Searching For Inputs

Agriculture is a risky business. Just ask those who stockpiled tons of costly fertilizer in 2008, only to have market prices fall fast and furious.

“Normally a fertilizer company like ours fills up with product in the fall or summer, then we would take advantage of fertilizer market appreciation through the winter and usually come out making a little money,” says Cleve Anderson, agronomy division manager for Frenchman Valley Cooperative, Imperial, NE. “After what happened in the industry a year ago, there are some companies out there, including ours, that lost a LOT of money in 2009. Just huge amounts of money. In the millions.”

Fertilizer Repair

Memo to fertilizer manufacturers: Retailers are looking to you to rebuild their trust. Some will take longer than others.

Many retailers were angry last year after being caught with fertilizer inventory as prices fell at the end of 2008. Some have moved past that, but retailer faith in fertilizer manufacturers has most definitely slipped.

The manufacturers encouraged retailers to buy in the summer, before prices rose further. “That was exactly the wrong thing to do,” Anderson says. “I would hate to be a fertilizer manufacturer because they lost a LOT of credibility last year after what happened in the industry.”

Retailers were upset for good reason, he continues. “We have done a lot of business on their advice in the past,” Anderson says.

James Howe, vice president of Star of the West Milling, Frankenmuth, MI, adds that “product increases came fast, but the collapse came even faster,” something he never experienced in his 28 years in the business. “It’s left retailers cautious.”

Retailers are moving forward, just with smaller steps. Tom Fullenkamp, CEO of Golden Furrow Fertilizer in Eldon, IA, notes that “we study the markets a lot harder. In the past I would buy ammonia once at 10,000 ton at a crack and have it all for the fall. Now, you have to go through stages and buy two to four times.

“We have to because we can’t let a competitor go whole hog and put us in a bad position,” he adds. “We’ll have to do this until we got some stabilization in the markets; I’m not smart enough to read them as they are now.”

In a recent CropLife eNews reader survey, 49% of participants (27 of 54) said they expected their grower-customers to use less fall fertilizer this year than in fall 2008. Just over a quarter answered that they anticipate more fall fertilizer application, and 18% felt fall fertilization would remain at the 2008 level. (The remaining responded that they didn’t know.)

“I think retailers are more cautious in their purchasing decisions going forward, I know we are,” says Jeff Eggleston of Hintzsche Fertilizer, Maple Park, IL. “I would say inventory levels on both fertilizer and nitrogen going into next season, or even going in to this fall season, are probably not as high as past five to six years.”

Grab Ag Chem Dollars

When Monsanto announced this fall that it was lowering the price of its Roundup brand herbicide by as much as 50% compared to 2008 highs, the simultaneous grower cheers and retailer groans could be heard across the country. As one retailer explained, the sudden drop in price cut deeply into his profit margins, and in some cases, retailers may be sitting on inventory that cost them more than the new selling price. Another, Jim Shelton of Landmark Cooperative Service, Cottage Grove, WI, says glyphosate will eventually become so cheap retailers won’t be able to afford to handle it.

And that could well mean crop protection sales figures will take a dip in 2010. Just ask Golden Furrow’s Fullenkamp. “We look dollarwise to be down on chemicals substantially next year simply because the price of gylphosate is going to be in the neighborhood of 50% of what it was,” Fullenkamp explains.

A new “no-service cash-and-carry” broker in Mountain View Co-op’s Black Eagle, MT, service area will hit hard on what’s left of glyphosate margins. “Now it’s shrunk to nothing,” says Paul Schumacher, agronomy manager. “Glyphosate was 50% of our total sales so this has a huge impact on our profitability.”

How will Mountain View respond? “We are going to do some customer segmentation to try to recognize the people that are going to buy on a program, and come up with a competitive program for them,” Schumacher says. “We will try to separate the cash-and-carry market from the full-service market.”

The late drop in glyphosate price didn’t affect the 2009 sales figures. CropLife 100 retailers were asked to compare their 2009 vs. 2008 crop protection sales; 64% responded that their sales were up by 1% to 5%. Specifically, herbicides (see chart) and seed treatments really carried the day in this category. Of the 76 retailers that responded, 66% said seed treatment sales were up 1% to 5% over 2008 figures, while 27% said sales were flat, and 7% reported sales were down between 1% and 5%.

That same research found that adjuvant sales for the 2009 season, compared to 2008, increased between 1% and 5% for 69% for the 76 retailers that responded. Another 22% said sales were flat, and 9% said sales were down 1% to 5%.

Retailers don’t need to carry every product growers may want, advises Tim McArdle, vice president and general manager for Brandt Consolidated, Springfield, IL. “We’ve honed our choices for crop protection down pretty severely — a few key suppliers to maximize our opportunities. We will always, at the end of the day, offer the customer what the customer wants, but in this era that we live in now, with glyphosate-tolerant corn, there’s a lot of products that basically do the same thing.

