10-K: Golden Growers Cooperative Reports on Financials and Operations for Fiscal Year 2023

Golden Growers Cooperative's 2023 annual report details its financial performance, membership structure, and ongoing relationship with ProGold LLC and Cargill.

Summary

• Golden Growers Cooperative had 1,462 members as of December 31, 2023, primarily from Minnesota, North Dakota, and South Dakota.
• The cooperative facilitates the delivery of corn to the ProGold facility, which is leased and operated by Cargill.
• The cooperative operates as a cooperative for state law purposes but is treated as a partnership for tax purposes.
• The cooperative's primary asset is its membership interest in ProGold, which provides distributions and value for members' corn deliveries.
• Effective March 1, 2022, the Cooperative and Cargill each own a 50% interest in ProGold.
• The cooperative is required to deliver approximately 15,490,480 bushels of corn annually to Cargill for processing.
• Members can deliver corn through Method A (physical delivery) or Method B (cooperative arranges delivery).
• In 2023, 28% of corn was delivered via Method A and 72% via Method B.
• The cooperative's income and losses are allocated to members based on their corn delivery volume.
• The cooperative made cash distributions to members of $6,816,000 in fiscal year 2023, compared to $6,506,000 in 2022.
• The cooperative's working capital was $6,542,000 at December 31, 2023, down from $6,969,000 in 2022.
• The cooperative received $6,084,000 of income from ProGold in fiscal year 2023, a decrease from $6,751,000 in 2022.
• The cooperative sold approximately 15.5 million bushels of corn on behalf of its members in both fiscal 2022 and 2023.
• Corn revenue was $88,019,000 in fiscal 2023, down from $107,409,000 in fiscal 2022, due to lower corn prices.
• The cooperative paid Cargill $63,000 in fiscal 2023 for services related to corn marketing.

Sentiment

Score: 4

Explanation: The document presents a mixed picture with some negative trends, such as decreased income from ProGold and lower corn revenue, offset by continued member distributions and a stable membership base. The overall sentiment is cautiously negative due to the financial headwinds.

Positives

• The cooperative maintains a strong membership base of 1,462 members.
• The cooperative has a stable relationship with Cargill, which leases and operates the ProGold facility.
• The cooperative continues to make cash distributions to its members, with $6,816,000 distributed in 2023.
• The cooperative has a line of credit of $2,000,000 available, though it was not used in 2023.
• The cooperative has a well-defined process for corn delivery through Method A and Method B.
• The cooperative has a clear governance structure with a board of directors and various committees.

Negatives

• The cooperative's working capital decreased from $6,969,000 in 2022 to $6,542,000 in 2023.
• The cooperative's income from ProGold decreased from $6,751,000 in 2022 to $6,084,000 in 2023.
• Corn revenue decreased by 18% in 2023 due to lower corn prices.
• The cooperative experienced a realized loss on investments of $266,000 in 2023.
• General and administrative expenses increased by 15% in 2023.
• The cooperative used operating cash flows of $281,000 in 2023.

Risks

• The cooperative is exposed to fluctuations in the market price of corn.
• The cooperative's financial performance is dependent on the lease payments from Cargill.
• The cooperative's income is affected by the operational performance of the ProGold facility.
• The cooperative is subject to the risk of members failing to meet their corn delivery obligations.
• The cooperative is exposed to cybersecurity risks, though no material incidents occurred in 2023.
• The cooperative is subject to the risk of changes in government regulations and environmental compliance.

Future Outlook

The cooperative's future performance is subject to various factors, including the market price of corn, the lease payments from Cargill, and the operational performance of the ProGold facility. The cooperative is also working to finalize the termination of its pension plan.

Management Comments

• Management believes that non-cash working capital levels are appropriate in the current business environment and does not expect a significant increase or reduction of non-cash working capital in the next 12 months.
• Management assessed the effectiveness of the Cooperatives internal control over financial reporting as of December 31, 2023, and concluded that the Cooperative maintained effective internal control over financial reporting as of December 31, 2023.
• The Executive Vice President manages the Cooperatives cybersecurity-related risks, communicates with suppliers and other third party providers regarding cybersecurity threats, incidents, plans and responses, and reports to the Finance & Audit Committee and/or the entire Board regarding such cybersecurity threats, incidents, plans and responses on at least a semi-annual basis, and more often as needed.

Industry Context

The cooperative operates within the agricultural sector, specifically in corn processing. Its performance is influenced by factors such as corn prices, lease agreements, and the operational efficiency of processing facilities. The cooperative's structure as a member-owned entity differentiates it from other grain shippers and corn processing facilities.

Comparison to Industry Standards

• Golden Growers Cooperative operates as a unique entity, making direct comparisons to publicly traded companies difficult.
• Unlike traditional corporations, Golden Growers is a cooperative, meaning its primary goal is to benefit its members rather than maximize profits for shareholders.
• The cooperative's financial performance is closely tied to the lease agreement with Cargill and the operational efficiency of the ProGold facility, which is not a typical model for most agricultural companies.
• While other agricultural companies may focus on direct sales of commodities, Golden Growers acts as a facilitator for its members, providing a market for their corn and sharing in the profits of the processing facility.
• The cooperative's reliance on a single processing facility and a single lease agreement with Cargill creates a unique risk profile compared to diversified agricultural businesses.
• The cooperative's financial metrics, such as revenue and distributions, are influenced by the price of corn and the terms of the lease agreement, which may not be directly comparable to other agricultural companies with different business models.

Related Party Transactions

• The cooperative has a lease agreement with Cargill for the ProGold facility.
• The cooperative has agreements with Cargill for corn delivery and marketing services.
• The cooperative and Cargill are both members of ProGold LLC.

Stakeholder Impact

• Shareholders: Members will receive distributions based on the cooperative's performance.
• Employees: The cooperative has one full-time employee, whose compensation is determined by the board.
• Customers: The cooperative's members are the primary customers, delivering corn for processing.
• Suppliers: Cargill is a key supplier, providing grain services and leasing the ProGold facility.
• Creditors: The cooperative has a line of credit, but no long-term debt.

Next Steps

• The cooperative will continue to operate under its current structure and agreements.
• The cooperative will continue to deliver corn to Cargill for processing at the ProGold facility.
• The cooperative will continue to make cash distributions to its members.
• The cooperative will work to finalize the termination of its pension plan.
• The cooperative will monitor the market price of corn and its impact on its financial performance.

Key Dates

Keywords

cooperative, corn, ProGold, Cargill, membership, distributions, wet-milling, lease, agriculture, partnership