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Co-ops: Equity revolvement

Published: Oct. 8, 2020 at 10:58 AM CDT
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LINCOLN, Neb. (KOLN) - October is cooperative month in Nebraska, and one way co-ops help producers is through what’s known as an equity revolvement program. We learn more about that from the board chairman of Frontier Cooperative.

During a recent visit to Neil Stedman’s farm, he outlined what his cooperative is doing in the area of equity revolvement. “Frontier was recently unified with another co-op,” Stedman said. “We had proud legacy cooperatives that made up that company. Those companies had several different ways of redeeming equity. Typically, we would redeem equity to producers by the age of the patron. So if they turned, for example, age 65 or 72, at that point they would get their equity redeemed. About 6 or 7 years ago, we did a study on equity revolvement and decided there might be a better way to redeem equity. Recently, we’ve made some changes. We are still redeeming equity to those patrons when they reach those age categories. But any new equity that we defer in patrons' names, is now going to a different program where the funds will be revolved out on the age of the account, rather than the age of the patron. The goal of that is to get the dollars back to the member owners quicker, so that even young producers will be getting their equity redeemed.”

Pure Nebraska also talked with Stedman about a new train-loading grain facility that was recently built near Syracuse. He says the facility has been very beneficial. “It’s directly tied to members' equity as well,” Stedman said. “One of the components of the members' equity is it allows us to leverage our balance sheet to build assets for the patrons that own the co-op for their future benefit. The facility that we built near Syracuse is state-of-the-art. It has a circle track that has access to two major rail lines. It has four million bushels worth of grain storage, and it has a 16,000 ton dry fertilizer plant. It provides access to our producers to sell their grain to destination markets that are outside what is the traditional truck market. It allows us to be able to purchase inputs of dry fertilizer from further distant locations, hopefully at a better price, to better impact farmers' bottom line.”

Stedman says co-ops are businesses that will stay strong, even in uncertain times. “They are a very stable portion of the state of Nebraska,” Stedman said. “Through up and down cycles, we don’t exit when it gets tough. That’s a true benefit to our co-op patrons and our owners, that we don’t exit when the times get tough.”

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