8 -

1.6 -

1.4 -

1.2 -

1.8 1

L

1.6 -

1.4 -

n

1.2 -

1 li

.8 0 .8

q

.6 .6 1

t

.4

.2 1

.4

.2

01’

1983

’

85

’

86

’

87

’

88

’

89

’

90

’

91

’ 01’

t

1983

’

85

’

86

’

87

’

88

’

89

’

90

’

91

’ 0:

Fiscal year Fiscal year

Flscal year 1984 not available.

Medium = $5-14.9 million total sales. Large = $15 million plus total sales.

1983 85 86 87 88 89 90 91

Fiscal year

45
Figure 28

Total Liabilities and Member Equity, First-Handler Co-ops

Wheat-Sorghum Wheat-Barley-Oats

Medium

$ million

5 5

4 4

3 3

2 2

1 1

0 0

Wheat-Barley

Large

16 -

15 -

14 -

13 -

- Member Equity D Total Liabilities

16

15

14

13

12

11

16-

15-

14-

13 -

12 -

11 -

IO9-

1983 85 86 87 88 89 90 91 1983 85 86 87 88 89 90 91

Fiscal year Fiscal year

Fiscal year 1984 not available.

Medium = $5-14.9 million total sales. Large = $15 million plus total sales.

46

1983 85 86 87 88 89 90 91

Fiscal year
Debt/Equity Ratios, First-Handler Co-ops

Wheat-Sorghum

Medium

Number

Wheat-Barley-Oats

_argl

.4

1

e

-Short- and Long-Term E= Long-Term

.6 .6 .6

.5

.4

.3

.2

.l

0

n

cl

.l

I I I I I I I I I 0I I I I I I I I I

.5

.4

.3

.2

.l

0I1983 85 86 87 88 89 90 91 1983 85 86 87 88 89 90 91 1983 85 86 87 88 89 90 91

Fiscal year Fiscal year Fiscal year

.4

.3

0

Wheat-Barley

I I I I I I I I I

I I I I I I I I

Fiscal year 1984 not available.

Medium = $5-14.9 million total sales. Large = $15 million plus total sales

47
Table 7--Net savings and return to member equity for wheat-sorghum first-handlers-of-grain cooperatives

by debt/equity ratio, by total sales group, 1983,85,90,91

Debt/equity

ratio

Unit 1983 1985 1990 1991

0.0

.oi-.39

.40-.69

.70 plus

0.0

.Ol-.39

.40-.69

.70 plus

0.0

.oi-.39

.40-.69

.70 plus

0.0

.Ol-.39

.40-.69

.70 plus

Dollars

Dollars

Dollars

Dollars

Dollars

Dollars

Dollars

Dollars

-

327,863

103,513

(11,757)

- -

1,000,025 492,096

538,888 239,846

349,999 (238,380)

Percent -

Percent 12.49

Percent 4.71

Percent -0.80

Percent -

Percent 12.70

Percent 13.81

Percent 6.06

NET SAVINGS

$5- 14.9 million sales

- 169,671 266,853

267,256 78,187 107,448

81,842 97,077 90,665

23,675 9,464 71,510

$15 million or more sales

RETURN TO EQUITY

$5- 14.9 million sales

- 6.04 8.36

9.23 2.88 4.38

3.91 4.79 4.17

1.34 0.74 4.54

$15 million or more sales

-

6.69

5.45

-8.25

- -

616,644 746,838

442,809 -

259.494 164.346

- -

8.14 9.61

9.66 -

5.49 3.34

48
Table 7-Net savings and return to member equity for wheat-barley-oats first-handlers-of-grain cooperatives

by debt/equity ratio, by total sales group, 1983,85,90,91

Debt/equity

ratio

Unit i 983 i 985 1990 1991

0.0 Dollars 123,012 185,614 89,399 62,491

.Ol-.39 Dollars 132,861 111,723 64,518 54,151

.40-.69 Dollars 115,647 136,160 - 47,502

.70 plus Dollars 111,676 72,932 (69,005) (128,802)

0.0

.oi -.39

.40-.69

.70 plus

Dollars - -

Dollars 409,999 (1)

