Profitability Drivers of Farmer Cooperatives – A Dupont Model Analysis
Christopher Hines, Wright, defended his thesis, “Profitability Drivers of Farmer Cooperatives – A Dupont Model Analysis,” on April 10, 2014. Hines is the Elevator Manager at Offerle Coop Grain & Supply Co. in Offerle. He is a spring graduate from Kansas State University with a Master of Agribusiness (MAB) degree.
For more than 100 years, farmer cooperatives have served area farmers as a place to store and market their grain and to purchase farm inputs. Co-ops must make sound economic decisions to provide stable growth for their members.
“Identifying profitability drivers provides cooperative board of directors tools to compare themselves with other cooperatives of similar size in Kansas or other Midwestern states. They can also compare themselves to 2003, which was a difficult year when many cooperatives were under tremendous financial stress, and the profitable year of 2009 when cooperatives were having an excellent financial year,” Hines said.
Hines used the DuPont model to examine earnings, asset turnover ratio, and leverage of cooperatives that allows for calculation of a cooperative’s return on assets and return on equity to identify the key profitability drivers of farmer cooperatives of different sizes over time. Financial data was gathered on 246 Kansas and Midwestern cooperatives from 1996 to 2010. The model revealed profitability drivers in cooperatives include fixed and variable costs, sales volume, the amount of grain, fertilizer, feed and chemicals sold, and price.
Dr. Brian Briggemann, Associate Professor of Agricultural Economics and Hines’ thesis advisor, said, “Chris examined the profitability drivers of farmer co-ops through time. His work should assist co-op managers and directors in assessing their financial position.”
The full thesis publication can be found online on Kansas State University’s Research Exchange at http://hdl.handle.net/2097/17561.