Feature

Multi-variety planters bring another layer to precısion agriculture

Written by Thad Becker on .

Equipment engineering is catching up with an idea that has been floating around in the precision agriculture industry for a while—the ability to switch seed varieties on the fly.

For years seed experts have told us that if you put the right variety in the right part of the field, you will seldom be disappointed with its performance. We spend a lot of time analyzing plots and picking the varieties we want on our farms, but we have to manage for our average acre, not our best or worst ground.

If you’re like me, there is always the urge to plant that “Corvette” corn hybrid and push it to its limits to see just what yield can be achieved. But more sober moments arrive: I remember that slope with thinner top soil on the far half of the field. I think about what a wreck that variety might cause over there if the weather isn’t just right. With that thought in mind, I pull back from the highest yield scenario and choose a more durable “farm truck” hybrid instead.

MFA has good soil in its trade area that can support those Corvette hybrids. Unfortunately it seems to come in 5- to10-acre chunks. Multi-variety planters will give us the opportunity to stay on the gas in those good areas with a high performance variety, but still pull through in the tough spots with a workhorse variety.

Currently there are two ways to get a multi-variety planter. You can buy a new planter from Kinze. Last year they released the 4900 Multi-Hybrid. Or, you can have VSet Select from Precision Planting retrofitted on your current planter.

The mechanics behind the retrofit involve putting two independently driven seed meters on each row. The seed meters are driven by electric motors and a controller in the cab. The controller tells each motor when to start and stop. It also can vary population on the go. The seed meters sit face-to-face and both drop seed down the same seed tube—allowing for seamless transitions from one variety to the next.

There may not be many farms with a multi-variety planter this year, but I believe we need to start preparing for the technology. Here in MFA territory, we deal with some of the most variable soils in the United States. We may, for once, have more to gain from this variable-rate precision technology than other row crop regions. To use these planters effectively, though, we need clearly identified management zones to locate the variety transitions in the field. Finding those zones takes some time and effort, but it is the same information that underlies other precision management on your farm.

First, the variation in your field needs to be identified, typically using historic yield data or imagery. Once you can identify areas of high and low yield, you need to identify the root cause of those variations. At MFA, use a handful of tools to find the cause of variability. Soil testing, electrical conductivity data, landscape, and perhaps most importantly, grower experience help to solve the puzzle. It’s only once we understand the root cause of crop performance differences in the field, that we can identify varieties that excel in those conditions and place them correctly.

I believe that in the not-too-distant future multi-variety planting will become standard practice. Research from South Dakota State shows a consistent 6-bushel-per-acre response in corn—and that is with currently available varieties. In the future, I believe we will see seed that is targeted to specific soil conditions, which will make per-acre gains larger.

These are exciting times. To make multiple-variety planting work, though, will take an investment in equipment and time. It will take teamwork between you, your seed supplier, equipment dealer and agronomist make the investment pay.

MFA is uniquely situated and taking steps to make sure that we can do just that.

Fescue seedhead suppression

Written by Austin Black on .

Summer fescue pastures can be a problem for cattle producers. When the plant matures, it stops growing leafy foliage and sends its energy to stems and seedheads. Nutritional values decrease and toxins in the seedhead can negatively impact cattle health. Suppressing seedheads reduces toxins and improves forage quality, allowing for an extended grazing season.

Last summer, Dow AgroSciences introduced technology to suppress fescue seedheads using Chaparral herbicide. Huntsville, Mo., cattleman and director of MFA’s Health Track program, Mike John partnered with Dow to conduct a field study on his ranch. John sprayed a 10-acre strip of pasture with two ounces of Chaparral while fescue was in the boot stage. The boot stage occurs in early spring when the plant produces a flag leaf. An adequate number of leaves are present to provide plenty of surface area for the herbicide. Application timing is crucial. Spraying too early can damage the fescue. Spraying too late can reduce effectiveness of the herbicide.

John said seedhead suppression and weed control was more than evident in his field study. “Not only did the treatment control weeds and seedheads, but other cool-season grasses showed up,” John said.

