Ag Retailers 2018 Resolution: Stay in Business!
It’s something of a tradition after a new year begins to make some resolutions — promises (or plans) to improve/change things in one’s life to make the future a brighter proposition. Typically, these involve such things as resolving to lose weight, give up a bad habit, or be an overall better person when it comes to neighbors and friends.
But for your average ag retailer in 2018, the new year’s resolution is probably a bit more straightforward and dire, perhaps. If I had to bet, I think many ag retailers going into the 2018 growing season are simply resolving to keep their businesses viable.
Now there are several very good reasons why this is likely to be the wish for many ag retailers. On one hand, the agricultural industry has already lived through a fairly lengthy economic downturn. Commodity prices are down significantly from just five years ago, and this has depressed already tight margins at the ag retail level even further. In fact, as has been pointed out at several industry events the past few months, the overall ag industry has lost approximately $15 billion in market value over this time frame. This at best has led to a rash of supplier and retailer consolidations that show no signs of slowing down with the coming of a new year. At worst, some long-time operators within the marketplace has just thrown in the towel and exited the industry, by either selling their businesses or declaring bankruptcy.
Coupled with this economic downturn, traditional ag retailers are under market pressures from alternative distributors. Following an economic model patterned after companies such as Amazon, a handful of new Internet-based start-ups have begun courting growers to purchase some of their crop inputs electronically rather than in person, effectively bypassing the traditional ag retailer to save a few bucks. The most prominent of these at the moment is Farmers Business Network (FBN), which has the financial backing of numerous large investment groups, not to mention Internet giant Google.
What this all adds up to is that the future path forward for many traditional ag retailers has never been more unclear. And what happens next is on virtually everyone’s mind.
Recently, I had the chance to speak on these topics at an ag retailer event. Not surprisingly, one of the questions I was asked following my presentation was future-based: “What do you think the ag retail industry will look like in five or 10 years?”
“This market tends to be very resilient and tends to change only slowly over time,” I answered. “Five years from now in 2022, I don’t think the industry’s look will be too different from today. But 10 years from now in 2027? I wouldn’t bet against things looking markedly different than they do now.”
What do you think? Drop me a line at [email protected]. I’d love to hear your views on what you believe the future holds for ag retailers, both good and bad …