The Cooperative Advantage

By Nichole Gouldie, Communications Specialist

There are reward cards and punch cards. You may have coupons or store cash but very few

MKC Field Marketer, Jared Jones, personally
delivers patronage checks to MKC members,
Jim Schmidt and Ben Schrag.

businesses offer an incentive quite like your cooperative. MKC returns profits to its customers, the members who use its services. That is the cooperative way of doing business.

“Doing business with MKC definitely has its rewards,” said Jim Schmidt, McPherson County producer. “Not only do we get quality and personal expertise, but facilities continue to be improved or new ones are being built, and at the end of the year we see a patronage check for our business.”

MKC Chief Financial Officer, Danny Posch, said we are often asked what does a cooperative do with its net earnings. “One of the primary uses is allocating a portion back to our members based on the business they did with the cooperative during the business year,” he said.

Where Answers Grow

By Nichole Gouldie, Communications Specialist

As crop values and input costs reach new heights, so does the value of solid, trusted agronomic advice. That’s exactly what MKC and WinField Solutions can provide.

MKC kicked off the 2013 Answer Plot season on July 16 near Inman with more than 125 guests in attendance. The hands-on experience of an Answer Plot® plus the expertise of MKC field staff equals valuable insights for the producer. 

“The Answer Plot® program has been one of the most beneficial learning tools for growers,” says Kent Nichols, MKC Agronomy Field Sales Manager.  “These in-field classrooms are much more than the traditional test plot that only compares one hybrid or variety to another.  Answer Plots are about a total agronomic system.”

WinField employees were an instrumental piece of making this year’s Answer Plot® a success.  In addition to coordinating the studies that are replicated in MKC’s local plot, WinField provided information to area producers in attendance. WinField employees kicked off the learning sessions by hosting a sprayer clinic for those present. 

MKC Field Marketer, Jeremy Peterson, explains how to get
the best coverage from sprayers by making the correct tip selection
and using the correct adjuvant package.

The sprayer clinic focused on many different aspects of both operating a sprayer as well as what types of adjuvants are available for both custom applied acres and those who spray their own fields. With new herbicide technologies coming soon, presenters illustrated different spray tips which are available. Many new herbicide technologies are requiring that producers and custom applicators use certain types of spray tips. Utilizing the correct spray tips in combination with recommended adjuvant products available from MKC, growers will be able to minimize chemical drift.

The field sales team of MKC also conducted a series of educational presentations.  Growers were split into three different groups and rotated through the different sessions. The first stop on the rotation focused on recent events which have occurred throughout the MKC trade territory, including Green Snap. MKC staff demonstrated the importance of large root systems in corn as well as other positive characteristics.  Examples of plant diseases were also presented, providing growers a better understanding of what to look for in their own fields.

The second rotation explained the NutriSolutions tools that are available to producers through WinField Solutions, LLC. NutriSolutions is a systems approach to nutrient management.  The main component of the NutriSolutions program utilizes tissue sampling, a process that utilizes plant tissue from different stages of a plant’s life cycle. This allows growers to make changes to a fertility program part way through a season, if the tissue sample shows that a plant is in need of additional nutrients. Moving forward, there will be additional tools available such as digital imaging as well as technology which allows growers to know exactly how much nutrients are available from the soil within a field.

The final stop at this session illustrated the differences between WinField’s Gold and Silver management practices. These different practices utilize multiple technologies such as seed treatments, in-furrow seed treatments, in-furrow growth promoters, as well as different levels of fertility.  Nichols stressed the importance of growers understanding the yield potential of their fields and managing it accordingly. 

“MKC field marketers are well versed and professionally trained in developing management practices which incorporate many different technologies,” Nichols said. “But there’s nothing like attending an Answer Plot® Knowledge Event, which is based on the idea that seeing is believing.”

Understanding the Domestic Production Activities Deduction

By Nichole Gouldie, Communications Specialist

Through a requested IRS Private Letter Ruling (PLR), MKC has found a path to pass a significant tax deduction on to the producers who are members through the Domestic Production Activities Deduction (DPAD).

“I was very excited when MKC contacted me regarding the cooperative’s willingness to set up the Domestic Production Activities Deduction to give this great benefit to their members,” said Jim Graber, a local accountant. “Right away I saw a potential of several million dollars of tax deduction to farmers.”

DPAD, often referred to as Section 199 Deduction, is a special federal income tax provision allowing a cooperative to allocate to its members a tax deduction generated by “qualified production activities.”  As outlined by the Internal Revenue Service, and as it relates to the DPAD, grain payments the cooperative makes to its members are considered qualified production activities by the cooperative, thus making the cooperative and its members eligible for the tax deduction.

“As of the first of the year, MKC has initiated a plan to fully capture the value of the Domestic Production Activities Deduction for our members,” said CJ Blew, MKC board chairperson. “This project further enhances the value of the cooperative to its members.”

The favorable ruling will allow the partnered cooperatives within Team Marketing Alliance, Inc. to utilize a $5M deduction previously not available to the cooperatives or their members. The ruling, which will require specific process and documentation changes by TMA and the partnered cooperatives, will have a significant financial impact on their local communities and members.

“Economic value of this kind of cash savings being injected into the local economy is a real boost for the area,” Graber said.

DPAD is a tax deduction established to benefit the U.S. manufacturers and oil companies for domestic production. “Farmers are domestic producers as well. They are eligible for the tax deduction even though it is missed on many tax returns,” Graber said.

With the danger of oversimplifying what the deduction is and how it works, Graber explains it to his clients as an extra deduction that equals 9% of profit from domestic production.

