ACCC Fact Sheet Series

The goal of this fact sheet series is to distribute relevant research and information to the cooperative community.

Fact Sheet 21 - Director Skills Gap Research Series Paper 4 (PDF)

Throughout the fact sheet series on the director skills gap research, we have explored the skills that are necessary for a farmer cooperative director to be engaged and knowledgeable. In this fact sheet, the 4th in a series of 4 fact sheets, we use all of the results from the previous 3 fact sheets to present the Skills Priority Matrix. Then, we discuss a straightforward, self-guided assessment tool a director can complete on their own to identify skill levels and gaps. This tool can help cooperative boards of directors identify skill gaps, which should allow for discussion and/or training on how to alleviate these gaps. Raising the skill level of all directors will provide strength to the cooperative industry and Rural America.

Thank you to our sponsors who provided funding for this research: CoBank, CHS, ProValue Insurance and Pride Ag Resources. Also, thank you to the group of state cooperative council leaders from Kansas, Nebraska, Iowa, South Dakota, Oklahoma, Texas and Missouri who helped circulate and promote our survey data collection.

Fact Sheet 20 - Director Skills Gap Research Series Paper 3 (PDF)

Directors need to possess several skills to be engaged and knowledgeable, but what skills are most important? In this fact sheet, the 3rd in a series of 4 fact sheets, we discuss what are the most important skills for directors, and then we rank them most important to least important. Using the previously discussed 11 skills directors need to be engaged and knowledgeable, a set of survey questions were developed that Plains and Midwest cooperative directors and CEOs/GMs answered to identify the most and least important skills. The top 2 skills identified were – Ask Critical & Constructive Questions and Strategic Planning. The not as important skills were – Time Management and Networking. To find out more where the other 7 skills ranked, please read our latest fact sheet on identifying the most important director skills. Also, look forward to our final fact sheet in this series on the Skills Priority Matrix, which is a tool cooperative leaders can use to evaluate individual and the full board’s skill set.

Thank you to our sponsors who provided funding for this research: CoBank, CHS, ProValue Insurance and Pride Ag Resources. Also, thank you to the group of state cooperative council leaders from Kansas, Nebraska, Iowa, South Dakota, Oklahoma, Texas and Missouri who helped circulate and promote our survey data collection.

Fact Sheet 19 - Director Skills Gap Research Series Paper 2 (PDF)

Identifying and assessing the necessary skills for farmer cooperative directors is integral to the company’s performance. In this fact sheet, the second in a series of 4 fact sheets, we identify skill gaps among new and current directors. The first fact sheet was devoted to identifying the 11 skills directors need to be engaged and knowledgeable. Now, we use those 11 skills to identify the skill gaps to better inform what skills need more attention in training programs. A survey of 174 Midwestern cooperative directors and CEOs/GMs was collected and analyzed. The largest skill gaps identified were in cooperative governance and policy and cooperative finance. Also, there were some interesting differences between the director and CEO/GM responses on the skill gap of strategic planning. For more on our findings, please read our latest fact sheet on existing skill gaps and look forward to our next fact sheet on what skills are most important.

Thank you to our sponsors who provided funding for this research: CoBank, CHS, ProValue Insurance and Pride Ag Resources. Also, thank you to the group of state cooperative council leaders from Kansas, Nebraska, Iowa, South Dakota, Oklahoma, Texas and Missouri who helped circulate and promote our survey data collection.

Fact Sheet 18 - Director Skills Gap Research Series Paper 1 (PDF)

The skill set of engaged and knowledgeable farmer cooperative directors is likely different today because the cooperative landscape has drastically changed. Given these shifts to the landscape, directors need to ensure they have the necessary skills to lead and make decisions within this changing and evolving industry. However, what skills are necessary? Where do skill gaps exist for directors? What skills are the most important? And, could a tool be developed to help a board of directors identify areas of development for training?

Answering these questions was the focus of Dr. Jody Herchenbach’s Ph.D. dissertation research, which will be discussed in a series of 4 fact sheets. In this first fact sheet, we identify the necessary skills for a director to be engaged and knowledgeable. We conducted personal interviews and led focus group discussions with Kansas farmer cooperative leaders. From this research as well as reviewing the literature on skills and characteristics of farmer cooperative directors, we identify eleven necessary farmer cooperative director skills. These eleven skills include cooperative finance, listening, asking critical and constructive questions, as well as other necessary skills. In subsequent fact sheets, we will continue to answer the questions outlined above.

