Viewpoint
By Don Copenhaver, President

MFA’s growth and success require VIP: vision, integrity and passion

MFA is about to conclude a great year financially. We’re due for one. Many things fell into place this year. The success of MFA is tied closely to the success of our member/owners. We’re all in the business of agriculture. So for MFA and for our member/owners, weather plays a huge role in our success. We take whatever Mother Nature deals us while contending with the economic cycles that affect agriculture.

MFA’s theme for the fiscal year that began Sept. 1 is MFA: VIP. Typically, the term VIP identifies a very important person. But our use of it embodies Vision, Integrity and Passion—the key components of good leadership. In the dictionary, vision is defined as foresight and wisdom in planning. Integrity is defined as honesty and incorruptibility, and passion as strong emotion and great enthusiasm.

MFA is blessed with talented people who go out of their way to provide outstanding service to our customer/owners. That’s the passion we refer to in our theme. As a farmer-owned cooperative, the most important asset this company has is its employees. The key to our continuing success is and always has been the people who make up this company, the people who work at MFA today and those who worked for us in the past.

This past year we enjoyed outstanding results from our joint venture operations, especially from Agri Services of Brunswick in Brunswick, Mo., and Cache River Valley Seed of Cash, Ark. We also enjoyed outstanding results from our wholly owned subsidiary, Morris Farm Center in northeastern Arkansas and our West Central AgriServices headquartered in Adrian, Mo.

At this writing I don’t have final numbers. But preliminary numbers show net earnings on our own operations, before patronage and extraordinary income, in the neighborhood of $15 million—the highest recorded since 1974. Much of the 1974 profitability was a result of grain revenue generated from the Commodity Credit Corporation on government-stored grain.

Agriculture is a dynamic industry. Certainly a new dynamic is the demand for renewable fuels. Its effect on our business has been both positive and negative. On the positive side, renewable fuels helped our grain farmers and certainly benefited MFA in fertilizer volume as well as seed corn sales. On the negative side, our livestock customers saw their cost of production rise. High grain prices and high fertilizer prices raised MFA’s working capital requirements by well over an additional $100 million a year.

Because of those capital requirements, MFA must continue to produce good results. Borrowing an additional $100 million at today’s higher interest rates requires MFA to generate additional profitability to offset the increased interest cost. Factor in today’s prices for corn, NH3, DAP and potash, and it doesn’t take long to tie up tremendous amounts of working capital, especially for a company with MFA’s volume levels.

Another dynamic relates to large margin deposits required by forward-contracted grain. Many of our grain farmers are selling forward from one to two years out to take advantage of these high grain prices. Earlier this year, we had well over $25 million on deposit in Chicago. In years past, we rarely had more than $1 million tied up. As a result, we are paying interest on an additional $25 million of working capital just in grain margin deposit monies—again a new dynamic.

With all the focus on renewable fuels, I do not see MFA going back to working capital levels of years past. Working capital will continue to be high. So, again, it is important that MFA continue to generate good levels of profitability. Maintaining profitability is important because we want to continue to grow and continue to be a leader in agriculture.

It takes capital to grow the company, and it takes capital to be on the leading edge in offering new technology and new services that our customers have come to expect. As a cooperative, MFA must finance itself in one of two ways: through profitability or additional debt. MFA is a fiscally conservative company and will remain so. As the 1980s taught all of us in agriculture, caution is always appropriate in taking on additional debt. Growing the company through profitability is obviously the preferred choice.

Sometimes our plans to grow the company are disrupted. Our business is adversely impacted by the ever-increasing costly and restrictive government regulations requiring huge amounts of capital. And, as I pointed out above, MFA’s profitability is affected by weather—by floods and by drought, by timely rains and untimely hail. Occasionally those of us in agriculture are lucky enough to have a bumper crop and good profitability. It’s the eternal optimism of agriculture and those of us who live it and love it.

All these things impact our ability to grow. That’s where wise stewardship comes in. We simply have to exercise sound, prudent business judgment as we look to the future, as in vision—foresight and wisdom in planning. At MFA, we have an obligation to you, our member/owner, to make sure we use our available capital wisely. Let us all pray for timely rain and a good fall season.

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