Spraying fescue during the boot stage stops seedhead production. The result is more leaf production and decreased endophyte toxicity. Decreased endophyte reduces heat stress, increases weight gain and improves reproductive efficiency in cattle. Increased leafy matter provides more digestible tonnage and improves forage quality. Dow AgroSciences range and pasture specialist Brant Mettler said some producers misunderstand this factor and are disappointed when their overall tonnage decreases. But when they test forage quality, nutrition and digestibility of the leafy matter is higher than stems and seedheads. The increased number of leaves provides more digestible tonnage and helps extend the grazing season into summer months.

“There’s no question we had more tonnage and forage quality,” John said. More digestible tonnage allows higher stocking rates and more efficient beef production.

Mettler said field trials showed 1 to 5 percent higher levels of crude protein and 7 percent higher total digestible nutrients on average in treated pastures.

In normal pasture conditions, cows will selectively and often unevenly graze a pasture. Mettler said the trials showed cattle graze treated pastures more evenly and smoothly than untreated. Cattle will also graze during midday hours. He said cattle will overgraze treated pasture so it’s important to watch the available forage.

For producers who harvest fescue seed, this technology can diversify the operation. Mettler said producers can use Chaparral on fescue pastures that are too rough or too difficult to access with a combine. John said producers need to evaluate the economics of each method to determine the best approach.

Using Chaparral to treat fescue pastures isn’t the right approach for every operation. It requires precise mixing, timely application and the ability to rotate cattle for deferred grazing.

There are no grazing restrictions when using Chaparral. However, in preparation for treatment, Mettler said producers should consider grazing their cattle early in the spring before rotating to a different pasture during spraying. Cattle can return to the treated pastures a month later for summer grazing. Spraying Chaparral will stress fescue plants for about two weeks, causing a yellow tinge in the foliage temporarily. Moving cattle to other pastures helps to not overstress the fescue and allows it to grow back in time for summer grazing. Chaparral will kill legumes, but producers will see more grass species appear in the pastures. Mettler said growing conditions will dictate if spraying is appropriate. In drought years, spraying might hurt forage production due to extra stress.

If producers can’t rotate their cattle, Mettler said to adjust stocking rates and manage grazing pressure. Interseeding cool-season grasses and annuals also helps. Mettler said overgrazing treated pastures will result in reduced plant health.

John said it’s important to know when spraying needs to occur and notify your local MFA Agri Service ahead of time. Chaparral is non-volatile and has a 45-60 day residual activity. For more information about using Chaparral, visit your local MFA Agri Services to plan your treatment.

Silently killing beef profits

Written by Nancy Jorgensen on .

Dr. Tony Martin, staff veterinarian for MFA Incorporated in Columbia, Mo., says anaplasmosis is nothing new. But in 2014-15, he fielded more questions about the disease. He heard of clinical cases earlier than normal, and received a number of reports of dead cows testing positive for the disease.

Dr. Gregg Hanzlicek, director of production animal field investigations at the Kansas State Veterinary Diagnostic Laboratory, saw more Kansas counties with cattle testing positive for anaplasmosis in 2015 compared to previous years—especially in eastern and central Kansas. His lab tracks cases on its website, and the map reveals that more cases are being discovered in western Kansas (ksvdl.org; click on the Disease Trend button).

“Local vets called me saying they were seeing dead adult cows in pastures—even bulls—which is really unusual,” Hanzlicek said. “Some larger herds had from seven to nine dead animals.”

As Hanzlicek explained, if the cattle producer asks a local veterinarian to conduct a necropsy (akin to an autopsy on humans), the vet usually sends a sample to the state veterinarian laboratory asking for an anaplasmosis test.

Martin speculates that wet weather in Missouri in 2015 may have increased the number of ticks and flies spreading the disease. “External parasite concerns occur every year for livestock producers,” he said. “Years with good moisture and humidity make for larger, heartier populations of the insects that are harder to control.”

