GGC Approves Distribution of $0.14/bushel

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On June 10th, the Golden Growers Board of Directors approved a distirubtion of $2,168,667 to member of record as of June 1, 2019. This distribution retires an additional portion of 2017 allocated income and is to be issued no later than June 30th. This distribution authorized by the Board will result in a remaining equity credit balance of $5,547,469 or $0.36/bushel.

Golden Growers has issued payments to members totaling $107,567,048 or 199.3% of the original investment in the ProGold plant.

The GGC Board made a decision to build a reserve in preparation for capital expenditures like major repair of the finish dryer or the replacement of the Distributive Control System. GGC must also be prepared for the potential that Cargill may exercise its option to purchase 50% interest in ProGold.

Cost to repair finish dryer at ProGold plant estimate to be over $2 million

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Recently, Cargill informed ProGold that repairs to the finish dryer at the plant would occur in 2020 at a cost of over $2 million. These repairs will consist of the replacement of the tube sheet, tubes and significant shell reinforcement. The fiber finish (tube sheet) dryer, is a last stage dryer for corn gluten feed shipped as a dry product. Over the past several years, efficiency and reliability has declined as 20% of steam tubes became worn out and were capped. Repair of the fiber finish dryer was an anticipated capital expenditure during the term of the current lease.

 

GGC Board Chair relays Importance of Trade and Biofuels

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On May 9th, Chairman Mark Harless was among a group of farmers who met with Vice President Pence near Glyndon, MN. Mr. Pence was promoting the passage of USMCA trade agreement. Harless stressed the importance of the Mexican market for black beans and HFCS. He explained how HFCS has a very fragile supply/demand balance. “We can’t afford to lose any customers. We need to pass USMCS to keep those trade lanes open.” Steel and Aluminum tariffs that were a sticking point on Congressional approval were lifted on May 17th. Within days, however, threats to impose escalating tariffs on Mexico over border security were announced. Those tariffs appear to be set aside at least for now.

Harless also had the opportunity to participate in a June 6th biofuels discussion in Moorhead, MN organized by Minnesota Senator Amy Klobuchar. Harless thanked her for her efforts in making E-15 available for sale year-round and her continued efforts to resolve the small refiner ethanol waivers issued by the EPA that have reduced demand for ethanol by 2.6 billion gallons. “We are on the cusp of many new uses for corn due to technological breakthroughs like CRISPR-Cas9. We need to keep the regulatory environment friendly to these new developments,” Harless concluded.

 

Executive VP’s Annual Meeting Report discusses Operations and Common Questions

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According to Stofferahn, administrative costs are down for the 5th year in a row. 2018 cost reductions are primarily related to reduced legal expenses (SEC related). “Direct Deposit of distribution payments has also been very helpful in allowing a more efficient refocusing of time to more important tasks.”

Stofferahn addressed additional questions often asked by members:

Question: What are my membership Units worth?

Answer: GGC does not place a value on Units. The best option is to review recent transactions at the www.fncagstock.com website. It is important to understand that Units are very thinly traded. “Arms-length transfers (sales) peaked in 2010 at 1.75% of total Units. In most recent years, however, sales have always accounted for less than 1% transferred per year. Values through FNC peaked in 2014 slightly above $6.00, but more recently have been closer to the $3.00 range.

Question: Why can’t I receive my GGC K-1 sooner?

Answer: First of all, a K-1 is not a 1099 which can be printed shortly after the first of the year. The K-1 requires GGC to: 1) Close our books for the year (mid Jan); 2) Satisfy our Auditor (late Jan); 3) Have our accountant prepare an income estimate (late Jan); 4) Allocate income through Board motion (early Feb); and 5) Have our Accountant determine ND income tax withholding (early Feb). Finally, the K-1 is processed, printed, and mailed (mid Feb). Because many of our members need to file their taxes by the end of February, we proceed as fast as we possibly can. It is not possible to speed up the schedule by cutting corners or ignoring critical process. It is also not legally possible for GGC to change our tax year. IRS rules require our tax year to be the same as the majority of our partners, which is the calendar year.

Question: What are Transfer Requirements?

Answer: At the conclusion of a transfer, the resulting Member(s) must hold a minimum of 4,000 Units. We also require delivery to be completed before a transfer is approved. For Method A pool participants, this means bushels of corn delivered for the year must be equal to or greater than the number of Units to be transferred. For Method B pool participants, the Agency fee of $0.02/bushel must be paid so that GGC can acquire and deliver corn on the member’s behalf. New members must complete a new Uniform Member Agreement (UMA) and a new Annual Delivery Agreement (ADA). Existing members acquiring Units must complete a new ADA to include all Units the member owns.

