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Profits Off From Last Year; Still Solid Returns
One year ago, your South Dakota Soybean Processors
(SDSP) was celebrating a record-breaking year in terms of
earnings. We certainly did not expect those high returns to
last due to changing economic factors in the industry, and
true to form, earnings did come down sharply in 2016. In
spite of that drop, the returns we experienced this past year
were still very solid from a long-term perspective. SDSP
finished the fourth quarter with net income in excess of $2.5
million, bringing the 2016 annual income close to $12.6
million.
Profits were impacted negatively from reduced demand for
soybean meal. While domestic demand was steady, export
demand was down. In addition, this past fall’s crop was
slightly lower in quality from a moisture perspective, and that
impacted SDSP as well. Overall, however, it was still a very
good year.
For the third year in a row, the number of bushels processed
was very strong. In Volga, SDSP processed 28.8 million
bushels, while the Miller plant crushed 2.95 million bushels.
While those numbers are good, Volga’s numbers are lower
than in 2015 primarily due to higher-moisture beans, which
required additional drying time.
Miller plant is running well
In 2015, during the Miller plant’s first year of production,
we processed 973,000 bushels of soybeans. This year that
number shot up to 2.95 million bushels. We are pleased to
announce that more than half of the Miller plant’s capacity
is now dedicated to the processing of identity-preserved,
primarily non-GMO soybeans. Even though the Miller facility
did not return a net profit in 2016, it is cash flowing well and is
generating a net return before depreciation. To help continue
this growth we are actively seeking non-GMO soybeans, both
old and new crop. I encourage you to call SDSP for program
details and current premiums.
Expectations for 2017
Looking ahead we see abundant supplies of soybeans in
South Dakota, which will be beneficial to both the Volga and
Miller facilities. We expect strong demand for our soybean
oil products from both the food and industrial oil sectors and,
due to the relationships we’ve built with our customer base
over the past five years, SDSP looks forward to a number of
opportunities to improve our soybean meal sales’ efforts.
I encourage you to look inside for additional information
on our financials as well as Phase II of our new receiving
complex at Volga. I also want to thank our employees and
producer members for the role each of you play in making
SDSP a company of which we can be proud.
P R O C E S S O R S
February 2017
Volume 11: Issue 1
www.sdsbp.com
SOUTH DAKOTA
Soybean
soybean
p r o c e s s o r s
S O U T H D A K O T A
Tom Kersting
CEO
Tom.Kersting@sdsbp.com
Exhibit 99.1
Condensed statement of operations
For the Year ended december 31, 2016
assets
current assets
cash and cash equivalents $ 11,654,648
trade accounts receivable 20,352,581
inventories 32,393,421
other current assets 3,857,534
total current assets 68,258,184
ProPertY and equiPment 89,832,688
less accumulated dePreciation (45,081,548)
total ProPertY and equiPment, net 44,751,140
other assets
investments in cooPeratives 6,231,233
convertible notes receivable 2,000,000
other long-term assets 1,783
total other assets 8,233,016
total assets $ 121,242,340
LIABILITIES AND MEMBERS’ EQUITY
current liabilities
excess outstanding checks over bank balance $ 6,643,226
current maturities oF long-term debt 59,558
accounts PaYable 1,456,802
accrued commoditY Purchases 35,688,152
other current liabilities 4,615,857
total current liabilities 48,463,595
long-term liabilities 725,818
members’ equitY 72,052,927
total liabilities and members’ equitY $ 121,242,340
Condensed BalanCe sheet
december 31, 2016
net revenues $ 377,931,693
cost oF revenues (363,829,609)
gross ProFit 14,102,084
administrative exPenses (3,445,978)
oPerating ProFit 10,656,106
other income (exPense)
interest exPense (409,331)
other non-oPerating income 2,346,281
total other income (exPense) 1,936,950
net income $ 12,593,056
basic and diluted earnings Per caPital unit $ 0.41
Weighted average number oF units outstanding
For calculation oF basic and diluted earnings
Per caPital unit 30,419,000
MARKETING UPDATE
©2017 South Dakota Soybean Processors, LLC. All Rights Reserved. Published in partnership with VistaComm® (www.VistaComm.com).2
UNAUDITED FINANCIAL STATEMENTS
Capital Units Trading History
period Units traded average high low
2016-Q4 53,000 $3.42 $3.50 $3.39
2016-Q3 47,500 $3.68 $3.75 $3.50
2016-Q2 30,500 $3.60 $3.75 $3.50
2016-Q1 91,000 $3.79 $4.00 $3.59
SDSP Capital Units are traded on an alternative trading system, operated by
Variable Investment Advisors, Inc. (VIA). Offers to buy or sell capital units can
be placed online at www.agstocktrade.com, or by calling VIA at 800-859-3018.
For more details regarding SDSP’s Capital Units Transfer System, please visit
our website at www.sdsbp.com, or email memberinfo@sdsbp.com.
Board to Recommend Operating Agreement Change
At the last annual meeting, SDSP Board of Managers’
member Delbert Tschakert informed attendees of an
issue under study by the board. The issue relates to
the current provision in SDSP’s operating agreement
which limits the maximum ownership percentage per
member to 1.5% of the outstanding membership units.
As many members are aging and addressing their
estate needs, a growing number are expected to
consider selling their shares. In recent years, SDSP
has been approached by institutional-type investors
wishing to take an ownership stake in the company;
however, the 1.5% maximum membership units
provision has been a stumbling block for these
investors as it does not allow them to meet their
minimum investment threshold. Your SDSP board
would like to see these types of investors given the
opportunity to bid for shares as they feel it would
provide greater liquidity and potentially higher unit
prices for all members.
