Progressive -

Professional - Proactive

The BLUF (Bottom Line Up Front)

——————–——–— Headline News —————––————

Newsletter Date: Dec 30, 2017 Volume 6, Issue 11

Pro Report Online

Winter Seasonal

Hours

7:30 - 4:00 (M-F)

Car Care Centers

(M-F) 7:30 a.m. to 5:30 p.m.

Saturday

7:30 a.m. to 12:00 p.m.

Inside this issue:

Pro/First Unification 2

Bull/Bear Bubble Charts 2

Grain Sales Targets 3

Technical Thoughts 3

Feed Promotion 4

Member Info Meeting 4

Connect with Us! 4

“Go with the Pro!”

Outlook Meeting 5

Pro Coop’s MISSION: PRO-viding a service-

oriented, unified, coopera-

tive to enhance owners

profitability.

___________________________________________________ _____________________________________________

PRO’s motto:

P - Professional

R - Reliable

O - Outstanding

Employee Spotlight

6

PROactive — PROgressive

PROfessional

DECISION POWER for

FARMERS

New Crop Technicals 5

I feel it’s important to use this platform today to discuss the upcom-

ing member vote on the proposed unification of Pro Cooperative with First

Cooperative. I believe there are some misconceptions that are moving

around the country and I wanted to be sure that I was able to give a perspec-

tive to each of you that will allow you to make an informed, educated decision based on factual

information and logic.

I’ve been Pro Coop’s Grain Manager for nearly 7 years. But I’ve been involved in various ways with this coop

and the former Farmers Coop – Ruthven, Terril, Graettinger and Wallingford since 1997 (over 20 years). I’ve been

a feed salesman, a grain market/risk consultant for cooperative members, a buyer of the coops feed products as a

customer, and an end user buyer of the coops grain before becoming your Grain Manager. I now hold the role of

Sales and Marketing Leader and focus my efforts on all customer facing areas of Agronomy, Feed, Fuel and Grain

Sales as well as brand/image and marketing campaigns and platforms for the entire Coop. For those of you who

know me well, know that I work hard for our members and fellow employees and I have a true passion for my work

and helping the people who are willing to sit down with me. For these reasons, I feel qualified and compelled to

share with each of you my perspective on why we should consider this unification opportunity. This commentary is

unsolicited and solely my opinion. First – a little history. After 6 months of working at Pro as the Grain Manager nearly 7 years ago, I made a

comment in one of the Board Meetings that “if we were to ever consider a merger with someone, First Coop would

be at the top of my list”. Why did I make this statement to Board Members? We weren’t looking to merge with

anyone at the time. The reason I even stated this was the knowledge I had of their company, their culture, their

systems and how they present themselves in their marketplace and the similarities they have to Pro’s culture, Pro’s

vision, and Pro’s focus. I never realized until we started going through this process how true and validating this

statement would be. As a part of the management team at Pro, your Board members task me with bringing them appropriate, fact-

based market intelligence on any project big or small. They expect me to conduct the research, provide detail, show

the pros/cons and look at the risk as well as the costs and projected returns with any project. They have consist-

ently challenged the entire team to build a strong cooperative system, strong enough so that our competitive neigh-

bors respect us enough that we are “invited to the table” when future growth opportunities develop. We have

done that at Pro. We have continually built a strong balance sheet. We have built up our facilities. We have up-

graded our rolling stock. We have improved our organizational structure. We have grown our business. And we

will continue to do this because it makes business sense no matter our name or our size. This is our strategic plan.

Because of what we have done, First Coop respected us enough to “invite us to the table” and have a discussion

about future opportunities. Yes, they sought us out because they respect us as a professional, successful organiza-

tion. This is exactly what your Board has asked us to do and we did it. As we began this unification process, your Board also asked the management team to spend over 2 months

combing through hundreds of documents through the due diligence process. They asked us to find any issues of risk

and validate IF a unification may jeopardize what our cooperative has built up. We also were tasked with finding

what synergies would occur that could create additional competitive advantages and allow us to continue our overall

growth of YOUR COOPERATIVE – no matter the name. We conducted site visits to EVERY First Coop location

and spent an average of 1-2 hours at each facility interacting with their employees, touring all facets of their opera-

tion and asking hundreds of questions. And they came to our facilities to do the same. These were all tasks that the

Board agreed needed to be completed in order to supply them with effective, fact-based, unbiased, logical infor-

mation so they could make the best business decision for the future success of this organization and its members.

