PACE Annual Report 2008

Retailers

Market studies indicate that after a long period of increasing operational size, large growers aren’t trying to increase acreage beyond where they are today. Instead, these operations and the individuals that run them have evolved from strictly growers to business managers. In this capacity, large growers are becoming more interested in areas such as finance and credit and not as interested in “just buying products at the cheapest price.”

In some ways, retailers say they are at a relationship disadvantage with many growers when it comes to risk management. Fertilizer deals made on a handshake can create devastating risks when companies buy high and get trapped in a sudden price drop that the grower expects to receive. 

 

Seed / Biotech

Retailers say their seed profits have taken a step backward in 2008. Many say there are too many brands out in the market or competing ideas on how to effectively sell seed to grower-customers. Being a full-time seed expert and understanding how these inputs can help individual growers is the key to making this segment become more profitable in the future.

Surprisingly, the demand for conventional seed in some markets grew in 2008 as growers revolted against paying higher tech fees for biotech seed types. Still, the demand for biotech seed was growing, specifically with increased interest in LibertyLink soybeans as an alternative to Roundup Ready varieties.

 

Fertilizer

Fertilizer prices, which had been moving upward at a steady clip throughout 2007 and early 2008, suddenly headed downward, with anhydrous ammonia and urea both experiencing steep drops in price. This softening in price has many retailers that bought their fertilizer ahead (and at higher market prices) wondering how to make a profit during the 2009 growing season.

Besides price, transportation continues to be an issue. Railroads continue to balk at hauling anhydrous ammonia (NH3), driving up its price and keeping supply situations tight. Many retailers are exiting the NH3 market altogether rather than fight this distribution battle, coupled with insurance and security risks.  

 

Equipment/Precision

Bigger equipment has become the norm, with spray booms now averaging 120 feet in length. The use of automatic steering has become widespread and high clearance sprayers are on the horizon from several major manufacturers. Precision technologies continue to grow. There was big growth during 2008 in the areas of automatic boom shut-off control, automatic boom leveling systems, and GPS technology, and this is expected to continue during 2009. 

 

Biofuels/Crop Intentions

Retailers report that demand and excitement regarding biofuels has dropped off significantly, particularly for ethanol as oil prices have dropped. Many observers feel corn ethanol will not be a growth area for the industry in 2009 or beyond.

With corn for ethanol demand dropping, there are numerous predictions that soybeans will be the king row crop in 2009 — at least in terms of new planting. Corn, wheat, and cotton will all lose acres in 2009 to soybeans, which could also benefit from fewer crop input demands and higher commodity prices relative to other row crops.

 

Crop Protection

Retailers saw a significant increase in fungicide applications in many areas of the country, with many growers using these products as a way to increase their yields, particularly in corn. Still, the equipment to apply fungicides as preventives isn’t there yet for many retailers. But equipment manufacturers are planning to introduce a host of ground-based sprayers in 2009 that will be able to apply fungicides over-the-top of corn, so the market should remain strong.

Spray drift remains a big area of concern for the marketplace. New EPA drift reduction lists might contain mandatory buffer zone requirements, which the application industry opposes. “Some in government feel that based upon the evidence and our technical advances that zero drift is possible,” said one PACE Council Member. “But we need to make the point back to government that although zero drift is our goal, it’s not attainable.”

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