At the Sept. 20, 2016 board meeting, board members
discussed feedback they had received concerning the
issue and moved to propose a change to the operating
agreement to increase the maximum shareholder
ownership from 1.5% to 10% of the outstanding
membership units. Your board feels that other
provisions in the operating agreement, such as the
board of managers’ right to approve or disapprove all
capital unit transactions, as well as the provision of
one vote per member regardless of the number of
units owned, will provide adequate protection from
anyone seeking to gain control of the company by
purchasing membership units. The membership
vote on this proposed change will be held at the
next annual meeting in June.
3
In SDSP’s continuing efforts to improve customer service, the company will
begin construction in Volga this spring of two new larger dumping pits and
an 850,000-bushel bin. The capital projects are the second phase of a new
receiving complex designed to better handle today’s larger trucks, increased
truck traffic and compressed harvest seasons.
Phase I of the receiving upgrade, including a new and larger staging truck
lot, an elevated two-probe station, new scales and an automated receiving
system, became operational in time for the 2016 harvest season.
Those improvements led to peak performance. Prior to the 2016 harvest
season, SDSP’s one-day record for trucks dumping at the facility was
approximately 370. With Phase I in place, that number jumped last year to
464, with each truck being probed. That signifies a substantial increase,
especially considering that both SDSP staff and our customers were adjusting
to a new traffic pattern and automated system.
We intend to improve the receiving process even more. The entire receiving
complex project is focused on getting trucks through the facility more quickly
and efficiently. The two new dumping pits, each 72’ long, will accommodate
the dumping of a truck and pup configuration without having to move the
truck ahead as is required on our current, smaller dump pits.
Speed is also a factor. The conveyance rate of each new pit will be 20,000
bushels per hour, compared to the 15,000-bushel-per-hour rate at our two
current pits. When the project is completed, all four pits will be available
to take beans during the busy harvest season. Not only will the dumping
process be faster, but the improvements are designed to streamline the truck
route through the facility. Trucks will come off of the inbound scale and drive
straight ahead to the new pits rather than snake around the existing bins.
The addition of the 850,000-bushel bin will increase our on-site bean storage
capacity, providing SDSP with approximately another 10 days of crush capacity.
Construction of the second phase of the receiving complex is scheduled to begin
in April with the goal of having projects completed in time for the 2017 harvest.
RECEIVING COMPLEX UPDATE
By Carl Odde, Engineering Manager, Carl.Odde@sdsbp.com
Phase II of Receiving Complex Underway in 2017
Nominations Open for Board of Managers
Members will be electing one board member from
each of the five districts during the company’s
annual meeting to be held in June. One position
from each of SDSP’s five districts will need to be
filled and voted upon by the members.
Please note that incumbents Gary Wertish (District
4) and Delbert Tschakert (District 5) will not be
running for re-election as their terms of service
expire. Any SDSP member interested in seeking
nomination for the board for any of the five districts
can contact Amy Koisti at 605-627-6100 to request
a nomination petition. The petitions must be
returned to the SDSP office by March 14.
Anyone with questions about the election or board
member responsibilities can contact a member of the
nominating committee. They are: District 1—Gary
Duffy, 605-270-2554, gduffy@alliancecom.net; District
2—Paul Barthel, 605-530-6139, pjdbarthel@svtv.
com; District 3—Gary Goplen, 507-223-5267,
gkgop@mvtvwireless.com; District 4—Randy Tauer,
507-249-3597, jrtauer3@gmail.com; District 5—
Ardon Wek, 605-327-3410, ajskwek76@gmail.com.
To view a map of SDSP’s five districts, go to www.
sdsbp.com and click on Board of Managers.
SDSP begins
construction
this spring on
Phase II of the
new receiving
complex at the
Volga facility.
New 850,000-
bushel bin
Existing soybean
storage
Existing
operations office
New dumping pits
100 Caspian Ave
PO Box 500
Volga, SD 57071
soybean
p r o c e s s o r s
S O U T H D A K O T A
Proud of Food Safety Team
For the fifth year running, SDSP has passed its Safe Quality
Food (SQF) certification audit with high marks. In fact, SDSP
achieved its highest score ever, earning 98 out of a possible
100 in the unannounced on-site audit.
The audit team recognized us for the excellence of our
food safety practices and programs. Our new Food Safety
Manager John Wilder and Quality Assurance Manager Susan
Selman did a fantastic job leading us through the audit. John
comes to us from the dry cereal industry, while Susan is our
previous food safety manager. I’m proud of our entire team,
including our refining technicians, for a job well done.
The combined efforts of this team are critical as SDSP
completes its plans and programs with the goal of being
compliant with the Food Safety Modernization Act which goes
into effect in September 2017.
Capital spending to improve meal-loading
at Miller
I invite you to read on page 3 about Phase II of our receiving
complex project in Volga. Our Operations team is also
planning additional projects in 2017, including needed work
in our extraction area at Volga during the August shutdown.
We will also continue to improve the meal loading facility at
Miller. A big step was taken this past December when we
put our rail system into service at Miller. In the past we had
been transporting meal by truck to a third-party loading site in
Tulare, South Dakota. We will now focus on changes that will
further improve our meal-loading capabilities.
Find cash bids at Volga and Miller. Go to sdsbp.com.
Now contracting
non-GMO
soybeans for the
Miller facility. Call
Kari Vander Wal
at 1-888-737-7888
for information
and pricing.
By John Prohaska
Group Operations Manager
John.Prohaska@sdsbp.com
OPERATIONS UPDATE