The 2015 CropLife 100: Lots To Like

Crop Production Services (CPS)

Despite all the challenges, 2015 was a pretty good year for many of the top 100 ag retailers.

As 2015 for agriculture comes to an end — a year that saw myriad challenges on several fronts — it’s time to gauge just how well the overall market performed. And the news is generally good — at least when it comes to how the nation’s top ag retailers did, with overall sales increasing approximately $500 million from 2014. In fact, if this year’s CropLife 100 were a social media website, participants would probably be clicking on their “share” and “like” buttons with great enthusiasm when reading the report.

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In truth, part of the reason for this level of happiness would tie back to the fact that it was slightly unexpected. To review, when CropLife® magazine compiled the statistics from its 2014 CropLife 100 ag retailers survey, the overall value of the marketplace did show a healthy increase, up 3% to $29.9 billion. However, virtually all of this gain came from a single large ag retailer, Pinnacle Holdings, purchasing dozens of smaller ag retailers and bringing their revenues into the CropLife 100 mix. Subtracting out the sales gains by this single company, the other 99 members of the 2014 CropLife 100 listing moved their revenues forward by only 0.7% for the year.

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Considering this fact — coupled with steadily falling commodity prices and grower-customer incomes — the expectations for a down year for ag retailers in 2015 seemed very real just one year ago. And once the rains began to fall (and never seemingly stopped) in many parts of the country during the spring of 2015, many market watchers feared the worst for ag retailer fortunes for the year.

But in the end, despite all the challenges, 2015 was a pretty good year. According to the 2015 CropLife 100 survey, the nation’s top ag retailers saw their overall revenues grow 1.7%, from $29.9 billion in 2014 to $30.4 billion. As a reminder, ag retailer sales stood at a little over $20 billion just five short years ago in 2010 — meaning the overall market has averaged $2 billion per year gains during that time frame.

Obviously, participants should definitely “like” these facts.

Crop Protection Leads The Way

To compile the overall numbers for the annual CropLife 100 report, the survey looks at sales figures in four different crop inputs/services areas — crop protection products, custom application (including precision agricultural services), fertilizer and seed. For many years during the early part of this decade, when commodity prices were high and grower-customer income was rising sharply year-after-year, it wasn’t unusual for all four categories to see sales increases from the year before. In most years, however, approximately half of these categories see gains while the other half record declines.

And this was the pattern that occurred in 2015. In terms of actual sales increases year-over-year, the crop protection products category performed best. For the year, according to the survey, this category increased its value $800 million, growing from $9.3 billion in 2014 to $10.1 billion. Significantly, this marked the first time that the crop protection products category has ever crossed over into the double-digit billion dollar region.

Naturally, since this 8.6% revenue jump easily outpaced the entire CropLife 100 ag retailer total, the crop protection products category succeeded in gaining market share for the year. As of the end of 2015, the category holds a 33% share of all crop inputs/services sales within the CropLife 100, up 2% from 2014.

As for why crop protection product sales are now one of the fastest growing categories for the nation’s top ag retailers, most respondents point to a single factor for the gains — spreading herbicide-resistant weeds. Through 2014, the numbers for herbicide-resistant weeds were staggering — approximately 60% of U.S. growers reported the presence of these weeds in their crop fields. In states such as Arkansas, this figure jumped to almost 95%. Among CropLife 100 survey respondents, 73% describe herbicide-resistant weeds as a major problem in “many or some” of the fields they regularly service for their grower-customers.

“There were definitely more high-anxiety weeds spreading across much of the country,” said Luke Peters, U.S. corn herbicide product manager for Dow AgroSciences at a late winter 2015 trade show. “There has been an increase in the number of hard-to-kill marestail, and some weeds in this family are starting to germinate at different times than they did in the past.”

To combat this growing crop yield menace, crop protection product manufacturers have spent the past few years introducing and preparing to introduce a host of new herbicide offerings. Many of these are blends of three or four different active ingredients featuring different modes of action to hopefully provide some measure of control. And this influx of new products has apparently translated into more brisk crop protection product sales at the ag retail level than the industry has seen in the past decade.

As might be expected, another beneficiary of the growing herbicide-resistant weeds fight in 2015 was the custom application category. According to the 2015 CropLife 100 survey, this category’s sales grew better than 15%, from $1.3 billion in 2014 to $1.5 billion. Market share for custom application held steady, however, at 5%.

In the case of custom application, the market growth in 2015 had more to do with timing than anything else, particularly when it came to ag retailers trying to help their grower-customers maintain their crop yields. “Timing is everything,” said Luke Bozeman, technical market manager, herbicides for BASF, at a recent industry trade show. “Once weeds have emerged, there is a limited window for applying a postemergence herbicide before the weeds grow too large to control or crops are beyond the size that allows an herbicide application. It is imperative that these weeds are controlled before they go to seed so that their progeny aren’t around to affect yield in the next growing season.”

You can almost feel more “like” and “share” buttons being clicked on following these figures.

Falling Fertilizer

Now, unfortunately, we come to the not-so-good news about the 2015 CropLife 100 that has to be shared. Prepare your “unlike” buttons, everyone.

