October 23, 2019

Archives for December 2017

2017 Grain Market Year in Review

By Karl Setzer, Risk Management Team Leader

To say the calendar year 2017 was full of unexpected turns in the markets may be the greatest understatement ever.

The years started out with all eyes on the financial markets to see what would happening following the election and placement of the new administration. Financial markets reacted approvingly, which may have been more of a coincidence than anything, but it still brought fresh investors to the marketplace. This sudden increase in the financial market actually hindered commodity trade as less interest was shown on those contracts. This was apparent all year, as any dip in the financials lent support to commodities.

The first story worth watching of the year was the South American harvest. Production numbers out of South America came in better than expected. This was credited to a near perfect growing season and improved farming practices. Farmers in South America have upped their use of inputs, mainly fertilizer, which has also been a great benefit for production.

The crop that received the most attention in South America was the Brazilian Safrinha crop. This is the winter crop that is grown in Brazil, and in many cases, is where Brazil’s exports come from. Given the record yields this crop produced, the United States was faced with prolonged export competition all year.

Chinese trade developments also were quick to impact the U.S. market last year. This started with China banning imports of distiller grains from the United States over the possibility of unapproved GMO content in them. While this may have been part of the reason China wanted to back away from U.S. DDGs, elevated domestic ethanol production was likely more of a factor. Chinese officials wanted to use their own DDGs rather than make imports, and the decision to ban them from the U.S. was an easy remedy to the situation.

Global trade on a whole was a factor for the market all year, primarily what changes were expected to take place to world trade agreements. The one that received the most attention was NAFTA, the North American Free Trade Agreement. There are thoughts that the United States will withdraw from this agreement and it will severely limit our exports. This is not out of the question, as Mexico and Canada are two of the top three trade partners the United States has.

The greatest surprise for the market in the past year came from the U.S. production season. Spring planting started out cool and wet in many regions of the Corn Belt. In fact, some regions of the Eastern Corn Belt had to reseed their crops two and three times due to excessive rainfall. This immediately generated talk of low yields and loss production.

Once the crops were in the ground, the weather talk only intensified. The focus shifted to the Upper Plains where severe drought was reported. This was focused on the Dakotas where yield loss of up to 50% was predicted.

As the growing season progressed, some analysts started to change their opinion on the crops. Field reports started to indicate that the crops were actually developing nicely, especially in fringe regions. This was verified by crop tours that found better stands than nearly all of trade was expecting. As a result, some analysts started to raise their yield expectations, and generated some disbelief in the market.

This uncertainty increased right up to the start of the harvest season. Initial yield reports came in much better than expected, with several cases of the Deep South reporting record production. The initial reaction to this was “just wait until harvest moves north, those yields will decline.” The reality is that they did not drop off, especially on corn. Many regions of the Corn Belt reported corn yields that were very close to last year’s, if not larger. As harvest wound down it was apparent that trade greatly underestimated the size of this year’s crop, on both corn and soybeans.

One positive side of these high yields is that with the market already being depressed, production numbers did not pressure values. In fact, in some cases, the high yields actually generated more income than what farmers were receiving a year ago on a per acre revenue case.

Questions are now being asked on what 2018 will bring the markets. One thing that will be likely is a slow reaction to adverse weather given this year’s yields. Any changes to trade policies and the financial markets will also be key to how the commodity market acts. At this point, it is not out of the question that 2018 could bring us a market very similar to 2017; sideways and lethargic activity all year.

Karl Setzer is a Commodity Trading Advisor/Market Analyst at MaxYield Cooperative®. His syndicated commentary and market analysis is available daily on radio, in newsprint and on the Internet at www.MaxYieldCooperative.com. The opinions and views in this commentary are solely those of Karl Setzer. Data used for this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

“Old” MaxYield Phone Numbers Stop Service January 15

The phone number of some MaxYield Cooperative locations changed during the summer of 2017. This update has gone relatively smooth and has helped achieve cost savings, increased efficiency and better service to you.

