2013 Ag Retail Outlook: Consolidation, Drought Among Topics To Watch

Fresh from serving as the primary educational session coordinator at the Agricultural Retailers Association annual meeting in December, noted agribusiness consultant and Purdue University professor emeritus Dr. David Downey shared his top-of-mind, post-conference thoughts and observations.

Drought impact. We are set up well financially, as crop insurance has put a lot of dollars in farmers pockets and is primarily why we expect a good year this year. But that could have some significant implications for next year because we are starting into the winter season highly dependent on some winter snows and rains. Last year we had soil moisture going into the season that set things up well, but unless we get a lot of good rains and snows this winter we will not have the same situation going into 2013.

Market volatility. This is an issue that continues to gnaw at us. It has settled down a little recently and I don’t anticipate major swings in 2013 like we had three or four years ago. But there is still going to be volatility because we are facing an increasingly active global market where the prices react quickly to all sorts of political, natural and industry issues. However, it seems clear that wholesale price volatility will continue to be on a new higher plateau that a few years ago. New sources of natural gas from fracking operations and new U.S. production facilities for NH3 will introduce new dynamics, but not in the immediate future.

Profits from traditional patterns of higher in-season retail prices and gains from inventory appreciation have become far less predictable, forcing ag retailers to give a lot more attention to managing their risks. This includes passing more of the price volatility risk on to the farmer who has more risk management tools available to them through their grain marketing strategies.

While commodity prices are at near record levels and the outlook continues to appear very favorable for the near future, there is legitimate concern about a wide variety of market conditions that might cause commodity prices to fall, placing many farmers into a very difficult position. And then there are all sorts of other risks like weather, disruptive terrorists activity and government policy changes.

Consolidation of large farms. High commodities prices have left many farmers flush with cash that they want/need to invest. Further, the robust farming economy is attracting a lot of new money from investors. In spite of soaring land prices and ballooning multi-year farm lease agreements that frighten more conservative farmers, we continue to see rapid consolidation of farms. Many of these larger operations are reaching the point where they think and act like industrialized businesses. They are becoming big enough to provide many traditional agronomic services themselves. Some farmers perceive, at least initially, that they can get the job done more efficiently and have better control over quality and consistency.

Many large operations have different business models that require ag retailers to rethink how they create value – value that often is based on using agronomic information to squeeze out better yields at a lower cost-per-bushel and to gain efficiency through logistics, consistency of service and sophisticated business practices. As Carl Casale, CEO of CHS, put it in his keynote address at the Agricultural Retailers Association conference, ag retailers must carefully and rapidly adjust to this new reality if they are to remain ‘relevant.’

Understanding the customer better. We are seeing a trend in better management of customers, using various form of Customer Relationship Management (CRM) tools. I must admit my bias toward using CRM systems. They allow ag retailers to manage relationships with customers through multiple locations, working with large customers who farm multiple units as well as their traditional customers. And with the continuing consolidation of farms, this allows them to coordinate activities to utilize their resources much more effectively. We are just beginning to learn how to collect and use information to coordinate multiple activities with our customers and there is rapidly growing interest in doing this right. Over the next three to four years we are going to see significant improvements in the ag retailer’s ability to monitor what’s going on with customers.

Customer segmentation is becoming much more critical to success. Some farms will continue to want high levels of service, but there will be an increasing number that hire their own agronomist and look to the retailer to be a dependable supplier of commodities and that is much more transactional.

This means more ag retailers assigning the right salesperson to specific customers who have the technical skills to work appropriately with each customer. Some are better with relationship selling, while others are better at technical and/or business relationships.

Precision needs improvement. Precision agriculture continues to grow in importance. Nearly every ag retailer touts their own brand of precision ag as a differential advantage. But the reality is farmers perceive wide variation in the extent and quality of precision ag service that is available to them, or that they are willing to pay for. It is easy to own a piece of variable rate equipment and promote precision ag. But it is quite another thing to have in-depth information and a control system embedded into the total management systems for customers who depend on the ag retailers expertise and technical competency as an integral part of their monument process. Getting results is about getting the details right, management systems, integrating information into the fabric of the customer operation and becoming the customer’s trusted advisor. This requires a major commitment and is a long road to travel. Committed ag retailers are seeing good results and are learning rapidly how to make it work for both them and their customers.

