MT. ANGEL — Record sales continued for a third consecutive year at Wilco, propelling the agricultural cooperative to its second-highest profits in 2022.

Wilco held its 57th annual member meeting March 8 in Mt. Angel, where top executives reported $373 million in sales — up $44 million over the previous record set in 2021.

Despite strong sales growth, net earnings dropped from a record $13.8 million in 2021 to $9.9 million in 2022. That is a reduction of approximately 28%, with inflation driving “significant” expense increases across all business divisions.

The co-op’s board of directors approved patronage and revolve payments of $3.4 million back to members, down 8% from the previous year.

“While we’ve had our challenges, Wilco is financially strong and growing,” said CEO Sam Bugarsky.

More than three-quarters of Wilco’s sales came from its 25 farm retail stores in Oregon, Washington and California. One new store opened in 2022, in Pasco, Wash., and a new, expanded store is scheduled to open in Prineville later this spring.

“We’re introducing what we sell to new customers every year,” Bugarsky said.

Valley Agronomics also netted its highest annual sales of $473.3 million in 2022. Wilco owns 26% of that business, part of a joint venture with Valley Wide Cooperative, based in Nampa, Idaho, and WinField United, the agronomy division of the Land O’Lakes co-op.

Not everything, however, was a success for Wilco’s bottom line.

It was a disappointing year for the co-op’s hazelnut division, which lost about $8 million in 2022, Bugarsky said.

Wilco acquired Hazelnut Growers of Oregon in 2016, which has yet to make a profit. Last year was a challenge industry-wide, with global factors combining to slash the price of hazelnuts by roughly half, from 80-90 cents per pound in 2021 to 40-53 cents per pound.

HGO was forced to write down the value of its leftover inventory from 2021, adding up to about $3.1 million in losses, Bugarsky said.

Meanwhile, production costs remain high at the co-op’s hazelnut processing plant in Donald, Ore. Whereas HGO has focused on growing its Oregon Orchard brand of hazelnut products, Bugarsky said it is now clear that strategy will take longer than originally thought.

Instead, Wilco has adopted a new plan for HGO that focuses on upgrading equipment and automating processing lines at the Donald facility.

“There are sorter updates, there is pasteurization automation, and there are some bagging equipment and handling updates,” Bugarsky said, adding that each of these measures will take cents per pound off of production costs.

HGO will also pivot to selling larger orders of hazelnuts to food service companies and private labels in order to give Oregon Orchard more time to grow as a brand.

“We do see a future of profitability at HGO,” Bugarsky said. “Our board is committed to figuring it out, and we do believe with this new plan that we can get where we need to go. But it will likely take another couple of years.”

Looking ahead to 2023, Wilco anticipates eclipsing $400 million in sales, though Bugarsky cautioned they face economic headwinds. Higher interest rates to curb inflation is changing customers’ spending habits, he said, and stores are already seeing less traffic.

On the agronomy side, lower prices for certain commodities may prompt farmers to tighten their belts, spending less on crop inputs and services as they normally would.

“There are definitely some challenges in the economy,” Bugarsky said. “We’ll be fine, but it’s going to be an interesting year.”