Dollars 174,538 (1)

Dollars -

(1)

0.0 Percent 11.00 7.32 8.95 4.25

.oi -.39 Percent 10.26 7.54 5.00 4.84

.40-.69 Percent 6.50 8.11 - 5.30

.70 plus Percent 7.01 6.59 -7.31 -13.16

NET SAVINGS

$5- 14.9 million sales

$15 million or more sales

RETURN TO EQUITY

$5-74.9 million sales

- -

1,002,385 810,250

61,474 -

$15 million or more sales

0.0 Percent - - - -

.Ol-.39 Percent 8.89 (1) 10.52 10.25

.40-.69 Percent 6.77 (1) 4.93 -

.70 plus Percent - (1) - -

1 Too few observations for meaningful data.

49
Table 7-Net savings and return to member equity for wheat-barley first-handlers-ofgrain cooperatives by debt/equity ratio, by total sales group, 1983,85,90,91

Debt/equity

ratio

Unit 1983 1985 1990 1991

0.0 Dollars 413,124 -

.Ol-.39 Dollars 284,175 286,533

.40-.69 Dollars 161,780 201,585

.70 plus Dollars -(15,985)

0.0 Dollars -

(1)

.oi -.39 Dollars 1,030,060 (1)

.40-.69 Dollars 702,154 (1)

.70 plus Dollars 359,811 (1)

0.0

.oi -.39

.40-.69

.70 plus

0.0 Percent -

(1) 4.83 7.06

.Ol-.39 Percent 18.62 (1) - 7.26

.40-.69 Percent 16.22 (1) -0.04 8.15

.70 plus Percent 11.08 (1) - 6.51

Percent

Percent

Percent

Percent

17.21 -

14.04 10.65

8.56 8.61

-

-5.09

NET SA VlNGS

$5- 14.9 million sales

$15 million or more sales

RETURN TO EQUITY

$5- 14.9 million sales

$15 million or more sales

-

134,439

-

-

258,204

(1,693)

-

186,262

184,507

268,010

(652,798)

215,671

499,639

1,450,430

548,306

5.10

6.37

11.96

-22.87

1 Too few observations for meaningful data.

50
much as members had invested throughout the

period. Considerable long-term debt and current

liabilities (mainly crop inventories) typified the

early years.

The debt-to-equity ratios indicated improvement in the amount of debt capital in relation to the

amount of member investment dollars. Two exceptions were the large wheat-sorghum and mediumsized wheat-barley-oats firms. This increased solvency was attributed to debt reduction (fig. 29 and

table 4). Steadily rising short-term debt on large

wheat-sorghum cooperatives since 1986 resulted in

a corresponding, but inverse, deteriorating solvency situation. The debt-to-equity ratio gradually

increased for wheat-barley-oats firms, largely

because of declining member equity.

The debt-to-equity ratio reflects not only the

universal importance of debt to a cooperative’s solvency, but also its influence on profitability.

Associations with higher debt-to-equity ratios

averaged significantly lower net savings than those

with lower ratios. This was as generally true for the

1990s as for 1983 and 1985 (table 7). This also was

the general pattern for net savings as a percentage

of member equity (return to equity). Rates of return

were nominal and even negative in several years

for most association groups with debt-to-equity

ratios of at least 0.70.

The net savings-to-equity ratio, the one used

frequently to measure return on member investment, showed considerable short-period variation

with several turning points during 1983-91.

Returns tended to decline early in the period, rise

for a couple of years, fall more than the rise until

around 1990, and then increase. The pattern of

change was similar for both size groups. Rates of

return for the large cooperatives were usually

about 3 to 5 percentage points higher (fig. 30 and

table 2). Except for large wheat-sorghum firms, the

period trend was a decline, with latter half returns

generally averaging 3.5 to 4.5 percentage points

lower than first half returns.