Hanzlicek reports that Kansas may not have been wetter than usual in 2015, but he thinks any increase in the disease may tie to a spurt in cattle coming into the state from drought-stricken places like Oklahoma and Texas in recent years. The disease has been found in every state except Hawaii, but is endemic to western Missouri, southeastern Kansas and parts of Montana and Idaho, he added. It strikes dairy as well as beef herds, but normally doesn’t affect other livestock in the U.S.

Both veterinarians also point to increasing awareness as a possible cause for what appears to be a rise in reported cases. Extension experts are educating producers about the problem in meetings, and producer publications are covering it. The high price of cattle may also be prompting producers to take more notice when they lose cows.

No one knows how many cows have died from anaplasmosis. “Many die from the disease without any diagnostic effort being made,” Martin said. “A lot of deaths, especially if it’s only one or two per herd, may go totally undiagnosed and are assumed to be normal losses.”

What are the symptoms?

Martin and Hanzlicek say you should watch for these early signs of the disease in cows:

  • Lethargy and slowness, falling behind others, stumbling and acting weak.
  • Open-mouth breathing.
  • Yellow around the eyes.
  • Lack of appetite.
  • A declining body condition score.
  • Pale or yellow gums.
  • Becoming hard to handle.

Martin offered a scientific description of what’s happening. “The disease is caused by a blood-borne parasitic organism that attaches to red blood cells and leads to their destruction. Red blood cells are destroyed faster than the animal can create new ones, and the blood can carry less oxygen.”

Even the most docile bull or cow can become dangerous when infected, Hanzlicek warned. “I’ve had to run from infected animals several times. They’re basically anemic; their brains are starved for oxygen and, therefore, they don’t function correctly.”

Hanzlicek said animals of any age can be infected, but you rarely see clinical signs except in animals at least two or three years of age. He warned that even if the animal recovers, it will carry the disease for life but will never again show symptoms—these are the carriers and the sources of infection for uninfected animals in the herd. This means that as blood is carried from the infected animal to others, the disease continues to spread. Anaplasmosis spreads only through blood.

How can you fight it?

Feed antibiotics. Martin’s top recommendation: “To aid in the control of an active anaplasmosis infection, Tetracycline is often fed continuously, at the label-approved dose, from shortly before the insect vector season starts until after the first killing frost when insect populations die off.”

Provide good nutrition. Martin emphasized that it takes an intact, strong immune system, supported by good nutrition and a good body condition score to fight off diseases like anaplasmosis and to make use of antibiotics to effectively control and prevent the disease.

Control ticks and flies. Hanzlicek said that insects carrying the disease include horse, deer and stable flies, dog ticks and maybe mosquitoes. Martin suggests you take a broad, integrated approach to minimizing insects, including fly tags, sprays, back rubbers and face dusters.

Avoid transferring the disease yourself. Both veterinarians warn against reusing injection needles. Make sure you properly disinfect tattoo pliers as well as castration and dehorning equipment.

Test cows when adding to your herd. Blood tests are available for farmers to diagnose anaplasmosis carriers. Hanzlicek says you must quarantine new animals for 30 days while waiting for test results from the state veterinary diagnostic lab. “Producers need to be sure of the health status of any new herd additions,” Martin said, adding you should include your local veterinarian in the discussions.

Call your local vet when you find a dead animal. “The animal may have died from other diseases,” Hanzlicek said. “You need to find out the cause so you can prevent future problems.”

Consider using the vaccine. Developed and manufactured at Louisiana State University, the anaplasmosis vaccine has been approved in Kansas, Missouri and other states for use by veterinarians. Hanzlicek hears most stories about dangerous animals when ranchers bring animals in from the pasture to administer the vaccine. “Cattle become stressed when moved and they can die on the way in,” he said, “Move them slowly.” Some vets don’t even recommend treating, as moving cattle to the administration site may cause more problems than the disease—and most animals will recover on their own, he added.

When and how can parasites affect your herd?

Hanzlicek reported that the disease takes on average 28 days to incubate, so you typically won’t hear about cases until late summer or early fall.

