Focused on positive gains

CoBank estimates the market share held by farm supply and ser­vice cooperatives to be in the 45% to 50% range. As member-owners, you own or influence a sizable percentage of the agricultural input market in your area. Thank you for participating in MFA.

As we close 2020, I can tell the past 24 months have strained that cooperative market share. When MFA closed fiscal year 2020, we recorded a $15 million loss. It follows a loss in 2019.

In recognizing those losses, I must accept the responsibility to reverse the trend. Along with other leaders in MFA and your board of directors, I am committed to returning your cooperative to acceptable profitability levels.

It is a process that requires an understanding of the critical factors that reduced profits.

In fiscal 2020, large sections of MFA’s operations were affected by input sales and grain volume hang­over from flooding and prevented planting during the prior spring.

We saw devaluation on the inputs inventory we owned, which also brings a cost to carry the product. Wet weather at planting reduced harvest-time grain volumes to begin fiscal 2020 (fall 2019). Then, adverse weather significantly reduced fall fertilizer application.

Still, we turned the page to cal­endar 2020 with a positive outlook. Commodity prices had returned to respectable levels, and U.S. trade agreements looked to create more predictable export sales.

Calendar 2020, though, was something other than predict­able. Aside from its monumental effects on public health and public movement, COVID-19 created uncertainty in the marketplace that led some producers to shift plans for crop inputs and feed, often seeking cost reduction. Wet weath­er through early spring further reduced input purchases. It was the lowest January-to-March sales activity for MFA in more than 15 years, putting additional pressure on existing plant foods inventory.

The cumulative effects of these challenges took an estimated $15 million from our bottom line. I’m not trying to rationalize the loss but to give context to plans going forward. There will always be dis­ruptions. We must manage to mini­mize their effects on profitability.

How do we go forward? We must take action to answer these two questions: 1) What opportunities exist in the marketplace? 2) What capabilities and resources help MFA take advantage of the opportunities?

For MFA, the opportunities are in delivering on our value proposi­tion—enhancing producer capabil­ity and profitability. That’s where we will focus resources.

Our top resource is our people. Competition for talent is tremen­dous, but we continue to focus on retaining employees who can de­liver value to you. We continually evaluate that talent. Do we have the right people in the right place?

In 2020, MFA’s agronomy and sales employees were combined under the retail umbrella. The change was intentional and made to improve customer relationships and overall account management.

After people, MFA looks toward products, services and facilities— all resources that our employees need to excel. That means investing in strategically placed facilities. Supplier competition and product delivery methods change every year. In some cases, it will look dif­ferent from the past. We must keep investing but with better focus.

MFA starts this year with an­other resource—financial strength. The past two years have reduced the strength of our balance sheet. Losses always do. But the strength we had built in our balance sheet has allowed us to absorb the hit.

Yet, it’s time to turn the tide.

What will you see going forward? We will employ our resources to build profitability. We will strive to hire and continue to develop the best talent in our trade area. We will focus on customer rela­tionships with competitive pricing that drives sales. We will offer value-added products and adopt technology that benefits you. We will help manage data for improved agricultural decisions.

You’ll also see a focus on member engagement, especially at the local advisory board level. Your involve­ment makes MFA better.

All of these strategies are targeted toward serving our customers and improving profitability. MFA’s fiscal year 2021 budget plan is to finish with a $3.2 million profit. That’s a target smaller than our long-term profitability goal, but it significant­ly improves recent returns. It’s an achievable turnaround and a first step in the improvement plan.

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