OF OPERATIONS

The following discussion should be read in conjunction with the Cooperative's financial statements, the notes thereto and the other financial data included elsewhere in this Annual Report on Form 10-K. The following discussion contains forward-looking statements. Such statements are based on assumptions by the Cooperative's management as of the date of this report and are subject to risks and uncertainties, as discussed in the section entitled "Forward Looking Statements." Readers should not place undue reliance on such forward-looking statements.


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Impact of COVID-19

The Cooperative continues to monitor the global outbreak of the novel coronavirus (COVID-19) and its impact on the Cooperative's results of operations and financial condition. Corn millers are reporting that demand for high fructose corn syrup in food service and entertainment sectors improved in 2021 compared to 2020. Starch demand continues to be strong and ethanol demand improved as COVID-19 restrictions were lifted regionally. The ProGold facility currently continues to operate in the ordinary course and the Cooperative's overall business has not been impacted. Although demand for products from the corn milling sector have stabilized or improved, the Cooperative is unable to predict the impact of COVID-19 on the future operations of the ProGold facility.

Results of Operations

The Cooperative derives revenue from two sources: operations related to the marketing of members' corn and income derived from the Cooperative's membership interest in ProGold. The corn marketing operations generate revenue for the Cooperative equal to the value of the corn that is delivered to Cargill for processing at the facility. The Cooperative recognizes expense equal to this same amount which results in the corn marketing operations being revenue neutral to the Cooperative, except for revenue from the Method B agency fee and expenses related to the Method A incentive payments, required licensing and bonding expenses, and the service fee paid to Cargill.

The Cooperative sold approximately 15.5 million bushels of corn on behalf of its members in each of fiscal 2020 and 2021. The Cooperative recognized corn revenue of $89,565,000 in fiscal 2021 as compared to $50,563,000 in fiscal 2020, an increase of 77.1% due primarily to an increase in the price of corn sold. The Cooperative recognized corn expense of $89,605,000 in fiscal 2021 and $50,606,000 in fiscal 2020, an increase of 77.1% due primarily to an increase in the price of corn purchased.

In fiscal 2021, the Cooperative's members, on the Cooperative's behalf, delivered to Cargill 4,141,000 bushels of corn using Method A and 11,349,000 bushels of corn using Method B. In fiscal 2020, the Cooperative's members, on the Cooperative's behalf, delivered to Cargill 4,179,000 bushels of corn using Method A and 11,311,000 bushels of corn using Method B. In each of fiscal 2021 and 2020, the Cooperative recognized incentive fee expense of $206,000 and agency fee income of $229,000 for this period as well as $60,000 of expense for Cargill's services as our agent in connection with the Cooperative's corn marketing operation.

The Cooperative derived $8,418,000 of income from ProGold in fiscal year 2021, an increase of $2,482,000 or 41.8% as compared to $5,936,000 of income in fiscal 2020. The increase in income received from ProGold was due primarily to an increase in supplemental lease revenue in 2021 compared to 2020.

General and Administrative Expenses

The Cooperative's general and administrative expenses include salaries and benefits, professional fees and fees paid to our Board of Directors. The general and administrative expenses for fiscal 2021 were $485,000, a decrease of $15,000 or 3% as compared to fiscal 2020. The decrease was due primarily to decreased meeting and board expenses and general administrative costs.

Other Income

Interest income for the fiscal year ended December 31, 2021, was $141,000 compared to $181,000 for the fiscal year ended December 31, 2020. The decrease was due primarily to decreased investment income. Realized gain/loss on investments for the fiscal year ended December 31, 2021, was ($4,000) as compared to $1,000 for the same respective period in 2020.

Liquidity and Capital Resources

The Cooperative's working capital was $5,935,000 at December 31, 2021 and $7,039,000 at December 31, 2020. The decreased working capital in 2021 as compared to 2020 was primarily a result of reduced ProGold distributions received during 2021 as compared to 2020.

The Cooperative received cash distributions from ProGold totaling $4,589,000 in fiscal 2021 and $7,019,000 in fiscal 2020. The decrease was primarily related to saving for anticipated major capital expense by ProGold in 2021 compared to 2020. The Cooperative paid cash distributions to its members totaling $6,041,000 in fiscal 2021 and $6,196,000 in fiscal 2020.


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In fiscal 2018, the Cooperative invested a portion of its cash reserves in bonds. To ensure that the Cooperative would have access to cash if needed before the maturity of the bonds, the Cooperative also established a $2,000,000 line of credit with a variable interest rate based on the prime rate that terminates on October 16, 2022. The line of credit is secured by the Investment Management Agency account for Golden Growers maintained by Bell Bank. There was no outstanding balance as of December 31, 2021.

The Cooperative had no long-term debt as of December 31, 2021 and December 31, 2020.

The Cooperative used operating cash flows of $384,000 for the fiscal year ended December 31, 2021 and $350,000 for the fiscal year ended December 31, 2020. The increased use of operating cash flows is primarily due to reduced investment income.

Management believes that non-cash working capital levels are appropriate in the current business environment and does not expect a significant increase or reduction of non-cash working capital in the next 12 months.

Critical Accounting Estimates

Management's estimate of the carrying value of the investment in ProGold is based on historical cost plus its pro-rata share of ProGold's net income and additional paid-in capital less distributions received from ProGold.

The Cooperative does not pay out Method A incentive payments or collect Method B agency fees until the end of its fiscal year. These amounts are accrued quarterly and then confirmed at the end of the fiscal year. The total annual Method B agency fee was determinable once the members completed their delivery method determination prior to January 1, 2021. The quarterly Method B bushel delivery and agency fee revenue was calculated by allocating the portion of the total annual agency fee for a particular quarter or cumulating it for the particular period. The annual Method B bushel delivery and agency fee revenue is confirmed at the conclusion of the fiscal year. The Cooperative tracks Method A corn deliveries throughout the year so it can report the bushels of corn delivered by its members as well as the corresponding Method A incentive fees earned. The final amounts owed by or due to Cargill and/or the Cooperative's members who elect to deliver using Method A is not calculated until after December 31 in order to account for any failures to deliver or over-deliveries of corn.

The Cooperative has determined corn revenue and corn expense for Method B deliveries based on the average quarterly cost per bushel paid by Cargill to the Cooperative's members for Method A quarterly deliveries.

Recent Accounting Pronouncements

There are no recent accounting pronouncements issued or adopted that have a significant impact to the cooperative.

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