“Cases are typically more prevalent in fall and winter as the nutritional quality of grazed forages decline, body condition slips a little, and, too often, use of Tetracycline is stopped too soon,” Martin explained.

Opinions vary about the cost of the disease. Martin and Hanzlicek have seen estimates showing the cost of treatment at more than $400 per animal. “An even greater cost most likely comes from effects that can reduce reproductive success, decrease milk production, or increase culling and death rates,” Martin said. With cow and bull prices reaching thousands of dollars, the cost of dead animals runs pretty high.

Beyond external parasites, other major pests that affect cattle in our area include internal parasites such as worms, coccidian and, occasionally, flukes, Martin concluded. In the winter, when animals spend more time close together, lice prevention and control come into play.

Contact your local MFA-affiliated Agri Services and AGChoice locations for additional information on products and procedures to control pests.

Managing wheat health

Written by Nancy Jorgensen on .

Mel Gerber loves growing wheat, and he thinks more farmers in Missouri could profit from it.

It may seem like he’s bucking a trend. In recent years, U.S. farmers planted fewer wheat acres, as wheat profitability declined compared to corn and soybeans. However, Gerber’s strategy of double cropping soft red winter wheat with soybeans gives him an edge.

“Wheat can be more difficult to manage than corn and soybeans, and that’s why few people around here grow wheat,” Gerber said. “I help other farmers grow wheat, and once they try it, it’s worth the effort because the wheat/soybean combination is profitable. Wheat has always been a stepchild in this state, but it responds to good management.”

Acre for acre, Gerber figures that by double-cropping wheat and soybeans, his income doubles over what he would make compared to single-cropping corn.

Gerber and his wife Mary do grow corn—700 acres of it, as well as 1,100 acres of soybeans. They doublecrop wheat with soybeans on another 600 acres, meaning they raise both crops on the same 600 acres in the same year.

Gerber usually plants wheat from Oct. 10 to Nov. 10, after soybeans have been harvested. He harvests wheat in June, which leaves time to plant soybeans again on the same ground.

Growing wheat in wet conditions and on clay soils takes smart management. Gerber and other wheat growers—including farmers in wet places like North Dakota and Minnesota—have been fighting a fungal disease, fusarium head blight, also called scab.

“Almost everyone who grows small grains has to deal with this when you have heavy rainfall,” Gerber said. “In the past year, it’s been a major issue in central Missouri.”

Here’s how Gerber manages scab:

  1. He selects a variety that carries some resistance to head scab and provides good yield. “Variety selection is important,” Gerber said. “Almost all modern wheat varieties have some resistance to almost all disease.” Also, he uses seed that’s been treated to fend off common diseases and pests.
  2. He applies good nutrition. Gerber applies the first dose in the fall. He applies more fertilizer before the wheat greens up on frozen ground, usually in January or February. He applies a third time— mostly nitrogen—when the wheat’s knee-high in mid-April.
  3. He also sprays the crop with a fungicide that fights head blight. Gerber says two types work: BASF’s Caramba or Bayer’s Prosaro. “You have to apply it at the right time, when the plant’s half-flowering,” Gerber said. “This takes intense field scouting, as flowering only lasts about five days.”
  4. He harvests quickly and on a timely basis to avoid rain, which diminishes yield.

Gerber purchases farm supplies at MFA Agri Services in Versailles. He also hires MFA agronomists to test his soil. He does his own field scouting for disease and pest issues and timing of applications.

When it’s time to take the grain to the elevator, MFA and other elevators test wheat for scab, and you can be docked for grain above a certain level. Often, the grain can be blended with other wheat to reach a level that’s safe for consumption, but deliveries with high levels can be turned away.

Flourmills conduct further testing. “Mills use optical sorters that kick out infected grain and reduce it by about 50 percent,” Gerber reported. European markets increasingly examine each kernel with infrared light, and Gerber predicts the U.S. will adopt this technique.

