The impact of this commitment to performance was most evident in Feed, where we made significant progress toward the full integration of Purina Mills feed operations (acquired in October 2001) into our system. In just the first full year of combined operations, Feed captured significant synergies as a result of this strategic acquisition.

The past year saw positive growth in branded companion animal and proprietary products, along with progress on strategic efforts to respond to challenges in the feed industry. Among these challenges was a significant drop in commodity feed prices throughout the year. In addition, industry-wide consolidation and ongoing restructuring in the dairy and swine industries precipitated sales declines in these markets.

Going forward, Feed has built a solid foundation for future performance, based on the quality and commitment of its people, the strength of the nation's number-one feed manufacturing system, two of the industry's leading brands and leading market shares in both lifestyle and commercial feeds.

Swine operations continued to face challenging markets, and slumping hog prices led to significant losses in 2002. Progress was made in positioning our system for improved performance in the future. Over the past year, we grew our profitable Aligned Swine program—dedicated to the principle of delivering genetically superior feeder pigs to independent producers through local cooperatives—while reducing volume in under-performing, higher-risk swine programs.

Land O'Lakes participates in layers and eggs through MoArk, which holds a top-three position in this industry. Egg prices were depressed throughout much of 2002, which had a significant negative impact on MoArk's performance.

Ag Services continued -->