The Pros & Cons of Consolidation

It has been said that “when the rate of change outside your company exceeds the rate of change inside your company, the end is in sight.” North American agriculture is undergoing rapid and significant change throughout all links in the supply chain.

As agricultural retail dealers, we have witnessed the levels of consolidation — both upstream through the basic manufacturers and distributors as well as downstream at the farm gate — for a number of years. But the rapid consolidation at our retail dealer level has been tremendous over the last couple of years as well, and more can be expected.

Upstream for dealers, crop nutrients have undergone consolidation for nitrogen in the last several years, and phosphate more recently. Meanwhile, potash has experienced less consolidation in the last decade, but it entered with fewer players to begin with.

Upstream consolidation has also occurred in crop protection basic manufacturers as well as with seed companies.

Finding The Positive

This consolidation has not necessarily been bad news for retailers, but it has been different, and has required all of us to adopt new strategies. Some distinct positives have come from the upstream consolidation. Today, the financial performances of these basic manufacturers are in record ranges. This is important to dealers who depend upon consistent supply, investments in research and development, and innovation. It is also important to dealers in that some level of long-term reliability has been established, which is positive for lasting relationships.

Downstream from retailers, we continue to see the consolidation of farming operations. More acres are being planted by fewer operators. This consolidation has imposed new conditions upon dealers as we work to discover methods of working with these mega-farmers. The information — both agronomic and market conditions — are essential requirements in today’s dealer toolbox when dealing with this customer segment. Additional demands come from their increased consumption capacity. Tractors, planters, and combines can cover so many more acres in a single day than ever before. Dealers must have the right product at the right time in order to meet these new demands. 

This has some positive aspects in that the dealers who can meet the requirements for the larger farmers often find that they can also apply those same skills and tools across many other acres to improve the return on the investment.

Down On The Outlet

Another trend of consolidation is at the retail dealer level. As shown in the annual CropLife 100 listing, the big continue to get bigger. This year alone, we may well see the combination of the 2007 CropLife 100’s no. 1 and no. 2 (Agrium Retail U.S. and United Agri Products, respectively). Efficiency gains often are the driving force behind many of the dealer consolidations; better utilization of assets, purchasing, and distribution advantages are realized. This, too, can be advantageous to farmers who want some stability in their local dealer as well as some level of supply assurance. 

There are positives for dealers as well as we focus our efforts in defining our value proposition and differentiation in the marketplace. The market tends to be more disciplined as regulatory and compliance issues are more closely adhered and a focus upon return on investment is installed.

Of course, no article would be complete without some mention of globalization, which too carries some forms of consolidation. The growing demand around the world for the products we as retailers require has also implied the importance of consolidation. The expanding length of the supply chain has changed many dealer purchasing habits. The luxury of picking up the phone and acquiring crop nutrients, crop protection products, or seed looks to be a thing of the past. Today, dealers must find and cultivate partnering opportunities both upstream and downstream in order to assure supply and manage risk throughout the length of the supply chain. 

This, too, is a positive for dealers as we work to identify and eliminate inefficiencies and balance our risk/reward conditions. 

Not all of these consolidation issues have been welcomed with open arms, but in the long term, they will make the system from manufacturer to consumer more cost-effective and sustainable.