Fiaure 30

Net Savings of Member Equity

Wheat First-Handler Co-ops

Medium

Percent

14 -

13 -

12 -

11 -

10 -

9-i

8 -

7 -

6 -

5 -

4 -

3 -

Large

-w

17

16

15

14

13

12

11

10

9

8

7

6

5

4

3

2

1

0

-Wheat-Barley

c=3 Wheat-Barley-Oats

-Wheat-Sorghum

-m

q

I I I I I I I I I

1983 85 86 87 88 89 90 91

Fiscal year

Fiscal year 1984 not available.

Medium = $5-14.9 million total sales. Large = $15 million plus total sales

51
(1) Corn Belt Grain Cooperatives Adjust to

Challenges of 198Os, Poised for 1990s. David

E. Cummins, ACS Research Report 117,

August 1993.

(2) “Patronage Refunds Boost Income of Local

Grain Cooperatives,” Farmer Cooperatives

magazine. David E. Cummins, ACS,

September 1991, pp. 7-9.

(3) “Co-ops Using Unit-Trains Lead Corn Belt

Recovery,” Farmer Cooperatives magazine.

David E. Cummins, ACS, August 1991, pp. 6-7.

(4) “Led by Larger Cooperatives, Grain Handlers

Turn the Corner,” Farmer Cooperatives magazine. David E. Cummins, ACS, July 1990,

pp. 8-10.

(5) Comparative Financial Profile of Cooperatives

Handling Grain: First-Handlers With $1

Million or More in Sales. David E. Cummins

and Francis I? Yager, ACS Research Report 63,

June 1987.

(6) Financial Profile of Cooperatives Handling

Grain: First-Handlers, $1 Million to $4.9

Million in Sales. Francis I? Yager and David E.

Cummins, ACS Research Report 58, January

1987.

(7) Financial Profile of Cooperatives Handling

Grain: First-Handlers, $5 Million to $14.9

Million in Sales. David E. Cummins and

Francis I? Yager, ACS Research Report 55, May

1986.

(9) Cooperative Involvement in Grain Marketing.

David E. Cummins, Francis I? Yager, Charles

L. Hunley, Michael D. Kane, and Bruce J.

Reynolds, ACS Research Report 38, August

1984.

(10) Regional Grain Cooperatives, 1980 and 1981. ’

Stanley K. Thurston and David E. Cummins,

ACS Research Report 27, April 1983.

(8) Financial Profile of Cooperatives Handling

Grain: First-Handlers, $15 Million Sales or

Larger. Francis I? Yager and David E.

Cummins, ACS Research Report 53, January

1986.

52
Appendix A Figure 1

All Wheat: Prices Received by Farmers and Ending Stocks, U.S. 1976-93

Billion bushels and dollars per bushel

2.5

2

1.5

1

.5

0

I I I I I I I I I I I I I I I I I I

1976 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93*

Marketing year (June I -May 31)

* November pro]ectlons (1992 estimated).

Source: USDA, ERS, FAS, World Agricultural Supply and Demand Estimates, Washington, D.C., selected issues

53
Appendix A Figure 2

Grain Sorghum: Prices Received by Farmers and Ending Stocks, U.S. 1976-93

Million bushels Dollars Der bushel

800 4

700

600

3.5

3

500

400

300

200

100

0

2.5

2

1.5

1

.5

I I I I I I I I I I I I I I I I I

I 0

1976 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93*

Marketing year (September 1 -August 31)

* November projections (1992 estimated).

Source: USDA, ERS, FAS, World Agricultural Supply and Demand Estimates, Washington, D.C., selected issues.

54
Appendix A Figure 3

Barley: Prices Received by Farmers and Ending Stocks, U.S. 1976-93

Million bushels Dollars per bushel

800

700

600

500

400

300

200

100

0

4

3.5

3

Seasonal Average Price (dollars)

2.5

1

.5

I I I I I I I I I I I I I I I I I I 0

1976 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93*

Marketing year (June 1 - May 31)

* November projections (1992 estimated).

Source: USDA, ERS, FAS, World Agricultural Supply and Demand Estimates, Washington, D.C., selected issues

55
Aooendix A Fiaure 4

Oats: Prices Received by Farmers and Ending Stocks, U.S. 1976-93

Million bushels Dollars per bushel

800 4

600 3

2.5

2

1.5

1

.5

0’ ’

I I I I I I I I I I I I I I I I ’ 0

1976 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93*

Marketing year (June I -May 31)

* November projections (1992 estimated).