One more important change is coming soon. Effective January 15, 2018, the “old” phone number you dial when you call the locations below will no longer be in service. If the “old” phone number is used after January 15, you will receive an out of service message and not be able to reach your MaxYield location. ■

To avoid any disruption in reaching MaxYield, we urge you to update your phone contacts to include the following new MaxYield landline numbers:

Belmond: 515-200-5140

Dickens: 712-454-1052

Emmetsburg: 712-454-1050

Emmetsburg – Kerber Office: 712-454-1055

Energy Central/Fuel Orders: 515-200-1362

Everly: 712-454-1038

Greenville: 712-454-1023

Gruver: 712-454-1030

Klemme: 712-454-1061

Mallard: 712-454-1040

Meservey: 515-200-5145

Superior: 712-454-1045

West Bend: 515-200-5123

West Bend Tires & Service: 515-200-5131

West Bend Cenex: 515-200-5161

West Bend Corporate Office: 515-200-5115

Contact your nearest MaxYield location with any questions. Thank you for your patience and understanding as we upgrade our phone system to save your cooperative money and increase efficiency.

Dan Stokes Retires from MaxYield Cooperative

Dan Stokes, seed solutions specialist in MaxYield Cooperative’s central area, recently retired.  Based out of West Bend, Stokes served seed and agronomy clients at MaxYield since 2005, when he sold his Mallard Ag Center business to the cooperative.

During a retirement coffee held in his honor on December 27th, Stokes was presented with a stainless steel Coleman cooler as a token of appreciation for his years of dedicated service to MaxYield.

We wish Dan all the best as he begins the next chapter in his life. Thanks Dan!

About MaxYield Cooperative

MaxYield Cooperative is a member-owned, diversified agricultural cooperative founded in 1915 and is headquartered in West Bend, IA. The cooperative has 24 locations and three Cenex convenience stores in Iowa. MaxYield also provides grain origination and accounting services for two Iowa feed mills. For more information, visit MaxYield online at www.MaxYieldCoop.com and www.FromTheField.com.

Adapt and Succeed: How MaxYield is Managing Through Tough Times

By Keith Heim, chief executive officer

It’s no secret that all of us are operating in a challenging financial environment, especially as agriculture endures its fourth year of lower net farm income. Just like you, we’re doing everything we can to adapt and succeed in this tighter market.

The ag industry’s current downturn began in early 2014, and its effects are widespread. That said, total revenues at MaxYield Cooperative were noticeably higher in 2017 but below budget. This can be attributed to lower carries in the corn market throughout the year and farmers maintaining ownership of more corn bushels than past years, and these bushels will carry forward into the next fiscal year. For the year ending July 31, 2017, MaxYield’s local savings from operations were a negative $1,258,390. Pre-tax total savings for the cooperative totaled nearly $3.1 million.

I want to emphasize that the local savings loss is not due to mistakes or missed opportunities. If you’re wondering whether MaxYield’s acquisition of seven locations from The Andersons in the spring of 2016 played a role, I continue to be pleased with the progress we’ve made to date.

I’m also pleased to report that your cooperative is as financially strong as it has ever been, as you’ll see on our balance sheet.

Strengthening MaxYield’s financial position

It seems counter-intuitive in times like this, but our balance sheet has never been stronger. Members’ equity increased by over $3.0 million, and we added $2.4 million to working capital in fiscal year 2017. This boost helped us reach $34.9 million in working capital, which is a record in the company’s history.

We’ve also lowered long-term debt by $3.9 million, so our leverage was down 15 percent at year’s end. We’re poised to lower leverage 15 points per year going forward.

Retained savings grew in 2017 and now total more than $45 million. In 1997, retained savings were a negative $122,242, so you can see we continue to make significant progress in strengthening MaxYield’s financial position.

DPAD and retirement of preferred stock

Your MaxYield board has chosen to retain this year’s earnings and use about 25 percent of the domestic production activities deduction (DPAD) to offset the tax obligation of retaining that income. The other 75 percent (approximately $3.1 million) will be passed through to the MaxYield membership.

You can apply the DPAD to your individual or business tax bill. Talk to your tax preparer for specific details.

The board also approved paying a 5 percent dividend on Class A preferred stock that was issued in 2013. Those checks were mailed in September. In fiscal year 2017, the MaxYield board distributed more than $500,000 for the retirement of preferred stock and preferred stock dividends.

Cost reduction and revenue enhancement

In case you’re wondering what MaxYield is doing in the current fiscal year to grow local savings, we’ve implemented a detailed cost reduction/revenue enhancement plan for implementation in 2017, 2018 and 2019.

This cost reduction/revenue enhancement plan will enable MaxYield to continue forward with a balanced approach of upgrading facilities and equipment, retiring previously issued preferred stock and lowering term debt. Your board continues to focus on upgrading rolling stock and facilities throughout MaxYield. We know members who use the co-op need efficient, modern facilities and equipment, and we’re pleased to fund these improvements.

The board has approved more than $3 million in capital expenditures for the 2017-2018 fiscal year. This is comparable to what we invested in the previous fiscal year.