Similar to patronage, this deduction will be shared by members based on the amount of grain business each member does with the cooperative. “Another benefit that separates your cooperative from other competition,” Blew said.

Once the Domestic Production Activities Deduction is calculated by each individual cooperative, the cooperative is allowed to pass through the deduction to its members. Once reported to the members on a 1099 Tax Form, the member will be allowed to utilize the deduction on their personal or corporate income tax return.

Graber has personally seen the deduction save up to $10,000 on an individual tax return. He said most farmers he sees could see a savings of $1,000 to $6,000.

According to Graber, there are no disadvantages of DPAD to the members of MKC. “It doesn’t decrease dividends, it doesn’t cost any extra in products,” he said. “It is simply a win-win situation.”

“I have found over the past 40 years as a public accountant, some of the worst tax advice comes from the coffee shops, church parking lots and family,” Graber said. “Before you dismiss this golden opportunity for a tax deduction on the coffee shop chatter, seek the advice of a competent professional. It is a great deal.”

Writer’s note: The views in this article are not intended to replace the advice of your tax professional. MKC encourages members to address questions to their tax professional or accountant.

Japanese Trade Team Tours MKC

By Nichole Gouldie, Communications Specialist

Industry representatives from Japan visited MKC at Groveland on July 26 through a trip hosted by the Sorghum Checkoff and the U.S. Grains Council (USGC). The week-long trip was an effort to emphasize the quality of sorghum produced in the U.S. and the value it can provide in Japan.

“We enjoyed the unique opportunity to host the Japan delegation to MKC,” said Nathan Eck, Groveland Location Manager for MKC. “Our visitors were very interested to see how the commodities they purchase from the U.S. work their way through the supply chain from farm gate to our cooperative to port and then on to their facilities in Japan.”

Matt Long, Grain Operations Manager at Groveland for MKC, covered Groveland’s intake of wheat, corn, sorghum and other commodities. Japan representatives also learned about the need for speed and space MKC customers are looking for and how the Groveland location fits those needs. The group also toured the warehouse and elevator facilities.

The Japanese group, consisting of five individuals involved in livestock feed production, arrived to the U.S and traveled to several different locations in Texas before making their way to Kansas. The group began in the Ft. Worth area where they met with sorghum farmers and learned how it was produced. Representatives also met with grain traders in the Texas Panhandle to learn about marketing sorghum and how sorghum is traded in the U.S. Their trip also included a feed lot tour learning about utilizing sorghum silage and flaked grain in beef production.

Their first stop in Kansas was in Wichita where they visited with animal nutritionists to learn more about the feeding value of sorghum. They also toured the Kansas Ethanol Plant in Lyons, KS, and learned about the feeding value of sorghum distillers grains. The group also had the opportunity to visit Baldwin Farms near McPherson.

Tetsuo “Tommy” Hammoto, Japan Director for the U.S. Grains Council, said this was the third

trip to Kansas for groups of Japan representatives.  “Hosting international trade teams continues to be an important effort by the USGC and the Sorghum Checkoff,” Tommy said. “The trips focus on internal marketing, allowing other countries to see the U.S. sorghum industry first-hand while making purchasing decisions.”

Japan is the third largest importer of U.S. sorghum and primarily utilizes the grain in its livestock industry. The United Sorghum Checkoff Program works to improve the profitability of the sorghum industry through research, promotion and information.

Building Momentum

By Dave Christiansen, President and CEO

It was a pleasure having more than 750 guests in attendance at our annual stockholders’ meeting last month.  Each year a theme is selected for the meeting and this time we felt “building momentum” best represented our past year.

Not only this past year, but over the course of the past several years, the board of directors and staff has focused on how to build momentum. Admittedly, there were days when we took two steps forward only to take three steps back. The challenge we faced - and will continue to - is the world and progressive producers continue to build their own momentum and at an ever-increasing rate.

Significantly contributing to building momentum at MKC is our vision and strategic objectives.  Once these elements became a part of everything we do at MKC, your cooperative began to achieve more.  We became more focused and began communicating the same message to all of our stakeholders, customers, vendors and employees.

Employee commitment - consistency in an ever-changing industry

By Melissa Woeppel, Communications Intern

As farming and technology continue to change, cooperatives must change as well in order to remain viable in the agriculture industry of today. Amid the change, however, loyalty and commitment from employees is an incomparable advantage for the co-op. MKC is fortunate to have employees who continue to help the co-op supply quality inputs and services and market our customers' products, resulting in the profitability of all.

Dianne Gilfillan, Grain Coordinator at Talmage, is just one example of such an employee. Growing up on a farm, Dianne has found memories of the local co-op where her dad would do his business with grain, feed and coal, and later on fuel and crop nutrient and protection products. For the past 32 years, Gilfillan has been working in the cooperative system. She started in May 1976 and left when her husband’s work moved the family to Oklahoma City, OK in 1978. After moving back to Abilene in 1981, she received a call asking her to come back to work. "I jumped at the chance!" admitted Gilfillan. She began work as a counter person on June 1, 1981. After the grain bookkeeper retired in 1985, she moved into grain accounting.

Building the future

By Melissa Woeppel, Communications Intern

Every day the agriculture industry continues to change and adapt new technologies and improvements. Because of this it is vital for young adults to be actively involved in agricultural processes. MKC is doing its part to help prepare the next generation of agriculturalists through the internship program.

This summer MKC hired ten college students to complete internships at various locations and within a number of departments. According to Brett Myers, Director of HR and Development for MKC, most interns were recruited from their university of college career fair. "Others were either referred to the company or had previously been summer employees," he said.