Customers: Growers Cautiously Optimistic

The CropLife 100 dealers have shared their outlooks, but our editors also wanted to gauge what grower-customers are thinking. Short-term, Midwest growers are understandably cranky with weather problems throughout the season, including fall rains that delayed harvest and fertilizer application. At presstime, parts of Iowa were seeing heavy rain — to the tune of 2 inches in a night — during supposedly prime harvest time. In late fall, some fields were “lakes,” reports Tim McArdle, executive vice president and chief operating officer of Brandt Consolidated, Springfield, IL. Drying costs will be tremendous, he notes.

“Growers are going to be cash-strapped, they’re going to dependent on their lenders. And they’re probably going to be dependent on us to some degree with terms, but the concern to me is will the farmer have cash availability to conduct his normal business — here it would be to prepay the majority of his spring inputs to get a better price.”

At Mountain View Coop, Great Falls, MT, Operations Manager Frank Schumacher also expressed concern. “Our customers are frustrated with the current price of wheat — many of them did not sell their crop at the same time as they bought inputs, and wheat prices are down so revenue is not matching up with expenses — it’s out of sync with their marketing plan.

Credit and capital accounts receivable is going to be an issue, and the next 60 days will tell us how bad it is going to be.” Schumacher anticipates that growers will not be able to pay bills because they have not sold their crop — they’re not willing to sell at the price currently offered, and the situation “could get ugly.” In fact, he says if growers haven’t sold their crop by the time they need to go back to the bank for financing, banks will force them to sell because of tightening restrictions on lending.

Brent Sutton, president and general manager of Growers Fertilizer Inc., Lake Alfred, FL, has noticed that more of his customers (primarily citrus growers and ranches producing hay) need extended terms, and his company is working with the John Deere Farm Plan to help. “We’re doing more volume business with Deere than we’ve ever done in the past,” he says. “It’s a nice outlet for us to be able to get paid and give our customers help with their cash flow.”

He finds the mood among growers much more positive compared to this time last year, with citrus prices up and fertilizer and glyphosate coming down: “It’s definitely a more profitable environment for them.”

Markets have rallied for Midwest growers as well, and customers are seeing higher commodity prices now, points out Roger Oliver, president of Van Horn Inc., Cerro Gordo, IL.

“You can look at the futures prices for next year and at the input pricing we have and a lot of customers could lock in a profit for next year today,” says Jeff Eggleston, general manager of Hintzsche Fertilizer, Maple Park, IL (in late October). In fact, McArdle sees growers considering expansion, as some of his customers are aggressively seeking to rent more ground for 2010.

Complicated Relationships

Retailers say growers are approaching 2010 inputs cautiously, in part because some felt burned by last season’s price issues. In fall of 2008 many dealers used contracts to sell prepay fertilizer to customers.

“Prices were running up and we could not accept all of the risk — plus our customers wanted to lock in the best price possible,” says McArdle. When prices tumbled some growers no longer wanted to honor those contracts. “We were fortunate in that most of the product we sold was already applied, and we did not have many of these circumstances come up. I do know of dealers who did.

“What many in the supply chain do not understand is that we can force a customer to honor a contract, but possibly lose him as a customer,” he says. “We have to manage the gray areas and handle each case as required. However, I am a big proponent of contracts, as they eliminate the issues 90% of the time.”

Dealers themselves were caught by surprise by the price hikes and dips. Richard Warner of Warner Fertilizer, Somerset, KY, feels most customers aren’t bitter and don’t blame retailers for increases. Then, too, relations between dealers and their suppliers were tested. “I’d say we’re healing. Fertilizer prices have been a sore subject for retailers and distributors,” says Van Horn’s Oliver.

Most of the dealers we talked with could boast of good relationships with their growers. “In this industry, it’s all about relationships,” says McArdle. “Your customer has to trust that you’re working for his best interest at all times. If you do that, these guys will not kick you out of bed over mistakes and things that happen.”

Dealers seem to be building and holding that trust. For instance, a whopping 82% of our CropLife 100 retailers agree or strongly agree that customers buy the majority of their seed based on recommendations from local retail experts.

Crop protection product salesmen also appear to be getting respect. Dan Kennedy, general manager at Ritter Crop Services, Marked Tree, AR, tells of basic suppliers trying to get around his staff to direct-sell in the past. “I’ve wished them luck since they would have one guy vs. my 19.”

For 2010, he sees business getting back to normal. “Our business has been here for more than 100 years. Relationships with growers will stay the way they have always been, and we will take care of our customers the fair way,” he says.

McArdle believes growers have changed. Many second- and third-generation growers have gotten ag degrees. “I constantly tell my guys that if they’re not smarter than a grower is on a specific subject and can’t provide him with relevant information, he doesn’t need you,” he explains.

Growers Take The Wheel

Are dealers worried about more customers no longer needing custom application services? One quarter of our CropLife 100 does see the move to growers doing their own spray work as a threat.

“I think there’s been a lot of sprayers sold to farmers in the last five years,” says McArdle. But it all comes down to labor, and some farms just don’t have the staff to handle application as well as planting, tillage, and more — though McArdle has found some families with second generations coming into the business will have the human resources to do it themselves.

