The Consolidation Scorecard
June 4, 2015 During the fall of 2014, I remember plenty of discussion regarding the expected state of the agricultural marketplace going into 2015. Many experts were predicting that as commodity prices declined from their record highs during the early part of the decade, many players in the ag field would pick this year to “cash in their chips” and retire from the daily grind. In fact, one of my main contacts to discuss all things agriculture, Ron Farrell, said the wave of company consolidation expected in 2015 would make what had come before “look mild” in comparison.
Now, here we are halfway through the year, and agricultural consolidation seems no more rampant than it has been the past few years. In fact, if you consider that one ag retail organization in 2014, Pinnacle, seemingly acquired a new company each week during the first six months of the year, 2015 has been very slow in comparison.
But there have been a few very big deals — along with hints of a few more which could be categorized as “monsters” (at least based upon the sizes of the players involved) if they take place. This includes several cooperatives in the Midwest joining forces, with the largest of these being the marriage of Aberdeen, SD-based South Dakota Wheat Growers and Ipswich, SD-based North Central Farmers Elevator. When combined at the end of June, this cooperative should easily rank in the Top 10 largest ag retailers in the country with more than 60 outlets spread across the upper Midwest.
Perhaps the biggest potential ag consolidation news is still in the making. Crop protection giants Monsanto and Syngenta have been in talks to join their businesses. Of course, given the size of this deal (not to mention the regulatory hurdles that would need to be cleared for it to happen), the discussion between these two will probably continue throughout the whole of 2015, if not spill over into 2016.
While company consolidation news is exciting by its nature, there is at least one downside — the loss of people. In fact, many view long-time industry players “disappearing” from the marketplace as if they have “died” in a way.
I was reminded of this fact at our magazine’s PACE Council meeting in October 2014. Just prior to the event, one long-standing council member, Dave Hintzsche of Hintzsche Fertilizer, had sold his business to Helena Chemical, so he declined to attend. At the meeting itself, several other PACE Council members talked about industry consolidation, consistently bringing up Hintzsche’s name in the past tense.
“Everyone here makes it sound as if Dave is dead, not just out of the ag business,” I finally observed to the council. And most agreed that “losing Hintzsche from agriculture” was the same thing as “losing Hintzsche period” in their minds.
Unfortunately, this “people cost” is an inevitable by-product of any consolidation, regardless of the market. And it will continue, no matter what.
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