Serving Your Customer Of The Future

One of the most important considerations for any business that’s planning for its own long term sustainability is figuring out who his customer will be, and what they will want. On this point, ag retailers arguably have as difficult a task as any group of businesses in any industry.

How the row crop grower will evolve over the next decade is a subject of great study, debate and uncertainty. Generational changeover, industry globalization, increasing demand for crops and inputs and wild market volatility each are impacting how growers are changing to sustain their own operation for the future. This, in turn, is going to significantly impact how retailers must prepare to meet the needs of these farmers of tomorrow.

We turned to a couple of individuals who have been watching and thinking about the evolution of the row crop grower for several years. Terry Kastens, a long time Extension ag economist at Kansas State University who now is an independent consultant and researcher working from his Kansas farm, and Moe Russell, a grower and president of Russell Consulting based in Iowa, both feel we are at a tipping point as far as grower size, but diverge on where they feel the retailer fits in the picture.

The slow and steady increase in average farm size has been reported ad nauseam in agriculture and popular press for many years, but both Kastens and Russell see signs that we are in the early years of a period of exponential growth.

“I can’t say exactly how fast or how large farms are going to get,” says Russell. “But the average size of farm that I consult for is probably 2,500 acres, and that could easily double over the next five to seven years.”

Ripe For Consolidation

The upbeat farm economy and positive prospects for agriculture for the foreseeable future will mean less fear of risk and an embracing of growth for progressive farmers. Kastens has seen it happening in recent years in Kansas, and believes that the trend will spread. He illustrated his point with a story.

“A few years ago, I was talking to a progressive 10,000-acre grower,” he recalls. “I asked him, if someone offered you an additional 10,000 acres, could you take it on? And he said, ‘Yes.’ So I asked him, if somebody offered him an additional 20,000 acres, could he take it? And he answered, ‘Give me one year.’ Sure enough, that grower today is farming over 30,000 acres. It can happen very quickly, and the Corn Belt is not immune.”

By “not immune,” Kastens is referring to the tidal wave that consolidated the poultry, pork and dairy industries. He believes a similar consolidation could occur among row crop growers and, like dairy, would be driven from the ground up by aggressive growers.

Kastens believes that growers could easily grow to the point of self sufficiency, and it’s possible that despite best efforts, retailers might not have anything to offer mega-growers if they establish their own relationships with suppliers, hire their own consultants and do for themselves what the retailer once did. Taking on risk is an enormous wild card in this scenario, but Kastens notes that some of the growers he works with are larger than any of the retailers in their areas.

Taken to its full conclusion, Kastens says that farming will move into a “bimodal” distribution, with a relatively smaller group of farmers working 80% of the land, and the remaining 20% being worked by smaller, part-time farmers. In this scenario, retailers will need to be geared up to service the two segments of growers separately.

Russell is more upbeat about the role of the retailer based on his work with growers because of what he says retailers bring to the table in risk management and service. “We have been encouraging our growers for years to develop long-term symbiotic relationships with input retailers,” he says. “With manufacturers pushing risk down the channel, and so much of the supply of products beholden to international markets, gone are the days when a grower can call a retailer for additional product on the fly and expect to have it delivered immediately.”

Russell asserts that it’s not exclusively the large growers that are most ripe for developing these sorts of partnerships, and that retailers should seek to work with growers of all sizes who are willing to be partners with them. In Russell’s scenario, there is a place for retailers both large and small if they focus on a few very key aspects of their business.

The first is transparency. Russell says that retailers need to make growers fully understand the background for pricing and for service to gain the grower’s trust. “Retailers need to provide detail on what they pay for product, what margins they need to cover overhead,” says Russell. “Farmers understand that, and they do not like feeling like they are playing in a poker game. It does not promote compromise and trust in a work relationship.”

The second is financial stability. With so much riding on the inputs and service they order, growers need to feel they are working with a financially solvent partner. “They are concerned about third party risk,” says Russell. “If they prepay for input will it get delivered, or could the supplier go bankrupt?”

Finally, it’s important to identify progressive growers and work to establish higher level relationships with them. Making yourself as relevant to the grower’s needs as possible will give you the best chance to sustain your business over the next decade and beyond.