There were 9 due diligence teams each compiling different information in the areas of Grain, Operations, Agronomy,

Feed, Fuel, Human Resources, Legal, Finance, and Communications. Each team had members from Pro and mem-

bers from First evaluating the risks and identifying the opportunities. Each team presented their findings to a joint

meeting of Pro and First Coop’s Board members. And it’s important to note that EVERY due diligence

team recommended pursuing this unification further based on their professional opinion and the in-

formation that they were tasked with collecting.

(see continued discussion of the Pro/First unification on Page 2 of this newsletter)

2017 Final Comments

6

Petroleum Power 7

So based on the information that your

management team was tasked with analyzing

during the due diligence phase, one may think

that logic would prevail. But there is one

thing we may not have accounted for

……...emotion. Despite my best effort and

others in explaining the logic, there are some

members that are against this unification. I’ve

been involved in those passionate conversa-

tions and despite my best efforts to explain

the logic, sometimes emotion still prevails.

I’ve been called a liar. I’ve been told I don’t

know what I’m talking about. I’ve been told

that I’m just saying what I’m told to say. I’ve

had my integrity questioned. And I’ve received

what felt like were personal attacks. There

have been signs put out expressing non-

support for this unification and there have

been letters put in local newspapers. I have

to admit – I appreciate the passion some have

shown for their coop and this process. But

having been intimately involved in this process

from Day One and maintaining an unbiased,

professional, fact based stance on the process,

I believe in my heart of hearts that this is a

good thing for Pro Cooperative and its mem-

bers and a large proponent of those against this

process have been more emotionally based

rather than factual. They have made assump-

tions on what they’ve seen happen in other

unification situations – but I know of many

successful unifications as well. They have not

asked questions to those on the due diligence

teams. And I believe if they had the correct

information, their thought process may change

in some instances. Don’t get me wrong – eve-

ry member is subject to their own opinion and

I wholeheartedly respect that. I just want to be

sure everyone has a chance to form their

OWN opinion, not swayed by something emo-

tionally charged and possibly misinformed. So how do you form your own opinion and

gather the best information? Attend our

upcoming member information meetings

(see flyer on page 4 in this newsletter) or

call and talk to me or others that were

involved in the due diligence fact-finding

period. I hope to see each of you at the up-

coming meetings. Get your questions an-

swered. The Board has elected to bring this

Pro/First Unification

Bull/Bear Bubble Charts Update

Page 2 Pro Report Online

Cash Price Comparisons Corn - Pocahontas Location

Dec-14 Dec-15 Last

Week Current* Dec-16

$3.71 $3.40 $3.11 $3.11 $3.06

*As of Close 12/29/17

Soybeans - Pocahontas Location

Dec-14 Dec-15 Last

Week Current* Dec-16

$9.84 $8.24 $8.69 $8.76 $9.43

*As of Close 12/29/17

important decision to all of the members so that

your voice can be heard. No matter the result of this vote, my ask

is that we come together as members and em-

ployees of this great cooperative and continue to

make us better in all facets of what we do. We

must maintain our professionalism and compo-

sure at all times and not make this a personal

quest to sabotage this democratic process or

make personal attacks to gain traction. We are

all better than that. It will always be our goal

at Pro Cooperative to follow our Profes-

sional, Progressive and Proactive motto

and to be a respected organization made

up of the best employees and patrons that

you can find. So please see this process

through, ask your questions, formulate your

decision, attend a member information meeting

and be sure to vote what you truly believe makes

sense for not just today but the future of YOUR

COOPERATIVE. Sincerely wishing each of you a blessed a

prosperous New Year.

Michael Schon

Sales and Marketing Leader

Pro Cooperative

Review charts to the left - The bull/bean charts to the left repre-

sent some of the key factors in each market - size of the bubble

represents a larger impact. The periods of time (shorter vs. longer

term) are on the horizontal axis and the price impact (bearish vs.

bullish) is on the vertical axis. These are the things to keep an eye

on as we go forward through the winter months.

