Wyoming Cooperative Model A Case Study 5 th Annual Farmer Cooperatives Conference November 15, 2002

The Wyoming Cooperative Model Evolves cooperative structure into new forms Offers flexibility in structure Cooperatives may be organized similar to LLC Opportunity for outside investment Cooperative owners are it’s members – Patron Members – Investment Members Patron members guaranteed 15% profit distribution Wyoming model effective 7/1/01

Cottage Grove Cooperative Core Divisions FeedGrainEnergyAgronomy Supporting Divisions Hardware Stores Convenience Stores Truck Stop Heating & Cooling Transportation Services

Union Cooperative Core Divisions FeedGrainEnergyAgronomy Supporting Divisions Convenience Stores Tire Sales Transportation Services

Reasons behind an Agronomy Joint Venture Enhance profitability – greater ROI Excel in customer service over a large trade territory Efficient utilization of people and assets Produce necessary critical mass Increase purchasing power Maximum advantage of dealer programs

Events Leading to the Formation of Landmark Our supplier, Agrilliance, owned four facilities near our trade territory Union Cooperative handled the accounting for Agrilliance for a fee Cottage Grove and Union had earlier developed a joint venture in Precision Agriculture Agrilliance and both boards met to plan the future Business service manager employed to lead feasibility study of combining nine agronomy locations

Landmark Continued Attorney hired to create joint venture agreement Wyoming model selected for business structure Name selection committee appointed Landmark Services Cooperative organized in October 2001

Landmark Startup Cost 50% investment by Union and Cottage Grove Landmark is approved for $12 million dollar seasonal line of credit Computer related expenses exceeded $100,000 Attorney fees - $50,000 Consulting fees $5,000 Selection of name and logos - $2500 Identification of vehicles and facilities Search of General Manager

Operating Landmark New equipment is purchased by Landmark Present facilities and equipment are leased to Landmark Employees are Leased to Landmark Cottage Grove administers human resource programs Landmark profit stream 60%CG and 40% Union Union can increase investment to 50% profit dist CG and Union each distribute patronage to growers

Landmark Governance Structure Union Director Union CEO CG Controller CG CEO Union Controller CG Director Board of Directors Landmark GM Hub Managers Employees EdgertonJuda Cottage Grove Evansville Employees

Computer Systems User Group Selected SSI Software Initial learning curve Challenge to setup customers, products, tonnage taxes, etc. Evaluated and upgraded hardware at all locations Connected all locations with wide area network

Accounting Systems Blended Cultures between the agronomy locations Adoption of 5% cash discount program Changed statement due date to the 20 th of each month Development of fall deferred billing program Employees initially resistant to changes Development of newsletter to communicate policies

Development of Future joint Ventures Wyoming model is favorable for many applications Each player should have reasonable profit expectations Communications to customers and employees should be given high priority Bringing philosophies & business practices together is a major challenge

Continued Startup costs generally will be higher than budgeted Eliminating employee positions may not be as high as anticipated Plan for tighter margins Forming Landmark Agronomy Services firmly positions our cooperative for future success