Call it a line in the sand. A point of no return. It’s the moment in dealers’ lives when they decide to get serious about selling seed. This month, CropLife® wanted to find out why some retailers have invested so heavily in these products and what they’ve had to do to build the business.
Why now? Readers have lamented the complexities of the seed trade to us for several years, that all the hard work required doesn’t pay off. But in returns for the CropLife 100 survey, to be published next month, an unexpected figure emerged: Many respondents report the percentage of total earnings that seed brought in for 2009 went up a notch from the year before.
We talked with dealerships and coops who have had varied experiences over the last 10 years that seed traits and technologies have been transforming the crop input landscape. What became apparent from visiting with most of them is the work is worth it. For the simple fact that selling seed can be a powerful tool to build enduring relationships with grower-customers — and there is indeed money to be made.
When It Started
Dan Weber, vice president of agronomy for Ceres Solutions LLP, Crawfordsville, IN, felt the growing importance of seed about nine years ago. “We could see the seed technology train coming, and we needed to get aboard if we were going to continue to provide our farmers with the best products and programs to help make them successful.” Indeed, almost every ag chemical company representative he met told how much of the firms’ R&D budgets were going into seed traits — and how little they were working on new chemistries. “We needed to figure out how to capture lost crop protection margins while providing value through seed sales,” he explains.
At the same time, Kyle Baltz, president of Baltz Feed Co., Pocahontas, AR, says his family’s 50-year-old company had seen the area’s market deteriorate to where his staff had become simply “order takers” when it came to seed. At neighboring dealerships, certain varieties were over-promoted by seed company reps or strong regional companies would convince retailers to stock only their product, thanks to personal relationships or kickbacks. “In neither of these cases was the stocked product being driven by customers’ requests. We saw seed as an area that was not being serviced,” he explains. The new approach was simple: Go and learn seed. Watch which varieties do well for growers and stock those products, even get pre-orders for them.
Expertise Builds Grower Confidence
Education in hand, Baltz felt his company could assert itself as an unbiased expert on varieties on the market. The team focused on — and still focuses on — the major brands, with exceptions for regionals when growers ask. Baltz says they try to select the best varieties, and they do not have a vested position with any one seed manufacturer. Sales staff gain expertise through seed company training and reviewing University of Arkansas field plots as well as Baltz’s own plots.
Hintzsche Fertilizer, Maple Park, IL, has also maintained extensive plot systems where staff spend a lot of training time during the summer. Information accumulated from the fields, including yield data, is compiled in the fall and shared with customers. The company can point to which hybrids will make the most money that year, then show multiple-year data on a family of hybrids so growers can see what a product did when it was dry, cold or hot.
“Spending time in those plots, our people start to see traits or specific qualities in hybrids in different locations. And the customer will see it in your eyes when you tell them about it,” says Scot Sparks, seed division manager at Hintzsche. It’s important that sales staff see the results and get their own opinions, so they can describe hybrids to the customer “when there’s snow on the ground.”
As a former seed company staffer himself, Sparks adds that dealers can’t always trust seed companies’ promises about a hybrid because they may be making recommendations for a large region. When narrowing a geography down to a small area, the hybrids may not respond the quite the same. “We do our own recommendations on placement and positioning base on what we see in our area,” he says. “We don’t always agree with what they say.”
At G&H Seed Co. Inc., Crowley, LA, management and agronomic staff are constantly being trained in the Best Management Practices (BMPs) for each of the crops the company services in a four-state area. That’s no small task considering the firm sells rice, wheat, corn, soybean, grain sorghum, ryegrass and other forage seeds.
“Customers expect and receive recommendations from a well-trained field service representative without paying consulting fees,” emphasizes Michael Hensgens, business manager with G&H. Staff constantly share information they’ve learned in the field with other field service team members.
Greg Spears, seed division manager at Trupointe (a recent merger of Southwest Landmark and Advanced Agri-Solutions Coop), Piqua, OH, says if a salesman has a territory, he’s expected to be the expert on that area, narrowing down which hybrids of the many available will work for a grower.
Because of the great advances in genetics, Spears says a farm plan now starts with what seed a grower is going to plant. “Then we want our sales force to be well-rounded and add more value. It’s important that sales person is building a relationship not just in one area of expertise but in offering the total package to the farm, from seed to fertilizer to chemicals.”
Harlan Asmus, president and general manager of Asmus Farm Supply, Rake, IA, sees fertilizer and chemical products as an entryway for seed business: “We build a relationship with a potential seed customer by first selling them other inputs.”
Face time with growers can take various forms, including a steak night at Bonanza where customers can learn which varieties “we’re going to be hot on this year,” says Baltz. Growers come to expect the company is committed to getting them in the best position it can for next year’s planting, he believes.
Unexpected problems during a season can test dealers’ commitment. “There’s been enough times in the last five years, for instance, that Group 4 soybeans have been short, but our customers have gotten all they needed, their original order,” Baltz says.
Nuts And Bolts
Beyond building a committed sales staff sales, retailers must work through with a host of other seed issues. “Seed is the most complicated thing we do,” says Baltz. “First you have to determine which varieties and hybrids you want, then determine supply, then take a position, then more often that not get allocated, then determine what discounts to take advantage of, then track lot numbers, counts, locations, etc.”
Specific problems such as managing inventory and maintaining adequate margins are two factors that are limiting success with seed at Ceres Solutions.
When retailers first got into seed, many had extra square footage in buildings to accommodate inventory. At Hintzsche, seed now takes up 25,000 square feet of previously existing warehouse space, plus the company built 16,000 units of bulk storage about eight years ago. The area also includes seed treatment equipment.
