Top 100 Ag Retailers Post Record Revenue In 2012
By now, everyone knows that even with much of the nation’s economy in the doldrums over the past four years, agriculture has continued to ride an ever rising tide of prosperity. Indeed, consider this statement from Jim Rogers, the 2012 Nobel Prize winner for economics, when asked what part of the U.S. economy financial players should invest in during the coming years: “I guess I would say agriculture is what I would invest in today if I had to invest in something.”
Naturally, this green tide of good fortune has had a ripple effect on the ag retailers that make their living catering to the needs of the agricultural community. In fact, during 2011, member companies of the CropLife 100 had their best year to date, with total revenues for the year topping $24.2 billion, an increase of 17% from the prior year’s figure. What was mildly surprising at the time was how well the industry performed despite many grower-customers dealing with extremely wet conditions during the spring and summer months. Coupled with a strong performance in 2010, the majority of ag retailers were cautiously optimistic that the positive financial wave would continue in 2012, with 78% of 2011 CropLife 100 survey respondents rating their outlook for the year “a seven to 10” on a scale of one to 10.
And it turns out the financial tide has continued to swell upwards. According to ag retailers polled in the CropLife 100 survey, 2012 was awash in revenue. For the year, the nation’s top dealerships and cooperatives took in $27.8 billion — an increase of 15% over their 2011 totals. What’s even more impressive is the fact that CropLife 100 retailers spent the better part of the 21st century inching towards the $20 billion mark, which they finally surpassed in 2010. Now, just two short years later, it looks as if breaking the $30 billion barrier might be possible with another strong revenue performance in 2013.
Raising All Boats
As with any kind of tide coming in — financial or otherwise — all the boats in the ag retailer’s fleets have floated upwards during 2012. In our CropLife 100 survey, the sales totals tracked include four categories — fertilizer, crop protection products, seed and custom application. Usually, in a normal year, one or two of these show significant sales increases from one year to the next, with the others suffering some kind of sales decline. Occasionally, three of these four categories will record revenue gains. Rarely, all four sectors would enjoy growth in the same year, such as happened back in 2005 and 2007.
At least it used to be rare. In both 2010 and 2011, CropLife 100 retailers reported that their sales grew for fertilizer, crop protection products, seed and custom application.
Could it happen again in 2012? In a word, yes.
With the overall ag market tide cresting nicely, all four categories saw their sales grow. This ranged from a high water mark of 24% for the custom application category to a low ebb of 6% for the seed category.
To market watchers, seeing the nation’s top ag retailers string together three straight years of all category growth must be something to behold. This is particularly the case considering how poorly 2012 was shaping up not too many months ago.
For many grower-customers, the year started out perfectly. A dry spring arrived early in much of the country and the season’s field work moved along at a healthy clip.
Trouble was the dry never ended for many. As more and more of the nation slipped into a major drought, crops were left dying across much of the Mid-South, West and Midwest. Given these conditions, many ag retailers during the summer of 2012 wondered if their businesses would ultimately suffer as a result.
But agriculture’s tide of good fortune continued to rise despite the dryness in the air (helped in large part by the crop insurance that approximately 90% of the nation’s grower-customers had on their fields). In fact, when asked what kind of business impact the Drought of 2012 had on their operations in this year’s survey, 46% wrote that it had had “no impact.” A slightly larger percentage — 48% — indicated the drought’s impact led to a “slight decrease” in their sales in 2012. Only 6% thought the lingering drought had a “significant impact” on their annual revenues.
“The drought had little to no impact on our business,” wrote Larry Arndt, agronomy team leader for MaxYield Cooperative, West Bend, IA, on his 2012 CropLife 100 survey. “Our growers ended up with good yields.”
Randy Orgill, controller for Crop Production Services, Inc., Loveland, CO, agreed with this assessment. “The nationwide drought was severe, but its primary impact was felt in the Midwest,” says Orgill. “The rest of our market area was less significantly affected, and in many areas, farmers will enjoy record yields and prices.”
In some cases, ag retailers thought the drought was good for their grower-customers in the long run. “So far, it has raised commodity prices, which helped us,” says Todd Kautzman, president of Mott Grain Co., Mott, ND.
