'Year Ahead Report' suggests slowing economic growth, growing ag debt

Expect trade uncertainty, rising debt levels and market volatility to continue creating difficult operating environments for U.S. agricul­ture in 2019. That’s the outlook from a wide-rang­ing report compiled by CoBank, a $128-billion cooperative bank serving rural America.

“Trade is the outsized risk,” said Dan Kowalski, vice president of CoBank’s Knowledge Exchange Division. “Unresolved disputes with Mexico, Can­ada, Europe and China are the greatest collective threat to the U.S. economy in 2019.”

The report, “The Year Ahead: Forces That Will Shape the U.S. Rural Economy in 2019,” offers a look at these 10 key factors:

  1. Global Economy — The global economy is slowing and the effects will spread to U.S. shores in 2019. World economic output hit an eight-year high in 2018, but challenges and risks are deci­sively weighted to the downside for the coming year. Trade policy between the U.S. and China will remain the leading risk to the global economy.
  2. U.S. Economy — The U.S. economic ex­pansion is set to become the lengthiest in history this summer. But clouds forming on the horizon suggest more modest growth in 2019 and greater concerns for 2020. We can expect a delicate balance of consumer strength to offset a slowing housing market and weaker business investment.
  3. Monetary Policy — The world’s largest economies were widely expected to grow in concert in 2018. That did not materialize. As a result, major central banks are attempting to guide their econo­mies through very different stages of recovery. Gross domestic product forecasts have been cut amidst a darkening outlook for the U.S. and Chinese econ­omies. It may become very difficult for the Federal Reserve to raise rates absent a spike in inflation.
  4. U.S. Government — With a split Congress, finding consensus over the next two years to move large legislation will be difficult, but there are rea­sons for managed optimism. The 115th Congress reauthorized the Farm Bill, yet the administration’s efforts on trade have many in agriculture nervous. There is work needed to re-establish major trade relationships before any further damage is done.
  5. U.S. Farm Economy — With agricultural commodity markets depressed by global supply abundance and ongoing trade disputes, farmers and ranchers face the arduous task of cutting production costs. However, continually rising costs in agriculture are expected to squeeze producers, causing further margin erosion and financial stress in 2019. Farmers should not bank on a fourth consecutive year of above-trend yields to make up for low commodity prices and rising costs.
  6. Ag Trade Policy — Ongoing tariffs and trade negotiations continue to hang over the U.S. ag economy with no clear sign of resolution, clouding agriculture’s trade outlook for 2019. Progress in negotiations is likely to be slow, which spells more pain for months to come. As a result of the trade war, the value of total U.S. agricultur­al exports in 2019 is expected to fall to $141.5 billion, down $1.9 billion from 2018, according to the USDA’s latest projections.
  7. Grain, Farm Supply and Biofuels — In 2019, expect new and intense competition for the grain, farm supply and biofuel sectors. These competitive changes will benefit a few while hurting many along the supply chain. The most impactful competitive pressure will come from outside the United States. Abundant U.S. supplies and a protracted trade dispute with China have enhanced foreign opportunities. Ag retailers will also face price hikes from a more concentrated supplier base.
  8. Dairy and Animal Protein — In 2018, the U.S. animal protein sector began suffering from the same oversupply and weak margins that have plagued U.S. dairy producers since 2015. Despite the less-favorable profitability environment, the protein and dairy sectors will continue to ex­pand production in 2019, prolonging the margin squeeze. Beef appears to be weathering the animal protein oversupply situation best.
  9. Rural Electricity — Last year was a turning point for the role data analytics will play in trans­forming the rural electric co-op industry. Opti­mization of the grid offers many benefits in cost savings and member relations. However, if co-ops do not harness the power of data to unlock value, third-party providers will step in to provide this service. Co-ops cannot afford to delay adopting strategies for a more distributed future.
  10. Rural Communications — Over the last few years, electric distribution cooperatives have been building fiber networks, causing fear about increased competition. For 2019, rural America should expect to see a continuation of these net­work builds, but the risk of co-ops overbuilding is low. Their primary focus is underserved markets to benefit their own operations and their customers.

The full report is available at cobank.com.

