On the forward path

One result of strong planning is the ability to compare results with goals. During the past three years, MFA’s management team has been clear about the cooperative’s mission and the goals MFA management and employees should strive for to best serve the cooperative’s members.

During his address at a district annual meeting held near Columbia, Mo., MFA president and CEO Bill Streeter said, “We can no longer just say we want to be a general caretaker. Caretaking is not going to let you thrive or move forward. We have a clear vision of were we should go and we have communicated that vision. We know how we want to get there.”

{gallery}Feb12/meeting:200:260:1:2{/gallery}Streeter was reporting on the fiscal year that ended Aug. 31, 2011, a year in which, even with weather challenges, market challenges and all the risk associated with farming, MFA and its members progressed as planned.

Financial performance
MFA’s net profit for the fiscal year was $18.1 million compared to $5.9 million in 2010. All operating divisions experienced increases in earnings in 2011. Business related to agronomic enterprises showed the strongest increases. Total sales for the year increased to $1.3 billion, an increase of $300 million from the previous year.

Grain sales
Grain sales for 2011 totaled $573 million compared to $431 million the previous year, a 33 percent increase (this figure largely represents 2010 crop-year sales). Actual bushels sold were down slightly for 2011 at 61 million bushels compared to 63 million bushels the previous year, but the average per-bushel value was higher.

 

Soybean sales totaled 23 million bushels, down about 1.6 million bushels or 6 percent from the previous year. However, the average value per bushel of soybeans was $12.57 for 2011 compared to $9.97 the previous year—a $2.60 increase.

 

Corn sales increased by 2 percent to 35.3 million bushels compared to 34.6 million bushels the previous year. Again, the value per bushel sold was considerably higher in 2011 at $6.18 compared to $3.74 the previous year—a $2.44 per bushel increase.

Wheat sales for both years was 2 million bushels. The 2011 average price per bushel of wheat sold was $7.26 compared to $4.75 a year earlier. That represented a $2.50 per bushel increase.
MFA Vice President of Finance and CFO, Ernie Verslues, noted that crop production totals for the state of Missouri, where the bulk of MFA grain sales originate, were down in 2011. With soybean production down 10 percent and corn production down 20 percent state wide, MFA managed to hold relatively steady in bushels handled, a sign of increased market share in available bushels.

Field crops
Field crop sales (plant food, seed, crop protection products) produced revenues of $558 million in 2011 compared to $396 million the previous year, a $162 million increase.

MFA sold 858,000 tons of plant food in 2011, an increase of 19 percent compared to the previous year—with wholesale and retail sales showing similar increases. Along with increased tonnage sold, average values per ton sold increased by $140 compared to a year earlier.

Crop protection volume was $118 million compared to $114 million the previous year. A portion of that increase was delivered by a focus to provide growers with more options for crop protection products, adjuvants, insecticides and fungicides.

Seed sales were $72 million in 2011, increasing from $58 million the previous year. Soybean seed sales increased by 35,000 units with 817,000 units sold. Seed corn sales reached 109,000 units, an increase of 21,000 units. Seed wheat sales increased by 50 percent and miscellaneous seed (grass and legumes) increased by 40 percent.

Livestock supply
Livestock supply sales (feed, farm supply, animal health and livestock marketing) totaled $167 million compared to $163 million a year earlier.
Manufactured feed tons sold totaled 322,000, essentially the same as the previous year. However, in light of recent reductions in the livestock herd (beef herd down 7 percent and dairy herd down 3 percent), maintaining similar tonnage sales is an accomplishment. By species, beef and poultry feed provided an overall increase in tons of feed sold while swine and dairy feed tonnage decreased slightly.

MFA’s Health Track program issued 38,000 tags in 2011 compared to 27,000 tags the previous year, a 40 percent increase.

Animal health sales were flat with a year earlier at $13.8 million in an environment of decreasing livestock numbers in MFA’s trade territory.

Farm supply sales totaled $26.8 million compared to $22.5 million the previous year, a 20 percent increase.

Finally, “other sales” in Livestock Supply (hardware, lumber and miscellaneous) totaled $11 million in 2011 compared to $10 million the previous year.

Margins and expenses
In addition to increased volume, there was an overall average increase on margins on comparable sales versus the previous year. Grain sales, for example, even with a decrease in bushels sold, delivered a $5.2 million increase in margins compared to the previous year. MFA’s sales of supplies represented a margin increase of $32 million compared to the previous year with crop production and feed products providing the majority of the gain.

Operating revenues were up $9.4 million for 2011, an increase largely driven by additional application revenue.

Income from MFA Enterprises’ joint venture with AGRIServices of Brunswick totaled $2.6 million in 2011 compared to $600,000 a year earlier. The joint venture with Cache River Valley Seed totaled income of $2.2 million compared to $2.3 million the previous year. And income from Central Missouri AGRIServices totaled $600,000 compared to $500,000 the previous year.

Expenses for 2011 totaled $174 million compared to $149 million the previous year, an increase of 16 percent. The significant increase includes $5.4 million in income tax expense compared to a tax bill of $700,000 in 2010. During the previous two years, MFA had restricted repairs and maintenance to critical improvements only. Repairs and maintenance expenses were up by 30 percent in 2011 as the cooperative caught up on deferred repairs and maintenance.
Also reflected in annual expenses was a 7 percent increase in personnel costs, including merit increases and benefits. 

Balance sheet
Current assets for 2011 (cash, receivables, inventory and prepaid expenses) reflect a 31 percent increase at $290 million. The increase includes $24 million in grain and $28 million in plant foods. While risk management remains a critical factor to MFA’s business plan, the cooperative positioned plant food products for sale earlier in 2011 and had additional tons on hand for delivery. Prepay on product for future delivery also contributed to the increase. Receivables were up $9 million from 2010.

Investments (MFA ownership in interregional cooperatives and joint ventures) totaled $41 million this year compared to $38 million the previous year. The increase is due to profits on joint ventures mentioned above.

Fixed assets (land, buildings, equipment and certain rolling stock) totaled $77 million compared to $81 million the previous year. There were no significant asset sales during 2011. The decrease is due to depreciation on assets outpacing capital expenditures.

MFA’s total assets were $408 million for 2011 compared to $358 million the previous year. Most of the increase is accounted for through inventory in plant foods and grain. Given MFA’s fiscal year ends before harvest begins in the cooperative’s trade territory, year-end numbers represent an annual low-level point for total assets. As harvest gets underway each year, asset values increase significantly.

Net worth increased in 2011 to total $112 million compared to $94 million the previous year. That increase comes from the $18.1 million profit for fiscal 2011 less some $800,000 of deceased patron equity paid.

At the annual meetings, Verslues reported that working capital for fiscal year began at $42 million, a level that he considered too low for the cooperative’s ongoing operations. Working capital at the close of fiscal year 2011 was $72 million, a $30 million improvement. Verslues said that with increased volatility in grain and fertilizer markets, MFA’s goal is to maintain $100 million in working capital.

Looking forward, MFA projects $14 million pre-tax profit for 2012 with after-tax profit estimated at $12 million. Based on those figures and projected income for 2013, Verslues said net operating losses experienced in 2009 will be used by the end of fiscal 2013. He offered the caveat that such projections are affected by weather and markets.

See related story here; MFA President and CEO, Bill Streeter addresses members.