1 11 TH ANNUAL FARMER COOPERATIVES CONFERENCE UNIVERSITY OF WISCONSIN CENTER FOR COOPERATIVES Cooperative Strategy, Structure and Finance November 18-19, 2008 Michael L. Weaver, Chair Agribusiness and Energy Group Lindquist & Vennum P.L.L.P. Minneapolis, Minnesota

2 SETTING THE STAGE Unprecedented Volatility in Commodity Prices (input costs!) Dramatic Increases in Working Capital Requirements Financial Markets Crisis Risk Assessment of Biofuels Industries Bankruptcy Filings 11 th Annual Farmer Cooperatives Conference Perspectives on Cooperative Finance Michael L. Weaver

3 COOPERATIVE MODEL Non-profit Marketing Association: grade, process, ship, market Net proceeds less expenses Principal/agent relationship vs. buyer/seller relationship Marketing agreement/Bylaws are key documents Losses constitute “overpayment” on delivered product 11 th Annual Farmer Cooperatives Conference Perspectives on Cooperative Finance Michael L. Weaver

4 COOPERATIVE MODEL – cont. Supply Cooperative Association Losses constitute “instant” patronage dividends Asset Evaluation Pursue Growth Opportunities Cash is King 11th Annual Farmer Cooperatives Conference Perspectives on Cooperative Finance Michael L. Weaver

5 COOPERATIVES – BACK TO THE BASICS Equity Primer Wall Street vs. Farm Operations $300 per acre/$250 per head Tools for Cooperative Boards Pricing (“at-cost” operations) Loss Financing Efficiency Balanced Dividend/Revolvement Policies Nonqualified Unit Retains 11 th Annual Farmer Cooperatives Conference Perspectives on Cooperative Finance Michael L. Weaver

6 COOPERATIVES: BACK TO THE BASICS Assets owned collectively to Supply or Market Products of Farmers Ownership Based on Patronage (“Need”) Democratic Principles Deeper Equity Pool Stronger Balance Sheet Cooperatives: Back in Vogue (or never left!) 11 th Annual Farmer Cooperatives Conference Perspectives on Cooperative Finance Michael L. Weaver

7 COOPERATIVES: THOUGHTS TO STRENGTHEN What Can We Do? Strengthen Agency Principles in Subch. T. (Bot case) Extend Securities’ Exemptions Direct USDA Loans/Investment into Qualifying Cooperatives Expand Sec. 1042(g) concept to Asset Sales to Qualifying Cooperatives (e.g. “1031” concept) Michael L. Weaver 11 th Annual Farmer Cooperatives Conference Perspectives on Cooperative Finance

attorneys, offices in Minneapolis and Denver Corporate Finance Group, representing both private and public companies in equity and debt financing transactions Mergers & Acquisitions Group, assisting clients buy and sell companies in industry groups Agribusiness and Energy Group, representing cooperatives and businesses in the agricultural, food processing, manufacturing, and energy industries Formation, financing, and construction or acquisition of processing and manufacturing facilities is core competency Our clients have been instrumental in biofuels industry, as well as wind energy, livestock, and cooperative services industries We assist companies with governance, strategic planning, and financing, and are recognized nationally for our tax planning work with cooperatives 11 th Annual Farmer Cooperatives Conference Perspectives on Cooperative Finance Michael L. Weaver

9 Michael L. Weaver Lindquist & Vennum PLLP 4200 IDS Center 80 South Eighth Street Minneapolis, MN (612)