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Equity Livestock reports strong financial performance

March 15, 2012 | 0 comments

Record high prices for most classes of livestock throughout most of 2011 translated into a very profitable year for the Equity Cooperative Livestock Sales Association.

It also helped with some catch-up on auction market facility upgrades that were put off during recent years of lean financial performance, members learned at the first of 10 district meetings for 2012.

Although Equity's net proceeds of $1,731,531 for 2011 represented an increase of just over 76 percent compared to 2010, the volume was down for two of the three major categories of livestock that the cooperative handles at its auction markets and through private treaty sales, according to a report by vice-president for finance and chief financial officer Nancy Bilz.

The 2011 total of 744,271 cattle and calves sold was down by 3 percent when compared to 2010, the sheep and goat total of 47,227 was down by 11 percent and the 68,109 total for hogs and feeder pigs was up by .4 percent.

For the 859,607 head of livestock sold in 2011, Equity realized an average income of $15.63 per head, the operating expense was $13.62 per head and the net return to the cooperative was $2.01 per head, Bilz pointed out.

At the end of 2011, Equity reported net assets of more than $32.906 million - an increase of nearly $4.2 million from 2010.

Bilz noted, however, that a portion of that increase was due to a significantly higher number of livestock sales checks that had not been cashed by the end of the 2011 business year.

Equity spent $462,000 of its 2011 profits on new equipment and to improve its facilities for safety, efficiency, and fast flow of livestock, chief operating officer Tod Fleming reported.

Part of that expenditure was at the auction barn at Lomira in southern Fond du Lac County.

Ripon-Lomira marketing cooperative board president Pete Badtke and Lomira auction market manager Kevin Johnson noted the success of the new approach of supporting county fair associations within the area of the market's shipping patrons.

Instead of buying an animal at the youth meat animal sales held at the fairs, the local association donated pedal tractors (John Deere model 70s in 2011) for an auction sale at the fair.

For the eight pedal tractors given to seven county fairs and the Alto Fair in 2011, the winning bids totaled $5,575 - money that went to the county fair associations.

For this year, Johnson said one more county fair will be added to the recipient list for a pedal tractor model he has yet to choose.

One of the safety features installed at Lomira is a scoreboard, which can provide a message to employees that an unruly animal is moving through the facility, Johnson indicated.

He also stressed how livestock sellers are assured of accurate weights on their animals and how they can obtain a check from Equity in as little as 30 seconds after the animal is sold in the auction ring.

Lateral memberships

and affiliations

In his annual report, Equity president and chief executive officer Chuck Adami focused on several of the lateral memberships and affiliations that the cooperative has.

One of them is the National Livestock Producers Association - a group of 10 livestock marketing cooperatives representing about 125,000 producers, which most recently has been emphasizing relations with veterinarians, addressing livestock health and supporting sheep and goat growers, he said.

Another affiliated organization is the Livestock Marketing Association, which consists of 800 marketing facilities and livestock dealers, Adami noted.

It is updating a video on the proper handling of livestock and has been giving special attention to the issue of drug residue in cattle sent to slaughter, he reported.

The National Cattlemen's Beef Association, which has about 25,000 members, works to influence legislation, which seems to be on "an ever-increasing upswing," Adami observed.

On that point, he noted that cooperatives have been waiting for a while for the U.S. Department of Agriculture to publish a report on market rules and competition.

In the National Association of Agricultural Cooperatives, Equity has an affiliation with producer and marketing groups with such diverse commodities as peaches, nuts, oranges, sugar, eggs and dairy, Adami stated.

He also mentioned challenges to the Taft Hartley Act, which addresses price fixing, being posed by separate current legal cases involving the mushroom, dairy and potato industries.

What's at stake in those cases are issues and rights of cooperatives on pricing and obtaining commodities, Adami pointed out. Unfavorable rulings in those cases would be "an attack on the cooperative way of doing business," he remarked.

District director David Wilke of Ripon, who was re-elected to begin his 7th year on the cooperative's board, pointed out that 2012 is being observed as "The Year of the Farmer Cooperative."

He noted that this designation was bestowed by the U.S. Congress, quipped that it was one thing that Congress had done right, and proclaimed, as the commemorative buttons say, that "Co-ops Rock and Make our Economy Roll."

In his report, Fleming highlighted the apparent reduction in the number of drug residue violations being documented in dairy cows and bob veal calves going to slaughter. But he and Adami cautioned that the current numbers being provided to the public should not be misread.

It was about a year ago that 28 cattle shippers in Wisconsin alone were on a federal list for having had two drug residue violations within the past 12 months, Fleming noted.

But as of the first week of March, Wisconsin had no double violators on that list, he reported.

Despite those numbers, Adami indicated that Equity is still receiving many inquiries from meat packing plants about first violators.

He pointed out that since July of 2011 the federal Food and Drug Administration is publicly disclosing only the names of second or more frequent violators within the previous 12 months.

He also emphasized that no conclusions should be drawn by making an association between first and second violations.

To a question about "pink slime" - the term for an ingredient in hamburgers - which was the subject of a recent national news network feature, Adami replied that the ingredient is "pure beef" that has been a part of hamburgers for many years.

He said such topics are always addressed in a negative way in the media and surmised that the National Cattlemen's Beef Association will be issuing a response.

An Equity member asked if the cooperative could help growers of limited numbers of beef cattle and hogs - numbers not qualifying for forward contracts with packing plants - to obtain such a contract.

Adami and Fleming acknowledged that it was a good idea but one that would depend on having two or more growers being able to provide similar types of animals on a given delivery date in order to meet the terms of such a contract.

Fleming noted that all growers have the opportunity to obtain price protection in the form of hedges or options.

Regarding a direct involvement by Equity on a forward contract, he recalled how a previous venture dealing with basis risk turned into "a disaster" and emphasized that the cooperative would be responsible if it set up a contract that the livestock growers would then not be able to fulfill.

While acknowledging Adami's point about the difficulty and possible impracticality of such a venture, another Equity member urged the cooperative's leadership not to dismiss the idea as such.

He suggested that it be presented in subsequent newsletters in order to gauge if there is adequate member interest in pursuing the idea.

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