Despite a wet spring and a general malaise in crop prices, MFA turns in a respectable fiscal performance. Member support and dedicated employees are keys to success, say company officials.

A strategic focus on innovation and service helps MFA remain a profitable and successful cooperative, said Don Copenhaver, president and CEO of MFA Incorporated. Copenhaver's comments came during the cooperative's annual meeting Nov. 20, 2001, in Columbia. The annual meeting, held this year at the Holiday Inn Select Executive Center, provides a forum for interaction among member/owners of MFA, executives of the cooperative and directors from MFA's corporate board.

News items announced to the 748 people attending the meeting included word of MFA's pre-tax profit of $9 million on total sales and revenues of $621 million. "I realize $9 million does not seem like a lot of earnings for a company our size, but it's respectable considering the overall condition of the agricultural economic environment and the adverse weather of last spring," said Copenhaver.

Only $1.2 million of the total came from patronage income from interregional investments. The rest was earned on MFA's own operations. In addition, said Copenhaver, the MFA corporate board of directors voted to distribute that profit (or net savings) 100 percent in cash.

Each year MFA's corporate board (composed of 14 farmers and ranchers) determines how profits should be distributed. This year, the board voted to distribute all available member income to members who have done business with MFA during the last 12 months, based on their individual volume. "No equity will be issued," said Copenhaver. "Therefore, you will only pay taxes on what you actually receive in cash, which should be good news to those of you who will be receiving a check."

Keith Schnarre, chairman of the corporate board and a crop and livestock farmer from Centralia, Mo., put innovation and service in perspective for those assembled. "Both are very necessary things that MFA provides for its farmer/members," said Schnarre. "Innovation is provided through things like precision farming, web pages and opportunities for marketing. Service is provided through stability and supplying the farmers' basic inputs. Unfortunately, we can't do the comfortable thing of standing still. We are either growing or we are falling behind."

Crop and livestock numbers
Harvest in the fall of 2000 brought record corn yields and near record soybean yields. As a result, MFA's system-wide grain sales increased 14 percent to stand at $151 million for the fiscal year, said Allen Floyd, vice president, chief financial officer and treasurer of MFA Incorporated.

"Consequently," said Floyd, "bushel sales increased from 36 million last year to 44 million in the 2001 year, or 22 percent." Prices per bushel, unfortunately, remained near historic lows. Still, MFA's grain storage revenue totaled $2 million, an increase of $200,000.

Field crop sales (plant foods, seed, crop protection chemicals and service revenues from application and equipment rental) increased 11 percent to total $320 million. "More than two-thirds of this sales increase is plant foods," said Floyd. "Sales again surpassed one million tons; however, tons sold declined approximately 10 percent when compared to last year."

That decrease reflects a wet spring on top of a 40 percent reduction in national nitrogen-manufacturing capacity and higher nitrogen prices, both of which were brought on by last year's significant price increases for natural gas. "Despite this unprecedented volatility in the fertilizer industry, MFA, through the efforts of our marketing, transportation and retail divisions, insured product was available for member needs," said Floyd.

Seed volume was excellent, he said, with corn units down slightly but soybean unit sales up 33 percent to 949,000 units. And Cache River Valley Seed, MFA's seed-processing joint venture headquartered in Cash, Ark., turned in profits of $1.1 million.

Wholesale sales of crop protection products increased $4 million due to further penetration into the midsouth and Kansas markets, noted Floyd.

Livestock supply sales (feed, farm supply and animal health products) totaled $107 million, a 4 percent increase. Feed, the largest contributor, accounted for $68 million. Tons sold declined by 3,000 tons from last year due primarily to a 6 percent reduction in dairy cow numbers in the territory. MFA-branded feeds continue to be market leaders in the territory.

In all, MFA registered $621 million in total sales, an increase of $60 million from last year. Factors contributing to that increase, said Floyd, include increased grain production, higher fertilizer prices, significant increases in soybean seed units and favorable swine market prices.

Expenses rose 6 percent for the fiscal year. "Approximately $2.1 million relates to the expenses of new locations acquired during 2001," said Floyd. In addition, lease expense was up 23 percent. MFA now leases most large dollar application equipment replacements as well as computer equipment at the store level. And, said Floyd, MFA's utility expenses were up 11 percent as a result of higher fuel oil prices, plus health care costs continue to rise.

The balance sheet
MFA's balance sheet remains strong, strength that is reflected in the numbers, said Allen Floyd, MFA's chief financial officer. Balance sheet totals in 2001 are higher than 2000, primarily because of MFA's acquisitions of the AGChoice locations in Kansas as well as the co-ops in Glasgow and Audrain County.

In all, said Floyd, 13 new facilities contribute to increases in current assets, fixed assets and debt. Current assets (cash, receivables and inventories) total $148 million, an increase of $19 million. Fixed assets (facilities, equipment and rolling stock) were up $5 million to stand at $75 million. "New and replacement assets acquired during the year total $17 million," said Floyd. "Acquisitions of new locations make up $7 million of this total."

Total assets stand at $290 million, an increase of $23 million. New business operations are the primary factor in that increase.

Net worth increased $6 million to total $108 million. Net worth represents the equities owned by members. Working capital (current assets minus liabilities) is $38 million.

"2001 was another successful year for MFA. We expanded the scope of our operations through key acquisitions, all of which have upside potential," said Floyd. "Our balance sheet remains strong, our plan calls for profitability in 2002, and we will continue to seek growth opportunities that benefit our members."

Looking ahead
Comparing MFA's year-end results to the results of other regional cooperatives across the United States has convinced Don Copenhaver that MFA is on the right path. "I firmly believe cooperatives can get so big they lose focus on why they were formed in the first place," he said. "Cooperatives were formed to stay in touch with member/owners by providing them with their service requirements while benefiting them economically. Bigger does not automatically mean better. We were formed 88 years ago to provide economic benefits for our member/owners. We must continually provide top-quality service with honesty and integrity."

A steady, conservative approach to business is key to successful operation in today's fast-paced agriculture. It's an approach MFA will continue in considering new technology and new acquisitions.

It's a focus on fundamentals that Keith Schnarre, chairman of the board, wants to see continue. "As Benjamin Franklin once said, 'The Constitution only guarantees us the right to pursue happiness, not to have it,'" he said. "MFA will be here to bring you new innovations but will continue to provide you with the basic services that you need to help you continue. It's up to us, as farmers, to take advantage of these technologies and services."