SUMMARY: The overall US stocks situation are a complete drag on

any short term rally opportunities. With the heavy carryout num-

bers and weaker export program, both corn and beans will have

difficulty this winter from a price perspective. Any rallies may be

met with stiff resistance. Spring/early summer pricing opportunities

may develop with weather issues and planted acreage changes.

Review the Mar corn chart below - March corn continues to be pressured against the

40-day moving average (currently $3.53). This is a well-followed speculative signal, and we

have seen all rally attempts stall out at this level over the past few months. With a large

fund short in the market, it feels like the downside is limited. However, this has been the

case since August, and the trend has not waivered. Nearby futures have held the 335 area,

while the upside has been confined to the 355 area. Unfortunately, this seems to fit the

overall range bound “feel” of the market for the foreseeable future.

Technical Thoughts - Mar Futures

Technical Thoughts - Mar Futures

Page 3 Volume 6, Issue 11

GRAIN MARKETING IDEAS:

General Comments: Prices have not been conducive to selling with a flat mar-ket. Now is typically NOT the time of year to be selling. But we all know cash is king and there may be a need to generate some cash. Any sales this time of year should be at least partially covered with a re-ownership strategy to give you some up-side opportunity into next spring. Ex-tended price (EP) and Minimum price (MP) contracts work best this time of year. Refer to marketing targets below of where to consider making sales. Old Crop Corn - Target July cash values from $3.35-$3.65 to finish all old crop sales. Nearby cash equivalent prices around $3.20 - $3.25. New Crop Corn - New crop Dec 2018 corn futures in a range of $3.90 to $4.25 need scale up sales made from early March through mid June. If those price targets do not occur before June 10 need to consider lowering our price targets to get something sold before fall. Be sure to have offers working before spring season gets busy. See chart on page 5 Old Crop Beans - Cash sales targets from $9.25 - $9.65 need executed upon. Scale in 10% each 10-15 cent rally would avg. almost $9.50/bu. On 50% of your bean crop.

New Crop Beans - Use $10.00 - $10.45 Nov 2018 bean futures as a range to get 25-50% of your new crop beans sold.

See chart on page 5

Final Marketing Comments - The past couple of years range bound/flat market has created extremely narrow selling windows in the spring/early summer. Sometimes the selling window is only days. We at Pro try to emphasize using offers and sales targets to better manage this window. We also want to use some of our specialty contracts such as Bonus Premium and Accumulator contracts to “stretch” out that marketing window al-lowing us not to wait for certain prices. Be proactive this market and discuss with us how to use these tools effectively.

Review the Mar bean chart below - March beans did not turn in a good end of year

finish. Funds amassed their largest ever year-end short position over the past few weeks,

as December featured one of the worst stretches for beans in a long time. We had been in

an uptrending channel pattern, but failure to hold the support point led to a significant

trend change in short order. Moving averages crossed over to the downside, triggering

fund selling. From here, it is all about watching for selling exhaustion, which is likely to be

identified with a reversal day in the near term.

PROgressive -- PROactive -- PROfessional PRO Cooperative DECISION POWER

Feed Promotion

Pro Cooperative’s Tub Promotion

November 1, 2017 - February 28, 2018

Save $10 per ton while supporting your county 4-H or local FFA chapter!

Receive an additional 5% discount when purchasing 8 tubs!

Qualifying products include the Purina Stress Tub and Rangeland 30-13 Tub. For More Information Contact: Taylor Handy • Feed Sales Specialist •

712-240-2089 • thandy@procooperative.com

Connect with Us! Stay up to date with all of the things happening

at Pro Cooperative news by following us on

Twitter, and “liking” us on

Facebook! ProCooperative @ProCooperative

For the Cattle • For the Kids

PROgressive -- PROactive -- PROfessional PRO Cooperative DECISION POWER

New Crop Technical Comments

Dec 2018 corn futures shown

at the right. The market re-

mains entrenched in a down-

trend. Looking ahead at possible

rally objectives on any short cov-

ering, it is pretty obvious to see

psychological resistance near the

400 mark. This seems to be a

logical target on any weather-

related rally this growing sea-

son. The trend is your friend, and

a downtrend is defined as a series

of lower lows and lower

highs….this is what we have been

doing since June.

Nov beans shown to the

left. One thing that can be

said about Nov beans rela-

tive to March beans is that

Friday’s market action held

the recent lows. This sets

up a nice level of support

for next week. Trade hop-ing for a short covering rally

to start the new year, but

the technical picture re-

mains tenuous with key

support right below the

market. Thin ice….