Leave a Reply

Paul Schrimpf Stories

Paul SchrimpfWorking With Walmart
June 2, 2014
It's critical for agriculture to have seats at the table as the mega-retailer works out its definition of sustainability. Read More

Trending Articles

Crop InputsPlatform Specialty Products To Acquire Arysta LifeScience
October 20, 2014
Once the acquisition is complete, Platform Specialty Products will combine Arysta LifeScience with previously acquired companies Agriphar and Chemtura Crop Solutions. Read More
Seed/BiotechMonsanto Offers New Support For Ferguson, Area Communities
October 8, 2014
Monsanto Co. has committed $1 million in new support for several collaborative efforts in Ferguson, MO, and surrounding communities in North St. Louis County. Read More
Seed/BiotechUnapproved Genetically Modified Wheat Found In Montana
October 3, 2014
USDA reports that one year after discovery of Monsanto's unapproved wheat in a single Oregon field disrupted U.S. wheat export sales, the GMO wheat has again been found in Montana. Read More
Equipment2014 Product Of The Year Voting
September 19, 2014
The deadline to vote for the 2014 CropLife IRON Product of the Year is October 31. Please cast your vote today to help us determine the winner. Read More
FertilizerFall Fertility 2014: Forecasting Fertilizer Use
September 7, 2014
Great crops this year have tapped the soil, and fall work is definitely called for, but how challenging will that get? Read More
CropLife 100CHS To Build $3 Billion Fertilizer Plant In North Dakota
September 5, 2014
The fertilizer plant in Spiritwood will be the single largest investment in CHS history, as well as the single largest private investment project ever undertaken in North Dakota. Read More

Latest News

InsecticidesValent U.S.A., MGK Form Marketing Agreement
October 24, 2014
Valent has formed an agreement with Minneapolis-based MGK to manage the marketing and sales of MGK’s crop protection line of insect control products within the U.S. beginning April 1, 2015. Read More
StewardshipFlorida’s 4R Advocate Keeps Improving
October 24, 2014
Florida farmer Alan Jones uses the 4R principles of nutrient stewardship as the core of his fertility program, which allows him to maximize production and keep costs in check. Read More
Seed/BiotechMonsanto Named One Of The World’s Best Multinational …
October 23, 2014
Monsanto ranked No. 8 in the world’s largest annual study of workplace excellence that identifies the top 25 best multinational companies in terms of workplace culture. Read More
Crop InputsArysta Hires Former Agri-Chem, CPS Employee For Delta S…
October 23, 2014
New Territory Sales Manager Mark Peel’s primary role will focus on working with growers regarding fungicides in Louisiana, Mississippi, Arkansas and Tennessee. Read More
CropLife 100GROWMARK Announces Appointments In Plant Food Division
October 22, 2014
GROWMARK, Inc. has announced the three key staff changes in its Plant Food Division. Read More
CropLife 100GROWMARK Appoints New VP Of Finance And Risk Management
October 22, 2014
Wade Mittelstadt has been named GROWMARK Vice President, Financial and Risk Mangement, effective December 1, 2014. Read More
FungicidesEPA Approves BASF In-Furrow Corn Fungicide
October 22, 2014
Field trials show Xanthion In-furrow fungicide provides more rapid emergence, extended residual control and improved seedling health than untreated crops. Read More
EquipmentAgraScout App Available At No Cost To Universities
October 21, 2014
AgraScout, a fast and easy to use mobile crop scouting app, is now available at no cost to University students, Read More
LegislationNew Farm Bill Program To Provide Relief To Farmers Affe…
October 21, 2014
The USDA has implemented a new Farm Bill initiative that will provide relief to farmers affected by severe weather, including drought. Read More
ManagementGreenfield Scholars Program Aims To Sustain Agronomy Wo…
October 21, 2014
The program encourages talented students to study agronomy, crop and soil sciences while cultivating networks to develop the necessary workforce to sustain the profession. Read More
Paul SchrimpfPrecision Ag: Taking It To The Hill
October 21, 2014
A new coalition took the good news message of precision agriculture to Washington, DC, last month. Read More
ManagementUSDA Awards $18 Million In Small Business Research Gran…
October 21, 2014
The grants will provide high quality, advanced research and development that will lead to technological innovations and solutions for American agriculture. Read More
FertilizerCF Industries Terminates Merger Discussions With Yara I…
October 21, 2014
CF Industries Holdings and Yara International have terminated their discussions regarding a potential merger of equals transaction. Read More
Seed/BiotechSyngenta Ranked A Top 10 Biotech Employer For Third tim…
October 20, 2014
Syngenta ranked in the top 10 among the world’s top biotech employers, according to an annual survey conducted by Science magazine. Read More
CropLife 100Wheat Growers Break Ground For New Facility At Kennebec
October 20, 2014
Wheat Growers has broke ground for a state-of-the-art shuttle loader grain handling, fertilizer and agronomy facility in Kennebec, SD. Read More
FertilizerVerdesian Life Sciences Signs Agreement With Los Alamos…
October 20, 2014
Verdesian Life Sciences has signed a licensing agreement with Los Alamos National Laboratory to develop and market LANL’s latest nitrogen enhancement technology for plants. Read More
MicronutrientsStoller Group Announces Groundbreaking At New Office Bu…
October 20, 2014
Jerry Stoller, founder and president of Stoller Group, announced the groundbreaking at the site of the company’s future headquarters in Read More
Crop InputsBioSafe Systems Opens New Production Facility In Nevada
October 20, 2014
BioSafe Systems has completed construction of a state-of-art production facility in Sparks, NV, for its line of activated peroxygen products. Read More