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Conversion nearly complete for MFA's MerchanAg software

Merchant MFAHolly Clevenger, an employee at MFA’s Agri Services Orrick location, works in MerchantAg, MFA’s new retail software system.A major milestone for MFA came in February with the conversion of the last group of company-owned stores to the MerchantAg retail software system.

The process began in late 2012 to replace the cooperative’s outdated mainframe computer with a modern platform that could integrate MFA’s wholesale and retail operations. The first stores went online with the MerchantAg system in July 2016, and the implementation team has been steadily adding more locations ever since.

The most recent stores to begin using the new system on Feb. 1 are MFA’s Trails Group (California, Cole Camp, Jefferson City, Sedalia, Tipton, Versailles and Windsor) and West Central Group (Adrian, Centerview, Chilhowee, Harrisonville and Rich Hill).

With MerchantAg, customers will see more than just a new look to their receipts and statements. The software offers benefits not available under the old system, said Craig Childs, MFA senior vice president of Agri Services.
“Consolidated statements are one big advantage,” Childs said. “A customer can buy products at multiple stores, anywhere in our trade area, and receive one statement. They can also have tickets emailed to them.”

For the stores, there are many other behind-the-scenes benefits, including a much more precise way to control inventory, margins, financials and customer data.

“This software gives MFA more consistent and centralized information to provide a better purchasing experience for our customers,” said Curt Price, MFA Incorporated operations controller. “The accessibility of this information and ability to support our retail locations will transform the way MFA does business.”

Price and a team of employees in MFA’s Retail Accounting and Information Technology departments have overseen the development and implementation of the MerchantAg software from the start. The daunting task began with the selection of EFC Systems, based in Brentwood, Tenn., as MFA’s software vendor. The team worked with EFC programmers to customize the software to fit MFA’s business model, which is a hybrid structure of company-owned stores and local affiliates along with wholesale operations.

“When we began looking at vendors, they either offered wholesale software or retail software, and we would have to find a way to integrate them,” Price said. “EFC offered both.”

Improved inventory management is among the biggest benefits of the new system, he said. Previously, there was a delay between the time products were sold or received and when inventory was updated in the computer. Now, that process happens in real time. Plus, company-owned locations can access current inventory records at other locations to shift products as needed to meet customer demand.

“It gives our stores visibility to other stores’ information, and it gives them visibility at the wholesale level,” Price explained. “They can see quantity on hand at the warehouse, so the store can more easily manage their inventory and provide the customer with products on a more timely basis.”

With MerchantAg, MFA Agri Services centers and local affiliates have improved access to actual costs, margins and expenses, which should lead to better analysis and, ultimately, profitability, Price added.

Though considered successful, the conversion process hit a number of snags along the way, but Price said that’s to be expected of a project this size. For example, reconciling product numbers was time-consuming. Historically, each store had maintained its own item database, but those product numbers might vary from location to location. In the MerchantAg system, company-owned stores now operate from a centralized product list, so those numbers had to be streamlined to one system. This also sets the stage for future online sales opportunities.

There is also now a common customer database for all company-owned stores with new identification numbers assigned to everyone who had an account in the system.

Because they operate independently from MFA, local affiliates have presented their own set of challenges in the conversion process, Price said.

“There are complexities associated with locals that we didn’t anticipate,” he said. “Even within the same company, they might not call a product the same thing or carry it in the same category across branches. We had to set parameters for inventory management. And each local maintains its own customer list. There’s no way to consolidate that because they are separate databases.”

MFA’s grain business has perhaps posed the biggest stumbling block, Price said.

“The way we handle grain made developing that part of the software much more difficult,” Price said. “At MFA, we centralize grain hedging but record profitability at the location level. Completion of the grain software fell outside our implementation window, so we moved forward with an alternative solution.”

That solution was to first convert all non-grain locations to MerchantAg, and then deploy the software to the remaining locations for their non-grain activity only. Grain transactions are currently recorded on the old “legacy” system.
This is a temporary solution, Price said. The grain software is expected to be completed by late spring or early summer, with plans to launch a pilot location before harvest.