Keeping with comparing the four revenue categories to boat types, fertilizer continues to be a catamaran. Since the drop off in sales the category experienced back in mid-2008, the fertilizer sector has continued to add more and more knots on its journey through the ag retail sea. In 2012, the category saw its sales grow a healthy 20%, from $12.7 billion in 2011 to $15.2 billion. This boost in revenue also puts the fertilizer category comfortably out in front in the Crop Inputs/Services Cup race for market share. Today, the fertilizer sector holds a 55% share of all CropLife 100 retailer sales, up 2% from 2011 and 14% from the start of the 2000s.
Meanwhile, for the crop protection products category, the ag retail sea in 2012 was traveled in a more traditional sailboat in terms of growth, as in slower, but steady. For the year, CropLife 100 retailers saw their revenues in this sector increase a nice 11% to $7.9 billion. Yet, because this rate of growth was less than that for the entire marketplace, the crop protection products category experienced another drop in its overall market share. In 2012, this sector accounts for 28% of all crop inputs/services sales among the nation’s top dealerships and cooperatives, down 1% from 2011.
The seed category took a similar path in 2012 as crop protection products did. In vessel terms, seed would be a steamship running low on power. On the plus side, the sector moved ahead on the financial tide 6%, increasing from $3.4 billion in sales during 2011 to $3.6 billion in 2012. On the minus side, however, the seed category once again dropped market share for the year, down another 1% to 13%. This marks the same market share of overall crop inputs/services sales seed held back in 2010.
But in terms of overall growth, no category topped custom application. Modeling its year after a wind surfer, the category had an impressive sales increase of 24% for 2012 according to CropLife 100 retailers, growing from $885 million in 2011 to $1.1 billion. This marked the first time that the custom application category (which includes precision ag revenues) has broken through the $1 billion mark. Despite this gain, however, the sector was only able to maintain its market share vs. the rest of the categories fleet at 4%.
Crop Protection Steams Ahead
Besides looking strictly at the revenue stream for the major categories, CropLife® also attempts to find out how all the most common crop inputs/services sectors performed during a given year. Therefore, for the past decade or so, we’ve asked survey respondents to tell us how the following nine segments — adjuvants, biotech seed, crop protection products, custom application, fertilizer, micronutrients, precision ag, seed treatments and traditional seed — did for the year in terms of sales. Specifically, we ask if these were up 1% to 5%, down 1% to 5% or flat. The past few years, eight out of these nine have been up for better than half the ag retailers we’ve polled, with only traditional seed falling below this mark.
And this was the same water route followed by these segments during 2012. According to survey respondents, eight of these nine segments were up for more than 60% of ag retailers. Leading the charge was crop protection products. In 2012, 90% of CropLife 100 retailers saw sales increases of 1% to 5% in this segment. Also performing well were fertilizer (up for 89% of those polled), adjuvants and micronutrients (both up for 87% of respondents).
Seed treatments and biotech seed sales finished in the second tier among these segments. Overall, 80% of CropLife 100 retailers had sales increases of 1% to 5% for their seed treatment businesses in 2012. Biotech seed sales, meanwhile, were up in this same range for 77% of those surveyed.
Likewise, custom application and precision ag followed similar growth paths in 2012. For the year, 68% of CropLife 100 retailers recorded sales gains of 1% to 5% for their custom application operations and 63% had these same increases for their precision ag businesses.
Bringing up the rear again was traditional seed — a position the segment has held for several years in a row now. In 2012, only 29% of CropLife 100 retailers had sales increases in this portion of their businesses, with an almost identical 28% experiencing sales declines in the 1% to 5% range.
More Than $1 Million
As might be expected, the rising revenue tide for crop inputs and services has also risen the fortunes of the CropLife 100 ag retailers themselves. In the 2011 report, we stated that just to make the CropLife 100 rankings, an ag retailer would need to bring in revenues of just shy of $1 million per month. But to make the 2012 CropLife 100 list, an ag retailer now needs to have monthly sales in the $1.1 million range. To land in the middle of the pack, an ag retailer will need to multiply this figure by almost six, with the median income level now just north of $75 million.
Furthermore, the biggest ag retailers just keep adding to their revenue totals. In the 2011 survey, 31% of the ranked companies fit comfortably into the $100 million-plus club. This year, five more members joined this group, bringing the total up to 36%.