“Plus, the way this whole business is structured with the crop protection companies and rebates and all that stuff, you can’t maximize your opportunity if you just carry a little bit of everybody’s products,” McArdle says. “We’re fortunate in that we have the ability to direct most of our business. Our customers will take our recommendations as long as it’s something that works.”

It’s All In The Seed

Grower-customers have a different mindset when it comes to seed. They leave the minutiae of crop protection and fertilizer to their retailer, but they check every aspect of seed and seed trial results themselves, says Star of the West’s Howe.

Growers also have a number of other seed sources — manufacturers, wholesalers, Internet brokers, the guy out of his garage. In times of economic crisis, these become more appealing as growers look for deals and take on a “do-it-myself” viewpoint. Seed companies that employ direct sales are shooting themselves in the foot, says one retailer.

Richard Warner, president of Warner Fertilizer, Somerset, KY, stresses the retailer’s role in seed sales and service. “I think seed companies need that dealer who’s knowledgeable about their products and provides the service that’s needed.”

“We’ve had some basic suppliers try to get around us in the past and I’ve wished them luck, since they would have one guy vs. my 19,” says Dan Kennedy, general manager of Ritter Crop Services, Jonesboro, AR. “We have great relationships with most suppliers. Someone will try it, but they won’t succeed.”

Another frustration for retailers is seed pricing. “It’s very hard to know your margin, and I cannot tell you what a bag of seed corn costs,” says Frenchman Valley Co-op’s Anderson. “The manufacturers and seed companies won’t disclose that information, so we’re going just on what they tell us.”

The major seed companies will “pull the strings more and more and tie fertilizer, seed, and chemical together and get bigger and bigger,” says Fullenkamp.

McArdle agrees: “We believe you can lead with seed. Companies are going to bring out new traits in the next few years that are more output traits, and so it’s hard to even sell a farmer crop protection or fertilizer unless you KNOW what seed variety he’s going to plant and what potential it has.”

CropLife 100 retailers indicate that they feel confident that they can get germplasm, varieties, and brands to be a significant seed player. When asked, 31% of the 70 respondents agreed they can, 29% strongly agreed, and 26% neither agreed nor disagreed.

“You have to find yourself a partner, a brand that you think trust and can recommend with confidence to your customers,” says McArdle. “Then you have to create the best opportunity with that brand company that you possibly can. We must negotiate a good position.”

Leave a Reply

Crop Inputs Stories

InsecticidesHow To Scout For Corn Earworms In Corn
July 28, 2014
In her weekly report, University of Missouri Agronomy Specialist Jill Scheidt discusses what to look for when scouting for corn earworm. Read More
Soybean field
FungicidesValent Launches New Seed Protection Fungicide For Soybeans
July 16, 2014
The INTEGO SUITE System contains the first new, novel seed protection fungicide chemistry registered in 30 years by the EPA for protection against Pythium and Phytophthora. Read More
InsecticidesEPA Grants Besiege Insecticide Additional Approvals
June 18, 2014
EPA has granted additional registration approvals for the use of Syngenta's Besiege insecticide on sorghum, cereal grains and peanuts. Read More
HerbicidesArysta Touts Burndown Herbicide For Brome Management In Wheat
June 4, 2014
Arysta LifeScience North America recommends PRE-PARE Burndown Herbicide for effective brome management in winter wheat. Read More

Trending Articles

Green Valley Ag facility
Retail FacilitiesGreen Valley Ag Adopts A.J. Sackett’s Precision Fertilizer Blending® Technology At New Facility
July 8, 2014
Sackett's Precision Fertilizer Blending® Technology is making huge strides around the world. Green Valley Ag adopts the technology at its new facility to support its advancing agronomic needs. Read More
Retail FacilitiesWaconia Manufacturing Builds Facility Designed For Speed, Efficiency
July 7, 2014
To make its new hub facility more efficient, Cooperative Elevator enlisted the aid of Waconia Manufacturing. Read More
EquipmentSummer Show Preview 2014: Superior Sprayers Take The Field
July 3, 2014
In this final installment of our coverage of the major categories of Big IRON that retailers can expect to test-drive at this summer’s events, here is a look at 19 sprayers. Read More
Scouting a soybean patch at Green Valley Ag.
EmployeesCropLife Compensation Survey: Battling Talent Drain
July 2, 2014
Retailers too often lose employees to companies outside of agriculture, while recruiting efforts are most often limited to competitors and other ag-focused organizations. Read More
HerbicidesDow AgroSciences Introduces SureStart II Herbicide
June 16, 2014
The enhanced formulation has improved viscosity and increased stability under heat and controls more than 60 high-anxiety grasses and broadleaf weeds found in corn fields. Read More
HerbicidesBASF Investing $270 Million To Expand U.S. Herbicide Production
June 11, 2014
BASF has invested more than $270 million to expand herbicide production capacities in the U.S., including more than 20 new products to be launched over next two years. Read More