The 2% market share boost that the crop protection products category received in 2015 had to come from somewhere, and in this case, it was the fertilizer and seed categories. First, a look at fertilizer is in order.

For a good portion of the early 2010s, the fertilizer category was humming along just find. Year in and year out, sales increased for the category and its market share steadily grew until it topped 55% in 2012. For a time, it seemed as if nothing could stop the category from capturing six out of every 10 crop input/service sales taking place at the ag retail level.

But starting in 2013, fertilizer revenues began falling — and like the old woman in the infamous Life Alert commercial, it can’t seem to get back up. That year, fertilizer revenues for the nation’s top ag retailers hit $15.3 billion. But they retreated 3% during 2014 to $14.8 billion. Going into 2015, everyone wondered if this downward slide would continue.

In a word, yes. According to the 2015 CropLife 100 survey, the fertilizer category saw its sales decline 2% to $14.6 billion. Market share for the category now stands at 48%, down 1% from the 2014 total.

For the fertilizer category, the past few years have presented something of a “perfect storm” of conditions to curtail usage by grower-customers — high fertilizer prices, dropping commodity prices, and extremely unfavorable weather conditions during the peak spring and fall application seasons. This was particularly pronounced during spring 2015.

“Our fertilizer applications ended up going considerably later than normal, and they would have impacted our normal fungicide operations,” said Scott Schertz, owner of Schertz Aerial Service, in an August interview with CropLife. “We really had to limit where we would do them so we wouldn’t cut into the normal core business.”

Unfortunately, most ag retailers expect these market conditions to persist well into 2016. “For next season, if growers plant the corn, we’ll need the nitrogen tons eventually, but the phosphorus and potassium is a little more suspect on what they might use,” said Daryl Warren, vice president of agronomy for Ceres Solutions LLC, in a CropLife interview earlier this fall. “[Here], they might pull back.”

As for the seed category, 2015 was a rough year on many levels. According to the 2015 CropLife 100 survey, this category’s sales dropped 4%, from $4.5 billion in 2014 to $4.3 billion. Market share dipped 1% to 14%.

When it came to the seed category downturn, ag retailers universally pointed to 2015’s extremely wet spring in many parts of the country for delaying (or outright cancelling) their seed business. “Most of our soybeans were planted around May 20-22 and about 80% of them didn’t get sprayed until the first week in July,” says Mike Carrell, branch manager for Ceres Solutions in Wingate, IN.

Another factor hurting seed sales in 2015 tied back to falling commodity prices. Many CropLife 100 retailers reported that several grower-customers were looking to cut back on expenses wherever they could — which in many cases meant switching to older (and consequently cheaper) seed choices. “A lot of farmers are going to be looking for ways to save any penny they can because of depressed commodity prices,” says Kevin Mainord, location manager for Sanders (part of Pinnacle), East Prairie, MO.

Consolidation Still Happens

Besides looking at the crop inputs/service categories, the annual CropLife 100 survey also tracks mergers and acquisitions that take place within the rankings. In 2015, there were just a handful of companies that disappeared from the list via this route. This included Golden Furrow Fertilizer, Eldon, IA, which was acquired by Crop Production Services late in 2014, and MRM Ag Service, East Prairie, MO, which is now part of the Pinnacle Holdings’ holdings.

And there is at least a few more to come in 2016, mostly taking place in the state of Iowa. In mid-2015, the board of directors for United Farmers Coop and Farmers Elevator Cooperative proposed a merger with CropLife 100 member Cooperative Elevator Association, which is still pending at press time. This will undoubtedly move the combined entity’s rank within the CropLife 100 from its current spot, No. 73.

Also in the works is a merger of No. 18 Farmers Coopera­tive, Ames, IA, and No. 72 West Central Cooperative (WCC), Ralston, IA. In November, the boards of directors for both cooperatives decided to proceed with a merger vote for members, which should be counted by December 18. If the merger is approved, the combined cooperatives would be based in Ames and headed by Milan Kucerak, current head of WCC. It would likely land the newly merged cooperatives within the Top 15 of the 2016 CropLife 100 rankings.

A Cautious Outlook

Given all these generally positive numbers, you would think ag retailers would be sharing the good news of 2015 through all their traditional communications channels (face-to-face, at the local coffee shop, etc.) and newer ones such as Facebook and Twitter. Still, it seems as if not many people within the industry are not shouting all that loudly. Why?

According to respondents, there is still too much uncertainty in the overall agricultural economy for comfort. As one participant put it at the recent 2015 PACE Advisory Council meeting of industry experts: “Next year, we will be in Year Three of the latest downturn cycle for agriculture, and this one feels different than the ones we’ve seen before.”

For 2015 CropLife 100 respondents, the feeling seems to be the same. When asked to rate their level of optimism for their business prospects in 2016, the market split almost evenly down the middle — 51% think the market will be “poor to average” and 49% believe it will be “better than average.”

I’m really not sure which button, like, unlike or share, should be clicked on for this variable.

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.

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