Mid-County Newsletter MCnewsletter-fall08

Mid-County Messenger Mid-County Coop Contact Information General Manager Bill Reimers (952) 466-3721 billr@midcountycoop.com Agronomy Manager Dave Eckhoff (952) 466-3730 davee@midcountycoop.com Agronomist Joe Forner (952) 466-3730 joef@midcountycoop.com Agronomy Production Specialist Doug Kraska (952) 466-3730 dougk@midcountycoop.com Certified Energy Specialist Rafael Lozada (952) 466-3725 rafl@midcountycoop.com Service Manager John Winter (952) 466-3710 johnw@midcountycoop.com Petroleum Operations Quay Zander (952) 466-3727 quayz@midcountycoop.com Cenex Convenience Store Cologne Manager Del Gallup (952) 466-5657 delg@midcountycoop.com Controller Dick Pauly (952) 466-3701 dickp@midcountycoop.com 700 W. Lake St. PO Box 177 Cologne, MN 55322 (952) 466-3700 Office (952) 466-3715 Fax www.midcountycoop.com Vol. 14 www.midcountycoop.com Fall 2008 Fuels & Gasoline - How do you price it? In our last newsletter I dis- cussed where fuels and gasoline for our area came from. We often get questions regard- ing how we price gas and fuels for our customers. We would like to say we buy it at a given price, add so many cents per gallon and post a price. But that is not the case. At a convenience store, you are either competitive with other stations in the local market or your sales will drop off dramatically within one day’s time. Some stations will change prices up to 3 times per day; and in some cases up to 25 cents at a time. In my opinion that only angers a customer, because it seems they either drop the price right after you drive away from the pump or they raise it as you are driving in. We try a little more tempered pricing program at Mid-County. Throughout the day we compare our prices with Chaska, Waconia, Chanhassen, Norwood etc., to make sure we offer a competitive price. We also try to avoid the 25 cent price swings in one day. Once again, that will only upset a customer when you do that. There are days that we sell gas at cost to be competitive with other stations, and eventually the major players in the market raise the price whereby we can recover from our losses. Bulk fuels that we deliver with our trucks on the other hand, is little trickier to price when the markets are so volatile. At a con- venience store, your inventory only lasts a few days, and it is replaced with the newly priced products. Bill Reimers General Manager (952) 466-3721 billr@midcountycoop.com At our bulk storage plants, we have a little over 200,000 gallons capacity whereby it takes a few weeks to turn the inventory. So it takes some careful decision mak- ing to fill up the tanks or to run them low. As harvest approaches, sup- plies get tight, and a person would think that you should fill up. Since October 1st of this year, prices have dropped more than 50 cents per gallon. If we would have filled our tanks, you can see how it would have impacted your coop. So how do we overcome the volatility without losing our shirt? So far this year it has paid off to keep moder- ate inventory levels, not too high, but not empty. Anoth- er is that we have contract- ed very little fuel without having it sold to the cus- tomer. In years past, we would buy contracts for our customers prior to the spring and fall and then go sell them. Currently there is just too much risk to do that. Each contract is 42,000 gallons, and our suppliers require us to take delivery of the contracts within one month. Currently the prices are drop- ping at the pump not only due to the decline of all energy prices, but added on top of that is the seasonal drop in price that we usually experience this time of year (see chart). As you can see, in an average year prices start to increase in February. But as we all know, this is not your average year. You can be assured we will be the best buyers we can for our customers. Though energy makes up a majority of your coop, the other departments are important to our success. We are just placing the finishing touches on our year that ended August 31st and it looks to be some very promising results financially. As always, I appreciate your comments and suggestions to make your coop better. (952) 466-3700 • 888-466-3700 • 700 West Lake Street, P.O. Box 177, Cologne H O N E S T Y • I N T E G R I T Y • VA L U E