Dave Coppess, vice president of sales and marketing at Heartland Coop, West Des Moines, IA, has seen a half-dozen very large commercial growers — with their sons joining the business — doing their own custom work in his territory. “They’ve invested in a sprayer, and last year they invested in a dry box. They already have semis and can go to the river and buy a truckload of fertilizer, paying the same price we do. Some may even doing some spraying for a neighbor.”

In addition, fertilizer blender manufacturers tell Coppess that a number of growers have installed their own blenders for the first time. This activity highlights the region’s changing landscape: “A lot of guys out there are 65 years old and exiting the business. The land is going to go to more commercial farms — these are people that are willing to pay for the things they want, so we have to find services they value and are willing to pay for,” he says.

That’s when “a new way of working with the customer” comes in, McArdle says. “We say: ‘Let us work with you. You’re not buying a package or mini-bulk, but you’re coming into our facility, and we can provide you with a tank. We’re going to inventory that product, blend that product so you know it’s right, with the right rate, and you pick it up and take it out and put it in your sprayer.’ Many of them are taking us up on that,” he says.

Grower application may ultimately be limited. McArdle emphasizes that his company’s customers tackling in-season spraying still come to Brandt for preplant fertilizer work. And Warner says once his customers start putting in crops, they want most fertilizer custom-applied because they’re too busy doing something else.

Selling Services

Grower application was one topic that CropLife editors brought up at a recent informal meeting of leading retailers to discuss industry trends. A conclusion: Farmers are being encouraged to do more application work themselves because retailers haven’t accurately justified the costs to growers. Participants are concerned that they’ve given too much away to growers over the years in the form of services — and that the whole structure of product movement to the grower will have to change from the current system. Their feeling is retailers have to decide what value they want to bring to big customers who will be around for the next 10 years. If smaller customers don’t want to pay for services, a dealer won’t be able to provide them service.

Sutton of Growers Fertilizer in Florida would stand by the complimentary services his company offers. “Salesmen are out in the field constantly bug checking and making recommendations for sprays,” he explains. His staff usually finds a problem before a grower is even aware of it. Soil sampling with fertilizer recommendations is also a free service.

And while precision agriculture services have been growing, CropLife 100 retailers say some growers will always hit a wall with the technology. “A vast majority of people out there are not really into precision,” says Oliver. “Our customers aren’t really willing to pay for it.”

McArdle agrees: “About 35% to 40% of our customers are doing some sort of precision agriculture. For others the learning curve is steeper, but we feel the investment is justified and profitable.”

Risk management tools will be a big opportunity to get in solid with the more professional grower, believes Coppess. “Our sales team is focused on their technical ability to help the grower choose the right seed, the right crop nutrients, crop protection products, but I am not sure the farmer, and in particular the commercial grower, finds as much value in that as they used to,” he says.

“I feel we have to shift as ag retailers to understand what the growers are going to value. The growers have told us that grain marketing skills are what they do value, so I think that, over the longer term, we have to shift the focus of our sales team to become more farm manager-type people,” Coppess says.

Leave a Reply

Management Stories

StewardshipMichigan Agriculture Leaders On Toledo Water Ban: We Want To Be Part Of The Conversation
August 8, 2014
Leaders of Michigan agricultural organizations said Thursday that the government should not have a “knee-jerk reaction” based on last weekend’s water ban in Toledo due to fertilizer run-off in Lake Erie. Read More
ManagementRussia Bans U.S. And EU Ag Product Imports In Ukraine Sanctions Battle
August 7, 2014
Russian President Vladimir Putin has banned the import of agricultural goods from countries that have imposed sanctions on Russia. Read More
EmployeesAsmark Institute Dedicates New Training Center To Ford West
August 6, 2014
The Asmark Institute plans to recognize the retired industry leader's years of service to the fertilizer industry at the new state-of-the-art facility in Owensboro, KY. Read More
LegislationUSDA: Quick Implementation Of Disaster Assistance Programs A ‘Top Priority’
July 9, 2014
USDA has processed 106,000 payments to farmers in 40 states across the country who suffered livestock and grazing losses between Oct. 2011 and passage of the 2014 Farm Bill. Read More

Trending Articles

ManagementExpert To Discuss Farmland Value, Rent At Farm Science Review
August 18, 2014
While cropland values in Ohio increased in the past two years, they have remained flat in 2014, declining in some cases, according to an Ohio State University agricultural economist. Read More
EquipmentAdvance Your Technology IQ At MAGIE
August 13, 2014
The Midwest AG Industries Exposition (August 20-21) is the place you need to be to see, study and evaluate how new advances in the equipment, operations, crop protection and fertility sectors can help your business prosper. Read More
HerbicidesScouting Key To Next Season’s Soybean Herbicide Program
August 12, 2014
When growing soybeans, growers need to think ahead to stay one step ahead of weeds. That means examining weed threats and evaluating which herbicides work best. Read More
StewardshipMichigan Agriculture Leaders On Toledo Water Ban: We Want To Be Part Of The Conversation
August 8, 2014
Leaders of Michigan agricultural organizations said Thursday that the government should not have a “knee-jerk reaction” based on last weekend’s water ban in Toledo due to fertilizer run-off in Lake Erie. Read More
CropLife 100BRANDT Acquires Lemon Ag Services
August 4, 2014
The acquisition of Lemon Ag fits BRANDT’s aggressive corporate strategy of providing superior agronomic advice and services for customers in central Illinois. Read More
Eric SfiligojThe Resurgence Of Crop Protection
August 4, 2014
Plenty of new offerings over the next few years should see a rebirth for the crop protection products category in terms of market share. Read More