Topics: ,

Leave a Reply

State of the Industry Stories

Liquid Fertilizer Storage tanks
State of the IndustryComplex Fertilizer Market Brings Mixed Feelings
January 5, 2016
Declining fertilizer prices and plentiful supplies should be good news for growers facing low crop prices. But they and their Read More
Asmus Farm Supply crop protection products in storage
State of the Industry2016 Crop Protection Outlook: The Guessing Game
January 4, 2016
One would naturally assume that retail sales of crop protection products in a contracted market would themselves be contracted, but Read More
Seed corn bags in storage
Special ReportsThe Outlook For Seed In 2016
January 3, 2016
Among all crop input categories going into 2016, the seed category has as many questions regarding which direction it will Read More
Wilbur-Ellis’ new fertilizer blending facility, located in Mott, ND, was designed by A.J. Sackett & Sons.
State of the IndustryBuying Intentions Survey: Retailers Taking A Prudent Approach In 2016
January 2, 2016
The CropLife® magazine Buying Intentions Survey made its debut last year to gauge current industry trends against the retailer’s plans Read More
Trending Articles
Food IT
Industry NewsCalifornia Event Will Mix Ag And Tech Professionals To Explore IT Solutions
June 20, 2016
Silicon Valley is hot on agriculture, and an upcoming event in California will bring together the food and tech industries Read More
Monsanto Luling Plant
Eric SfiligojWhat’s Next For Monsanto?
May 31, 2016
For the folks at Monsanto’s headquarters in St. Louis, MO, it has been an eventful few weeks. Back on May Read More
Soybean Plant closeup
Industry NewsMonsanto Rejects Bayer Bid; Open To More Talks
May 25, 2016
Monsanto Co, the world’s largest seed company, turned down Bayer AG’s $62 billion acquisition bid as “incomplete and financially inadequate” Read More
Eric SfiligojPity The Monsanto Haters
May 23, 2016
An old saying goes thus: “Be careful what you wish for. You just might get it.” Given current events, there Read More
Monsanto Luling Plant
Crop InputsReport: Bayer Eyeing Monsanto For Possible Mega-Merger
May 16, 2016
Bayer AG is exploring a potential bid for U.S. competitor Monsanto Co. in a deal that would create the world’s Read More
Aerial Drone
Precision AgA Deeper Dive Into The Future Of Precision Ag
May 9, 2016
For about two decades now, through the good and the bad times, the ups and the downs inherent in agriculture, Read More
Latest News
Eric SfiligojThe British Leave Vote Impact On EU Agriculture
June 27, 2016
Like virtually everyone else in the world this past week, I’ve watched the global reaction to Britain’s vote to exit Read More
Valent David Nothmann
Crop InputsValent Names David Nothmann Vice President Of Marketing
June 27, 2016
Valent U.S.A. Corp. has announced the appointment of David Nothmann as vice president of marketing. Nothmann will be responsible for Read More
The Andersons Waterloo
ManagementFirst Indiana Facility Certified Under 4R Nutrient Stew…
June 27, 2016
The 4R Nutrient Stewardship Certification Program has announced that The Andersons, Inc.’s Waterloo, IN, facility has been added to its Read More
CropLife 100BRANDT Contributes To Mayo Clinic
June 27, 2016
BRANDT, a leading agriculture retailer and manufacturer of specialty agriculture products, has pledged a sizable donation to the Mayo Clinic Read More
ManagementReport: U.S. Farmland Values On Average Continue Gradua…
June 27, 2016
Land price movement has been in the forefront for farmers, landowners, lenders and land brokers for a decade now during Read More
AdjuvantsPrecision Laboratories Introduces Intact Xtra For Use W…
June 27, 2016
Precision Laboratories announces the launch of Intact Xtra, an adjuvant designed for applicators who want to maximize spray applications and Read More
Key Cooperative’s new liquid fertilizer, crop chemical, and seed facility in Grinnell, IA stores 1.5 million gallons of liquid fertilizer and 120,000 gallons of crop chemicals.
Retail FacilitiesKey Cooperative Facility Features The Latest In Murray …
June 27, 2016
When Key Cooperative wanted to improve the overall efficiency at its new state-of-the-art facility in Grinnell, IA, it turned to Read More
Allen Summers Asmark Institute PSM Training
EmployeesAsmark Institute Sponsors 25 ResponsibleAg Auditor Trai…
June 21, 2016
The Asmark Institute has announced plans to provide 25 scholarships through their affiliated State fertilizer and agrichemical associations to help encourage Read More
Kennebec Elevator
CropLife 100Wheat Growers Celebrates Kennebec Elevator Grand Openin…
June 21, 2016
Over 250 patrons and guests were on hand to celebrate Wheat Growers’ Kennebec Elevator grand opening. South Dakota Secretary of Read More
Land O Lakes
Industry NewsLand O’Lakes To Acquire Ceres
June 20, 2016
Land O’ Lakes, Inc. and Ceres, Inc. have announced that they have signed a definitive merger agreement under which Land O’Lakes Read More
Food IT
Industry NewsCalifornia Event Will Mix Ag And Tech Professionals To …
June 20, 2016
Silicon Valley is hot on agriculture, and an upcoming event in California will bring together the food and tech industries Read More
LegislationVilsack Christens WinField Crop Adventure, Talks Monsan…
June 17, 2016
The WinField Crop Adventure grand opening ceremonies at Fair Oaks Farms (near Winemac, IN) welcomed USDA Secretary of Agriculture Tom Read More
Crop InputsFields of the Future: WinField Doubles Down with Agri-E…
June 16, 2016
Land O’Lakes, Inc., joined by Agriculture Secretary Tom Vilsack, today will host Fields of the Future, a live broadcast about Read More
Bayer sign
Crop InputsMonsanto Turns Back Bayer Again
June 14, 2016
Bayer AG’s bid to buy Monsanto Co. for more than $60 billion has hit an impasse that could pose a Read More
Young Corn Field
Crop NutritionNext Generation Of Nitrogen Efficiency Technology Conve…
June 13, 2016
Commodity price projections indicate farmers will continue to face tight margins again this year. Delivering higher yields and more bushels Read More
Industry NewsLa Crosse Seed Acquires Cover Crop Solutions Brand
June 10, 2016
La Crosse Seed announces that it is the new and exclusive owner of the entire family of brands of Cover Read More
ManagementTravel Plans and EU Rejection of Glyphosate, Biotech Cr…
June 9, 2016
Editors Paul Schrimpf and Eric Sfiligoj talk about upcoming trips and the latest in the European Union’s moves against glyphosate Read More