Four years ago at the spring district delegate meetings, we noted that while agriculture was good, MFA must be prepared for an inevitable business cycle downturn.
At the time, the overall economy had suffered through a recession that began in late 2008. Still, much of agriculture did very well during this period.
We all knew in 2012 that we were at the top of the ag cycle. We just didn’t know when, how fast or how much it would change. We have a clearer picture now.
Most key agricultural statistics today paint a somber picture for the near term:
- In 2015, net farm income was down more than 50 percent from 2013 highs.
- 2016 net farm income is projected to fall for the third year in a row.
- Operating costs have fallen but not to the extent income has.
- U.S. and world grain production is outpacing demand.
- Strength of the U.S. dollar is reducing exports.
- From a row-crop standpoint, this will push corn and bean values to levels that will challenge positive cash flow on many farms.
- Pork and dairy prices currently reflect modest profits at best.
There are other factors that will impact agriculture: an election, new regulations, political paralysis.
That’s not a forecast for gloom and doom. Bright spots will reduce the impact of this downturn. Those bright spots include low fuel prices, historically low interest rates, today’s strong producer balance sheets, and the fact that beef prices are respectable and enhanced by low feed costs.
Your cooperative is positioned to help you minimize the impact.
During the best years of agriculture, MFA did a good job of strengthening its balance sheet. Many of you have done the same.
That strength has allowed us to pursue growth and expand operations. It also positioned MFA for the challenges of today’s marketplace.
MFA is financially sound, as evidenced by current levels of working capital and net worth. The reduction in working capital from all-time highs is directly related to financing acquisitions and joint ventures over the last few years. That’s part of an overall plan.
But we didn’t just concentrate on the financial side.
We also made sure we addressed talent and technology—two areas that have a direct impact on your farming operation.
In terms of talent, MFA has the best workforce in the trade-territory. We are committed to challenging MFA employees to improve their skillsets. This is accomplished through relevant training programs—both in-house and outside, professional training.
In addition, we are dedicated to protecting the safety of MFA’s workforce. This is evidenced by the success of our SHIELD program that just wrapped up its first year.
During the district meetings, those attending heard from young people who are part of MFA’s Ag Experience program. Those individuals were hired full-time after graduation.
MFA’s Ag Experience program is designed to attract the best and brightest students to MFA. There is tremendous competition for these graduates. There simply aren’t enough to meet agriculture’s demand. MFA has the people side covered.
MFA continues to be innovative in both product and service offerings that provide value to you. That innovation shows up in the new software system MFA is installing that will drive efficiencies. Innovation is evident in MFA’s PowerCalf offerings as well as Nutri-Track stewardship.
MFA’s MorBrand agronomy offerings continue to excel in university trials and, more importantly, in member fields.
All of these are designed to help members be more efficient (profitable) in their operations. Now more than ever, MFA continues to prove its value to your operation, whether it’s increased net revenue per acre or per animal.
In summary, there is no doubt that agriculture will be facing tough economic times. All of us need to continue striving to be better managers and become more efficient. Profit levels will not be what they were from 2010 to 2014.
That is not, however, a cause for despair. It is a call to action. All of us need to keep things in perspective. We must all visualize what we want and what we can control rather than worrying about what we fear.
We must look for opportunities. They are out there. And we don’t want to miss them. That should be our focus.