Annual Report

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MFA Incorporated Annual Report for August 31, 2009

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.


Bill Streeter
President and CEO

Joe Dent
Chairman of the Board


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Fiscal year wrap up

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Having wrapped up a difficult fiscal year in August 2009, MFA Incorporated’s board of directors decided to decentralize the annual meeting to provide more opportunity for interaction between the cooperative’s members, directors and management.

The meeting was split into five regional venues to accommodate member travel. {gallery}Feb10/meet:200:260:1:0{/gallery}

MFA president and CEO Bill Streeter addressed each crowd with the same message: Fiscal year 2009 was a challenge for the cooperative. Retrospectively, we know what happened and how it happened, and at the direction of its board of directors MFA has developed policy and risk-management strategy for the future.

The challenges were familiar for many ag retailers during the same timeframe. Plant food inventory purchased for fall distribution sat in warehouses due to a late harvest and wet fall. Meanwhile, a volatile fertilizer market ebbed greatly, causing stored plant food to depreciate to unprofitable values. Devaluation also affected the generic crop protectant market, affecting MFA inventories.

At the same time, an already weak pork market imploded on news of the H1N1 influenza. MFA’s swine operations suffered along with the rest of the industry. Deteriorating values for ingredients that MFA had already contracted for fall and winter feed production also affected profitability.

In the face of these shortcomings, expenses were ratcheted down by $22 million, or 13 percent, from the previous fiscal year. Nearly half of that savings came from freezing wages, eliminating bonuses and reductions in retirement funding. Repairs were down by $6 million and lower fuel prices and lower volumes in grain and plant food meant car and truck expenses were down by $4 million.

Looking at the cooperative’s fiscal year in more detail, there were certainly positive achievements to report.

The Seed Division earned $6.3 million and Crop Protection had a record year, earning $5.9 million. Thanks to strong grain revenue, the Retail Division had its second best year ever with earnings of $8.5 million. MFA opened several new retail locations to achieve increased market share. A new and highly efficient fertilizer plant in Piggott, Ark., came on line. MorCorn and MorSoy continue to succeed in the market. An employee safety plan has had real results on insurance claims and is saving the cooperative money.

In his address to the membership, Streeter said that he and MFA management had put Fiscal Year 2009 behind them, but the lessons learned won’t be ignored. A risk management team is in place and meets frequently to review MFA’s ongoing business. But, he said, by no means will that prevent the cooperative from an attitude of growth and investing in opportunities with promise for solid returns. Streeter added that the cooperative’s strong customer base, economy of scale, penetration in the marketplace and well-respected employees put the cooperative on a strong path toward profitability in Fiscal Year 2010 and beyond.

“The long range plan to keep MFA healthy is profits,” said Streeter. “We cannot save our way out of the kind of events we have been through. We will increase sales and continue to find opportunities for growth.”

Replacement heifer management

Written by Dr. Jim White on .

MFA TECHNICAL BRIEF: MFA’s new feed, Cruisin’, can fill the gaps in forage and nutrition

I was reading the program information for the Missouri Show-Me Heifer program when I ran across this line: “One of the largest problem areas for cow/calf operations is the developing phase of the replacement beef heifer and related inadequacies in nutrition and management.” And the following paragraphs brought an excellent point—beef replacement heifers are principally forage-fed and many operations do not measure growth.

To achieve good reproductive efficiency,

Spend it wisely

Written by Nancy Jorgensen on .

Investments you can make during uncertain economic times.

If you’re like most farmers, you probably aren’t planning many major purchases these days. Profitability took a dive for most operators over the past year or two—especially for livestock growers. But, if you have the resources, it may be a good time to consider some modest and wise investments. Some will cost you more time than money.

We asked Daryl Oldvader, CEO of FCS Financial, if the time is right to upgrade or make new purchases for the farm. He referred to an old saying about real estate—that you should look for three things—location, location, location. “The three financial priorities of any producer in this environment should be liquidity, liquidity, liquidity,” said Oldvader, whose association provides financing to Missouri farmers. In other words, take care to limit your debt.

What do they tell us about fertilizer?

Written by Nancy Jorgensen on .

If you live in rural America, chances are you don’t use much natural gas. Generally, suppliers deliver natural gas via pipeline to homes and businesses in urban centers. When you fire up your furnace this winter, your fuel probably comes from a white tank out back filled with liquid propane (LP), a by-product of both natural gas and oil processing.

But natural gas may affect you more than you realize. For nitrogen fertilizers, “natural gas has the largest impact on production costs—it’s about 70 to 90 percent of the cost,” according to Kathy Mathers of The Fertilizer Institute.
When American grain growers look back on 2008, they will remember strong returns, but also sharply higher prices for inputs such as fertilizer. 2008 also brought high natural gas prices.


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