Thank you to our sponsors who provided funding for this research: CoBank, CHS, ProValue Insurance and Pride Ag Resources. Also, thank you to the group of state cooperative council leaders from Kansas, Nebraska, Iowa, South Dakota, Oklahoma, Texas and Missouri who helped circulate and promote our survey data collection.

Fact Sheet 17 - Stress Testing Farmer Cooperatives: An Application to Fertilizer Inventories (PDF)

Fertilizer prices are soaring and many industry leaders in U.S. agriculture are concerned. Farmer cooperatives do have experience managing through significant fertilizer price volatility. In 2007-2008, fertilizer prices skyrocketed and then collapsed. So, what lessons learned from the 2007-2008 fertilizer price volatility period are applicable today?

In this fact sheet, we discuss the recent development of elevated fertilizer prices and its implications for U.S. farmer cooperatives. We develop a cooperative financial stress test model and use the model to run fertilizer inventory stress scenarios on various types of farmer cooperatives. Results show that most cooperatives are well capitalized and can absorb a loss stemming from a fertilizer inventory write down. However, two types of farmer cooperatives from the stress test could experience a significant decline in retained earnings – mid-sized cooperatives with sales between $50 million and $150 million that are a mix of grain and farm supply sales and small, supply cooperative with less than $50 million in sales. Key takeaways from this research, which is applicable to all farmer cooperatives, are to ensure fertilizer inventory is managed appropriately and to make certain all contracts for fertilizer purchases are collected in a timely manner.

Read more in the fact sheet on additional research findings, ways to manage fertilizer inventory, and price risk management strategies.

Fact Sheet 16 - Trends and an Update to Grain Storage of Kansas Farmer Cooperatives (PDF)

The Kansas farmer cooperative landscape continues to evolve. Since the 1950s, the number of local, farmer cooperatives in Kansas has fallen from a peak of 364 to 62 today. The Kansas farmer cooperative landscape continues to evolve. Since the 1950s, the number of local, farmer cooperatives in Kansas has fallen from a peak of 364 to 62 today. Despite this consolidation and based on a grain storage capacity survey and research conducted in 2020, nearly 50% of grain storage in Kansas is connected to a local cooperative with the rest being on-farm and non-cooperative grain storage. To learn more about this grain storage research, please read ACCC fact sheet #16 co-authored by Dr. Brian Briggeman and Ciara Hodgkinson. Also, Dr. Briggeman recorded a webinar to further discuss the grain storage research and its connection to the evolving Kansas farmer cooperative landscape.

Fact Sheet 15 - Rising Equity and Retained Earnings for U.S. Farmer Cooperatives (PDF)

Equity is critical for any business, and its composition is unique to cooperatives. Since 2008, average total equity for farmer cooperatives has risen by 4X and retained earnings now represents on average over 60% of total equity. The increase in retained earnings has largely been driven by nonmember business, outside investment returns, and tax deductions like Section 199. But the changes in equity and the composition of equity vary quite a bit across states. Given a board of directors and senior management do have some control over their respective cooperative’s equity composition, the implications of the rise and compositional changes of equity should be considered. This fact sheet explores the changes in equity for U.S. farmer cooperatives across various states and discuss the implications of these differences.

Fact Sheet 14 - The Contribution of Farmer Cooperatives to the Kansas Economy (PDF)

Farmer cooperatives contribute value in many ways to their members and to their communities. Yet, the economic contribution of the Kansas grain marketing and farm supply cooperative sector to the overall Kansas economy is unknown. In this ACCC Fact Sheet, Amanda Clymer, Dr. Brian Briggeman, and Dr. John Leatherman discuss and show the total economic contribution of grain and farm supply cooperatives for the Kansas economy. The data collected for the study shows some significant direct impacts of cooperatives to its members and the state of Kansas. In 2017, Kansas farmer cooperatives:

  • Paid $71 million in cash patronage
  • Paid $22 million in property taxes
  • Provided over 4,600 jobs
  • Paid over $300 million in employee wages, salaries, and benefits

Using these data, a contribution analysis is conducted to identify indirect impacts of Kansas farmer cooperatives. Contribution analysis quantifies the total industry “ripple effects,” or flow of dollars, through households, governments, and other industries in the state of Kansas. For example, the research results show that for every job at a farmer cooperative, at least one other job is supported throughout the Kansas economy. In addition to this finding, the fact sheet reports other “ripple effects” and other economic activity of Kansas farmer cooperatives.

