President's / Chairman's Letter
MFA’s fiscal year ended Aug. 31, 2009, is by far the most difficult year in the company’s history. Largely as a result of the global economic crisis and volatility in commodity markets, energy and plant foods, MFA Incorporated reported a substantial loss for the fiscal year, following the previous year’s record company profit. MFA’s balance sheet strength is such that at no point during this period was member equity impaired.
Four areas represented the negative results: devaluation of generic crop protection products, deteriorating values of feed ingredients, negative effects of the H1N1 flu panic on the swine industry and, most specifically, precipitous decline in fertilizer prices. Considering MFA’s inventory positions in these affected sectors of agriculture, the cooperative’s losses were understandable. Still, we consider those losses to be unacceptable.
MFA management has established risk-management policies and controls to prevent recurrence of these losses. MFA’s balance sheet and loan structures continue to allow the cooperative to capitalize on opportunity in the marketplace. We have a high degree of confidence in the company’s ability to generate healthy profits. In fact, for fiscal year 2009-2010, management has conservatively budgeted good profitability. MFA also enjoys the full support of its lending institutions.
MFA continues to enjoy a capital-structure competitive advantage. Our balance sheet remains solid. MFA’s seed division had outstanding results of $6.3 million in earnings. The crop protection division had record earnings of $5.9 million. MFA’s retail division had its second best year ever with earnings of $8.5 million. The cooperative has continued to open new locations, to construct state-of-the-art fertilizer plants, to grow MFA branded seed, to strategically acquire facilities, and to implement new products and programs to benefit member/owners.
Despite this past year’s dramatic market fluctuations, MFA remains a strong company. MFA is unique, a farmer-owned enterprise, developed to serve the specific needs of farmer/members in our sales territory. Products and practices have changed over the nearly 100 years of MFA’s existence, but the basic characteristics of our market, members and company remain the same. MFA has a proud history and an excellent reputation. We have a strong customer base. Our employees are well respected by customers, suppliers and other agribusinesses. MFA is large enough to compete favorably and small enough to understand and appreciate our customers’ needs.
MFA’s physical presence and heavy concentration in the territory provide competitive advantages. Adding to those advantages are the cooperative’s offerings of application equipment, precision farming services, product and performance testing, specialized customer contact, intricate customer databases, regional storage opportunities, customer education opportunities, and information services.
Above all, MFA has experienced tough times before and has continued to prosper. MFA has an outstanding workforce. MFA charts the course, and MFA employees pull together to assure continued success. Together, MFA members and MFA employees will make this a better company than ever before.
President and CEO
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