MFA financial update
Nearing the halfway mark for the fiscal year, MFA shows solid footing for 2008, but risk from extreme market volatility is still a concern.
In early March, at district meetings throughout MFA’s trade territory, representatives from the cooperative’s Columbia, Mo. headquarters provided a snapshot on business since the fiscal year’s start. With grain commodity prices dominating the ag scene, there was some strength to report on the crop side, but concerns about the vitality of the livestock sector and general increased risk tempered the reports.
Here are a few highlights (for business transacted between Sept. 1, 2007 and Jan. 31, 2008).
Grain sales were recorded at $214 million compared to $162 million for the same period a year ago. The sales increase was largely due to increased price per bushel for all commodities, even as there was a slight decline in total bushels sold.
Field crop sales, which include fertilizer, seed, plant protection products along with application charges, reached $210 million for the period compared to $153 million a year ago. The supply and demand effect of increased crop acreage in the face of high commodity prices pushed the increase. Fertilizer makes up 85 percent of the total for this category. With world fertilizer supply consolidating and world demand at unprecedented levels, unit prices for all plant food products at least doubled from the same period last year.
Livestock supply sales (including feed, farm supplies and animal health products) were $68 million compared to $66 million a year ago.
Given the current agricultural economy, the livestock sector remains difficult for everyone involved. Increase in feed tonnage and higher ingredient prices are responsible for the gains to this point in the fiscal year but will drop when grass becomes available. High feed and input prices are expected to further fuel herd liquidation, affecting earnings in the sector. This is seen already in Farm Supply sales, which were at $12 million for 2008, down a million from last year.
Other sales for the cooperative, which include livestock marketing, miscellaneous retail and other revenue stood at $20 million for the period, compared to $16 million a year ago. Much of that increase is attributed to the return of hog production at the Marshall, Mo. swine complex, which was destroyed by a tornado in 2006 and spent 2007 in a phase of rebuilding and repopulating.
For the first 5 months of the fiscal year, total net income stood at $10.4 million compared to a loss of $3.1 million in the same period last year. Part of the change is performance of MFA’s joint ventures at Cache River Ark., Brunswick, Mo., and Marshall, Mo. Combined these ventures contributed $3.2 million profit to MFA. Much of the rest of the increase was attributed to higher prices across sectors, even as volume remained flat or increased slightly. Another difference in net profit level for this year is timing of income. With good fall weather, fall input sales and application were up. That will contribute to some dampening to sales this spring. Other trends to watch for the remainder of the year include cutbacks on pasture fertility due to overwhelming price pressure on cattle producers and the herd culling that will result.
Just like farm-level economics, the cooperative’s credit needs have increased to cover inputs. Interest costs on high-priced grain and input inventory require proportionate earnings increases to retain competitive rates. The good news is that the outlook for 2008 provides such earnings. Planned fiscal year-end profit for MFA Incorporated is on schedule to surpass last year’s earnings.
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