During the first week of March, MFA held district meetings and elections for our corporate board. Members elected two new directors and re-elected three. I'm pleased to welcome to MFA's corporate board of directors Leo Himmelberg (Glasgow, Mo., District 6) and Harry Thompson (Lohman, Mo., District 9). Both are well-respected farmers. MFA and its members will benefit from their considered input. I'm also pleased to announce the re-election of Phillip Becker (Mexico, Mo., District 7), Frank Samek (Bolivar, Mo., District 11) and Dan Clemens (Marshfield, Mo., District 12). In addition, I'd like to thank the two individuals leaving our board: Keith Schnarre (Centralia, Mo., District 6) and Vincent Samson (Bonnots Mill, Mo., District 9) for their service to MFA. We will miss their contributions. Both provided valuable input, and I want them to know how much all of us at MFA appreciate their service.

I encourage all of our member/owners to attend these meetings. They provide an excellent place for management and members to interact. Of the many items discussed at these district meetings, fertilizer prices, particularly nitrogen prices, ranked right up there in terms of interest. Natural gas prices have been on a roller-coaster ride throughout this spring season. It's similar to 2 years ago when natural gas prices forced nitrogen prices to almost double. Nitrogen production is completely reliant on the natural gas market. Natural gas is the primary component in producing anhydrous ammonia, accounting for 75 to 90 percent of the total cash cost. Anhydrous is used to produce urea, nitrogen solution and ammonium nitrate.

Two years ago, price spikes in natural gas hit in December. That gave people in MFA's plant foods and distribution divisions enough time to contract for foreign supplies. We could get ships here from as far away as Saudi Arabia in time for planting. This year natural gas prices rose well over $10 per million British thermal unit (btu) at the beginning of March. A year ago the price stood at $3.42. With the late spike, there was no chance to out-maneuver the market by contracting foreign product for delivery before planting season. We couldn't get foreign product in time.

Complicating all of this were bottlenecks and increased costs in the distribution system. Diesel and gasoline costs are obvious as were market fluctuations caused by the Iraq situation. But we also had to navigate the country's deteriorating river system. High water in the lower Mississippi River kept barges and supply downstream. The Missouri River's opening was marked by pulse releases because of endangered bird concerns. North Dakota lobbied hard to keep the river closed to help sport fishing.

To get product to our customers, we relied on multiple modes of transportation. In some cases we went from water to road to rail to fill warehouses. That increased freight costs. Recharging the supply system has been difficult from a logistical standpoint. To refill our Palmyra warehouse above St. Louis, we used every mode of transport except air. Add in handling costs each time. We faced similar processes from rail to truck in southwest Missouri. We tried for optimum use of company assets and facilities, and we met or exceeded the competition.

During the meetings in the northwestern part of MFA's territory, we asked farmers about their planting intentions. Analysts suspect the high cost of inputs will affect cropping decisions, moving corn ground to beans. But many farmers already had nitrogen down. They'd already negotiated loans with bankers. That meant they had to cut back somewhere. If they skipped on fertility, they said, it would be on P or K. Farming is often a choice between hard options. But I hate to see cutbacks on fertility. Both P and K are yield-limiting factors.

Besides, phosphate is a great deal for farmers this year. India and China, two traditional customers of U.S. phosphate producers, have committed to becoming self-sufficient in production. With both countries dropping out of the market, U.S. production is not in line with use. This year phosphate price is a tremendous value for farmers. Manufacturers are subsidizing the market.

Another concern voiced in meetings in our southern territory was the ammonium nitrate situation. Simply said, ammonium nitrate is scarce this year. Because of the natural gas situation, all nitrogen-based products are. Ammonium nitrate supply also suffered because two manufacturers exited the business. That crippled supply. MFA is a huge customer for ammonium nitrate, but when our stockpile was depleted, there was nothing left in the supply chain for us to replenish our stocks. Many of our southern customers were forced to rely on urea.

Some members voiced concern about cooperatives in general considering what has happened to Farmland. Farmland's biggest problem, from my perspective, is that it tried to get too big too fast. Farmland's executives paid way too much for businesses just to enter those markets. They then tried to compete in industries in which they had no real competitive advantage. That's not our method at MFA. We are too conservative for that approach. We do not like to borrow money. When we do take on debt through acquisitions, we have strict procedures for the enterprise to pay down that debt in a short, specified timeframe. We focus on core businesses through joint ventures or limited liability companies. We're here for the long term, folks.