We’ll also continue to implement strategies to lower MaxYield’s cost structure. We reduced our full-time team member count in fiscal year 2017.

We’ve also identified other cost saving and revenue enhancing measures that will improve our financial position noticeably. We’ve already started implementing many of these initiatives, including our new MaxYield leadership training program, which you can learn about on page 10.

Above all, we’re taking a balanced approach to enhancing revenue and decreasing expenses so we can meet the diverse needs of our members. As always, we appreciate your support and want to help your cooperative thrive for years to come.

 

103rd Annual Meeting Held

MaxYield Cooperative® held its 103rd annual meeting Wednesday, December 13th at the Clay County Regional Events Center in Spencer, IA.

Board chairman Howard Haas called the meeting to order at 10:00 a.m.

During the meeting, MaxYield CFO Susan Post discussed the financial results of the cooperative. The audited financial report for the fiscal year ending July 31, 2017 reported local earnings of ($1,258,390) with total pre-tax earnings totaling over $3 million.

In his remarks to the membership, MaxYield CEO Keith Heim commented on the tight ag economic environment and its effect on the cooperative’s financials.  “Local earnings were lower this year due to decreased margins and reduced farmer spending. Corn margins were limited in 2017 due to minimal board carries and basis that remained flat throughout the fiscal year. Our interest expense came in higher than expected, also.”

Heim noted that even though the fiscal year was challenging, the cooperative continues to have a very strong balance sheet. “It seems counter-intuitive to say, coming off a difficult earnings year, however, the balance sheet at MaxYield has never been stronger. Term debt has decreased by over $3.1 million, member’s equity increased and we added $2.4 million to working capital in 2017. MaxYield also increased retained savings, which now totals over $45.0 million. In 1997, retained savings were ($122,242), so you can see we continue to make significant progress in strengthening the financial position of MaxYield. We have been and will continue to focus on enhancing revenue and decreasing expenses in this tight economic environment,” he added.

MaxYield has focused on a balanced financial approach, Heim added. “MaxYield has invested approximately $41.6 million in facilities and equipment since 2008 including $3 million in fiscal 2017. In that same time period, we have paid out over $12 million in cash to members through a combination of cash patronage on current year’s earnings and retirement of previously issued preferred stock.”

Board member Barry Anderson of Greenville announced the results of the director election. James Black of Algona, David Garrelts from Emmetsburg and Don Hejlik of Britt were reelected to serve three year terms.

Following the annual meeting, Howard Haas was elected by the board to continue serving as chairman. David Garrelts was elected vice chairman and Eric Marchand will continue to serve as secretary/treasurer.

About MaxYield Cooperative

MaxYield Cooperative is a member-owned, diversified agricultural cooperative founded in 1915 and is headquartered in West Bend, IA. The cooperative has 24 locations and three Cenex convenience stores in Iowa. MaxYield also provides grain origination and accounting services for two Iowa feed mills. For more information, visit MaxYield online at www.MaxYieldCoop.com or www.FromtheField.com.

 

 

Cost of 4-H Membership Decreased in Clay County

Amy Forrette, (right) county associate director youth programming and Jo Engel, county youth program coordinator for human sciences accept a contribution from MaxYield that will decrease the cost of 4-H enrollment in Clay County.

MaxYield Cooperative announced recently that they are continuing their commitment to Clay County 4-H members and clubs by decreasing the cost of enrollment in the youth program.

“We are continuing our support of local 4-H clubs and our commitment to 4-H,” said Chad Meyer, MaxYield client relations/communications director. “Recently, we presented a contribution for $10.00 per 4-H member in Clay County to decrease the cost of 4-H membership.”

Meyer said the cooperative has two goals in providing the program. “First, we want to make 4-H an affordable youth program for local families. Secondly, by paying a portion of each 4-H member’s enrollment fee, we are able to continue our mission in supporting 4-H so that each member benefits.”

The cooperative contributed nearly $2600 to Clay County Extension.

“We believe that 4-H is one of the cornerstones in developing youth and 4-H provides an excellent foundation to build strong families in this area. 4-H also provides a great way for young people to learn more about agriculture and its exciting future,” commented Meyer.

MaxYield Cooperative is a local farmer-owned cooperative serving members and clients in Iowa, and southern Minnesota. Founded in 1915, MaxYield Cooperative is headquartered in West Bend, Iowa. More information about the cooperative can be found online at www.MaxYieldCooperative.com and www.FromTheField.com.