It’s three days to Halloween, a week until the elections, and declarations of national and global recessions seem to be moments away. But if you live in Minnesota, you need not hide behind the curtains or crawl back under the covers. We still have some strengths standing strong as a line of defense.
That has become clear from messages sent to members by Minnesota credit union executives that point out these local, member-owned financial institutions are not caught up in the mess on Wall Street. Similar words of comfort have come from Minnesota-based mutual insurance and investment groups as well, although they aren’t bragging about returns on investment. On Friday this past week, Minnesota 2020 undergraduate research fellow Kabir Sethi reported on the strong footing of our Minnesota Independent Community Banks as well.
Then on Saturday, news reports revealed that Stearns Bank in St. Cloud is buying assets and taking over banking operations from a failed regional bank in Georgia, following a similar but much larger banking acquisition by Wells Fargo that has its operational base in Minneapolis. A new round of merger and acquisition activity isn’t what most of us may have envisioned when the federal government stepped in to help banking institutions, but it certainly is one way to get banking back to normalcy.
What that means is that we’re on pretty stable footing even as the pains of the national and world economy roll back on us. We won’t ride out a recession unscathed. But united, we can stand and fight.
Let’s take stock of some of our strengths by first acknowledging weaknesses.
From Halloween last year to the close of trading on Friday, the Dow Jones Industrial Average had lost 42 percent of its value. A big sell off in Asia before Wall Street trading resumed Monday dropped stock values around the world by 51 percent since peaks of the past year. This report was filed early Monday before trading in the United States.
The mortgage market was the card that toppled the U.S. financial house of cards and is pushing the entire world into recession, and that is impacting us as well. But if you are into creative accounting like the federal government, typical Minnesota taxpayers can take some comfort in knowing they’ve saved from $100 to $1,000 a year in federal taxes despite wars on two fronts around the world. Better ignore that it cost you in about half the value of your investment portfolio and retirement funds and reduced the value in your home from 20 percent to nearly 40 percent, depending where you live.
Agriculture, and from it the rural Minnesota economy, still looks fairly strong but is coming under strain from falling commodity prices and rising production and land costs. Rod Leonard, the former aide and confidante of former Minnesota Governor and U.S. Agriculture Secretary Orville Freeman, points out that farm commodity prices have fallen even farther than stocks on Wall Street.
Closing prices on Friday for nearby futures contracts at the Chicago Board of Trade and Minneapolis Grain Exchange bear that out. Corn and soybean prices had both fallen 53 percent from highs earlier in the year, and northern grown hard red spring wheat prices were down 75 percent from record highs earlier this year.
Minnesota 2020 had warned that an agricultural land bubble would likely burst once commodity prices returned to more historical trend lines. Commodity prices are falling, as we suspected they would; but there are no indications yet that land prices are following.
So where are there glimmers of hope in this? It’s the structure of businesses in Minnesota, notes cooperative development specialist Kevin Edberg. Minnesota leads the nation in member-owned enterprises that are either cooperatives or mutual associations that operate like cooperatives.
Researchers at the University of Wisconsin Center for Cooperatives are working on an assessment of cooperative business activity and members that, hopefully, will quantify the number and economic value of the mostly small co-ops in Minnesota. In the meantime, we only have data on the large co-op firms based here that are assembled annually by the National Cooperative Bank (NCB) in Washington, D.C.
NCP has issued its Co-op 100 list based on annual revenue and assets. Minnesota has eight of the top 100 firms, including the largest, farmer-owned CHS Cooperatives Inc. of Inver Grove Heights, with $17.2 billion in 2007 revenue – before commodity prices and farm inputs started peaking in the current fiscal year.
Other national co-op leaders include Land O’Lakes, of Arden Hills, at No. 3; and AgriBank FCB, of St. Paul, ranked at No. 9. The latter, as a financial institution, is better measured by assets rather than revenue and had $59.2 billion in 2007 assets that are mostly farm mortgage and operating loans. That makes it the largest cooperative financial institution in the nation.
The top 100 list also includes HealthPartners Inc., the consumer-owned healthcare company in Bloomington, at No. 13; Associated Milk Producers Inc. in New Ulm, at No. 27; American Crystal Sugar Co., Moorhead, at No. 34; Great River Energy, Maple Grover, at No. 60; and First District Association, Litchfield, at No. 96.
Nationally, the NCP Co-op 100 list 40 enterprises that are agricultural in business and memberships, 15 involve groceries, 14 are financial institutions, 19 are energy and media related, including the Associated Press; five are hardware and lumber co-ops, and seven are categorized as “other,” including HealthPartners. Nemcon, the roofing and siding purchasing cooperative in Woodbury, would have ranked 95th on the list if its $460 million in negotiated sales were counted as revenue.
Paul Hazen, president of the National Cooperative Business Association, is encouraging member organizations to take time during the annual October Cooperative Month observances to remind everyone of co-op strengths.
“Right now, our country’s economic crisis leaves much to be gloomy about. The economy is suffering and with it so are many American’s retirement funds and mortgages,” he told cooperators. While investor-owned firms are facing criticisms and problems from “excesses and abuses,” he added, “most co-ops haven’t born the full brunt of the volatile credit market.”
These are economic strengths that touch the lives and households of a majority of Minnesotans. Our co-op toolkit is well-stocked and, most importantly, its track record strongly suggests growth potential. Amidst the financial crises, co-ops are a beacon of hope and stability.
Post election and heading into the new year, Minnesota 2020 will explore ways to build on these strengths to encourage entrepreneurship, cope with the mortgage crisis, and refresh the cooperative spirit to counter hunger and poverty in our communities and neighborhoods.