Latest News

Crop InputsBASF Is Betting On A Bright Agricultural Future
September 1, 2014
The crop protection products giant is gearing up for a busy time in agriculture by investing in both product production and development over the next couple of years. Read More
Eric SfiligojAn Erie Feeling For Ag
September 1, 2014
Plenty of water issues have been in the news lately, including the continuing drought in California. Read More
CropLife 100Pinnacle Acquires California-Based Retailer
August 29, 2014
Pinnacle Agriculture Holdings will acquire Kerman Ag Resources, Inc., which will operate under Pinnacle's Performance Agriculture brand. Read More
Allied Cooperative Grain Plant
ManagementArcadia Co-op To Merge With Allied Cooperative
August 28, 2014
Allied Cooperative has announced that members of Arcadia Co-op voted in favor of a merger with Allied Cooperative, paving the way for the consolidation which will be effective on December 1, 2014. Read More
InsecticidesBioinsecticide VENERATE Now Registered In California
August 27, 2014
Marrone Bio Innovations' VENERATE is a new tool to help California growers control crop-damaging insect pests, fight the development of insect resistance and reduce pesticide residues on fruits and vegetables. Read More
CropLife 100Two Iowa-Based Ag Co-ops To Merge
August 27, 2014
The Board of Directors and management of United Western Coop, Missouri Valley, IA has completed a merger with Heartland Co-op, West Des Moines, IA, effective September 1, 2014. Read More
FertilizerKoch Expands AGROTAIN Nitrogen Stabilizer Portfolio
August 26, 2014
Koch Agronomic Services, LLC has added two new innovative nitrogen stabilizers to the AGROTAIN product family – AGROTAIN ADVANCED and AGROTAIN DRI-­MAXX. Read More
Seed/BiotechDuPont To Build Two Seed Treatment Centers
August 26, 2014
DuPont has announced construction on two state-of-the-art centers dedicated to developing and testing seed treatment formulations, applications and seed handling techniques in an important step toward bringing new solutions to growers. Read More
Seed/BiotechLoveland Products Acquires A Controlling Interest In Ag…
August 26, 2014
Loveland Products, a subsidiary of Agrium , has announced the company has acquired a controlling interest in Agricen, a Dallas-area agricultural biotechnology company delivering biochemical-based products for efficient and sustainable plant nutrition. Read More
StewardshipUp Close Look At The 2014 Environmental Respect Award W…
August 25, 2014
The 2014 Environmental Respect Award winners were honored recently at the 24th annual event in Wilmington, DE. Read More
Eric SfiligojAg Science Rejection Carries Consequences
August 25, 2014
As innuendo and fear dog the regulatory process, agriculture can’t get the new tools it needs to combat world hunger. Read More
LegislationFarmers Dismayed As New Farm Bill Dumps Direct Payments
August 25, 2014
The threatened end of cash subsidies to the nation’s row crop farmers dates back through at least the last two iterations of national agriculture policy legislation. Read More
MAGIE 2014 ShowStopper
EquipmentJohn Deere Again Wins MAGIE ShowStopper Award
August 25, 2014
For the second consecutive year, John Deere was honored at the Midwest AG Industries Exposition (MAGIE) for its new R4045 sprayer. Read More
CropLife 100GROWMARK CEO To Retire
August 22, 2014
GROWMARK chief executive officer Jeff Solberg has announced his retirement effective September 15, 2014. Read More
InsecticidesDuPont’s Prevathon Approved For Dry Beans
August 22, 2014
DuPont Prevathon insect control powered by Rynaxypyr has received EPA registration for foliar use on dry bean crops, including dried shelled peas and beans. Read More
ManagementNCGA DuPont New Leaders Program Enters Sophmore Season
August 20, 2014
The National Corn Growers Association and DuPont are pleased to announce the second year of the NCGA DuPont New Leaders Program. Read More
FungicidesVerdesian Links Up With Mitsui, Hokusan
August 20, 2014
Mitsui Chemicals Agro, Inc., and Hokusan Co., announced the signing of an exclusive licensing agreement allowing Verdesian Life Sciences global access to its patented technology for suppressing mycotoxin contamination in wheat and barley. Read More
SprayersUniversity Of Illinois Introduces New Spray App
August 18, 2014
University of Illinois Extension has released a new smartphone app for making sprayer-related calculations. Pesticide Spray Calculator, or Spray Calc, Read More