Clyde Kringlen, sales manager with Triangle Ag LLC, Ulen, MN, was concerned the company had overbuilt three years ago. But business growth has proven the expansion, which included bulk and bag storage at six locations, valid. Customers are now familiar with what products they can get where, including seed treating.
Unfortunately, facility and distribution needs can change as seed products change. Spears says his company originally planned to build seed storage at each of its locations. But as soybean packaging changed over the last five years, the coop saw the need to construct one mega soybean bulk facility – and is in the process of building another to the north. “We’ll have two main bulk hubs that can support a pretty big radius,” Spears describes.
As Ceres Solutions has grown in seed corn and bulk soybean sales, the company has also moved to the centralized seed hub concept, with each hub serving a specific geographic region of about 50 miles. Weber explains that receiving, sales, and distribution are provided through these hubs. The company has built four so far.
Fred Seiler, seed and trait specialist with Mid Kansas Coop, Moundridge, KS, reports the company built its first bulk plant in 2007, with another currently under construction. And plans even call for adding two more plants in the next three years.
Transporting product to customers can pose a major logistical challenge. In fact, Hintzsche has one full-time logistics manager, who handles all the seed ordering, seed receiving, assembling loads, and palletizing them by customer. The manager also oversees the seed treatment in the company’s bulk seed equipment.
Many retailers are delivering seed right to farms, saving customers time and energy. Baltz would like to step up his company’s pre-planning efforts, trying to deliver seed earlier in the spring, and getting pallets in farm shops a month ahead of planting. “When you get to the actual planting day or day before, everyone is at their wits’ end. Farmers are all jacked up, and we’re usually two days behind in fertilizer application, so we’re all jacked up,” describes Baltz. Early delivery will improve efficiency and calm nerves.
This season, The Andersons, Inc. facility in Walton, IN, invested in a large-capacity weigh wagon for deliveries, to aid growers during the busy planting season. Customer response has been very positive. “These farmers go so fast, they don’t slow down for anything, and you don’t want to cause a bottleneck for them,” says Joe Johnson, plant manager.
Trupointe has people devoted solely to delivery during spring planting, with semi-trucks hauling seed right to the farm, literally anytime a grower needs it, Spears says. He believes delivery makes both his company and farmers more efficient.
Accounts receivable for seed orders is another challenge retailers are working through. Baltz believes his company is managing too much seed financing. “We need to trim our accounts receivable on seed a little bit, utilizing the manufacturers’ and Farm Plan options,” he admits.
Partnering With Seed Companies
“It’s not too hard to decide which seed companies to work with,” says Sparks. “They sort themselves out pretty quickly because they either want to work with us as a partner or they want to do what they want to do, not support what we want to do.” Dealers identified a number of areas that can cause friction between dealers and manufacturers.
Margins and profitability have topped the list of retailer concerns in the past. Weber says Ceres Solutions will continue to work with seed partners to ensure his company is fairly compensated “for moving the seed to the farm through our assets and utilizing our people. I think those true costs are still being identified but we are getting closer to knowing where we’re at and where we need to be,” he says. One specific issue that would help margins: Weber thinks retailers with the assets to treat seed should be allowed to do the job for the grower – and capture the value added for the service.
Asmus is not pleased that some seed companies limit access to markets, only allowing a certain number of dealers in a region. He sees it hindering his dealership’s seed sales, which produced just 5.2% of the company’s profit in 2009. “Seed is not much of a profit center for us, and we are not where we want to be in sales,” he admits.
Other seed companies will allow many dealers in a region to represent their product. Sparks says that can lead to problems when seed salesmen aren’t properly trained in the technology. He would like to see some kind of standards set for what a dealer needs to know before handling seed. “Seed is not a commodity,” he emphasizes. “There’s way too much at stake for the end user to have malpractice going on by people who are trying to do the right thing but really don’t understand what they have to offer.”
There was debate among retailers about the value of the increasing number of traits seed companies are putting in products. Baltz wonders if there really are so many different field situations that require so many different hybrids, as many as 100-plus releases. “And if there are, can dealers effectively get them into the right spots?” Simplification here would be helpful, he believes.
Baltz also struggles with companies constantly upgrading varieties. “Farmers can plant a variety two to four years in a row, then companies want to bump them up to the next, newer generation,” he says.
Hensgens says the added patented traits have raised the cost of seed, but have also given his company the opportunity to work with producers to adjust their seeding rates to a level that best suits their crop and cultural practice. Lower rates ultimately mean the same or lower seed costs — plus customers’ confidence that G&H is looking out for their best interest, not just trying to sell more seed.
Kringlen points out dealers can show farmers how they can cover higher seed costs with higher yields that the new technology hybrids will produce, when matched to individual fields.
Seed marketing programs were a big talking point for some retailers. Spears believes some growers see these as gimmicks. No matter how great the incentives, though, Spears wants his staff to emphasize seed choice should be about in-the-field performance.
Some dealers have felt boxed in by seed company return policies. The penalty for a return of more than 10% really starts to impact profitability, says Baltz. He has run into years, for instance, when unpredicted weather shifted growers’ choices of a soybean from Group 4 to Group 5 — or even to another crop entirely. The dealer gets holding unwanted product. It’s a constant struggle to maintain needed seed supplies without over-committing, says Baltz.
Generally, the retailers we talked with felt they were compensated fairly for seed sales, in spite of the work building the business entails. “Some people get frustrated with it, yet it can be extremely rewarding in the end to a company,” says trupointe’s Spears. “I think it’s a great opportunity if you’ve got the right people on your sales force to build stronger relationships with your growers.”