The cycle can be unkind
When MFA leaders give presentations about the fiscal year that ended Aug. 31, 2019, I imagine the emotions of farmers who shared the challenges MFA and all of agriculture faced last year. Possibilities for those emotions range from pessimism about what we dealt with to optimism about factors that could bring an agricultural rebound. Hopefully, though, we all settle somewhere between. Realism is the best way to meet challenges.
Throughout our long history, MFA has enjoyed the peaks and endured the valleys delivered by agriculture’s cyclical nature. Those peaks and valleys have trained us to strengthen the organization in the good times and to be prepared for the difficult times.
For all of us in agriculture, the past four or five years have been challenging, and in many ways, the past 12 to 18 months have been the most challenging of the period.
MFA ended its fiscal year with a loss. It’s not something I’m proud of, and I know I speak for everyone in the company when I say that. Whatever the outcome of each year, it is essential to understand the factors that led to the result.
For 2019, one notable factor was prevent-plant acres. There were 1.4 million in Missouri alone. Of that total, 750,000 acres were corn—a 20% reduction. About 450,000 acres intended for soybeans didn’t get planted—an 8% reduction.
For a company like MFA, loss of those acres resulted in significant decreases in sales of fertilizer, seed, crop protection and our Crop-Trak and Nutri-Track acres.
When we analyzed the challenges from 2019, three major influences were prominent contributors: weather, the general farm economy, and changes to our sales structure.
The weather impact was estimated to be $18 million. The impact of the tight farm economy—mainly in feed and farm supply—was estimated at $4 million. And, we estimate $500,000 in potential lost in the process of implementing our new sales structure.
I list these factors not as a way to rationalize the loss but rather to specify the causes. That’s necessary to develop plans for recovering those sales volumes going forward.
Of course, we won’t recover all of it at once, because there is never a “normal” year in agriculture. But as we move through 2020, we do have the plans, people and desire to capture the vast majority of volume lost this past year.
Certainly, MFA’s goal of continually strengthening the balance sheet has paid off during the latest down cycle. Our balance sheet is solid despite the loss.
Given my role with the company, people frequently ask me to comment on how MFA has done over the past year. I’ve had a chance to fine-tune my answer this year. I start by saying, “The good news is that the year is over. We have an opportunity to start fresh.” I follow that statement by explaining that our most significant challenges— weather and trade—are outside of our control.
We can’t ignore those factors. We have to recognize they are always a threat and find ways to mitigate their impact.
Another part of my answer is that we have a system and team in place to take advantage of opportunities going forward.
I finish the answer by pointing out that we can’t forget the many things we did right in fiscal 2019, whether that was the teamwork it took to handle major flooding or the outstanding service our team provided during the short windows of time suitable for fieldwork.
The retail agriculture market is mature and very competitive. A year ago, I wrote about new organizational structures for MFA retail, sales and agronomy. Those changes were made to strengthen relationships and improve interactions with our members and customers.
Despite the change, most of you are dealing with the same retail staff, the same sales staff and the same livestock and agronomy staff. I believe, as a company, MFA is better focused on building relationships with you and better prepared to serve your needs.
For 2020 and beyond, we will continue to focus on three areas. First, we’ll focus on customer relationships and delivering MFA’s full value to the farm. We’ll continue to emphasize improving and maintaining our operations by investing in facilities and rolling stock.
Finally, we will continue to empower MFA employees with the training and tools they need to help you grow your operation. That’s the ultimate measure of our success.
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