Some Hope Ahead For Ag Retail

Happy 2015 everyone! As you enjoy this column, another year in the life of the ag retail marketplace has begun. As always, 2015 is filled with plenty of uncertainty regarding which direction the marketplace will head once the crop year begins in earnest in a few short months.

As I pointed out in last month’s column, there are lots of folks in the ag retail industry who believe 2015 will be a much different year than the previous half-dozen, with tighter margins, more reluctance on the part of grower-customers to spend money and a host of new legislative initiatives at the local, state and federal levels that will severely hamper agriculture’s ability to turn a profit. “It could be a very bumpy ride,” said one agricultural product supplier representative during one of 2014’s fall meetings.

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And on one hand, this view was confirmed for me a bit at the 2014 annual Agricultural Retailers Association (ARA) meeting, held in December. During many of the educational sessions held at the event, speakers talked about the increasing scrutiny on water quality issues as they pertain to agriculture as well as the ongoing difficulties in attracting new employees to the marketplace and finding enough railcars to transport crop nutrients to waiting customers.

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“The historic peak volume for railcars in the U.S. was in 2006, but this quickly dropped off once the recession hit in 2009,” said Scott Mickey, director of agrainputs for CGB Enterprises. “But now that demand for railcars is almost back to its 2006 peak level, the rail providers are having to play catch up in trying to order new locomotives and crews to handle it. And that might take another couple of years to sort itself out.”

Ag retail equipment manufacturers are also bracing for a slow 2015. Many of the companies that normally exhibit at the ARA show were missing in 2014. Meanwhile, those that were present seemed more subdued in their outlook.

On the other hand, one of the last conversations I had at the 2014 ARA show gave me confidence that 2015 won’t be that bleak after all. For the past several years, ag retailers flush with cash from grower-customers have spent a lot of money on expanding their facilities or building new ones. In fact, according to the 2013 CropLife 100 survey, more than 80% respondents followed this approach during the year.

And at first glance, the 2014 survey numbers are not as robust. In 2015, only 63% of respondents planned to spend as much or more money on facility building vs. 2014. However, according to a few of the companies doing this building, they haven’t seen any kind of a drop-off in demand.

“We will be as busy as we ever were in 2015,” said Steven Anderson of Stueve Construction Co. “And we already have plenty of new orders going into 2016 as well.”

Of course, all these new ag retail plants will need new equipment to run properly. So there is at least some hope on the horizon as 2015 kicks off.

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