MFA is one of the few cooperatives paying patronage after a trying year in agriculture. That's because the cooperative is structured to help member/owners while growing conservatively in a changing world.

MFA Incorporated was profitable for fiscal year 2001-02 to the tune of $4 million, said Don Copenhaver, president and CEO of MFA. He made that announcement to the 833 people attending MFA's annual meeting Nov. 26, 2002, in Columbia, Mo.

While that may be low profitability for a business of MFA's size, he said, company executives are happy with the strength of the its balance sheet, a strength that allows the cooperative to weather the cyclical storms of modern agriculture. For evidence, look no further than the $69 million increase in total sales and revenues for fiscal year 2001-02. That increase brought total sales to $690 million for the regional marketing and farm supply cooperative.

Consider, too, that MFA's total assets stand at $296 million. Working capital expanded $13 million to total $51 million. And net worth increased to $109 million. All of those figures look (and are) good, solid numbers on a company's balance sheet.

"Considering all the challenges and difficulties we faced this year, we were fortunate to conclude the year with a profit," said Copenhaver. "We certainly did not set the world on fire. But considering all the adversities in agriculture, we were just pleased to end the year in the black."

The adversities include the nation's economic downturn, agriculture's low prices, the stock market's abysmal performance and the continuing increase in expenses over which most businesses have little to no control.

Just this past fiscal year, for instance, MFA's expenses rose nearly $5 million in casualty insurance, retirement funding and health-care costs alone. In addition, MFA was forced to write off its $2.3 million investment in Farmland Industries. That $7.3 million comes straight off the cooperative's bottom line. But the situation is no cause for pessimism, much less despair, Copenhaver pointed out.

"We're not alone in this climate," he said. Compare MFA's returns to the returns of other agribusinesses and cooperatives, and that $4 million looks better all the time. In the big picture among agribusinesses this year, he said, profitability was an accomplishment.

"We at MFA are pretty darn conservative when it comes to taking on additional debt," he said. "We have had lots of discussion with your board of directors on how we grow the company to spread costs over more units without over-leveraging the company."

As a result of the cooperative's profitability, member/owners of MFA Incorporated will divide more than $1 million in patronage. "Your corporate board decided to pay this 100 percent in cash," said Copenhaver. "There will be no equity issued for you to pay taxes on."

Crop and livestock numbers
Sales were up across the board for MFA Incorporated, said Allen Floyd, vice president, chief financial officer and treasurer of MFA Incorporated. In his address on the financial condition of the cooperative to those assembled at MFA's annual meeting, Floyd pointed out total sales and revenues were up 11 percent to total (as mentioned earlier) $690 million. "The addition of new locations and increased market penetration are the primary reasons for the increase," said Floyd.

Bushels of grain sold increased 5 million to total 49 million bushels. That growth, said Floyd, reflects the acquisition of the Glasgow Cooperative Association in August of 2001 as well as Mid-Missouri Cooperative Association in February 2002.

MFA's $500,000 increase in total grain storage revenue of $2.5 million is also mostly the result of both acquisitions. "Soybeans averaged $4.54 per bushel sold," said Floyd, "and corn averaged $2.10 per bushel sold."

Field crop sales were a shining example of MFA's increasing market penetration and established reputation for quality, said company executives. Sales increased 11 percent to stand at $355 million.

Plant foods sales account for $15 million of the total. "But dollar growth is not the story," said Floyd. "Unit growth, or tons sold, increased 33 percent at the wholesale level. In all, 1.4 million tons (an MFA record) were sold."

In fact, Floyd pointed out, sales to all markets increased. Nearly two-thirds of the increase took place outside traditional MFA markets to distributors, joint venture partners and market expansion accounts, which include many previously Farmland-affiliated local cooperatives.

While total seed volume was even with last year, crop protection volume increased by $18 million, a 23 percent increase. Primarily, this increase was at the wholesale level in the southern market and came at the expense of competitors.

Sales of livestock products increased 7 percent or $8 million to total $115 million. Those sales include feed, farm supply and animal health. Feed was the largest contributor, recording $72 million and an increase of 7 percent in tons sold.

Farm supply sales posted a 20-percent increase with all product lines showing improvements. Wire and steel sales were up 28 percent, while livestock equipment sales were up 22 percent. Animal health sales rose 6 percent.

The balance sheet
MFA's balance sheet remains strong, showing the underlying strength of the cooperative, said Floyd. Current assets (cash, receivables and inventory) increased $9 million to total $157 million.

Fixed assets (facilities, equipment and rolling stock) held steady at $75 million. That occurred, said Floyd, because while new and replacement assets totaled $13 million, depreciation expense was $12 million and the book value of assets sold was $1 million.

Major new additions include the Mid-Missouri Cooperative retail facilities; fertilizer plants at Popular Bluff, Mo., and Olpe, Kan.; and a Farmland feed mill at Centralia, Mo.

Total assets are $296 million, an increase of $6 million. MFA's net worth stands at $109 million. Net worth, noted Floyd, represents equities allocated to members and after-tax income on non-member, non-patronage business. Working capital (current assets minus current liabilities) increased $13 million to total $51 million.

Investments, however, declined $3 million to stand at $64 million. That decline reflects the previously mentioned $2.3 million Farmland investment. Investments represent MFA's ownership interest in interregional cooperatives and joint ventures.

"Performance measurements, including liquidity, debt to equity and interest coverage ratio all improved over last year," said Floyd.

In short, said MFA's chief financial officer, MFA recorded yet another profitable year, despite the red ink experienced by so many other agribusinesses. "We will continue to work to maintain profitability and improve our financial condition in this difficult market," he said.

Looking ahead
Consolidation continues to affect agriculture. "We have fewer farms, fewer suppliers of crop protection products, fewer seed genetic companies," said Copenhaver. "In fact, the chemical companies have already grabbed up most of the major seed companies. We also have fewer fertilizer manufacturing companies. The list of consolidation goes on and on. It changes the landscape of agriculture drastically."

But change is not the only issue, he pointed out. How people and institutions respond to that barrage of change is crucial.

"I want to compliment the board of directors of MFA for their guidance," said Copenhaver. "I can assure you they are focused on making sure the company's overall guiding policies are consistent with our mission and that is 'to provide economic benefit for our member/owners.'"

Lester Evans is chairman of the board for MFA Incorporated. He's also a farmer from Lebanon, Mo., who manages about 1,000 acres of hay and pasture and runs a 200-head cow/calf herd.

"MFA has been a leader in the farm community all down through the years," he told those attending. "We haven't been a follower. We've been the leader in setting prices, in developing new products. We've built feed mills, milk plants, fertilizer plants, warehouses and an infrastructure to handle our farmers' needs as times have changed."

That's been continuous for all of MFA's 88 years, said Evans. It's part of growing the business intelligently and strategically while never losing focus on the member/owner.

"As we look toward the future," said Evans, "we can see we are on the right track. We have the right people on staff. The board of directors is very aware of the challenges we face as changes continue. Changes aren't new. MFA has dealt with change all down through the years. With loyal members, a staff that is on the cutting edge, an active board for oversight, I think we are ready to face the future, and I'm proud to be a part of it."