Leave a Reply

Management Stories

Young Corn Field
StewardshipStudy: Ohio Farmers Doing ‘A Good Job Of Managing’ Phosphorus Levels
September 27, 2016
Leaders from Ohio’s largest grain farming organizations announced today that Ohio farmers are doing their part in effectively managing phosphorus Read More
StewardshipMonsanto Invests $1.6 Million In System To Quantify Greenhouse Gas Reductions
September 23, 2016
The USDA – Natural Resources Conservation Service (USDA-NRCS) recently awarded the National Corn Growers Association (NCGA) and its Soil Health Read More
Pipe rack
LegislationCourt Sides With Ag Retailers On PSM
September 23, 2016
The D.C. Court of Appeals has ruled the Occupational Safety and Health Administration violated the Occupational Safety and Health Act when Read More
ManagementPacific Coast Fertilizer Announces Interest In Longview, WA Facility
September 22, 2016
Pacific Coast Fertilizer LP (PCF) announced at the Cowlitz Economic Development Council board of directors meeting its interest in developing Read More
Trending Articles
Corn Field
Eric SfiligojFacing Ag Industry Challenges
September 26, 2016
At the 2016 annual Mid America CropLife Association (MACA) meeting in September, a pair of crop protection company representatives discussed Read More
Bayer Monsanto
Crop InputsBayer-Monsanto Mega-Merger: 6 Things You Need To Know
September 14, 2016
Mega mergers have become almost routine in the agricultural industry. Right on the heels of Monday’s news that fertilizer giants Potash Read More
Potash Corp Agrium
Crop InputsAgrium, Potash Corp To Merge To Create $36 Billion Company
September 12, 2016
Canada’s Agrium Inc. and Potash Corp of Saskatchewan Inc. have agreed to combine in a deal that would create a Read More
Osage Co-op Elevator Osage, IA Finished Building
OpinionAre We Crazy?
September 8, 2016
At some point in the first few months of my employment here at CropLife® magazine, I started getting curious about Read More
ManagementMAGIE 2016 Highlights and Deere Anti-Trust
September 1, 2016
CropLife Editor Eric Sfiligoj discusses the recent Midwest AG Industries Exposition and the Department of Justice’s objection to John Deere Read More
ASMARK 2016 Retailers Live! Tour - CPS
CropLife 100CPS Acquires Texas Retail Operation
August 23, 2016
Crop Production Services (CPS) has acquired the assets of Larry’s Chemical and Spray, Inc., for an undisclosed amount in an Read More
Latest News
Corn Field
Industry NewsMarrone Bio Innovations’ SVP And Chief Sustainability O…
September 29, 2016
Marrone Bio Innovations, Inc., a leading provider of effective and environmentally responsible pest management and plant health products, announced today Read More
Young Corn Field
StewardshipStudy: Ohio Farmers Doing ‘A Good Job Of Managing…
September 27, 2016
Leaders from Ohio’s largest grain farming organizations announced today that Ohio farmers are doing their part in effectively managing phosphorus Read More
Growmark FS Outlet
Industry NewsGROWMARK To Purchase Suncor’s Share Of UPI
September 26, 2016
GROWMARK and Suncor have reached an agreement in which GROWMARK will purchase Suncor’s 50% interest in UPI, Inc. in Ontario, Read More
Corn Field
Eric SfiligojFacing Ag Industry Challenges
September 26, 2016
At the 2016 annual Mid America CropLife Association (MACA) meeting in September, a pair of crop protection company representatives discussed Read More
Syngenta Seedcare Institute
Seed/BiotechSyngenta Opens New North America Seedcare Institute In …
September 23, 2016
Syngenta unveiled its new Seedcare Institute in Stanton, MN, during a recent grand opening celebration. More than 150 industry leaders, Read More
StewardshipMonsanto Invests $1.6 Million In System To Quantify Gre…
September 23, 2016
The USDA – Natural Resources Conservation Service (USDA-NRCS) recently awarded the National Corn Growers Association (NCGA) and its Soil Health Read More
Pipe rack
LegislationCourt Sides With Ag Retailers On PSM
September 23, 2016
The D.C. Court of Appeals has ruled the Occupational Safety and Health Administration violated the Occupational Safety and Health Act when Read More
ManagementPacific Coast Fertilizer Announces Interest In Longview…
September 22, 2016
Pacific Coast Fertilizer LP (PCF) announced at the Cowlitz Economic Development Council board of directors meeting its interest in developing Read More
Young corn plants in soil
UncategorizedCool Planet Raises Additional $9 Million To Commerciali…
September 22, 2016
Cool Planet has announced the first close of a new financing round to commercialize the company’s Cool Terra Engineered Biocarbon Read More
Crop InputsJim Loar Promoted To President And CEO Of Cool Planet
September 22, 2016
In a move that reflects and reinforces the company’s commitment to the agricultural market, the Cool Planet board of directors Read More
BlendersNorth Dakota Coop Debuts Dry Fertilizer Plant
September 22, 2016
North Central Grain Cooperative has begun operations at a new dry fertilizer plant at its Rolla, ND, site. It is Read More
Crop InputsMonsanto, Bayer Officials Defend Proposed $66 Billion M…
September 21, 2016
Top officials for Monsanto and Bayer defended their proposed $66 billion merger before skeptical senators on Tuesday, insisting that the Read More
ManagementUpcoming Shows & Recent Events
September 19, 2016
Editors Paul Schrimpf and Eric Sfiligoj talk about upcoming trade shows and events and review the Mid America CropLife Association Read More
Industry NewsVerdesian Life Sciences Appoints New CEO
September 19, 2016
Verdesian Life Sciences, a plant health and nutrition company, today announced that its board of directors has named Kenneth M. Avery Read More
Corn
Crop InputsEPA Settles With Syngenta For Alleged Multi-Regional Pe…
September 19, 2016
The U.S. EPA has announced a multi-region settlement with Syngenta Crop Protection, LLC (Syngenta) in Greensboro, NC, for alleged violations of Read More
ManagementMerger Mania
September 16, 2016
Editors Paul Schrimpf and Eric Sfiligoj discuss this week’s mega-ag mergers of Bayer and Monsanto and Potash and Agrium. Read More
Monsanto sign
Crop InputsMonsanto Ends Up Being A Bargain For Bayer
September 16, 2016
History will say Bayer got a bargain in its $66 billion purchase of Monsanto, writes David Nicklaus, St. Louis Post-Dispatch. The Read More
Greg Musson, Gar Tootelian
CropLife 100California Ag Retailer Steps Up To Feed Families Affect…
September 16, 2016
GAR Tootelian, Inc. (GAR) in Reedley, CA, is challenging the Central Valley to help raise enough money and provide 525,000 meals Read More