Pro Coop’s Winter Market Outlook

Wednesday January 24, 2018

at

*The Shores at Five Island Golf Course in Emmetsburg*

8:00 - 8:30 Registration & Coffee 8:30 - 8:45 Welcome—Mike Schon 8:45 - 9:30 Energy Market Outlook Mike Molly - CHS Inc. 9:30 - 10:30 Agronomy Outlook and Pricing Todd Minnihan - Winfield United 10:30 - 11:45 Grain Market Outlook Matt Campbell, INTL FCStone Financial Inc. 11:45 Conclude with Lunch

Call your local Pro Coop office to RSVP or call Jamie to RSVP or with questions

712-335-3060 or johearn@procooperative.com RSVP Appreciated so we have enough food & materials

Take

Your Marketing

to a New

Level!

PROgressive -- PROactive -- PROfessional PRO Cooperative DECISION POWER

Pro Cooperative will honor employees on January 13 Pro Cooperative will celebrate these employees at its annual Holiday Party!

We thank them for their years of service.

40 years Robert Allen- Location Manager/Gilmore City

20 Years Nicholas Weydert- Operations Worker II /Rolfe

Dale Garber- Location Manager/ Milford

35 Years None

15 Years Rodney Stoulil- Energy Manager /Pocahontas

30 Years Doug Habben- Administrative Assistant/ Manson

Susan Sikora- Grain/Feed Assistant/Ruthven

Carol Forey- Agronomy Assistant/Ruthven

10 Years Diana Yocum- Administrative Assistant/ Pocahontas

Perry Barrett- Operations Worker II/ Manson

Matt Schroeder- Operations Worker II/ Wallingford

25 Years Arlis Kuchenreuther- Administrative Assistant/Rolfe

Mike Schall- Location Manager/ Gilmore City

5 Years Tanner Day- Crop Production Specialist/ Manson

Dean Christiansen- Grain Delivery Driver/Ayrshire

Lance Larson- Operations Worker II/Ruthven

Trey Deling- Grain Delivery Driver/ Graettinger

Help us Welcome Geoff to our Team!

Hi, my name is Geoff (Jeff) Peterson. I am one of the newest members of Pro Cooper-

ative and excited to join the team. I will be leading the Grain Department as Mike Schon

moves into his Sales and Marketing Leader role. Don’t worry as Mike will be around to

help guide and coach me. I am originally from Corning, IA and attended Iowa State Univer-

sity where I majored in Agricultural Business. My family and I are excited to be moving to

Northwest Iowa . My wife, Amber, and I have 3 children: Caroline (6), Riley (5), and Ella

(2). I have spent 18+ years in the grain business working for Cargill and Louis Dreyfus Co

in various merchandising and trading roles in the United States and Mexico. If you come to

the office please stop by to say hello so I can meet you. I look forward to meeting every-

one and helping the business grow.

Final Commodity Comments for 2017

Grains - Prices are in the lower 1/3 of the overall past 5 year average range in corn, beans, cattle and hogs. March corn futures settled just a

penny/bu lower than a year ago at this time. And Dec 2018 corn futures are 4 cents/bu higher than new crop a year ago. Given today’s prices vs

year ago, one can see why there is more chatter of acres switching back to beans, oats, cotton and spring wheat in the US. This week of trading in

corn represented the lowest volume total for any non-delivery front month contract since May 2014. This was the narrowest range in yearly corn

charts since 2005, and open interest levels have doubled since then. This is truly a low volatility year. Corn export pace is about 40 mbu behind

this time last year but soybeans down a tremendous 315 mbu vs last year at this time! Ethanol production seeing some of the highest weekly pro-

duction levels on record. The soyoil market continues to be driven by the support of bio-diesel production with the $1 gal tax credit to be passed

for this past year’s production and also for 2018. Half of the soybeans shipped to China in 2017 would not have met their new “less than 1% foreign

material requirement that goes into effect on Jan 1, 2018 causing exporters to wonder what additional processing and costs would incur by attempt-

ing to meet this new quality requirement. The

current standard is only a 2% FM requirement. Looking forward to a new year, with

hopefully some weather threats (outside

of our trade territory, of course!)

