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June 2010 e-Link

Message From the Manager

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Message From the Manager

June 15, 2010

Todd Ludwig, CEO

Thanks to some timely rains and some bright sunshine, area crops are looking good. The corn crops are ahead of normal, while our soybeans are lagging and could use a little heat. We’re also seeing more weeds in our soybeans than normal, most likely due to early planting and their slow emergence. As usual, it will be interesting to see as the season progresses if the crops will continue on this steady pace.

CHS passes 199 tax credit on to local cooperatives
The Domestic Production Activities Deduction (Section 199 of the IRS code) continues to evolve and change. We anticipate utilizing the deduction again this year, and you can expect your 1099 for 2010 to reflect this. Hopefully, by letting you know in advance, you will have time to prepare. As always, we encourage you to talk with your accountant.

CHS was also able to utilize the 199 deduction this year. However, they have passed a portion of the credit back to WFS. We are currently in the process of determining how to best utilize the credit and would like to give some direct benefit to our customers, as opposed to previous years when the co-op benefited directly and the customer indirectly.

A decision on how to utilize the CHS credit will need to be made by our fiscal year-end. At that time, we will send you a formal communication outlining our decision. Any way you look at it, this deduction has a huge benefit to both you and your cooperative.

TFE Enterprises building in dire need of improvements
As a little known entity of WFS, we don’t often talk about TFE Enterprises. Most of you probably don’t even know what it is. TFE Enterprises is located in Truman and manufactures a feed ingredient called Cheese Supreme. Cheese Supreme is a dried cheese product made from discarded cheese that provides an excellent source of milk nutrients, protein, and fat for swine diets. WFS utilizes this product in our nursery feed, but the majority of the product is shipped overseas to countries like China and Korea. The current facility that TFE occupies is old and is in dire need of updating. Although it is not a core business to WFS, it certainly is complementary to our feed business and provides an additional revenue stream. Because of its value we felt it necessary to explore our options in making the much needed repairs.

Progress continues on upgrading projects
As I stated last month, the Welcome dryer project has not been progressing as fast as we would have liked. We ran into some challenges along the way with our natural gas source and would have had to do some extensive upgrading to the pipeline system that currently exists in order to get enough gas to supply the dryer. However, as we continued to research our options, another source of natural gas came into the picture and we are now moving forward. The dryer is on its way, and barring no more setbacks, we anticipate the project will be complete before harvest.

The Wells dryer project and equipment upgrade has gone very smooth, with a majority of it already completed. The dryer is on its way and we should have no problem getting the rest of the project finished before harvest.

The bean dump upgrade at the west end of our St. James facility has been completed. With these improvements, the dumping capacity of soybeans should double. We are also going to be making some improvement to the scale on the west end. With this upgrade, we will be able to probe grain directly from the scale. This project will begin in July and may go into August. Fortunately, we only foresee the scale being down for a 3 - 4 day period.

Update on new grain facility
We continue to work on plans for a new grain facility. We have narrowed down the location, but have run into some issues with the railroad. We are very frustrated about the length of time it has taken to get this off the ground; however, we are still very committed to improving our grain handling capabilities and will do what we can to continue this process. If, by chance, this project never gets off the ground, we will move to plan B and focus on upgrading our current facilities. We are just as anxious as you to see some improvements being made.

Cooperative Council: Sounding board for co-op
The WFS Cooperative Council was formed last November to serve as a sounding board for the Board of Directors and Management. The council first met last December and discussed topics such as: the cooperative’s financial position, the need for efficiency, operational issues, a new grain facility, the Section 199 tax deduction, and the proposed by-law amendments. The council is now scheduled to meet for a second time on Tuesday, June 22, at Hamilton Hall in Blue Earth from noon - 3 p.m. This meeting’s agenda includes: an update on new grain facility; upgrades at St. James, Welcome, and Wells; review of operations for Clarks Grove LLC; the 199 tax deduction; and a review of financials—budget vs. actual. We welcome any members who are interested in getting involved to call and join us for our next meeting. I felt everyone who attended the first meeting appreciated the opportunity and we would like to have more of you get involved.

As always, thank you for your continued support during this growing season!