Cash Those Checks!

Golden Growers members have the option to receive their distribution payments through Direct Deposit or by paper check. One third of members continue to receive payments by check. Unfortunately, several checks are never cashed because they are lost or misplaced.

Currently, there are numerous uncashed checks from 2018 and 2019.

We work hard to make sure our members receive the money due them and to avoid sending these funds to unclaimed property agencies of the member’s state of residence. That’s why we send letters to members who have outstanding checks, follow up with phone calls, and reprint checks if necessary.

If you receive payment by check, please review your deposits to verify that you have received your payments for February and June. If not, give us a call so we can help resolve the situation.

If you want to avoid lost check problems, please sign up for Direct Deposit.

Starting in 2020 – New Policy on Reprinted Checks

The Board of Directors has approved a new policy for 2020 that will result in a $25 charge for every check that is reprinted.

This fee will be waived if the member enrolls in Direct Deposit when the request to reprint a check is received.

Natural Gas Availability in Wahpeton is Vital

Constraints on natural gas supplies in Wahpeton have caused concerns at the ProGold plant and for other major users of natural gas in the area. Whenever the temperature drops below 20 degrees on winter days it is common for Great Plains Natural Gas (local supplier) to notify Cargill and other major users to curtail use or dial back production.

This situation has been getting steadily worse and has the potential become critical in coming years.

Background: Natural gas is supplied to Wahpeton through a 60s era 8” pipe that originates in Vergas, MN, goes to Fergus Falls and then is reduced to a 6” pipe feeding the Wahpeton – Breckenridge community. As use of natural gas along the line expanded, pressures were increased to meet the growing demand. Presently, the line’s capacity is tapped out. And because of safety concerns, federal guidelines may cause pressure on the line to be reduced at a future date and dramatically exacerbate the situation.

Discussions within the community have been ongoing for several years, but no resolution is in sight. Several options have been considered – all of which would require a firm commitment over a period of years to guarantee the cost of construction of a new supply line. More importantly, any solution should have the capacity to serve future needs and growth (residential, commercial, and industrial) of the community. Additionally, any new supply for the area would serve as a backup supply for Fergus Falls should the existing pipeline go down.

As you can see, any solution provides a significant benefit to the area and other customers of Great Plains Natural Gas. Yet, proposals to pay for the majority of the project rely on guarantees of current major users at a significant increase to their current cost of natural gas.

Two scenarios are important to keep in mind. The first is simply to provide enough natural gas to maintain operations at the ProGold plant and meet the current needs of other major users with nearly all of the cost of increased supply shouldered by those users. The second scenario involves the addition of increased demand, whether it is another industrial user, processing plant, or an expansion of any of the existing plants currently served by Great Plains Natural Gas. In this situation, the cost of the supply project would be spread among existing and new users, but it would still result in a substantial increase for current users if the solution were to provide for future needs of the community.

To further complicate the situation, Cargill has less than four years remaining on their lease with ProGold. Any new pipeline would take approximately two years to build, which means Cargill could not and ProGold LLC would not guarantee payment for the cost of construction.

Meanwhile, we are all aware that over 20% of natural gas resulting from oil development in western ND is being flared. It would seem that the State of ND has an interest in the future of the ProGold plant, the community of Wahpeton and others like it. Hopefully, we can engage them in finding a solution to this dilemma.

2020 Annual Delivery Election Decision

2020 ADA Pool Election Decision
Each year, Members have the opportunity to change their method of delivery by submitting a revised Annual Delivery Agreement (ADA). This is your only opportunity to change your method of delivery for the coming year.

You should have already received your Annual Delivery Election letter with the ADA form on the second page. If you intend to change your delivery method, return the form no later than December 10th.

Only members intending to change their delivery method need to respond. Members who deliver directly to the plant through the Method A pool have a $0.07/bushel advantage over members participating in the Method B pool. In 2019, 27% of bushels were delivered by members directly to the plant.

2020 Incentive Payments and Agency Fees
Incentive Payments and Agency Fees for Method A and Method B Pool participation will remain the same for 2020. That means Golden Growers will pay $0.05 for Method A bushels delivered directly to the plant and will charge $0.02 for Method B bushels the Cooperative secures and delivers on a member’s behalf.

GGC Board Approves Distribution of $0.14/Unit

On September 12th, the Golden Growers Board of Directors approved a distribution of $2,168,667 to members of record as of October 1, 2019. This distribution retires the remaining portion of 2017 allocated income and a portion of 2018 allocated income. Total 2018 allocated income was $7,811,471 or roughly $0.504/bushel. In combination with the February and June distributions, a total of $6,691,887 has been issued to members in 2019.

As previously mentioned, the GGC Board believes it is important to build a reserve during the course of this new lease for several reasons that include likely capital expenditures at the plant, and the potential for Cargill to exercise its option to purchase 50% interest in ProGold. This distribution authorized by the Board will result in a remaining equity credit balance for 2018 of $3,378,802.

GGC Approves Distribution of $0.14/bushel

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

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

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

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

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

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.