2017 CropLife 100 Report: Some Ag Retailers Move Forward, Others Backward
December 8, 2017 For more than three decades now, the nation’s top ag retailers have played an annual game of sorts called the CropLife 100. Each year, these companies participate in our magazine’s survey, dealing how they competed with one another to win the financial race by making more money than the rest of the field. At the very least, the nation’s dealerships and cooperatives look to keep more money in their banks than they did the previous year.
And as long-time members of this select group of ag retailers will attest to, no two games played (or years lived through) pan out exactly the same as the ones that have come before. Put into gaming-eze, some years have featured speculator winning moves, with jackpots hit by just about every player in the game. Other years have witnessed rapid slides to the bottom of the profit margin barrel, as if companies had taken bad missteps onto the backs of slippery snakes. Many had just as many good plays as bad ones and could accurately be described as “bored walks” by the players involved. Given these descriptions, the 2017 edition of the CropLife 100 game seems to have featured all of these scenarios playing out in one manner or another.
In terms of the overall CropLife 100 game, the nation’s top ag retailers all reached their home bases in 2017 with some money left in the bank. According to the survey, CropLife 100 respondents saw their collective revenues increase from $29.6 billion in 2016 to just below $29.8 billion. Although this represented less than a 1% gain of their jackpots from the prior year, this was still a much better outcome compared with the almost 3% revenue drop CropLife 100 retailers saw play out during their 2016 gameplay.
However, a closer examination of the overall CropLife 100 game board shows that a slightly less successful financial game was the norm for the majority of the players. In fact, subtracting out the five companies that are appearing within the CropLife 100 for the first time, 51% (48 companies) of them recorded lower sales figures in 2017 vs. 2016. Of the remaining 47 companies, 20 had sales volumes nearly identical in both years. Only 27 retailers actually saw their revenues grow in 2017.
Even worse for the 2017 CropLife 100 players, this bad gameplay seemed concentrated at the top. Of the Top 20 ag retailers on this year’s list, only five recorded sales gains during the current year. If you take this group to one-quarter of the CropLife 100 for 2017 (the Top 25), only six companies were in the black compared with 2016.
This identical financial profile also played out with the smaller ag retailers within the CropLife 100. If you look at the companies that make up Nos. 76 to 100 on the list, again, only six retailers showed revenue gains in 2017 vs. 2016.
As for profit margins, these performed a bit better in the 2017 CropLife 100 game. When considered as an entire group, slightly over one-third of respondents (37%) said that their profits for the year were higher than they had been during the prior growing season. Another 34% indicated that their profits remained flat for the year. The remaining 29% reported lower profits in 2017 vs. 2016 or weren’t sure at the time of the survey’s completion if their profits would be up, down, or flat.
Fertilizer’s Backward Movement
So why was it so hard for players to hold onto their money while taking part in the 2017 edition of the CropLife 100 game? Unfortunately, the majority of this backward movement apparently happened on the road that led to what could be referred to as fertilizer fields.
For several years now, the fertilizer category within the CropLife 100 has been retreating across the crop inputs/services game board rather than moving forward. The situation seemed to come to something of a head during 2016, when the category lost more than $1 billion in revenues. Most market watchers predicted fertilizer would begin to at least stop losing game squares in 2017 and get back on the path to some profitability.
But that didn’t happen. According to the 2017 CropLife 100 survey, the fertilizer category lost another 10% in sales volume for the year, falling from $13.5 billion to $12.1 billion. This $1.4 billion drop in revenue for the category was severe enough to decrease its overall market share of all crop inputs/services to 41% — virtually the same market share the category held back at the start of the 21st century.
Some observers have rightfully pointed out that the fertilizer category’s recent backward movements on the CropLife 100 game board could be a result of lower fertilizer prices being paid by grower-customers and that fertilizer volumes might be as healthy as ever. And this may be the case for phosphorous and potassium. In fact, when asked to describe how easy or difficult marketing fertilizer to grower-customers was during the year, better than 70% of 2017 survey respondents indicated this was “not unusually challenging” for these two macronutrients (79% for phosphorus and 71% for potassium, respectively).
However, the gameplay was much harder when it came to nitrogen-based fertilizers. In this sector, 51% of 2017 CropLife 100 retailers said that marketing these products to grower-customers was “very challenging” or “more challenging than normal.” The remaining 49% described the climate for nitrogen-based fertilizer with their customers as “not unusually challenging” for the year.
Everything Else Moves Forward
While the fertilizer category continued to backslide in 2017, the rest of the crop inputs/services categories were much more successful in their gaming strategies. For example, the seed category advanced 2% to top the $4.7 billion mark. Market share for this sector held steady at 16%. Likewise, custom application services (which included precision agriculture products/services) moved forward 7% to top $1.6 billion. As with the seed category, the market share for custom application remained steady at 5%.
Of course, every game usually has a big winner, and in 2017, this was the crop protection products category. While the rest of the crop inputs/services tokens were moving backward or forward slightly, this sector’s game piece raced across the financial board during 2017, effectively rolling doubles plus. According to CropLife 100 retailers, their collective crop protection product sales increased 14%, from slightly less than $10 billion in 2016 to an all-time high of $11.4 billion. With this increase providing momentum, the category was able to significantly move its overall market share vs. all other crop inputs/services forward, gaining 4% to 38%. The gap between market leader fertilizer and crop protection, which was as far apart as 20% at the start of the 2010s, now stands at only 3%.
