Tag: newsletter articles

Phil Kenkel

Bill Fitzwater Cooperative Chair

Most U.S. agricultural cooperatives started with a homogeneous group of producers and were organized around a simple common need.  Over time, the membership in agricultural cooperatives has become much more heterogeneous.  CEOs and boards face that issue as they consider equity management, pricing, services, infrastructure needs and other issues.  There are actually multiple dimensions to membership heterogeneity and considering the dimensions helps to bring the issues into focus.

The first dimension is farm level …

Phil Kenkel

Bill Fitzwater Cooperative Chair

Cooperative employees can be a good source of ideas.  At the same time an employee suggestion program can end up being just a channel for employees to vent frustration or to generate wild ideas that the cooperative could not possibly implement.  The solution is to put a little structure, but not too much structure, into the format for suggestions.

The suggestion form (paper or electronic) should begin by asking for a one sentence description …

Phil Kenkel

Bill Fitzwater Cooperative Chair

Last week I discussed the sources of grain margin risks in grain marketing cooperatives.  Some sources of that risk relate to grain grading accuracy and stored grain management and must be managed in the elevator.  Other elements such as estimating transportation costs and hedging fall to the manager and merchandiser.  The more straightforward source of grain margin risk is when a cooperative raises grain prices (and thus lowers margins) in an effort to maintain …

Phil Kenkel

Bill Fitzwater Cooperative Chair

One of my recent research projects has involved applying the principles of enterprise risk management to grain marketing and farm supply cooperatives.  ERM involves analyzing all of the “risk buckets” for a firm as well as their capacity to withstand risk and their “risk appetite”.  We used data from 10 case study cooperatives to investigate the historic risks for grain marketing and farm supply cooperatives.

Not surprisingly, variation in the volume of grain received …

Phil Kenkel

Bill Fitzwater Cooperative Chair

The road to our present Section 199A tax deduction started back in 2004 with a tax deduction for domestic manufacturing firms.  Tax specialist were able to first argue that crop producers were manufacturing firms and then extend that argument to allow cooperatives to be collectively manufacturing their member’s crops.  The cooperative could then retain the deduction or pass some or all of it on to the producers.  Use of the old Section 199 (DPAD) …

Phil Kenkel

Bill Fitzwater Cooperative Chair

Your annual meeting is an important opportunity to give you members a brief synapses on how the cooperative is doing (and why) and what the cooperative is investing in (and why).  Annual meeting attendance should be judged by quality and not quantity.  The challenge is to get active members to attend, vote and provide input.  Members need a reason to attend.

One approach is to structure the meeting to provide the answer to one …

Phil Kenkel

Bill Fitzwater Cooperative Chair

Most cooperative managers are open to suggestions from employees at any time.  For that reason they have not developed any formal efforts to harvest employee suggestions.  Last week I discussed the idea of periodically asking for written or oral suggestions on a specific topic.  That’s a great way to get ideas on specific opportunities or problem areas. Another vehicle to both improve the cooperative and enhance employee morale is to hold a brainstorming session.…

Phil Kenkel

Bill Fitzwater Cooperative Chair

Last week I started my list of the key areas that a good board needs to get right.  A good board needs the right people working through the right structure of meetings and committees with the right information.  Next, on my bill of “rights”, a good board has to have the right processes.  While board structure relates to the number of members, meetings and committees, process refers to what happens during the meetings. A …

Phil Kenkel

Bill Fitzwater Cooperative Chair

Tapping into employee ideas allows your cooperative to deliver more value to your members while boosting employee morale and motivation.  Each day your employees encounter challenges at work as they interact with your customer members.  Each challenge can spark an idea for the cooperative to become more efficient or provide more value.  The manager’s challenge is to harvest those ideas to improve the cooperative’s performance.

When an employee is able to provide suggestions on …

Phil Kenkel

Bill Fitzwater Cooperative Chair

In this series of articles I have been discussing reinvestment in equipment and infrastructure.  We have seen that the growth or decline of the cooperative is a function of the reinvestment ratio and the cooperative’s return on equity.  At first blush you might expect growth to be function of the return on assets.  If I invest in my grain assets at a rate greater than they are wearing out (net investment) I would expect …