CropLife 100: The Good, The Bad, And The Ugly
There’s no simpler way to say it: 2009 was one for the ages. Years — perhaps decades — from now, market observers and financial analysts will look back at the year that is just finishing up as one of the most turbulent and unsettled times in the history of the U.S. Going forward, 2009 will most likely be talked about in the same fashion as 1929 and 1973-74 (for those in the agriculture market) are in other financial circles as a watershed time when everything shifted in an entirely new direction.
Given this backdrop, you can appreciate just how nervous CropLife magazine’s editors were in mid-July 2009 when they first started sending out forms to gather ag retailer data for the 26th annual CropLife 100 ranking. Would retailers, reeling from massive fertilizer write-downs during the last part of 2008, see their input sales nosedive by 30%? 50%? Could the CropLife 100 see dozens of companies exit the listing, swallowed up by seas of red ink and/or Chapter 7 liquidations? Would anyone even return a severely negative 2009 CropLife 100 form? These and many other questions loomed large as the first forms hit mail and e-mail boxes.
Somewhat Good News
In the end, however, the news wasn’t that bad. Following the industry record-setting mark of $19.1 billion revenue in 2008, the 2009 total was off only slightly to $18.9 billion (a little over 1%). While it’s true that a $200-million drop in income for the calendar is nothing to cheer about, early projections from ag retail market insiders during the summer months of 2009 indicated that sales were likely to fall to their pre-2007 levels — to somewhere north or south of the $15 billion range. The fact that this didn’t happen is a testament to the ability of most ag retailers to work through these challenging times and adapt their business models accordingly.
Of course, seeing a significant sales increase in one input sector didn’t hurt, either. As we pointed out in last year’s CropLife 100 report, 2007 and 2008 were unusual in that all four input/service sectors — fertilizer, crop protection, seed, and custom application — recorded sales increases from their year-before figures. In this sense, 2009 was a less than stellar year for ag retailers, with three of the four tracked sectors losing financial ground from the prior year. The only exception to this widespread trend occurred in the seed segment. Here, revenue in 2009 increased 18%, from $2.2 billion in 2008 to $2.6 billion. Market share for seed among all inputs/services also grew, up 1% to 13%. This means the seed category has increased its overall inputs/services market share 5% since the start of the decade. Looking at the bigger picture, the success of seed in 2009 effectively cancelled out sales losses in a few other segments.
Speaking of fertilizer, perhaps no other category of the inputs/services marketplace experienced a rougher year in 2009. Following a huge spike in prices/revenues during the booming 2007/early 2008 time frame, the fertilizer segment had managed to grab a 50% market share compared with to its input/service brethren. Conventional wisdom at the time had fertilizer soaring ever higher, surpassing the $10 billion mark in the coming years and steadily moving closer to a 55% market share.
Then, in 2009, fertilizer returned to earth with a loud thud. For the year, sales were down $300 million, from $9.5 billion in 2008 to $9.2 billion. This drop also saw the fertilizer category’s market share decline from 50% in 2008 to 49%. Essentially, wrote CropLife 100 retailers, virtually no fall fertilizer was applied during 2008 and a wet spring in 2009 — coupled with grower-customer reluctance to purchase higher priced fertilizer types — kept revenues from moving forward.
For the crop protection product category, the news was also negative. On the heels of a record revenue year in 2008, this segment saw its sales decline $100 million, from $6.5 billion to just below $6.4 billion. On the plus side, the crop protection product category was able to maintain its market share of the total inputs/services pie at 34%.
Finally, the custom application category was also bitten by the down income bug. For 2009, sales in this category declined 9%, from $837 million in 2008 to $763 million in 2009. Market share remained flat at 4%. Significantly, however, CropLife 100 ag retailers reported that income for their precision agricultural services increased in 2009, growing from $145 million in 2008 to just shy of $165 million.
Now for some of the more frightening news from this year’s CropLife 100 survey. For the past several years, the survey has asked ag retailers to tell us if their sales in nine different ag input segments were up 1% to more than 5%, flat, or down 1% to more than 5%. In 2008, the news in this area was extremely positive, with eight out of the nine tracked segments being up more than 50% for survey respondents. Better still, three segments — crop protection, fertilizer, and biotech seed — saw increases among retailers of more than 90%. Only traditional seed fell below these averages, with a mere 36% of respondents seeing sales increases in this category.
In 2009, it was an entirely different story. For the year, only four of the nine segments — biotech seed, adjuvants, seed treatments, and crop protection products — were above the 50% positive sales mark (each in the 60% range). All the others were below 50%, with traditional seed continuing to bring up the rear position at 20% with positive sales.
The biggest change occurred in the fertilizer segment, not surprisingly. Whereas 90% of CropLife 100 retailers recorded sales gains in fertilizer during 2008, only 39% could say the same thing in 2009. More troubling, 57% of those polled had fertilizer sales declines of 1% to more than 5% — by far the highest percentage of sales losses among the nine input segments.
Considering how badly many ag retailers suffered in 2009, sales-wise, conventional wisdom would have predicted dozens of companies would have closed up shop/merged with neighbors. This did happen, but it wasn’t a widespread phenomenon. In all, only two retailers — Ripon Farm Service and Myers — merged with larger entities. But there was one significant asterisk to this group. Eldora, IA-based United Suppliers — a 20-year member of the CropLife 100 listing with annual sales in the $100-million range — exited the retail market, selling its 40 outlets to neighboring dealerships.
Still, compared with historic input sales levels, the 2009 numbers weren’t that bad. It’s just that, as many retailers have noted, 2007 and 2008 were “two of the most profitable years ever.”
This attitude was further reflected in the 2009 survey. When asked to compare their profitability level in 2009 vs. 2008, 64% of respondents wrote it was identical for both years. Only 17% said they were less profitable in 2009 vs. 2008 — a fact which bodes well for the market in 2010.
Editor’s note: CropLife magazine would like to thank all the CropLife 100 retailers for helping make this report possible. We appreciate your time spent filling out our annual survey form.