Source: USDA, ERS, FAS, World Agricultural Supply and Demand Estimates, Washington, D.C., selected issues

56
Appendix B Table l-Selected operating statement cost and income data, by size*, wheat-barley-oats firsthandlers-of-grain cooperatives, 1989

Cost/income Total sales group (million dollars) All

item $15 or more $5.0-14.9 cooperatives

EXPENSES:

Labor

Facility

GeneraVadm.

Subtotal

Interest

Subtotal

Income taxes

Total

INCOME/SALES:

Gross income

Per $ exp.’

Net savings

Of sales

Total sales

Per $ exp.’

Grain sales

Of total

Pricelbu.2

Bushels sold

Bushels storage

Turnover rate 3

Dollars Percent

646,876

727,552

130,937

1,505,365

222,101

37.15

41.79

7.52

86.46

12.76

Dollars

204,281

242,119

41,132

487,532

52,243

37.48

44.42

7.55

89.45

9.58

1,727,466

13,663

99.22

0.78

539,775

5,298

99.03

0.97

Dollars Percent

330,736

380,814

66,791

778,341

100,774

879,115

7,688

37.30

42.94

7.53

87.77

11.36

99.13

0.87

1,741,129

1,884,141

1.09

143,012

29,593,297

17.13

26,349,998

3.38

7,784,801

2,074,918

100.00

0.48

89.04

545,073

574,283

1.06

29,211

8,929,802

16.54

8,031,625

3.58

2,242,343

695,088

100.00

0.33

89.94

3.23

886,803

948,528

1.08

61,725

14,833,658

16.87

13,265,445

3.55

3,825,902

1,089,325

100.00

0.42

89.43

‘Size based on cooperative total sales for FY 1989.

1 Includes interest paid; excludes Federal/state income taxes paid

2 Weighted average price per bushel received for all grain sold.

3 Ratio of bushels grain sold to bushels grain storage capacity.

57
Appendix B Table P-Total operating costs, by major cost category, by size*, wheat-barley-oats firsthandler grain cooperatives, 1989

Cost category Total sales group (million dollars) All

$15 or more $5.0-14.9 cooperatives

Dollars Percent Dollars Percent Dollars Percent

Labor 646,876 37.44 204,281 37.85 330,736 37.62

Facility 727,552 42.12 242,119 44.86 380,814 43.32

GeneraVadm. 130,937 7.58 41,132 7.62 66,791 7.60

Subtotal 1,505,365 87.14 487,532 90.32 778,341 88.54

Interest 222,101 12.86 52,243 9.68 100,774 11.46

Total 1,727,466 100.00 539,775 100.00 879,115 100.00

‘Size based on cooperative total sales for FY 1989.

Appendix B Table 3-Total operating costs, by major cost category, by size*, wheat-barley-oats firsthandler grain cooperatives, 1989

Cost category Total sales group (million dollars)

$15 or more $5.0-14.9

All

cooperatives

Dollars Percent Dollars Percent Dollars Percent

Labor 646,876

Facility 727,552

GeneraVadm. 130,937

Total 1 1,505,365

‘Size based on cooperative total sales for FY 1989.

? Excludes interest paid.

42.97 204,281 41.90 330,736 42.49

48.33 242,119 49.66 380,814 48.93

8.70 41,132 8.44 66,791 8.58

100.00 487,532 100.00 778,341 100.00

58
Appendix B Table 4-Labor/labor-related cost, by cost category, by size*, wheat-barley-oats first-handler

grain cooperatives, 1989

Cost category Total sales group (million dollars)

$1.5 or more $5.0-14.9

All

cooperatives

Dollars Percent Dollars Percent Dollars Percent

Wages/salaries 538,882

Benefits 64,014

Taxes 43,980

Total 646,876

‘Size based on cooperative total sales for FY 1989.

