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
AGCO RG700 cab
OpinionRoadblocks To Precision Ag Innovation
October 5, 2016
On August 29, I got to preside over the PrecisionAg Innovation Series event, “Game-Changing Advances in Precision Farming Technology,” developed Read More
J.C. Ramsdell containment system
EquipmentClear Opportunity In The Tank Market
October 4, 2016
Crop prices may be down, but steel prices are too — and that’s good news for retailers looking to add some Read More
WinField booth Farm Progress
Special ReportsTalking Weed Management Strategies At Farm Progress 2016
October 2, 2016
The annual Farm Progress Show — this year staged in Boone, IA — is always a great place to catch 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
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
Latest News
Kennebec Grain terminal
CropLife 100Wheat Growers Kennebec Facility Loads First Rail Cars
October 21, 2016
In a season of firsts for Wheat Growers’ Kennebec Grain Terminal, the first 115-car unit train was loaded with soybeans Read More
ManagementThe Latest Dow-DuPont Rumor, Product of the Year Voting…
October 20, 2016
CropLife Editor Eric Sfiligoj shares a new rumor about the Dow-DuPont merger and updates on two CropLife-driven programs, the CropLife Read More
Soybean Closeup
FungicidesFMC Begins Registration Process For New Fungicide Activ…
October 19, 2016
FMC Agricultural Solutions has begun the joint U.S. EPA and Canadian Pest Management Regulatory Agency registration process for bixafen, a new Read More
Soil Young Corn
Industry NewsAgribusiness Search Firm Appoints New Managing Partner
October 18, 2016
Morris Bixby Group, a leading agribusiness search firm providing the highest quality professional recruiting and career advancement services since 2000, Read More
Wheat Field North Dakota
FertilizerUnited Suppliers Acquires Kansas Fertilizer Business
October 17, 2016
United Suppliers, Inc. has purchased the assets of Evans Enterprises, LLC, an ammonium chloride fertilizer business based in Olathe, KS. Read More
Corn Field
Industry NewsFMC Launches New Operations In Argentina, Exits Joint V…
October 17, 2016
FMC Corp. has exited its joint venture with Ruralco Soluciones S.A. FMC has launched new commercial operations, FMC Quimica S.A., Read More
Dow AgroSciences
InsecticidesRenewed Registration Issued For Products Containing Sul…
October 17, 2016
On October 14, 2016, the U.S. EPA re-established the registration of products containing sulfoxaflor (Isoclast Active), including Transform WG, Closer Read More
Eric SfiligojThe Whys Of Agriculture
October 17, 2016
During 2016, there have been myriad challenges facing the whole agricultural industry. Such wide ranging issues as water protection, sustainable Read More
Young Corn Field
FertilizerImproved Phosphorus Management Essential To Feeding Wor…
October 14, 2016
With a global population expected to reach 9 billion people by 2050, improved management of key essential nutrients such as Read More
ManagementHarvest and Crop Price Updates; EPA and Crop Protection…
October 13, 2016
Glyphosate and atrazine get public comment support from ARA as each is reviewed by EPA, and the latest on the Read More
Matt Hopkins15 Twitter Accounts Every Ag Professional Must Follow
October 13, 2016
What do singer Katy Perry and the President of the United States have in common? They are two of the Read More
Corn Field
Industry NewsArysta LifeScience Adds Two Key Account Managers
October 13, 2016
Arysta LifeScience North America recently announced the addition of two key account managers: Doug Hoberty and Rob Wier. Hoberty and Read More
EquipmentDeere Announces Development Deal with Scherer Design
October 12, 2016
Deere & Co. announces a joint development agreement with Scherer Design Engineering, Inc. to develop and commercialize kernel processing solutions Read More
Crop InputsMarrone Bio Innovations Celebrates 10 Years Of Innovati…
October 12, 2016
Richard Rominger, former Deputy Secretary of the USDA and former agricultural secretary of California, emceed a 10th anniversary luncheon celebration on Read More
Photo credit: The United Soybean Board/The Soybean Checkoff.
Industry NewsVive Crop Protection Closes Financing To Support Corpor…
October 11, 2016
Vive Crop Protection has announced the closing of growth financing to support 2017 commercial expansion. The financing was led by Read More
SoftwareHD Precision Analytics Launches New Mobile App For Agri…
October 11, 2016
AGSentry from HD Precision Analytics is a Software-as-a-Service (SaaS) platform that offers simple data service and actionable analytics tool. It focuses Read More
HerbicidesWeed Control And Soil Health Go Hand-in-Hand
October 10, 2016
Although many landowners may not give much thought to weed control as a soil health measure, Gared Shaffer, South Dakota Read More
Students Soybean Field
Eric Sfiligoj2016 Young Leaders Speak
October 10, 2016
One of the consistent cries in agriculture today is the need to try and connect with the younger generations, attempting Read More