This rate of success for most of these major categories also showed up when 2017 CropLife 100 retailers were asked about their company sales performances. Looking at how each of nine separate sectors of crop inputs/services did in terms of sales, being up, down, or flat, crop protection products, custom application, and precision agriculture products/services all finished in the Top 5 (at Nos. 2 with 60% seeing increases, 4 with 56% seeing gains, and 5 with 52% witnessing higher revenue, respectively). Leading the pack among all these sectors in 2017 were adjuvants, which 68% of CropLife 100 retailers indicated increased sales between 1% and more than 5% for the year.
Here, too, the fertilizer category had the toughest go among ag retailers. According to the survey, 61% of respondents had their fertilizer sales volumes drop between 1% and more than 5% in 2017. Only 35% of CropLife 100 retailers recorded any type of revenue gain in this category.
Playing the Game in 2018
Now that the CropLife 100 game for 2017 has concluded, the nation’s top ag retailers are preparing to begin moving their financial tokens into place for the 2018 edition. To this end, the 2017 CropLife 100 survey asked respondents to tell us what one major issue going into the new growing season would pose the biggest headache to “moving forward” on the industry’s game board. And although myriad areas of concern were mentioned, there were four that ultimately came up as being potential pitfalls for 2018’s game players.
First up were two issues that have consistently represented “bad spins of the wheel” for ag retailers for several years now. Far and away considered the “worst roll” for 2018 was the continued struggle of grower-customers dealing with lower commodity prices and credit crunches.
“The prices received by growers for corn and soybeans is the major issue,” wrote Tim McArdle, Vice President for BRANDT. And with corn selling for around $3 per bushel and soybeans under $9, this feeling was shared by 41% of all 2017 CropLife 100 respondents.
“Farmer profitability due to commodity values is currently causing more heartburn than any other current issue,” wrote John Christian, President of Green Valley Agricultural.
Bob Willard, Chairman for Willard Agri-Service, agreed, summing up the whole low commodity prices equals less retail sales issue in a brief, to-the-point sentence. “If the farmer is not making much money, it’s hard for us to make money,” wrote Willard.
The other holdover “bad card” in ag retailers’ concern deck was labor. The ability to hire and keep good employees has dogged the industry for virtually every CropLife 100 game played over the past 20 years. This year, this was mentioned as the chief issue negatively affecting their businesses by 13% of respondents, tied for fourth among the chief concerns of ag retailers going into 2018.
“Having adequate help to service our customers’ needs is our main worry,” wrote Robert Zempel, President for TH Agri-Chemicals. Max Smith, Manager at Smith Fertilizer & Grain, took the labor issue a bit further, pointing to a lack of education/knowledge as part of the problem. “There are fewer people to hire who have any clue what we do in agriculture,” wrote Smith.
Then there were three newer “bad rolls” among ag retailer concerns, all being mentioned by similar percentages of respondents. Leading this pack was the ongoing consolidation of major industry suppliers and the uncertainty this is anticipated to bring to the entire ag retail marketplace in 2018. This was mentioned as the major concern by 16% of 2017 CropLife 100 survey takers.
“The unknown direction of the newly merged basic manufacturers in both chemical and fertilizer is causing us the most stress going into 2018,” wrote Brent Low, Vice President of Agronomy at Ag Partners.
Along these lines of uncertainty, 14% of 2017 CropLife 100 survey takers cited alternative distribution providers that utilize the Internet (i.e., Farmers Business Network) as their major concern when playing 2018’s agricultural game. As Kathy Sims, President for Sims Fertilizer & Chemical, wrote on her survey form: “The easy accessibility of products via the Internet, without customer support and education, as well as a concern for the lack of responsibility on the part of the seller.”
The final issue to score in the double-digits as a major headache for ag retailers was dicamba. “Issues around leaf cupping and dicamba beans will continue to be a concern,” wrote Tracy Linbo, Senior Vice President for South Dakota Wheat Growers.
And this view of the problems surrounding dicamba in the marketplace as a major topic of concern for 2018 was shared by 13% of 2017 CropLife 100 respondents. Furthermore, as questions continue to pop up for this portion of the agricultural business, ag retailer fear their 2018 sales in this area could end up suffering. “The challenges with dicamba and knowing what the future will bring on spray dates while trying to sell seed,” wrote Karen White, Corporate Controller for MFA Inc.
Looking forward to the annual CropLife 100 game for 2018, most players are feeling a bit better about their ability to play a winning game. When asked to best describe the majority of their grower-customers’ attitudes about the upcoming season, the largest percentage (45%) indicated this could be best summed up as “somewhat pessimistic.” However, an almost similar portion (39%) said that they believed their grower-customers were “cautiously optimistic” about the prospects for 2018. Only 15% thought customers thought that 2018 would be a “very pessimistic” year. The remaining 1% were “very optimistic” for their growers’ fortunes for the upcoming season.
Perhaps better news for the 2018 CropLife 100 game outlook is how ag retailers rate their overall optimism for their businesses in the new year. When asked to rank 2018 on a scale of one to 10, 69% believed the next growing season would rate between a seven and a 10 in terms of performance. Another 25% believed 2018 would fall somewhere between a four and a six on a 10-base scale. Only 6% thought the upcoming year would rank in the one to three range.
This attitude was summed up nicely by Tony Weathered, Executive Vice President for Stanislaus Farm Supply. When asked to say what one agricultural trend was the most troubling for the new year, Weathered declined to list one. “I don’t have one,” he wrote. “I feel very optimistic going into 2018!”
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