Other diseases that concern wheat growers include soil-borne viruses, and Gerber suggests that you use seed that resists them. Insects can transmit viruses, but most insects in wheat can be addressed with pesticides, Gerber said, as long as you choose a pesticide that works for the situation.

While some wheat growers let cattle feed on winter wheat during cold months, few Missourians use this practice. “It does a lot of damage if you’re looking for high yield,” Gerber said.

Besides profitability, Gerber also sees another benefit to growing wheat. “More people are planting cover crops to keep soil from eroding, and wheat is a good cover crop,” he said, adding that his clay soil drains poorly. “Soil’s fragile here, and conservation’s important to me.”

Gerber believes that ongoing research will improve wheat yield. “Wheat breeding has fallen behind soybean research, so there’s a lot of room to improve,” he said. “I’m convinced we can go beyond the yield we typically see in the U.S.”

In MFA’s trade territory, hard red winter wheat is mostly grown in Kansas, while soft red winter wheat is the main choice in Missouri. No matter which type you grow, Jason Worthington, agronomist at MFA Incorporated, offers tips on how to keep your wheat healthy.

What can I do now in the spring to improve yield?
Scout wheat for weeds, insects and diseases, and to determine how well it made it through the winter. Count tillers (lateral branches) to determine if you should apply early nitrogen to induce tillering, as more productive tillers lead to better yield. Nitrogen application can help until the boot stage in late April, when the fully developed head can be easily seen in the swollen section of the leaf sheath. Ideally, apply one-third of your spring N as a topdress before green-up if added tillering needs to be induced. Apply the remaining two-thirds after jointing begins. If no further tillering is needed, apply all spring N after jointing. Topdress the majority of your N and sulfur, and consider two field applications of N. Always fertilize based on soil tests and prior yield data or yield goals.

How important is scouting to successful wheat?
I find that growers do not commonly devote as much attention to their wheat as they do other crops. Wheat may respond better to an intensive management system that a crop consultant can help implement. Thorough and frequent field inspections are critical, because the timing of fertilizer, pesticide and fungicide applications pays dividends. Checking pest and disease levels, hitting the right growth stage, and applying the right product can be more accurate when a professional walks the field regularly.

What’s the greatest concern for wheat disease?
Fusarium head blight (head scab) has been the greatest concern over the past year. This fungus can be borne in seed or soil, which is why we highly recommend fungicide seed treatments. However, it can infect flowering wheat heads as well. While flowering, glumes that cover reproductive parts of the flower open to allow for pollination. During this time, rain can splash head scab spores into the glumes, making wheat vulnerable. The flowering pattern of wheat also makes complete control with fungicide difficult. Head scab fungicides are not systemic—they must cover the part of the plant they’re designed to protect. You must apply fungicide during flowering when glumes are open, before infection occurs. Typically, no more than 20 to 30 percent of the wheat head flowers at one time, giving you a three- to five-day window for treatment. Regardless of when you spray, you can’t protect the entire head, but spraying remains valuable—a 30 percent reduction in head scab still increases yield and grain quality.

How do head scab fungicides help ensure grain quality?
When head scab attacks developing kernels, it leaves behind a shrunken pink berry or an empty glume called a tombstone. Tombstones lower yield, reduce grain quality and often contain high levels of mycotoxin that elevators must screen. Fungicide treatment can reduce dockage at the elevator or prevent a load from being rejected. During the 2015 harvest, even well-timed fungicide treatments weren’t always enough, as tombstone scab and mycotoxin levels ran high.

What other diseases have we been seeing?
We saw several other fungal diseases, but rust was a major concern over the last year. Rust does most of its damage by attacking leaf tissue, which reduces the plant’s ability to photosynthesize energy and convert it to grain. Stripe and leaf rust are fairly easy to control by applying fungicides to wheat before infection becomes severe and after the wheat’s flag leaf emerges. When left uncontrolled, yield losses can be severe.

