It was another successful year for the United Ag cooperative, and despite losses in the grain division, it turned a profit of more than $4 million.
The co-op’s year runs from May 1 to April 30.
The co-op board had good news not only about profits, but dividends, too, for its members at the 37th annual meeting last week at the Knights of Columbus Hall.
In his manager’s report, Jimmy Roppolo gave highlights and lowlights for the year.
“We had a record year in the gin department, but we didn’t have a record year in earnings, and that is totally due to the wet cotton that was picked last year,” Roppolo said.
This has led to the co-op board’s consideration of an update in ginning charges (that is usually charged by the hundred weight) to ginning by the hour to approximate the cost of ginning wet cotton, he said.
“Everybody that brought good cotton is paying for those who brought bad cotton,” he added.
“Our Danevang gin can gin 75 bales an hour and Hillje can gin right at 50. Let’s take the difference between ginning 60 bales an hour which is the average between the two and ginning 10 bales an hour in a 24-hour period. That’s a $119,000 in gross revenue difference.”
“We do something at the end of the year that is really bad. The profits we make at the gin we divide it by the bales ginned and guess what?
“Everybody gets the same thing so the guy who picked the cotton well is paying the bill again,” he added.
He turned to the grain department, praising employees who handled 40 percent less of a crop.
“One of the things that helped our grain department is the corn bagging plant. We generated enough margin in the corn bagging plant to add back to our elevator and make that loss less.
“We did the same thing in our feed mixing plant by using our own commodities and adding value to them,” Roppolo said.
The gin expansion delivered 172,202 bales for the 2018 crop or 15,700 (10 percent) more bales ginned than in the prior year.
Overall earnings in the gin department were $1.8 million or $10.64 per bale.
Total ginning and revenue sales were about $15.5 million.
The grain department sold 2.8 million bushels after receiving 3.1 million bushels of all grains.
“The volume in the grain department was not near what we normally have. When you look at the overall bottom line you’ll see we have a loss of $405,000,” said Greg Taylor with D. Williams & Co., CPA’s out of Lubbock, during the financial report.
”You have to give your merchandisers credit, they did get good margins out of what we did have to handle.”
Other revenue comes from the warehouse, farm supply and fuel departments, with fuel losses at 11 percent due to a wet fall and winter that caused a delay in field preparation.
In his president’s report, A.J. Kresta discussed the co-op’s “busy year.”
“We finished the Danevang gin on time through a lot of hard work. Included in that is a design to increase productivity by as much as 20 percent when the time comes,” Kresta said.
Storage was added to the corn bagging facility to allow for more efficient use of it.
Maintenance and repair were another focus, especially at the Hillje gin.
“It is a very humbling experience to stand before you, to share these numbers with you, and to tell you about your co-op that you have entrusted us to run. We do not take it lightly,” Kresta added.
The co-op is paying dividends on $1,602,401.
In the cotton division, that averages out to $9.30 per bale with 50 percent paid in cash and 50 percent in shares or book credits.
It is expected to be paid in late July.
In the grain department the loss will be carried forward as an unallocated patronage loss ($350,952), Taylor said.
“We did increase our retained earnings by $820,000. Most of that is due to retention of the Section 199A deduction with a little over $806,000 in that total,” he said.
This is the same as the loss carried forward in the cotton division in 2017, according to Kresta.
The co-op’s total assets at the end of April were $43.6 million about $4 million more than in 2018 that includes the gin expansion at Danevang.