Question: If I sell my Units, what would be my tax basis?

Answer: GGC does not offer tax advice. You must talk to your tax advisor. When it comes to basis, every member’s situation is different. GGC does provide important information to members or their tax advisors that may be necessary for basis calculations. It is important to recognize that a taxable event occurred when GGC converted from a ND Cooperative to a MN 308B Cooperative in 2009. Units were appraised to have a value of $2.86/Unit. For some, this was a taxable loss, for others it was a taxable gain. Distributions issued to members since t hat time (available on the GGC website) also have an impact on the tax basis. Generally, partnership distributions (characterized as a refund of equity) have the impact of reducing basis. Allocations of income, that have not yet been retired, generally have the impact of increasing basis. Basis is also tied to when a member acquired Units and how much the member paid for them or valued them at the time. GGC may provide information from an individual member’s file to indicate when Units were acquired along with any sales data that may have been involved. Once again, it is best to consult with your tax advisor.

Bylaw Change Approved, Directors Re-elected and Appointed to New Districts

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At the GGC Annual meeting, members overwhelmingly approved bylaw changes to reduce the number of directors from 15 to 9 (through attrition) and the number of districts from 5 to three. Members also re-elected: David Benedict, Matthew Hasbargen, Nicolas Pyle, Byron Koehl, and Brett Johnson.

At their reorganization meeting, the Board re-elected the following Board members to serve on the Executive Committee:

Chair of the Board – Mark Harless; 1st Vice Chair – Nicolas Pyle; 2nd Vice Chair – Shaun Beauclair; Secretary  – Matthew Hasbargen; and Treasurer – Les Nesvig.

The Board also approved a resolution to define the three district boundaries and appoint Directors to each district and as At-Large Directors.

Below is a map of newly defined GGC districts, a description of each district, and the Directors appointed.

Districts are now defined as follow:

North District – includes all counties in North Dakota except Cass, Dickey, LaMoure, Ransom, Richland, and Sargent AND the counties of Clay, Becker, Wadena, Cass, Crow Wing, Aitkin, and Carleton and all counties North in Minnesota.

Central District – includes the counties of Cass and Richland in North Dakota and the county of Wilkin in Minnesota.

South District – includes the counties in North Dakota not included in the North and Central Districts; the counties in Minnesota not included in the North or Central Districts; AND all counties in South Dakota. The South District will also include all members who live outside of the states of ND, SD and MN.

Director Appointments

Serving the North District: Shaun Beauclair, Glenn Johnson, David Benedict and Mark Harless; Serving the Central District: Chris Johnson; Butch Jirak; Nicolas Pyle, and Brett Johnson. Serving the South District: Bruce Speich, Leslie Nesvig, Larry Vipond and Richard Bot. Serving At-Large: Byron Koehl, Matthew Hasbargen, and Scott Jetvig.

 

‘Change is Inevitable’ – Chairman’s Annual Report

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Chairman Mark Harless opened his remarks by outlining the proposed bylaw amendment and concluded, “In 2009, Golden Growers changed to a MN 308B Cooperative. Members voted to amend our bylaws to accommodate that change. On the ten-year anniversary of that vote, we ask for your support again to amend and update our bylaws.”

Highlighting changes in the corn milling industry, Harless noted that Ingredion closed their Stockton, CA plant citing lower sweetener demand and higher manufacturing costs. “It’s no secret that domestic consumption of HFCS continues to decline. Corn refiners have managed this decline in a variety of ways.” Exports (primarily to Mexico), plant closures, swinging production to ethanol, and using corn sweetener or starch as the feedstock to make other products, have all played a part. “Corn refiners continue to push forward with research to expand these non-sweetener uses,” said Harless.

This summer, several board members toured Cargill’s Blair, NE bio-refinery campus where the refinery supplies feedstock to a growing number of co-located companies to include Natureworks, Novozymes, Corbion, Evonic, and Evolva. “Cargill’s Blair campus is a prime example of how the industry is transitioning away from HFCS production toward innovative products fermented from corn sweetener and starch.”

