Agriculture Braces For More Belt-Tightening

Spring is in full bloom across the U.S. and ag retailers and their grower-customers are busily getting into high gear. Over the next few weeks, the pace at which this annual spring rite moves will likely increase even further to its highest level.

Yet, even as they move quickly to get their 2015 crops into the fields, grower-customers are reportedly looking at every expense they have, looking for ways to cut back and/or streamline what they’ve spent during the previous four years. Indeed, according to grain price projections from the USDA, 2015 is expected the least profitable year the nation’s growers have experienced in eight years.

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This has already had a profound impact on several sectors of agriculture. Last fall, many ag equipment manufacturers were warning of lackluster sales during 2015 – and this has apparently been the case. For example, the world’s largest farm equipment maker, John Deere, experienced a 43% drop in profits during the year’s first quarter. This has prompted the company to lay off 1,500 workers at plants in Iowa, Illinois and Kansas, with an additional 500 employees being furloughed in the process.

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Somewhat surprisingly, one other area currently being negatively impacted by this grower-customer pullback in spending is seed. According to major seed producers such as Monsanto and Pioneer, many growers are opting to replace higher priced biotech seeds, which offer protection against rootworms for instance, for this spring’s season in favor of slightly older and cheaper varieties. In fact, Monsanto reported its seed sales for the second quarter were off 10%.

Have your growers switched to older seed brands in 2015?

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Perhaps anticipating this trend, at least one crop protection products company is catering directly to this trend. For 2015, Dow AgroSciences is introducing an insecticide called PowerCore that contains Bacillus thuringiensis. “PowerCore is for growers who want to guard against aboveground insects such as cutworm, European corn borer and earworm without using some kind of below ground option,” says Damon Palmer, director of U.S. Seeds for the company.

It will be interesting to see just how far this “simpler seed” trend goes once the 2015 season enters its full-speed ahead phase. But if you follow agriculture like I do, I would suggest you stay tuned for a very interesting year.

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