CropLife 100: Machine Works
The market for custom application stayed positive in 2008, with equipment and precision sales showing growth.
November 26, 2008
For the custom application business, 2008 was a good year — not great, but good. Overall according to the figures compiled in the 2008 CropLife 100 survey, sales for this category increased a modest 1% to $837 million. Market share was down 2% from the 2007 total, but the category showed several positive signs for the year.
On the custom application end, 71% of CropLife 100 retailers said that their revenues in this category grew from 1% to more than 5% during 2008. This was down slightly from the 2007 total of 76%. However, in 2007, 17% of ag retailers polled said their custom application sales had declined for the year from 1% to more than 5%. In 2008, this percentage had dropped to only 6%.
In the minds of many CropLife 100 retailers, custom application has benefitted from a couple of ag industry trends. First off, the impressive run up in corn acreages during 2007 served as a big plus for the marketplace. While corn acres dropped slightly in 2008, respondents indicated that demand for custom application work continued to stay strong. Many even credited a stronger performance among soybeans for keeping their work loads busy during 2008's growing season.
The other big reason for custom application business continuing to grow ties back to the increased popularity of fungicide application in corn. For many years, various crop protection product manufacturers such as BASF have been promoting the use of fungicide as a preventative agent/yield booster in corn. Until recently, these claims have been unsupported by the industry's Extension researchers. However, during 2008, some researchers began softening their stand, giving an added boost to fungicide sales and application work involving them.
Indeed, when the 2008 CropLife 100 form asked retailers if fungicide application had or would continue to have an impact on their bottom lines, 86% described this as "a significant growth opportunity" for their businesses. More impressively, the remaining 14% thought fungicide preventative application work would be a "good growth opportunity" going forward.
On the precision side of the equipment equation, the numbers were a little more muted. In 2007, 58% of respondents to the CropLife 100 survey said their precision agriculture sales were up 1% to more than 5%. This year, that figure fell slightly, to 53%. The number of ag retailers seeing slight declines in their precision agriculture revenues also grew, from 5% in 2007 to 7% in 2008.
The Equipment Mix
For equipment manufacturers caught up in the overall ag economic growth, 2008 was a bit of a breather. In 2007, caught off-guard by the increased demand for their brands in the wake of huge upticks in corn acreages, equipment manufacturers spent virtually the entire year scrambling to fill customer orders in a timely fashion. Of course, for many, the definition of "timely" lengthened some, from three months from order placement to delivery to six months or more.
"We spent all of 2007 running like crazy to keep up with demand without even stopping," says Bob Mills of Ray-Man Inc. "This year, things were still busy, but not as crazy as they were."
Other manufacturers agreed with this assessment. By the time 2008 rolled around, manufacturers had pretty much gotten a handle on their order/delivery schedules. And this was reflected in the CropLife 100 numbers.
Starting in 2006, the CropLife 100 survey began asking retailers which product names were most common in their sprayer fleets. In that year, Ag-Chem brands were the most popular, used by 81% of respondents. A distant second was Case IH at 54%. In 2007, there wasn't a lot of movement between these two equipment giants, with Ag-Chem maintaining its 81% percentile and Case growing slightly to 61%. The news in 2007 was the performance of John Deere. Sprayers painted green were present in 58% of the machine fleets of CropLife 100 retailers in 2007, up from 53% the year before.
Given this history, how would 2008 play out, we wondered? In a word: wow.
According to the 2008 CropLife 100 survey, Ag-Chem sprayers still represent the lion's share of fleet equipment, but the percentage has fallen slightly to 80%.
The real news, however, comes from the company that now sits in second place. In 2008, according to respondents, 71% of their sprayers were John Deere green, up 13% from the year before. As for the previous No. 2, Case sprayers now represent only 50% of the average CropLife 100 retailer fleet, down 11% from 2007.
The only other sprayer company that made any kind of move was GVM. Its percentile grew slightly, from 12% in 2007 to 18% in 2008.
Looking ahead to 2009, the race between Ag-Chem and John Deere sprayers could become even more interesting if CropLife 100 respondents are to be believed. When asked what brands they were considering buying for the upcoming growing seasons, 48% said they would be looking at John Deere units. Meanwhile, 46% have plans to scope out Ag-Chem sprayers. If these numbers hold, the gap between Ag-Chem and John Deere sprayers within CropLife 100 retailer fleets could shrink to 5% or less during 2009.
Although, this assumes that demand for Big IRON stays strong into 2009 — by no means an absolute given the prevailing economic conditions currently plaguing the overall U.S. market. But big rig manufacturers should be able to breathe a little easier based upon the data reflected in the 2008 CropLife 100 survey.
In 2007, the number of retailers not planning to add or upgrade their equipment fleets stood at 24% — somewhat surprising given how strong the marketplace was performing. This year, however, the percentage of ag retailers not planning to expand their number of units droppped to 23%
Sfiligoj is the Editor for both CropLife and CropLife IRON magazines. He travels regularly to cover industry events and has been dedicated to the ag retail industry since he joined the staff in 2000.