Challenging Global Economic Conditions Putting More Heat On U.S. Ag Retailers
There it is. That vague, slightly sickening feeling in the pit of my stomach. Things are getting weird out there.
In all honesty, it’s been coming on for some time. It started with the unease of last year’s market downturn that stunted grower incomes, and consequently spending. The uncertainty has bled into 2016, where there’s not a lot of agreement when the malaise will subside.
Equipment and fertilizer companies reacted predictably with necessary production cutbacks. But for crop protection manufacturers, faced with more than just a down U.S. economy, setting up a sustainable business model has been a complicated process.
The regulatory process is growing out of control, sending R&D costs into the stratosphere. Efforts by CropLife America and other industry organizations to keep the process in the realm of science and away from social and emotional persuasion were dealt a blow with the death of Supreme Court Justice Antonin Scalia. While there’s no surrender in them, the discouragement of months and years of work being marginalized, or going down the drain, was weighing on them when I visited last month.
In the basic manufacturer ranks, the dominoes are already falling, with the Dow-DuPont and Syngenta-ChemChina deals already in process as the rumors of other deals continue to fly.
But this is only half the story. Our sister publication AgriBusiness Global™ sent a team to attend one of the largest crop protection conferences in China in March, and the missives they were sending were pretty interesting.
“Everyone here is asking us how they can do business in the United States,” said Eric Davis, our group publisher who represents AgriBusiness Global and CropLife® magazines.
The answer is, of course, “you have to have distribution.” Growers we’ve talked to over the years have said time and again that the retailer matters a lot. We ground test this regularly through surveys and market discussions, and this is still a prevailing truth.
That said, the world economic situation in agriculture is so dire in key markets like Brazil and China, overseas companies are getting desperate for markets to sell into. And while things don’t feel particularly “bright” in our neck of the woods, we look pretty appetizing to those facing financial starvation.
Which gets me back to the weirdness. We’re being told that there’s a growing number of independent representatives approaching growers, looking to sell crop protection products direct from the manufacturer.
And on top of that, we have Farmers Business Network making a revenue play by offering direct-to-grower crop protection products at prices well below what’s being offered by the local retailer.
Finally, early last month Syngenta sent out a one-page missive reminding us of the benefits of branded products vs. generics, with a focus on known product quality and company support.
Desperation does indeed induce strange behavior, often transcending relationships and, occasionally, logic. As retailers, we can be the calm in the storm. Our advice, expertise, customer trust, and product access is extremely valuable to both manufacturers and growers. Keep your cool, make that extra call on your customers, and keep your supply partners close.