Harless pivoted to discuss plans to maintain the ProGold plant. He reminded members of the $750,000 annual contribution toward maintaining infrastructure like painting structural steel, repairing roofs, and improving floor coverings. “ProGold is also responsible for major capital improvements that are important to the profitability of the plant AND its long term condition.” He reported that the ProGold board voted to move forward with the replacement of the Distributive Control System (DCS) which functions as the nerve center to control functions throughout the plant. He noted that the legacy vendor is discontinuing support for the 24 year-old system. “This means it will become obsolete very soon. Our plan is to complete replacement of roughly half of the system during the current lease,” stated Harless. Golden Growers present and future reserves are expected to be sufficient to handle these expense and allow for regular distributions to members, he concluded.

 

Cargill’s Ryan Sirolli Describes Strategy for Sustainability.

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Ryan Sirolli, Cargill’s Global Row Crop Sustainability Director, explained why sustainability is one of the major trends impacting the food industry. “Companies like McDonalds, MARS, Pepsico, General Mills, and Unilever have made commitments to achieve carbon intensity reductions in their supply chain from 20% to 50%.”

Cargill is consistently working to achieve GHG reductions within operations through improvements in equipment efficiency and updates as well as changing energy sources such as wind power and natural gas. However, while Cargill will continue to focus on its own operations, there are significantly larger opportunities to reduce GHG emissions, “Within our own supply chain, one of the largest areas of opportunity to achieve these goals is within crop production.” According to Sirolli, Cargill is in the process of rebuilding its sustainability model to show value for all of their enterprises.

“We see farmers investing in these improvements, but we need to fully quantify the impact and make the focus ‘farmer centric’”. Sirolli stated farmers understand issues of soil health. Improving soil health is recognized to have long term benefits for farmers in regards to productivity and economics while delivering positive environmental benefits of reduced greenhouse gas emissions, improvements in water quality and greater water use efficiency that many downstream customers and consumers are looking for. There are often ‘up front’ costs to adoption of these beneficial practices, however. “Our goal would be to move from a transactional process to a system of support that achieves long-term gains.” Support could include agronomic and financial support to implement soil health practices and decision making.

While Cargill is in its initial stages of developing a new strategy, they intend for their approach to show benefit (and value) for growers and their customers. “The opportunity is to demonstrate mutual value and partner with our customers to support farmers along the way,” said Sirolli.

 

Remembering Harvey Pyle – Harless/Dillon Recall ‘One of the Giants’ of the GGC Board

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Former Board Chair Harvey Pyle passed away February 28th. Harvey Pyle was elected on May 23rd, 1995 at the first GGC members meeting and served until March 2010. He was Chair of the Board from January 2008 until March of 2010. “Harvey was one of the ‘giants’ of our Board who served during our most difficult times and became Board Chair when we were able to see light at the other end of the tunnel,” recalled Harless. “He was one of my personal heroes,” stated former Executive VP Mark Dillon. “Harvey was a man of uncommon integrity and intelligence. I will always treasure his friendship and sage advice.” Our heartfelt sympathies go Havey’s wife Marlyce and the entire Pyle family.

 

Cargill’s Sustainability Director Featured at GGC Annual Meeting

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Golden Growers is pleased to announce Ryan Sirolli as our annual meeting guest speaker. Ryan is the Global Row Crop Sustainability Director for Cargill. He is responsible for leading strategy development and implementation of row crop sustainability programs and initiatives across Cargill’s enterprises.

‘As the food and bio-industrial industries evolve, it is important to understand the opportunities and implications for growers. Understanding the role of sustainability and how ag can be a major part the solution to the changing food and bio-industrial landscape can lead to win-win-win opportunities.’ – Ryan Siroli.

Five District Directors to be Elected at March 29th Annual Meeting

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At our Annual Meeting, Members have the opportunity to re-elect or elect Directors to serve on the GGC Board of Directors. Current directors up for re-election are: David Benedict, Sabin, MN (EC District); Matthew Hasbargen, Breckenridge, MN (NE District); Nicolas Pyle, Casselton, ND (NW District); Byron Koehl, Hancock, MN (SE District); and Brett Johnson, Mooreton, ND (SW District).

Any member in good standing is eligible to be nominated for the Board in the district where their membership is registered. If you are interested in serving on the Board and want to be listed on the ballot for your District, you must file a petition with signatures of at least 10 members from your District no later than five days in advance of the annual meeting. Candidates may be nominated from the floor, but their names will not appear on the ballot. For more information, visit www.goldengrowers.com or contact Scott Stofferahn, 701-281-0468 or scotts@goldengrowers.com.