Fact Sheet 13 - The Impact of the "Transition Rule" on Grain Sales to a Cooperative and a Farmer's Section 199A Deduction (PDF)

The “transition rule” in Section 199A could significantly impact a cooperative patron’s 199A deduction. Under this rule, the timing of grain sales to a cooperative with a fiscal year that starts in 2017 and ends in 2018 could reduce the amount of 199A deduction a patron can claim on their 2018 farm tax returns. While this reduction in a patron’s 199A deduction is not because of a decision the cooperative made, it is a reality that could affect many farmers. Cooperatives should be aware that their patrons might contact them to find out (1) when is the cooperative’s fiscal year end; and (2) when was their grain sold. In this ACCC Fact Sheet, Dr. Brian Briggeman, Professor and ACCC Director, and Mark Dikeman, Associate Director of KFMA, use a straightforward example to discuss the transition rule’s implications for farmers and cooperatives.

Fact Sheet 12 - Talent Management in Grain Merchandising: Expectations and Perceptions of Agriculture Majors Interested in Grain Merchandising Careers (PDF)

Employee selection is important. Poor recruitment practices can result in financial losses for any company, including grain marketing cooperatives. As such, the focus of this ACCC Fact Sheet is to gain a better understanding of what undergraduate students prefer in a grain merchandising job. Students at Kansas State University and Fort Hays State University were surveyed about their preferences for a job merchandising grain. Results indicate grain marketing cooperatives looking for new employees offer job attributes that are appealing to various students. To learn more about what are those job attributes and how much students value them, please read this new ACCC Fact Sheet.

Fact Sheet - *UPDATE* Special Edition - Collaborative Research OSU/KSU: Impact of Revised Section 199A on Grain Producers (PDF)

On March 23rd, 2018, President Trump signed into law the Omnibus Spending Bill, which included a revision to Section 199A. The revised Section 199A language provides a deduction at the cooperative level that can either be retained or passed through to patrons. And a deduction for producers, except those farming as a C-corporation, that equals 20 percent. But this producer level deduction could be reduced when farmers conduct qualifying business with a cooperative. In particular, this potential reduction is significantly impacted by the W2 wages paid by a farmer.

In this fact sheet, Dr. Phil Kenkel and Dr. Brian Briggeman analyze the implications of the revised Section 199A for farmers delivering grain to a cooperative. The fact sheet also examines the implications of the W2 wage limit that could reduce the patron’s deduction. Based on a set of assumptions for a wheat cooperative and USDA data on a wheat farmer, this particular wheat cooperative must pass through 75 percent of its deduction in order to offset the W2 wage reduction. Or stated another way, the cooperative must pass through a deduction equivalent to $0.055 per bushel so the wheat farmer would still receive their full 20 percent deduction. Kansas Farm Management Association (KFMA) data are used to examine those farmers that are most likely to have their deduction reduced when marketing their grain with a cooperative. In the fact, these individuals are called, “high” wage farmers, and they tend to be large, non-corporate operations.

Fact Sheet - *UPDATE* Special Edition - Collaborative Research KSU/OSU: Impact of Tax Reform on Agricultural Cooperatives (PDF)

Since the Tax Cuts and Jobs Act of 2017 was passed into law, new information has become available about the impact of tax reform on cooperatives. The focus of the earlier fact sheet was on (1) the elimination of DPAD or Section 199; (2) lower corporate tax rates; and (3) lower member taxes on qualified distributions from a cooperative. Now, there is a fourth component that must be considered; (4) a new tax deduction called Section 199A. In this revised fact sheet, an updated analysis is presented that considers this new information.

December 18, 2017: The purpose of this fact sheet is to examine the implications of the proposed tax reform plan for agricultural cooperatives. Under the proposed tax plan, there are three key changes for cooperatives – (1) elimination of the domestic production activities deduction or Section 199; (2) lower corporate tax rates; and (3) lower member taxes on qualified patronage distributions. Based on the analysis completed in the fact sheet, these proposed changes affects the optimal structure of distributing profits to members. Cooperatives that use Section 199 to retain funds as unallocated retained earnings will have an incentive to retain funds under tax reform as allocated equity. There is however a slight advantage of distributing equity in patronage in a nonqualified form. Cooperatives that did not use or could not use Section 199 will benefit from this tax reform plan.