Corn Hogs Beans Cattle

Chart below shows commodities relative performance for the entire year. Amazing to see

how flat corn has been this year….and in fact, the past few years. Corn prices currently at $3.50, a year ago they were $3.52, and the year before that they were $3.58. It’s truly stag-gering to see how sideways market action has been in these big supply years….but it does

make sense. Here’s hoping that 2018 brings SOME level of volatility and price movement.

PRO COOPERATIVE

Main Office

17 3rd Ave. Northeast

Pocahontas, IA 50574

Phone: 712-335-3060

Fax: 712-335-3075

E-mail:

mschon@procooperative.

com

with your comments and

suggestions!

PROgressive -- PROactive -- PROfessional PRO Cooperative DECISION POWER for FARMERS

We’re on the Web! Visit

us at

www.procooperative.com

PLEASE NOTE This newsletter subscrip-

tion is ONLY distributed

by email. If you know

someone who wants to be

included, please email mschon@procooperative.com

with the word SUBSCRIBE

in the subject area and the

requested email address.

PROactive — PROgressive

PROfessional

DECISION POWER for

FARMERS

Mark Hambleton - Long Time Employee

The Pro Cooperative family mourned the loss of a treasured former

employee, Mark Hambleton, who passed away at age 60 unexpectedly at

his home on December 9. Mark Hambleton served Pro Cooperative for

31 years. He graduated from Dayton Community School in 1975, and com-

pleted the Elevator and Farm Supply Management program at lowa Central Community College in Fort Dodge in 1976. Mark married his sweetheart,

Jane Heddinger in 1986, and the couple established their home in Fort

Dodge. Mark began working at the Dayton Coop in 1974. In 1986, he came

to work for Pro working his way up the ladder to ultimately be promoted

to Safety Director and Credit Manager. Mark was one of the founding members of the Ag Cooperative Safety Direc-

tors of lowa, and served as an officer for many years. He was one of the first in the nation to arrange for his coopera-

tive to donate grain bin cofferdams to local fire departments for grain bin rescues. And his legacy lives on with many

other cooperatives participating in this grain bin safety donation program still today. We all miss his caring and genu-

ine attitude and know he is resting peacefully sitting by a campfire and cheering on the Hawkeyes.

Petroleum Power

As we close 2017 and move into 2018 U.S. oil prices hit their highest mark since mid-2015. An unex-

pected decrease in American output and a fall in commercial crude inventories encouraged buying. An in-

crease in U.S. refining runs pushed overall capacity to 95.7 percent, which is the highest in December dating

back to 1998. Refiners have profited in recent months due to the spread widening between U.S. crude and

Brent future prices.

According to the U.S. Energy Department crude stocks dropped by 4.6 million barrels last week as

refineries increased output, while gasoline and diesel inventories increased. Gasoline stocks rose by 591,000

barrels, and distillate inventories increased by 1.1 million barrels. Inventories excluding the nation’s strategic

reserve have declined more than 11 percent in the last year.

Oil could be due for a sharp correction in the near future according to some analysts. Oil prices are 30

percent higher than they were in June and global economic growth is strong. End-use petroleum demand con-

tinues to do better than the historical norms. Compliance with OPEC’s output numbers have been high and

Venezuela’s production keeps dropping month to month. Supply disruptions due to hurricanes and the outage

in the North Sea have unexpectedly tightened the market in the past 6 months, supporting OPEC’s longstand-

ing efforts since 2014 to rebalance the market. All of these factors and OPEC’s willingness to keep production

outputs in check have decreased excess inventories. It appears investors are positioning for a bull rally, which

could leave the oil market susceptible to a sharp correction should the fundamentals disappoint. We will need

to watch this closely as we move into 2018. Find out more insight into the fuel market at our Market Outlook

scheduled for Wed. Jan 24. Hope to see you there! As 2017 comes to an end I would like to recognize a few employees who are retiring from our petro-

leum department this year. I would personally like to thank them all for their efforts in serving you over the

years.

Dan Benjiman – Petroleum Transport Driver

Bob Severson – Pocahontas LP Delivery/Dust control

Dave Ezarsky – Graettinger Grain/LP

Dan O’Conor – Gilmore City Station

Rick Houseman – Estherville

Wishing all of you a happy new year !

Rod Stoulil - Fuel Department Leader