Federated Co-operatives Limited has another co-op to thank for continued strong sales in the agriculture sector.
Speaking to delegates at FCL’s annual meeting in Saskatoon this week, president Dennis Banda described 2002 as a phenomenal year for the organization.
Sales topped $3.23 billion, down slightly from last year’s record of $3.25 billion. A new high was established for profits with net savings topping $246 million, obliterating last year’s record of $216 million.
Canada’s largest non-financial co-operative also managed to improve on sales of crop supplies and feed in the midst of the most severe drought since the 1930s.
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“We’ve obviously picked up some of that business that would have left Saskatchewan Wheat Pool,” said Banda in an interview after his speech to the delegates.
He attributed the 16 percent rise in feed sales to the drought. FCL’s mills sold a record $93 million worth of product because pasture and forage production was down markedly across the Prairies.
But it was SWP’s financial struggles that led to a slight increase in crop input sales in a year when that segment should have been way down. Federated sold $140 million worth of crop supplies in 2002, up from $139.6 million the previous year.
“We’ve been beneficiaries of somebody else’s problem,” said Banda.
Farmers like dealing with their local co-ops because they know they are financially stable, he said. It also doesn’t hurt that 85 percent of Federated’s retail co-ops paid out cash dividends to their members last year.
Brett Fairbairn, director of the University of Saskatchewan’s Centre for the Study of Co-operatives, said the crop input sales figures are astonishing.
The fact that FCL improved sales of those products in a year when growing conditions were miserable in many of the regions it services proves Federated is gaining market share in that segment.
“They’re probably gaining a little bit from everyone, but there’s no doubt that in certain areas it is particularly from former pool members,” said the analyst.
Exacerbating the trend is a mood within Federated’s retail system that the pool is now fair game. In the past, some co-ops refused to compete with the pool on things like fertilizer sales, but no longer.
Many Federated members are angry with the pool or have the perception that it is no longer a co-op, creating a no-holds-barred environment in the country these days, said Fairbairn.
There is nothing to keep local co-ops from competing with the pool anymore.
And it is stiff competition because Federated is about as financially healthy as a co-operative can get. It has zero long-term debt, and cash on hand of $237 million.
Its retail co-ops have decreased their long-term debt to $55 million in 2002 from $260 million 20 years ago. That’s after paying out $739 million in dividends to their members and spending $700 million on fixed assets over the past decade.
Reinvestment in new facilities has been the key to Federated’s string of record sales and profits, said Fairbairn.
“I guess one of the things that strikes me is that there is a constant effort to promote change and adapt.
“They’re not trying to stay the same,” he said.
Banda said the next frontier for the organization will be expansion in Alberta and British Columbia. Markets in Saskatchewan and Manitoba are pretty much tapped out.
Sales are up once again for the first three months of 2003, although the bottom line has dropped slightly from the same time last year.
