A study of the rural co-ops by The National Bank

The NZ rural co-operatives studied in this paper make up five of the top 20 and eight of the top 30 companies in NZ by turnover reports The National Bank. The objective of this research was to see if there was any appreciable difference in the financial performance and position of the rural co-operative companies. We found that many of the financial efficiency performance indicators of these co-operatives are similar within a functional category as one might expect. There are material differences in the levels of equity, capital structures and redemption risk. Payment to and prices paid to farmer shareholders are often blurred by non-market income or expenses. An ongoing due diligence on major purchasers or suppliers of the farm business should be part of the risk management plan of every farmer. The companies fall into four natural groups: dairy (Fonterra, Westland and Tatua); meat processors (Silver Fern Farms and Alliance); fertiliser manufacturers (Ballance and Ravensdown); and merchandise co-operatives supplying farm inputs and services (Combined Rural Traders and Farmlands). Measures Several of the financial performance indicators that might help meet the objective of this paper were not available. To be fair, they are not available for listed or privately owned companies either. Direct financial comparisons between companies are always a challange. The underlying trends in the data can be more important than the absolute numbers. This article focuses on eight high-level measures including absolute values and trends in: growth in gross income; gross margins; capital turnover; rebates; the amount retained for the future; the amount of shareholder capital; the redemption risk and the amount paid for produce or charged for input.