It should be noted that as of the date of writing this fact sheet, the tax reform plan has not been passed into law. The analysis starts a discussion on how tax reform could impact a cooperative’s distribution of member profits. Individual cooperative directors and managers should consider their own situation before altering their distribution decisions.

Fact Sheet - Special Edition - Collaborative Research KSU/OSU: Impact of Tax Reform on Agricultural Cooperatives (PDF)

The purpose of this fact sheet is to examine the implications of the proposed tax reform plan for agricultural cooperatives. Under the proposed tax plan, there are three key changes for cooperatives – (1) elimination of the domestic production activities deduction or Section 199; (2) lower corporate tax rates; and (3) lower member taxes on qualified patronage distributions. Based on the analysis completed in the fact sheet, these proposed changes affects the optimal structure of distributing profits to members. Cooperatives that use Section 199 to retain funds as unallocated retained earnings will have an incentive to retain funds under tax reform as allocated equity. There is however a slight advantage of distributing equity in patronage in a nonqualified form. Cooperatives that did not use or could not use Section 199 will benefit from this tax reform plan.

It should be noted that as of the date of writing this fact sheet, the tax reform plan has not been passed into law. The analysis starts a discussion on how tax reform could impact a cooperative’s distribution of member profits. Individual cooperative directors and managers should consider their own situation before altering their distribution decisions.

Fact Sheet 11: Sustainable Growth Rates (PDF)

Strategic planning sessions and meetings often center around the topic of growth. Any cooperative having this strategic discussion must ensure the growth strategy add value back to the membership whether it is through a merger, an acquisition, a fixed asset investment or joint venture. An integral part of this discussion is how growth affects the cooperative’s financial position. The decision to grow will be impacted by changes in the economic and financial landscape. For cooperative directors and managers, monitoring and assessing how the cooperative should best fund this growth is beneficial.

In this ACCC Fact Sheet, the sustainable growth rate (SGR) model is examined and applied to Kansas farmer cooperatives. The SGR model is a financial metric used by many businesses to monitor and address potential growth problems. The model uses four key and interdependent financial ratios. Understanding this model provides directors and managers a deeper understanding of how to react to challenging economic times as well as ways to seize growth opportunities.

Fact Sheet 10: Influence of Shuttle Loaders on Grain Markets in Kansas and Montana (PDF)

Agribusinesses and cooperatives have strong incentives to invest in shuttle train-loading facilities because they lower the variable costs of handling grain. Yet, what are the benefits for farmers who have access to these shuttle-loaders? In this ACCC Fact Sheet, Drs. Bekkerman and Taylor use a unique data set to identify that companies and farmers both benefit from shuttle-loading investments. Furthermore, the authors find that there are some unique differences between Kansas and Montana grain markets. These differences are highlighted in a map of the two states, which provides key insights for cooperative directors and managers who are considering investing in a shuttle train-loader.

Fact Sheet 9: Monitoring the Evolving Kansas Cooperative Landscape: Mapping Grain Locations in Kansas (PDF)

The cooperative landscape in Kansas is changing rapidly. Infrastructure is being built, competition is rising, new innovations are being developed, and all of this has contributed to fewer grain marketing and farm supply cooperatives in Kansas. In fact, there were 86 Kansas co-ops in September 2015, and by September 2016, that number had fallen to 77. To help Kansas cooperative leaders better understand this evolving landscape, the Arthur Capper Cooperative Center has constructed a set of interactive maps of all cooperatives and non-cooperatives’ grain locations in Kansas. In addition, these maps and fact sheet really highlight the value the cooperative system bring to Kansas farmers. There are more than double the number of cooperative grain locations than non-cooperative grain locations! For more information, please read this fact sheet to learn about the details, need, use, and accessibility of these maps.

Fact Sheet 8: Cooperative Earns, Turns and Leverage: The DuPont Profitability Model *revised2019* (PDF)

DuPont Analysis Worksheet *revised2019* (Excel Spreadsheet)

Leading and directing a cooperative requires a solid understanding of the co-op’s financial position. In this ACCC Fact Sheet, the DuPont Profitability Model is presented and applied to a set of data that will help cooperative managers and directors understand their co-op’s financial position during periods of financial stress and prosperity. The DuPont Model is straightforward because it breaks down return on equity into its key components. The model shows how margins or “Earns,” efficient use of assets or “Turns,” the “Spread” above cost of debt, and the debt capital structure or “Leverage” impact Kansas grain and farm supply co-ops. In addition, an Excel spreadsheet of the DuPont Profitability Model is provided so you can conduct your own analysis of your cooperative’s financial position.

