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
ManagementMACA 2014: The State Of The Agricultural Industry, And Then Some
October 9, 2014
The trade association’s annual gathering featured speakers from across agriculture and beyond. Read More
StewardshipA Multi-Layered Approach To Water Quality
October 6, 2014
Illinois event highlights research and technology designed to better monitor and improve water quality — and the benefits of cooperative, coordinated effort. 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
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
Top 100 Articles
Milan Kucerak, president/CEO, West Central
CropLife 100West Central Cooperative And Its New President Are A Match Made In Deviation
June 29, 2015
To appreciate just how unique West Central Cooperative is in the world of ag retail, an observer need only consider Read More
Winter Wheat
CropLife 100South Dakota Co-op Member Owners Vote No On Unification
June 26, 2015
The Boards of Directors for North Central Farmers Elevator (NCFE) and Wheat Growers (WG) have announced that member-owners have voted Read More
CropLife 100The Andersons Acquires South Dakota Plant Nutrient Manufacturer Kay-Flo
May 20, 2015
The Andersons, Inc., ranked No. 22 on the CropLife 100, has purchased Kay Flo Industries of North Sioux City, SD. “This Read More
CropLife 100AgGateway’s Barcoding Initiative Progressing Nicely
May 8, 2015
According to legend (or Wikipedia), the first step towards modern bar codes came back in 1948, when Bernard Silver, a Read More
CropLife 100Pinnacle Agriculture Acquires Minnesota Retailer
April 14, 2015
Pinnacle Agriculture Holdings, LLC, ranked No. 6 on the CropLife 100,  has successfully acquired Liebl Ag, LLC in Ada, MN.  Read More
CropLife 100CHS, Aurora Cooperative Complete Fertilizer Storage, Grain Shuttle Loading Facility
April 13, 2015
CHS Inc., the nation’s leading cooperative and ranked No. 5 on the CropLife 100, and Aurora Cooperative (ranked No. 21) Read More
Latest News
Measuring Bulk Tanks
ManagementBulk Pesticide Compliance: Top 10 Areas Of Improvement …
July 1, 2015
  In honor of the 33-year run of David Letterman’s Late Show, the American Agronomic Stewardship Alliance (AASA) is happy Read More
Industry NewsArysta North America Hires Midwest Sales Manager
July 1, 2015
Arysta LifeScience North America recently announced the hiring of Brian Battles as the Senior Technical Sales Manager for the Midwest Read More
Farmer on tablet
Eric SfiligojThe Never-Ending Battle Against Modern Agriculture
July 1, 2015
In the world of comic books, the character of Superman often refers to the fight to save the world as Read More
Retail FacilitiesBuilding Up Ag Retail
July 1, 2015
In the oftentimes unpredictable world we live in, it’s nice to know some things can be reliably countered on to Read More
Retail FacilitiesMaple River Grain And Agronomy Phases In Site Developme…
July 1, 2015
Marcus Construction helped Maple River Grain and Agronomy in Casselton, ND, with the design-build of its dry fertilizer, liquid chemical/seed Read More
Retail FacilitiesA&B Welding Builds A New Liquid Terminal Hub For Br…
July 1, 2015
To build its new hub facility, Briggs Crop Nutrients enlisted the help of A&B Welding. The result, an efficient facility Read More
Edon Farmers Co-op
Retail FacilitiesNew Marcus Facility At Edon Farmers Co-op Provides More…
July 1, 2015
Edon Farmers Co-Op in Edon, OH, needed a new facility to consolidate outdated locations. Marcus Construction was able to design Read More
Retail FacilitiesKinder Morgan Expands Its Storage With A New Dome Barre…
July 1, 2015
Kinder Morgan wanted additional covered storage at its Dakota Bulk Terminal on the Mississippi River in St. Paul, MN. With Read More
Retail FacilitiesHeartland Tank Protects Fertilizer From Extreme Cold At…
July 1, 2015
The Arthur Companies in Harvey, ND, enlisted the help of Heartland Tank Companies to develop a new liquid fertilizer facility Read More
The McGregor Co. fertilizer loadout
Retail FacilitiesThe McGregor Co. Partners With Kahler Automation To Cre…
June 30, 2015
Kahler Automation helped The McGregor Co. expand its Clarkston, WA, operation with unstaffed loadout technology that enables customers to pick Read More
Dry and Liquid Plant
Retail FacilitiesKahler Automation Helps CHS Dakota Ag Cooperative Build…
June 30, 2015
CHS Dakota Ag Cooperative in Mooreton, ND, wanted a liquid/dry blender system that could meet the needs of its customers Read More
Crop InputsLand O’Lakes, United Suppliers To Merge Crop Inpu…
June 29, 2015
Land O’Lakes, Inc. and United Suppliers, Inc. of Ames, IA, today announced their intent to merge their crop inputs businesses. Read More
FungicidesHelena To Distribute Unique Summit Agro Fungicide
June 29, 2015
RANMAN 400 SC fungicide, the only fungicide with a FRAC group 21 designation, is now part of the innovative Summit Read More
Eric SfiligojIARC Targets 2,4-D In Latest Report
June 29, 2015
The International Agency for Research on Cancer (IARC) has struck again. Earlier this year in March, this agency of the Read More
Milan Kucerak, president/CEO, West Central
CropLife 100West Central Cooperative And Its New President Are A Ma…
June 29, 2015
To appreciate just how unique West Central Cooperative is in the world of ag retail, an observer need only consider Read More
EquipmentCase IH Launches New Precision Air 5 Series Carts
June 29, 2015
Case IH recently introduced its new Precision Air 5 series air carts, developed to get the most from every plant’s Read More
InsecticidesVestaron Biopesticide Approved In California
June 29, 2015
Vestaron Corporation, a developer of insect control products derived from naturally occurring peptides, today announced that its VST-006330-EP biopesticide has received Read More
InsecticidesValent’s Zeal SC Miticide Receives EPA Approval
June 29, 2015
Valent U.S.A. Corporation announced today that Zeal SC Miticide has been registered by EPA with a new liquid formulation that Read More