How can we defeat bugs?
I always recommend a seed-applied insecticide in wheat. Aphids and armyworms are the biggest problems. You can control aphids through seed treatment as well as foliarly applied insecticides. Aphids usually do the most damage by infecting wheat with the Barley Yellow Dwarf Virus; as few as one aphid per foot of row can cause enough damage to justify treatment. Armyworms move in after moths lay eggs in developing fields and worms hatch. They also migrate into fields like an invading army—hence their name. Scout for these destructive leaf feeders frequently. If levels are high enough, control them with a foliar insecticide. Hessian fly infestations can also be a concern, but planting after a killing freeze greatly reduces its likelihood. Resistance traits in wheat can also control a small number of insects on a limited basis.

What about controlling weeds?
Several herbicides can be effective, depending on the weed species and timing of application—just like with any other crop. However, fall-applied herbicides in wheat are under-utilized.

What advice can you share on seed selection for this fall?
My top bit of advice for growing healthy wheat is to start by selecting certified, treated seed designed to tolerate the challenges that you face in your area. Look for seed varieties with high yield potential as well as traits that make the plant resistant to diseases including rust, tan spot, septoria, fusarium head blight and viruses. Buy certified seed that has been rigorously cleaned to reduce the number of shriveled kernels—these are more likely to be infected with diseases such as head scab. Certified seed also helps ensure all seeds are viable. A lot of farmers save wheat in their bins to plant, but this seed may have a low germination rate, is likely not thoroughly cleaned, and could carry higher levels of seed-born diseases.


CLICK HERE for more in the Feb 2016 Issue of Today's Farmer Magazine

 

Forging into the dawn of a new era

Written by Steve Fairchild on .

MFA's success in 2015 was evidence that a diversified portfolio of products and services mitigates the extremes of weather and markets. With supplies and personnel aligned for a promising year, the cooperative suffered the same fate as its farmer/owners—the wettest spring in memory. For much of the planting season, MFA’s agronomic inputs and services were idle along with farmers’ planters.

The planting season was greatly compressed in most of MFA’s trade territory, with extremely late corn and soybean plantings, and on too many acres, no planting at all. In just Missouri, there were about 1.7 million acres idled by wet conditions.

While this dramatically impacted volumes and profitability in MFA retail, plant foods and seed operations, the company finished profitably. Precision agriculture acres continued to increase. The crop-protection business was strong. Strength in grain sales along with growth in feed and farm supply income helped bolster the bottom line.

Financial performance
MFA’s CFO Jeff Raetz reported a pre-tax profit of $12.5 million for fiscal year 2015.

That profit is derived from the financial performance made up of MFA’s constituent business entities: MFA Incorporated, MFA Enterprises, AGMO and several joint ventures.

MFA Incorporated is the member cooperative business with some $1.3 billion in sales. MFA Enterprises is a wholly owned subsidiary of MFA Incorporated. Formed in 2001, MFA Enterprises represents non-cooperative expansion including operations in southern Iowa, southeast Kansas, west central Missouri and northwest Missouri. It contributed some $217 million in sales in fiscal 2015.

AGMO is a farm-input financing business that until recently operated as a separate cooperative. In fiscal year 2015, it originated $71 million of crop input loans. At the beginning of fiscal year 2016, AGMO became 100 percent owned by MFA Incorporated.

Also contributing to MFA profitability were the company’s joint ventures. MFA has 50 percent ownership in these ventures. Cache River Valley Seed contributed $39 million in sales. Agri Services of Brunswick contributed $188 million in sales. Mid-State Seeds contributed $21 million in sales. Alliance Animal Care contributed $16 million in sales, and Central Missouri AgriServices, of which MFA is a 45 percent owner, contributed $127 million in sales. Together, the joint ventures delivered $391 million in sales.

Total volume for MFA’s business entities, including joint ventures was just less than $2 billion. That’s about $86 million short compared to sales figures from a year earlier. The decrease was primarily due to reduced sales volume in field crop sales and lower grain commodity prices.

“It was not the year we thought we would have coming out of the winter but a good profit year considering the challenges we encountered in the spring,” said Raetz.

