How The Coop Helps Farmers And Ranchers Behind The Scenes

July 26, 2022

It’s hard to believe we are two years down the road from the start of the pandemic. Shared concerns seem to indicate there is now more uncertainty facing us all, especially financial uncertainty. With rising fertilizer and fuel prices, no one knows this better than you, the farmers and ranchers of Rocky Mountain Supply (RMSI) who receive this newsletter. RMSI has continued its investments back into the local community with upgrades to our retail stores, fuel trucks and agronomy equipment. This would include the new Townsend retail store that Bill Balliet talks about on page 1. Much like world events blew us sideways in 2020, the challenges of 2022 seem like we are still fighting unrelenting headwinds. Neither new facilities nor new fuel trucks at the co-op can erase the fact that fertilizer has doubled in price since 2021 and fuel prices have skyrocketed. Everyone tries to mitigate risk while reaping some sort of profit in 2022. Meanwhile, your co-op is doing several things behind the scenes to help you achieve that goal. Our sales force is there to supply excellent sales, service and advice on quality products at a competitive price. Those are the tangibles you see on the front lines. But there are quite a few things going on behind the curtain to help your bottom line.

Patronage pool

RMSI Patronage is based primarily on local savings, regional patronage (CHS and Land O’ Lakes) and earnings from Montana Energy Alliance LLC. The local savings is basically the bottom line for retail, bulk fuel, and agronomy. The diversity of RMSI allows us to benefit and then distribute back to the patrons. Recent years have shown an increase in what we would call consumer sales. Some examples would be increases in hardware, grocery and sporting goods. Not only has this new business allowed RMSI to grow and expand, but it also has benefited farmers and ranchers without them knowing it. By being able to collect our funds in the ‘patronage pool’, it has allowed a greater patronage percentage return in some lean years for agronomy. PAGE 5 BY TERRY SWEENEY, CFO How the Co-op Helps Farmers and Ranchers Behind the Scenes

Non-qualified equity

2022 will mark the second year that RMSI will distribute non-qualified equity to the farm and ranch accounts. You only pay tax on the cash portion of your patronage distribution! This is only available to the farmers and ranchers, a.k.a. producer accounts.

Cash management

The commodity price increases have been a burden on all of us. The ability to fill RMSI’s fertilizer bins this year put us in quite a position of leverage. The day-to-day administration of managing cash inflows and outflows has presented a challenge this year that I have not seen in my career here. The benefit to you, the farmer and rancher, is being able to count on us for product when you need it. The other gain would be the minimization of interest paid by the co-op. Every dollar saved on interest expense ultimately helps towards your patronage return.

Stock/equity retirements

RMSI returned a record $744,000 back to the membership in the form of stock/equity retirements in 2021. In November 2021, RMSI retired $347,000 to patron/ members based on their age. Then, on Dec. 30, 2021, over 1,200 checks went out the door. These checks totaled about $397,000 based on the year in which the stock was earned. This second retirement covers all types of accounts—farms, ranches, businesses, etc. By far, the largest portion of retirement dollars are issued to farm and ranch accounts and/or ag-related entities. The RMSI board of directors has earmarked a similar amount to be retired in 2022. The board and management team will strive to continue sending more and more cash back to you, the owners/members, so you can realize the value of your local cooperative and the positive impact it has on your community. As your ag-based local co-op, RMSI has designed and modified the patronage and equity management programs to directly benefit you, the farmer and rancher.