Reading Between The Lines
September 15, 2008
As a statistics junkie, I think December is my favorite time of the year. This month, CropLife® has compiled information from our annual survey of retailers. Although putting together the articles and charts from this data that make up the bulk of this issue’s content is fun, reading through completed survey forms gives me invaluable insights into the inner workings of this industry.
Looking through this year’s forms, I was struck by just how profitable 2007 was for most ag retailers. Sales were up, percentages were high, and the overall answers to our survey questions were positive. On the surface, it was a great year to be in this business. And yet …
Reading between the lines a bit, I found indications of an underlying uneasiness among respondents. Sure, 2007 was a fantastic year, but could this positive trend carry over into 2008?
Part of this hint of worry probably stems from ag retailers remembering their history. Traditionally, huge sales “up” years are inevitably followed by “down” ones, if for no other reason than any kind of exceptional “market heat” is hard to maintain for very long. This year, the ethanol craze and move to corn provided this in spades. As one equipment manufacturer said to me recently: “I’m used to seeing a one-year boom followed by three-year busts.”
So to analyze this worry a little deeper, I turned to this year’s CropLife 100 forms for help. Here’s what I found:
Overall Sales Were Strong. For 2007, ag retailer revenues increased 8.9% to more than $14.7 billion. This represented an increase of $1.2 billion over the 2006 total. During an average year for CropLife 100 retailers, the annual sales gain is usually in the 2% to 3% range. On the downside, this kind of market growth will be hard to duplicate in 2008, unless conditions remain identical to 2007, which is unlikely.
Fertilizer Sales Were Incredible. Fertilizer was far and away the biggest crop input in dollars, up 13.6% to more than $6.7 billion. Even better, 96% of CropLife 100 retailers said their fertilizer revenues increased in 2007. Put into perspective, and using the 100 ranked companies as a guide, this means that only four retailers within the CropLife 100 didn’t have higher fertilizer sales this year. Again, this kind of overall growth might be difficult to keep going for two years in a row.
Equipment Sales Were Down. According to manufacturers, sales of self-propelled sprayers were down 7% to 8% for 2007, despite projections to the contrary. However, many observers believe that retailer spending could pick up once their grower-customers cash in on higher commodity prices this year. Still, almost one-quarter (24%) of CropLife 100 retailers say they have no plans to buy new equipment in 2008.
Less Corn Means More Crop Mix. While increased corn acreage drove the market in 2007, 2008 could be a different story. Most CropLife 100 retailers think corn acres will decline or stay flat, with other crops such as soybeans and wheat gaining ground.
Taken together — and reading between the lines — all four of these variables say 2008 will be a “normal” year for retailers compared with 2007. Then again, retailers have been profitable under these circumstances for many years, so there’s reason to believe the industry will keep some of the gains it made this year. Time will tell …