CropLife 100: Custom Application Report

It’s been giddy times for Big Iron these past two years. During 2007 and 2008, respondents in the annual CropLife 100 ag retailers survey indicated that their custom application revenues were up, grower-customers were spending money, and fungicide application work was helping to expand application options. Needless to say, everyone was very content with how this part of their business was rolling along.

Then the industry hit a serious speed bump toward the end of 2008. High fertilizer prices coupled with dropping commodity values put up a serious stop sign for growth. This was followed by an extremely wet spring season, with crop plantings in some parts of the country stretching almost to the start of summer.

Given these developments, it probably will surprise no one that overall custom application revenues were down in 2009. According to data compiled from CropLife® magazine’s annual CropLife 100 retailers survey, custom application sales declined 9% to $763 million. Even more telling, in the 2008 CropLife 100 survey, 71% of respondents said their custom application business grew 1% to 5% for the year, with only 6% experiencing a 1% to 5% decline. In 2009, the percentage of ag retailers seeing 1% to 5% growth for their custom application business dropped to 49%. Furthermore, almost one-third of respondents said this portion of their operation had a sales decline of 1% to 5%.

Less Fungicide Profit

To understand why this drop took place, you need to look no further than fungicide application. As the use of fungicide application as a preventive against disease began to take off during 2007 and 2008, ag retailers were reaping some significant rewards. In 2008, for example, 86% of the retailers polled in the CropLife 100 survey indicated this part of their custom application business was providing a “significant profit potential” for them.

During 2009, however, this percentage took a major hit, dropping to only 9% seeing a profit. Instead, 28% now say fungicide applications in 2009 made them less profits vs. the prior year. Another 53% of those polled said this part of their business was flat.

All the 2009 marketplace street lights weren’t red for custom application, however. Conventional wisdom among market analysts has always been that precision agriculture practices would perform well in a down year because of their inherent ability to target crop input use and save grower-customers money.

This apparently panned out. For 2009, said CropLife 100 respondents, site-specific revenues increased from $145.2 million in 2008 to $164.9 million, a jump of 14%. Despite this fact, only 43% of ag retailers surveyed said precision agriculture sales were up 1% to 5% for their operations, down 10% from the 2008 total of 53%.

Machine Wars

On the self-propelled sprayer side of the picture, AGCO brands (including Ag-Chem and Spra-Coupe) continue to be the most popular models in CropLife 100 ag retail fleets. For 2009, respondents said 75% of their sprayers were painted in the company’s distinctly yellow hue. This represented a slight decline from the prior year, where Ag-Chem RoGators tended to make up approximately 80% of existing sprayer fleets.

Coming in second among sprayer models were ones sporting John Deere green at 67%. Again, this percentage marked a slight drop (5%) from 2008’s 71% figure.

The news was much brighter for red sprayers in 2009. According to figures from the CropLife 100 survey, 57% of ag retailer units were provided by Case IH. This represented a significant 7% increase from the 2008 total of 50%.

But the biggest mover in percentage among sprayers in 2009 belonged to Hagie Manufacturing. In 2008, only 12% of CropLife 100 ag retailers had Hagie yellow sprayers in their grower-customers’ fields. In 2009, this figure more than doubled to 25%.

For the other two major sprayer manufacturers — GVM and Miller-St. Nazianz — 2009 was a year of opposites. Whereas the percentage of GVM sprayers in CropLife 100 fleets dropped 1% to 17%, the number of Miller sprayers increased 6% to 13%.

Still, the most scary news for ag sprayer makers comes not from how many units are currently in the nation’s ag retail fleets, but how few might be joining them in 2010. For the past several years, the CropLife 100 survey has asked respondents to say which company sprayers they were planning to purchase in the coming year. Normally, the top end of this group falls within the high 40% range. This year, however, the highest percentage of planned purchases was 38%, being recorded by both AGCO and Case units. Another 33% said they plan to buy sprayers made by John Deere in 2010.

Significantly, the number of ag retailers planning to forego any sprayer purchase in the new year has expanded. In a normal year, perhaps one in five respondents say their company isn’t planning equipment buys in the year ahead. In 2009, however, this percentage jumped to 33%. In other words, approximately one in three retailers don’t plan to purchase new sprayers in 2010.

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