The amount of education and support needed to ensure a smooth transition has also been a learning experience, Price said. Before every conversion, an intensive one-day training is held to cover the system’s most important functions. Support personnel also stay on site anywhere from a few days to a week during each MerchantAg deployment. A subsequent training is held 45 days after conversion to delve deeper into the features.

“Every time we bring a new group online, there’s something else that crops up that we didn’t anticipate,” Price said. “The workload that first week is amazingly busy. We’re constantly taking calls. By the end of the week, however, it starts to slow down.”
The MerchantAg implementation builds the foundation for future online interaction with MFA customers, the first of which is a customer portal (see story below).

“One driver for us to change software platforms was to give customers online access to their accounts,” said Childs. “Our legacy system just could not do this.”

Getting all company-owned stores on MerchantAg is a “big hurdle,” Price added, but there is plenty of work left to do.

“We’re still experiencing growing pains with MerchantAg, and we’re continually pushing updates and changes to the software,” Price said. “Training our personnel will be an ongoing task. But I’m proud of the work that our entire team has done so far. They’ve sacrificed a lot and put in many hours to provide MFA with a computer system that will serve our company well for many years to come.”

MFA launches online customer portal Merchant CustomerPortalScreenShot

With the completion of MerchantAg conversions at all MFA company-owned stores, a new online customer portal is available that provides a convenient connection to detailed account information.

Through the portal, customers can access invoices, statements, purchase history, bookings, prepaid contracts and much more. They can run summary reports of purchases for any time period and export it to a spreadsheet for their recordkeeping. Customers can also conveniently pay their bill through an electronic bank payment, which helps remove inconsistency of mailing checks and makes payment posts more timely.

“As MFA moves into the future, technology is playing a bigger role for our customers, especially those who prefer electronic communications,” MFA Operations Controller Curt Price said. “The online portal offers a convenient way to track input expenses and pay bills, and that’s important these days when producers are busier than ever.”

To access the customer portal, simply log on to https://customerportal.mfa-inc.com/. If this if your first time accessing the portal, click “Create Account.” All you’ll need is a recent MFA receipt with your account number, store number and invoice number.

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Plotting for pollinators

Paris FFA plants native habitat with help from MFA, MDC, Quail Forever

In December, students from the Paris High School FFA chapter took time from their indoor studies to sow seed over a half-acre plot on the school grounds. The seed will eventually grow into a plot of native, blooming plants designed to attract a variety of pollinator insect species.

ParisPollinatorsThe project is a joint effort among the FFA members, MFA, Missouri Department of Conservation and Quail Forever. Over the past year, MFA Precision Agronomy Manager Matt Hill has been working with the school’s ag teacher and FFA advisor, Josh Bondy, along with MDC Private Lands Conservationist James Ebbesmeyer and local Quail Forever Farm Bill Biologist Courtney Nicks to establish the pollinator plot in hope other schools will follow suit.

“MFA is an active member and funding partner on the Missourians for Monarchs Steering Committee, whose focus is to educate Missourians about monarch butterfly population declines, habitat needs and ways to help,” Hill said. “Schools, community groups, and nonprofits are great partners that typically have access to some acres that aren’t utilized to the full potential and are usually excited about new projects like this.”

Over 30 different varieties of native species were planted in the Paris plot. The students will be involved in its management, collecting data on different populations and participating in management practices like prescribed burnings and landscaping. Ebbesmeyer said that something should be blooming during the spring, summer and fall to attract a variety of insect species.

“We wanted to work with the younger students on this so they would be able to see the full cycle,” he said. “This year these plants will begin to grow, but the plot probably won’t fully flower until next year. By that time, it should be buzzing with activity out here.”

The goal of the project doesn’t only involve educational opportunities for students. Bondy says he hopes the community will use the land as well. A walking path is projected for the future, and signs will identify the native species.

“I’m curious to see what parts of the community find uses for it,” Bondy said. “My wife works as a photographer, and she was excited because it would be another place to take photos. That’s something I hadn’t thought about. I’m want to see other teachers bring their kids over to learn about the life cycles of these plants and insects.”

It’s important to find ways to get kids outside for any reason, Hill added. “But I hope introducing students to the benefits of native plants and diversity early on will result in appreciation later in life.”

CLICK TO READ more stories from the Feb. 2019 Today’s Farmer Magazine.

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