Baseball pitcher Joaquin Andujar enjoyed a sometimes stormy, sometimes stellar 13-year career that included time with the St. Louis Cardinals in the mid-1980s. Cardinal fans will know he pitched in two World Series. He was part of winning the championship against the Brewers, and three years later, part of losing the championship to the Kansas City Royals.
Andujar was quoted many times during his big-league career. One comment that resonates with me describes the last 18 to 20 months in agriculture. After a disappointing performance, he told a reporter, “You can sum up the game of baseball in one word: ‘You never know.’”
But who’s counting words?
Agriculture is a cyclical and sometimes volatile industry. “You never know” often fits the situation. Take the onset of the pandemic in 2020, which delivered a stretch of volatility we had never seen before.
Entering fiscal 2021, we were cautiously optimistic about the potential for the year. Commodity and livestock markets had recovered to respectable levels. MFA’s $3.2 million budget for the year reflected significant improvement over the previous two years but well below our annual expectations.
In the category of “you never know,” the industry didn’t anticipate the late 2020 and early 2021 run-up in grain and fertilizer prices. That movement changed market dynamics, especially for row-crop farmers. It provided optimism and opportunities for you and your cooperative. We were able to capitalize on some opportunities as were many of you.
It’s no secret that a significant part of profitability above our targeted plan was attributed to a favorable fertilizer market. It was a welcome reversal from a fertilizer market that devalued during fiscal 2020 and contributed to our losses. Some years it works in our favor. Some years it works against us.
But, let’s not overlook other positive efforts this year. Our team did a fantastic job serving MFA customers and delivering value to your operations. And, they did it in the face of supply chain disruptions and product shortages. MFA had sales increases in all supply sales categories, with fertilizer and crop protection leading the way. We also improved focus on expense management and capital investments.
All together, MFA finished fiscal 2021 with a pre-tax profit of $23.5 million, the fourth-highest posting in company history. I’m proud of the team. They delivered outstanding results. We now benefit from a really solid balance sheet again.
Despite the profit level, we won’t pay patronage this year. We have net operating losses carried over from the past two years, which will be used to offset the current year’s profits. This was a recommendation made by management and approved by the board of directors in September. It wasn’t an easy decision, but it is the right decision.
There were a couple of other factors to consider in the decision. First is that net farm income for most producers has been pretty good over the past year, thanks to commodity and livestock values plus government payments tied to the pandemic. Second, we realize that MFA can’t deliver on our value promise if we don’t have dependable facilities and equipment. Late in fiscal 2021, MFA made considerable investments in rolling stock.
One of our key priorities going forward is investing in facilities that provide the best opportunity to generate profit for MFA and value to our producers. We currently have three large projects in process.
Right now, our Adrian grain complex is being rebuilt with expanded capacity after damage from an explosion on Dec. 31, 2020. It should be fully operational by summer 2022.
Additionally, we will construct a centralized fertilizer and crop protection facility in Nodaway County near Ravenwood, Mo. That facility will be a hub for producers in the area who do business with MFA.
Finally, we will construct a centralized fertilizer facility in Lafayette County, just outside Higginsville, Mo., to serve producers who support MFA locations in the surrounding area. This project, and the facility in Ravenwood, are expected to be complete by fall 2022.
These facilities will provide the speed and space demanded by a changing customer base. It is the right time, and we have the right people in place to lead this change. It is important to note that these projects are not expected to impact overall capital available.
In my Viewpoint for April 2020, I discussed resilience in a harsh environment. I said that we could work through the challenges if we maintained passion, stayed prepared and exhibited perseverance. Because “you never know.”
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