October 25, 2018

April 30, 2018 Marked the end of a very challenging fiscal year.

April 30, 2018 marked the end of a very challenging fiscal year. The biggest and most stressful part for all of us was when Hurricane Harvey’s wind and rain hammered our crops and the flood waters damaged the homes of many of our friends and customers. While most of our grain and rice crops were already harvested, the huge cotton crop that our producers had nourished and pampered all year took the brunt of the storm. Our cotton producers had about 60 percent of the crop harvested when the storm hit, which amounted to almost 6,000 modules either on our module yards or in the field. We were not prepared for the 20 plus inches of rain and horrific winds. After the storm we saw many modules that were flooded and some even floated away. The same was true for many residences in low lying areas.

We were all devastated by the damage. Cotton crops not harvested were reduced to a total loss in many instances. The one glimmer of hope that everyone held on to was the hurricane insurance coverage United Ag had procured for its producers.

Immediately after the water receded, our management team and gin crews worked around the clock to do their very best to gin cotton in the most efficient manner. Equipment was purchased to better identify wet spots in modules. By bypassing wet modules, we were able to gin more efficiently. Every module was picked up and moisture was monitored, in some cases many times, to eliminate spending hours ginning a wet module when we actually had dry cotton that would gin more efficiently. We continued to assure producers that our insurance would make up for any losses. Our gin management and crews worked 12 or more hours per shift 24 hours a day from August through January. Our employees went to work every day and were not able to take any time off for six months. We did shut the gin down for Thanksgiving and Christmas, but otherwise our employees were doing their best to save every pound of cotton and seed, and gin as efficiently as possible for our cotton producers.

As soon as data was available, our office personnel worked feverishly to start the process of proving losses to our insurance carriers. This was a long tedious process, but thanks to our PCCA bookkeeping system and their personnel we were able to download all of this data to identify losses for our producers who had picked their cotton prior to Harvey. We applaud our members for being very patient and trusting that United Ag, their cooperative, would take care of them. Our policy called for a $50,000 deductible, which your board of directors decided that your cooperative would pay, so producers were paid out every cent lost as a result of Harvey. Finally, we were able to agree on the settlement from our carriers and immediately started the process of dispersing the funds to our members. This all sounds easy now, but I imagine there were probably about a million calls to our cotton personnel about these losses and everyone continued to assure our members that losses would be covered. Your board of directors were kept updated about our progress and were very supportive, as most all our producers were, and we thank you all very much for the confidence.

Grain harvest was lighter than expected, but everything went very smoothly. The addition of the flat storage pit helped to disperse trucks so long lines were never a problem. We finally got an entire fiscal year run at our deer corn bagging plant and it has truly paid off. We envisioned this venture to add value to the corn crops we produce locally, and it has lived up to its expectation. For the full year, we moved more than 1.1 million bags of bagged corn.

To further add value and offer better service to our cattle producers, we built a feed mill to make some of the same feeds we were purchasing from Purina. We are able to do this using corn that was produced locally and handled by United Ag and Purina concentrates to make the limiter feed that a cattle producer would need to feed, wean, or background his cattle. Not only does this use our own corn, the efficiency lowers the cost of these feeds approximately $25 to $100 per ton depending on the corn and concentrate mix. This means a lower cost of gain for our producers, putting pounds on at a lower cost. The mill is built at our Danevang facility and we have added delivery units to be able to deliver truckloads of feed straight to our producers’ cattle pens or pastures. After a few delays, the mill came on line at Thanksgiving. Between the deer corn bagging plant and the feed mill operating only five months, 27 percent of the corn we took in this harvest was put through those two facilities. All this adds value for our corn producers’ crops and helps cattle producers receive better delivery service and obtain lower cost of gains on their cattle. A win-win for everyone.

Our farm supply store continues to break sales records, even with the oil industry suffering throughout most of the year. We continually strive to have the best service for our patrons and members.

Moving on to 2018, after much analysis on the growth of our cotton acres we realized that expansions your board had been contemplating in our cotton ginning operation needed to happen this year. After thorough analysis and several meetings with our gin management, we developed a plan of expansion and are in the process of increasing the capacity of our Danevang gin for the 2018 crop. Those of you who have stopped by have witnessed the transformation of our Danevang gin from the old facility to a bigger building with an additional gin stand and lint cleaners, larger conveyor distribution, new gin feeding, new steamroller, new battery condenser, new seed auger and seal lift, new module feeder with an automatic round bale unwrapper, and most importantly, a new more efficient press. These additions should take us to around 70 bales or better per hour. Our Hillje gin has been repaired and should average 45 to 50 bales per hour. Our goal was to gin a larger crop as fast as possible knowing that cotton in a bale is much safer than cotton on the stalk or in a module.

Also, we held a cotton gin seminar for moduling, module placement, tarping methods approved by our insurance, and most importantly, eliminating the plastic contamination that has increased the last few years. We had speakers from the National Cotton Council, USDA Classing Office, John Deere and Case IH. These speakers addressed picker settings and ways to help eliminate plastic in cotton. Not only is round bale plastic a problem, but any plastic in fields needs to be removed before it is picked and mixed with cotton. This year, every classing office in the U.S. had samples with plastic in them. Foreign mills are blackballing some gins because plastic in cotton ruins the fabric. The word is out, bales that show plastic in samples this year could be rejected by merchants because mills will not accept them. We urge everyone to eliminate all plastics and do not set round modules down where cotton stalks will puncture them. It is found that any punctures in the plastic raise the possibility of plastic in the bale by 60 percent. Please visit with your picker mechanics for adjustments that need to be checked to eliminate the problem now in order to keep U.S. cotton in demand in foreign mills. This is a very serious problem, one we cannot take lightly, because if it isn’t handled, it will cost us dearly.

United Ag has the ability to do a class on every variety that is run through our gin, but to accomplish this we ask producers to please come in and let us know what variety they plant on each farm. This report can be crucial in letting us know how a variety ranked over our whole area. Please help us in getting this information by letting our office staff know now what variety is planted on each of your farms.

Again, I hope this gives you a better understanding of what is happening at your cooperative. Please feel free to call or come in to talk about any issues you may have. Here is hoping to a great 2018 harvest, grain and cattle prices to rise, and cotton prices to stay up. Thank you for your confidence in your cooperative.