Grain sales
Grain sales income has remained even for the past three years, even as bushels have increased. Grain moving through the system from the 2014 harvest meant MFA handled 83 million bushels in fiscal year 2015, a 33 percent increase compared to a year earlier. However, due to sagging commodity prices, grain sales income dipped slightly compared to fiscal year 2014. Raetz reminded the audience that grain sales reflected the bin-busting crop harvested in 2014. For reference, consider that in the four years leading up to the 83 million bushels handled in fiscal year 2015, the MFA system averaged about 56 million bushels per year.

Field crop sales
Field crop sales (plant food, seed, crop protection products) produced revenues of $665 million in fiscal 2015 compared to $741 million in 2014. A decrease of $76 million. Volume was driven lower from considerable weather difficulties in the planting season.

“The 1.7 million acres of prevented planting had significant impact on these volumes,” said Raetz. Plant food sales were down 7.5 percent compared to a year earlier which totaled 945,000 tons. This resulted in a $30 million decrease in sales. Seed sales slipped 23 percent compared to a year earlier to total $75 million. Crop protection sales volume reached $164 million, a 11 percent decrease from fiscal year 2014.

Livestock supply sales
Livestock supply sales (feed, farm supply and animal health) totaled $169 million in fiscal 2015, similar to total sales from a year earlier.

“This is not a true reflection of the volumes we are handling in livestock supply sales,” said Raetz. “Lower commodity/feed unit values have driven category sales dollars lower.”

After several years of decline, animal numbers in MFA’s trade territory are projected to increase as the beef herd rebuilds and the livestock complex adjusts to market signals in general.

Even as the low end of the beef cycle occurred in fiscal year 2015, MFA increased tons of feed sold to 343,000, about 3 percent more than the previous year.

“We continue to feed a higher percentage of the animals in our trade territory. Our feed division has developed products that set us apart from our competition,” Raetz said. “While livestock prices have recently come off all-time highs, the forecast continues to be favorable for this segment of our market.”

Higher value for livestock has meant that producers are willing to spend more on their investment. Animal Health and Farm Supply sales were up a consecutive year. In fiscal year 2015, Animal Health sales increased 14 percent to $16.1 million while Farm Supply sales increased 16 percent to $37 million.

Margins and expenses
Product margins, service revenues, joint venture earnings and patronage combined for a total of $216 million, a $7 million decrease compared to fiscal year 2014. This decrease follows the softer sales numbers mentioned earlier. In general terms, areas that reported increases in margins included MFA retail stores, due largely to increased grain volume from the 2014 harvest. Farm Supply, Feed and Animal Health increased margins on the strength of livestock markets. Areas in which margins decreased reflected the weather challenges for the year. They were Plant Foods, Crop Protection and Seed.

For fiscal year 2015, joint venture earnings, which tend to follow margins on agronomic offerings, were $2 million compared with $5.1 for fiscal 2014.

Expenses
Expenses for fiscal year 2015 totaled $203 million, a 2 percent increase over a year earlier. This total includes operating and fixed expenses, but excludes income taxes.It doesn’t come as news to farmers that agriculture is a capital-intensive business. Maintaining inventories and operating facilities requires significant expenditures.

“Good facilities, good equipment and good employees are essential to our success,” said Raetz, “And there is a cost associated with maintaining each of these. We have and will continue to manage these areas closely.” Perennially, the budget categories of Car & Truck, Repairs & Maintenance and Personnel Costs account for approximately 80 percent of MFA’s operating expenses.

Balance sheet
Working capital measures MFA’s ability to meet short-term financial obligations. In simple terms, it is current assets (receivables, inventory and prepay) minus current liabilities (vendor/grain payables and short-term debt).

“Strong working capital gives us the flexibility to take advantage of volatility in commodity prices, prepay opportunities and expansion opportunities,” said Raetz. “And it allows us to pay patronage and retire past equities.”

For fiscal year 2015, working capital finished at $75 million, down from $91 million in 2014. The decrease represents capital expenditures, additional investments in joint ventures and more than $10 million in patronage and retirement of past equities during the year. All of these expenditures were funded through working capital.