Latest News

HerbicidesWillowood To Market Glufosinate
July 28, 2014
Willowood USA recently announced that Federal EPA has approved its technical registration for glufosinate. Read More
InsecticidesHow To Scout For Corn Earworms In Corn
July 28, 2014
In her weekly report, University of Missouri Agronomy Specialist Jill Scheidt discusses what to look for when scouting for corn earworm. Read More
Crop InputsDuPont Pioneer, Weyerhaeuser Enter Technology License A…
July 28, 2014
The agreement brings together agricultural and forestry know-how to sustainably improve crop productivity for corn growers around the world. Read More
EquipmentAGCO Launches Global iPad App
July 28, 2014
The free AGCO Global iPad App can be downloaded from the Apple iTunes Store and features the full family of RoGator self-propelled sprayers and TerraGator high-floatation spreaders. Read More
Eric SfiligojYuma Centennial Ag Supply Earns 2014 National Environme…
July 28, 2014
Colorado-based ag retailer receives top trophy in 24th annual DuPont Crop Protection/CropLife ceremony. Read More
CropLife 100Pinnacle Forms Alliance With Wildlife Managment, Seed O…
July 25, 2014
The strategic alliance will provide Tecomate with key wildlife products, processing facilities, distribution centers and sales through Pinnacle’s ever-growing retail network. Read More
ManagementFranken Presses White House On RFS Support
July 25, 2014
Al Franken and a group of Senate democrats recently met with senior White House official John Podesta to urge the administration to change its position on an EPA proposal. Read More
ManagementASA, FarmLink To Launch ‘Operation Benchmark̵…
July 25, 2014
The American Soybean Association (ASA) and FarmLink are teaming up to help farmers close the $11 billion gap between what they harvested in 2013 and what they could harvest annually. Read More
StewardshipNorthey: Farmers Commit $1.4 Million to Try New Water Q…
July 25, 2014
The practices that are eligible for funding include cover crops, no-till or strip till and using a nitrification inhibitor when applying fall fertilizer. Read More
Precision AgFarmers Learn How Changing World Will Impact Iowa
July 24, 2014
Technology and understanding global consumer demand for Iowa farm products brought hundreds of farmers and agribusiness leaders to Ames recently for the annual Iowa Farm Bureau Federation Economic Summit. Read More
HerbicidesPurdue: Late Season Weeds May Require Manual Removal
July 24, 2014
Hand-rouging and pulling late season weeds by hand may be the best way to remove them, more so than using a herbicide, a Purdue Extension weed scientist says. Read More
Soybean Field
InsecticidesTransform WG, Closer SC Insecticides Receive R&D 10…
July 23, 2014
Dow AgroSciences has received the award from R&D Magazine for Transform WG insecticide and Closer SC insecticide with Isoclast active. Read More
EquipmentKinze, Raven Team Up On 4900 Planter Monitor
July 23, 2014
Kinze Manufacturing announces a partnership with Raven Industries to develop a standalone monitor solution for the Kinze 4900 series planter. With this new Read More
LegislationNew Farm Bill Continues To Confuse As Growers Await USD…
July 23, 2014
The new five-year Farm Bill eliminates many of the direct payments previously payed to growers and could benefit from USDA clarification, reports a Toledo Blade columnist. Read More
EquipmentPrecisionAg.com Relaunches With Responsive Design For M…
July 22, 2014
PrecisionAg, the worldwide leader in precision agriculture information and analysis, announces the launch of its completely redesigned website, PrecisionAg.com. Read More
FungicidesEPA OKs Two Willowood Fungicides
July 21, 2014
The EPA has approved Willowood Azoxy 2SC and Willowood AzoxyProp Xtra. two widely used broad spectrum, preventative fungicides with systemic and curative properties. Read More
Precision AgFarmers Learning Fast As UAVs Take Off
July 17, 2014
Farmers and others interested in how UAVs can be used in agricultural applications were able to learn more about the technology during the recent Precision Aerial Ag Show. Read More
CropLife 100Bobby Knight, Richard Petty To Highlight Ag PhD Field D…
July 17, 2014
Attendees at the July 24 Ag PhD Field Day at Hefty Farms will learn about the latest agricultural technologies, and get a chance to meet legendary sports figures Bobby Knight and Richard Petty. Read More