Taking hold of an uncertain future
External risks require planning and focus for farmers and agribusinesses
As we reviewed MFA’s successful fiscal year at our annual meeting on Nov. 29, one topic we covered was how market and supply-chain volatility has affected our operations. I’m sure this topic has been repeated at annual meetings, quarterly stockholder calls and financial updates in every business sector.
Clearly, the uncertainty in the supply chain hasn’t settled. As soon as one part gains traction, a disruptive factor emerges elsewhere. We’re living through a real-time object lesson illustrating modern interdependence on global manufacturing and trade. Part of that lesson is that solutions don’t travel nearly at the speed of disruptions.
As we cross the threshold into 2023, one New Year’s prediction I feel safe making is that operational risks brought on by heightened volatility and uncertainty will continue. For all of us in agriculture, seeking to manage external risk in our operations during the coming year will require focusing on some particular challenges.
The conflict in Ukraine continues to deliver anxiety. Putting aside the danger of escalation, that situation affects agriculture more acutely than other industries. Its disruption to energy, grain exports and crop input supply will continue to be an immediate risk for U.S. farmers.
Along with international disruption to commodity flows, drought in the United States has added energy to this instability. While supply challenges can sometimes present opportunity, that’s small consolation to producers in the southern and southwestern areas of MFA’s trade territory who were hard-hit by drought this past year. Current conditions across the Midwest will rightly keep the attention of markets and agricultural officials.
Exacerbating many of the challenges we face, limited availability of labor and transportation means we have to move inputs and products into our facilities earlier. We can’t rely on just-in-time delivery. Moreover, as I write this, we’re still navigating a potential rail strike, and the Mississippi and Missouri rivers are at record-low levels. Each of these threats is enough to affect daily business. Combined, they could deliver a more severe blow.
Managing the risk brought by these scenarios is complicated by macroeconomic conditions such as historic inflation, which is severe enough to suggest a recession. It’s a concern for the near-term success of agricultural operations and the American consumer—our ultimate customer. An inflation-fueled stronger dollar is also a threat to ag exports and the income they bring.
Central banks fight inflation by raising interest rates. As of November 2022, the Fed had added 375 basis points to interest costs and suggested that more increases were on the way. In an asset-heavy industry like agriculture, increased cost for borrowing ups the ante for risk.
Amid the uncertainty and volatility, we must stay positive and move forward together. MFA’s focus is on positioning the company to minimize risks and take advantage of opportunities available to the cooperative and its members.
A few years ago, business trends author Patrick Dixon wrote one of those lines that sticks in your head: “Take hold of the future, or the future will take hold of you.” That’s a sentiment worthy of consideration whenever uncertainty weighs heavily on the outlook.
Rather than letting the future take hold of us, a successful future requires we anticipate, plan and implement the changes needed to adapt.
For MFA, that means building on the products and services we currently have. We have proven that delivering solutions puts us in a position to improve crop yields and feed efficiency on your farm.
MFA aligns a wholesale supply system with retail facilities and support staff. This long-time formula fits future challenges, but we must continue to leverage MFA’s strengths to increase our value to your operations. How we do it will be affected by the challenges I’ve listed here. In short, our plans will focus on technology, people and operations.
Strategy for those plans is developed and led by management, then presented to and approved by the MFA Board of Directors. We have collaborated on some difficult decisions in recent years, including expansion and upgrades in some areas along with consolidations and closures in others.
Managing assets and employing capital will always be a challenge for agribusinesses. It means balancing current needs while taking hold of the future. Fiscal 2022 was profitable. And it was a big year for MFA in capital expenditures and repairs. Your operations have changed. Your cooperative will also change to meet those needs in ways that benefit you.
President & CEO of MFA INCORPORATED
Read more in this Dec/Jan2023 issue of Today’s Farmer
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