83.30 169,975 83.21 275,377 83.26

9.90 19,397 9.49 32,145 9.72

6.80 14,909 7.30 23,215 7.02

100.00 204,281 100.00 330,737 100.00

Appendix B Table 5-Facility operating cost, by cost category, by size*, wheat-barley-oats first-handler

grain cooperatives, 1989

Cost category Total sales group (million dollars)

$15 or more $5.0-14.9

All

cooperatives

Repairs 66,644 9.16 20,999 8.67 34,040 13.42

Truck/trac./auto 37,775 5.19 11,083 4.58 18,710 10.81

Dryer fuel 4,409 0.61 1,379 0.57 2,245 1.33

Plant supplies 21,270 2.92 5,935 2.45 10,317 2.15

Grain weighing 7,531 1.04 2,573 1.06 3,990 0.71

Pest treatment 2,770 0.38 797 0.33 1,361 0.07

Nongrain testing 4,285 0.59 1,413 0.58 2,234 0.07

Licenses/fees 3,094 0.43 4,159 1.72 3,855 0.50

Insurance 104,783 14.40 43,777 18.08 61,207 11.18

Taxes 53,197 7.31 16,707 6.90 27,133 9.12

Utilities 83,055 11.42 19,865 8.20 37,919 9.55

Telephone 19,170 2.63 4,932 2.04 9,000 1.47

Rents/leases 35,930 4.94 6,622 2.73 14,996 3.13

Misc. 1,344 0.18 147 0.06 489 0.66

Depreciation 282,295 38.80 101,729 42.02 153,319 35.83

Dollars Percent Percent Dollars Percent

Total 727,552 100.00 242,119 100.00 380,814 100.00

Size based on cooperative total sales for FY 1989.

59
Appendix B Table 8-General/admin. operating cost, by cost category, by size*, wheat-barley-oats firsthandler grain cooperatives, 1989

Cost category Total sales group (million dollars) All

$15 or more $5.0-14.9 cooperatives

Dollars Percent Dollars Percent Dollars Percent

Directors fees

Bookkeeping

Legal

Prof. services

Data processing

Office supplies

Advertising

Dues/subscriptions

Meetings/travel

Annual meeting

Public relations

Bad debt

Electron. services

Misc. services

Misc. taxes

Bank charges

Miscellaneous

4,620 3.53 1,930 4.69 2,698 4.04

16,688 12.75 3,349 8.14 7,160 10.72

1,163 0.89 135 0.33 428 0.64

20,507 15.66 9,295 22.60 12,498 18.71

1,221 0.93 438 1.07 662 0.99

22,848 17.45 7,025 17.08 11,546 17.29

20,622 15.75 6,695 16.28 10,674 15.98

4,314 3.29 1,206 2.93 2,094 3.13

14,737 11.26 4,282 10.41 7,270 10.88

2,854 2.18 892 2.17 1,453 2.18

13,850 10.58 1,238 3.01 4,841 7.25

3,109 2.37 1,464 3.56 1,934 2.90

2,501 1.91 227 0.55 876 1.31

175 0.13 153 0.37 159 0.24

195 0.48 140 0.21

1,729 1.32 2,608 6.34 2,357 3.53

Total 130,937

Size based on cooperative total sales for FY 1989.

100.00 41,132 100.00 66,791 100.00

60 *U.S. GOVERNMENT PRINTING OFFICE : 1994 - 377-686 QL 3
U.S. Department of Agriculture

Rural Development Administration

Cooperative Services

Ag Box 3200

Washington, D.C. 20250-3200

RDA Cooperative Services 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.

Cooperative Services (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.

Cooperative Services publishes research and educational materials and issues Farmer

Cooperatives magazine. The United States Department of Agriculture (USDA) prohibits

discrimination in its programs on the basis of race, color, national origin, sex, religion,

age, disability, political beliefs and marital or familial status. (Not all prohibited bases

apply to all programs). Persons with disabilities who require alternative means for

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contact the USDA Office of Communications at (202) 720-7808 (TDD).

To file a complaint, write the Secretary of Agriculture, U.S. Department of Agriculture,

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is an equal employment opportunity employer.