Fact Sheet 7: Effects of Collective Action Water Policy on Kansas Farmers' Irrigation Decisions: The Case of the Sheridan County 6 LEMA (PDF)

In this ACCC Fact Sheet, Krystal Drysdale, PhD student and CoBank Research Fellow, and Dr. Nathan Hendricks, Assistant Professor in Agricultural Economics, explore the impact of a Local Enhanced Management Area (LEMA) on farmers and crop input suppliers. They estimate the LEMA’s impact on total water use, cropping pattern changes, as well as crop nutrient and seed purchases. Results show that farmers within the LEMA significantly reduce their irrigated water usage and plant fewer total irrigated crop acres, especially corn acres. With fewer corn acres, grain and farm supply cooperatives could be challenged by having fewer bushels coming into the elevator as well as a decline in seed, chemical, and crop nutrient sales in the near future. In the long run, cooperatives could see greater bushels and greater input sales because the reduction in current water use will extend the life of the aquifer. Read the fact sheet to discover more about the authors unique approach to arriving at these results as well as the percentage declines they estimated for water usage, crop acres, and crop inputs used.

Fact Sheet 6: Financial Trends and Needs of Cooperatives and Implications of Consolidation in the Farm Credit System (PDF)

In early 2014, the Farm Credit Administration (FCA) held a symposium titled, "Consolidation in the Farm Credit System: The Factors Influencing Consolidation and the Potential Impact on Mission." The purpose of the symposium was to consider the effects consolidation may have—both positive and negative—on the System's safety and soundness and its ability to fulfill its mission. The symposium was held at the FCA headquarters office in McLean, Virginia.

ACCC Director, Dr. Brian Briggeman, was invited by the FCA board of directors to prepare a report and present the cooperative’s perspective on consolidation during the symposium. The attached ACCC fact sheet is based on his report. In this fact sheet, Dr. Briggeman explores the financial state and future financial needs of agricultural cooperatives. Furthermore, he discusses the implications of consolidation within the Farm Credit System on the cooperative industry. In short, this fact sheet illuminates the importance of a safe and sound Farm Credit System for many cooperatives, their farmer-owners and the rural communities they serve.

Fact Sheet 5: Rising and Changing Costs in Production Agriculture (PDF)

In the latest installment to the ACCC fact sheet series, Dr. Brian Briggeman and Chuck Mickelsen explore the evolution of the costs of agricultural production. Today, the costs of agricultural production have surged to the historically high levels of the late 1970s. Comparing these elevated costs to the 1970s shows that technological costs have nearly doubled for today’s producers while land rental costs are fairly low. Looking ahead, economic conditions suggest costs may continue their rise, especially land rents.

Fact Sheet 4: Equity in Kansas Ag Co-ops (PDF)

Equity generation and composition are important topics for any cooperative. Since 2003, Kansas co-ops’ total equity and the percentage of total equity designated as unallocated equity have both risen significantly. This fact sheet explores these trends and provides talking points for a cooperative's board of directors and management on this topic. (updated 22June2016)

Fact Sheet 3: Sunsweet Marketing (PDF)

At the center of a solid marketing campaign typically lies an effective advertising plan. If done correctly, advertising can boost sales, but making this link can be difficult because of many competing factors that impact consumer sales. The research within this fact sheet discusses a methodology and illustrates how advertising increased sales of a new product, Sunsweet's Ones prunes brand. Other businesses marketing branded products should identify the impact of advertising on their product sales, and the methodology described in this fact sheet allows them to do just that. Authors: John Crespi (Kansas State University) and Michael Boland (University of Minnesota)

Fact Sheet 2: Comparison Land Values (PDF)

Farmland Value Data: Implications of Survey Accuracy and Reliability.” A hot button issue in agriculture is whether or not farmland values are sustainable or even forming a price bubble. While it is difficult to determine if a bubble is forming, if not impossible, publicly available data does provide insights in near-term trends of farmland values. Presented in this fact sheet are the research results of the accuracy and reliability of land value data as well as information on the recent, staggering rise in values.

Fact Sheet 1: Farm Credit Patronage (PDF)

Few studies have analyzed preferences for patronage refunds. However, one study found that Farm Credit member-borrowers’ strongly preferred cash patronage payments versus lower fixed real estate loan interest rates. In this fact sheet, these research results as well as talking points on the potential positives and negatives of using patronage as a marketing tool are discussed.