Investment activity, also funded from working capital, represents MFA’s ownership in joint ventures, interregional cooperatives and deferred assets. The total for fiscal year 2015 was $61 million, an increase of $12 million compared to a year earlier. Of that total, some $32 million is accounted for through investments in joint ventures.

Fixed assets (land, buildings, equipment and owned rolling stock) totaled $97 million, up $1 million from fiscal year 2014. This figure doesn’t account for leased equipment, which, if owned, would add an additional $30 million to the fixed assets column.

“MFA continues its plan to invest significant capital to upgrade facilities and equipment and to acquire assets in new geography,” said Raetz. “Over the past four years, the company has invested a total of $87 million in those categories.”

Total assets for fiscal year 2015 were $441 million, up slightly from the previous year’s total of $439 million.

For MFA, there are two primary sources of long-term debt: term loans with CoBank and the MFA Bond Program, which is classified as unsecured debt. Bonds are an important source of non-bank financing for MFA and represent some $57 million of $72 million in outstanding long-term debt.

Net worth
“We have a good trend line in net worth since 2011,” Raetz said. Total net worth increased to $154 million in fiscal year 2015. “This number represents the amount of the company owned by you, the farmer member,” he said.

On Aug. 31, 2015, the end of the fiscal year, member ownership was 35 percent, up a percent from the previous year. MFA has a standing goal to reach 40 percent member ownership.

Raetz said that a five-year run of strong profits on its own operations has strengthened MFA’s balance sheet and made it a much stronger company. He added that MFA has leveraged that success by building for the future through increased investment in facilities as well as increasing cash payments to member/owners.

Patronage
MFA by-laws stipulate that patronage will be paid on earnings. For fiscal year 2015, total pre-tax earnings were $12.5 million. Of that total, some $2 million was non-patronage eligible as it came from outside of cooperative-designated earnings through joint ventures and MFA Enterprises. These earnings are not eligible for distribution.

Additionally, there was $2.7 million in earnings from business with non-members—mostly from non-member wholesale business. This also is not eligible for distribution.

There was a tax adjustment of $3.4 million.

Therefore, of total earnings, there is $4.4 million available for distribution to MFA members. MFA Incorporated’s board of directors voted to make a patronage allocation of the full $4.4 million back to the members. Half ($2.2 million) will be paid in cash. The remaining 50 percent will be allocated equities.

Equity retirement
“If you look at our member equities, they currently go back to 1980 which is 35 years,” said Raetz. “MFA management has developed a plan to reduce this timeline. It’s obviously contingent on continued profitability.”

Raetz said that the company’s continuing goal is to incrementally work outstanding equities down to 25 years, then 20. He pointed out that the reduction will take time.

As part of that plan, MFA’s board of directors voted to retire 50 percent of remaining 1980 equities ($2.8 million).

The cash patronage along with 1980 equities bring the total paid to back to member/owners to $5 million.

Wholesale patronage and equity retirement began in December. Retail patronage and equity retirement began in January 2016.

Domestic production deduction
In addition to patronage, MFA will once again take advantage of a manufacturing deduction that falls under the IRS designation “Domestic Production Activities Deduction.”

“Our preliminary calculations suggest that approximately $5.5 million in deductions are available and can be passed through to members on grain sales made to MFA during fiscal 2015,” said Raetz.

Raetz informed the audience that a notice separate from patronage checks will be sent to eligible members sometime in late spring 2016. Calendar-year taxpayers will be able to use the deduction on 2016 tax returns.

Going into a challenging agricultural economy, Raetz said that MFA’s financial plan for fiscal year 2016 reflects target net income after taxes of $11.7 million, up slightly from $10.8 million this year.

“Each year, we set goals. We develop and fine-tune operating plans to continue to build the financial strength of MFA,” said Raetz.

View the Keynote Speaker HERE

More in the Feb 2016 Issue of Today's Farmer Magazine

 

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