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After a
downturn in 2006 and a rebound in 2007, it’s time to do a bit of
belt-tightening because there are too many variables impacting
agriculture to push ahead at full speed, said Paulk.
"We
think the only prudent way to prepare ourselves for those times is to
back up on spending, take a serious look at costs and maybe stand in
place for a year or so," said Paulk.
During an
interview at the Hotel at Auburn University and Dixon Conference Center
following his annual report to an audience of 350 farmers and their
spouses, Paulk discussed future planning.
He
acknowledged the year just ended was a record one for AFC, but pointed
out "there’s a lot of uncertainty out there right now, especially
for the U.S. economy."
"With
an election coming up, we think it’s best to do a better job with what
we’ve got and not increase our leverage," he said. "We’re
going to slow our growth."
One
reason for that decision, he said, is to avoid "huge inventories
and increased leverage."
"We’re
real afraid of debt right now because so many lending institutions find
themselves in trouble and internal problems they face could have a
detrimental effect for us on how they position themselves in the
marketplace," said Paulk.
During
his prepared remarks, Paulk said 2007 was a difficult year because of a
devastating, protracted drought. Ironically, it also produced one of the
best bottom lines ever for the cooperative.
He said a
return of about $17 million to local cooperatives throughout Alabama
amounted to a "shot in the arm that could not have come at a better
time when it was more greatly needed."
That
"shot in the arm" came mainly from the sale of Anderson’s
Peanuts, a transaction Paulk said, was "painful" because it
had been such a productive and important part of our cooperative for so
many years.
With the
sale, he said, patronage will be paid only on earnings from Feed, Farm
and Home and from Agri-AFC "and I don’t see that changing any
time soon."
"It
was difficult to say goodbye to a group of loyal and hardworking
employees, many of whom had devoted their careers to this company,"
Paulk said, referring to Anderson’s Peanuts. "But, changes in
that industry, driven by changes in the Farm Bill, rendered too great
the risk of our continued ownership."
Prior to
Paulk’s address, AFC Chief Financial Officer Dan Groscost outlined the
positives and negatives of the cooperative during the past fiscal year.
One of
the highlights, Groscost said, was a $36 million swing resulting from
total indebtedness being reduced $18 million from the previous year
while equity was up more than $18 million.
He said
the $20 million net margin before tax was a record for earnings.
"Because
the fixed assets at Anderson’s had largely been depreciated there was
a gain of about $6 million on the sale of the business to
Birdsong," said Groscost.
He said
the sale of Anderson’s was an "enormous undertaking" because
it involved considerable assets and locations.
During
his address, Groscost focused on each of the AFC’s departments and
divisions, pointing to gains and losses. They were:
GRAIN:
Although
it didn’t exceed the record year of 2006, Groscost said it still
turned in a strong performance, earning nearly $2.7 million before taxes
while handling 28 percent less volume.
The year
just ended was exceptional for the AFC, said Groscost, who pointed out
it was done at a time when the department had to deal with
"difficult crops brought on by poor growing conditions."
FEED, FARM AND HOME:
It earned
$796,000 which represented a 44 percent improvement over 2006. Each unit
within the department was profitable and most showed improvement over
the previous year.
ANDERSON’S PEANUTS:
It
operated through the end of March, 2007 and had a margin of $1.8 million
which compared to a loss of $3.2 million for 2006. Including interest
income and the gain on the sale and the net margin before taxes was just
under $10 million.
BONNIE PLANTS:
It was an
outstanding year for the Bullock County-based business that has a
national audience. Bonnie’s had an operating margin of $20.5 million
and a net margin before taxes of $15.2 million.
The 2007
totals compared to an operating income of $10.4 million and a net margin
before taxes of $5.9 million in 2006.
Bonnie’s
sales for fiscal 2007 were $141 million which represents a $31 million
increase over the previous year. Sales for the coming year are being
projected to be more than $170 million.
FRANK CURRIE GIN:
It had a
very good year with an operating margin of $863,000 and a net margin of
$1.5 million before taxes. That compared with an operating margin of
$309,000 and a net margin before taxes of $795,000 in fiscal 2006.
Facts and
figures might tend to be mind-boggling at times, but the bottom line was
easy to understand for 2007. It was a record year for Alabama Farmers
Cooperative with AFC meeting most, if not all, of its financial goals,
said Groscost.
During
his speech, Paulk said the departmental reports reflected an outlook of
"enthusiasm and optimism" for the coming fiscal year.
"I
cannot tell you how proud I am of these leaders and their success,"
said Paulk, referring to department spokesmen who gave their reports.
Despite
optimistic predictions, Paulk also cautioned members of the cooperative
to be prepared for changing times.
"We
saw some pretty good prices on some commodities, but price becomes
irrelevant when yields are at or near zero," he said, without
having to support that statement since everyone in the huge meeting room
knew about the devastating impact of the lingering drought.
As the
winter moves into its final days and planting season nears, Paulk said
he is concerned a new Farm Bill has yet to be signed by President Bush
who "promises to veto it."
Because
of that uncertainty and with some disappointing yields in recent years,
Paulk said, "Our farmers have no safety net and are hamstrung in
their ability to plan for the coming years."
Much of
the planning, he said, will depend on passage of a Farm Bill which will
impact agriculture throughout the country.
Paulk
said the 2006 national election resulted in a Congress that
"finally seems determined to pass a Farm Bill that will provide a
meager safety net for our farmers."
He said
it should forestall, at least for a few more years, "the disturbing
trend toward allowing other countries to produce our vital and strategic
needs like energy and food."
The theme
of the annual meeting was "An Ever Changing Environment" and
those who listened to Paulk’s report left with a better understanding
of just what that meant.
Alvin Benn is a freelance
writer from Selma.
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