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

State of the IndustryAgriculture’s Troubled Waters
March 3, 2014
Water quantity and quality issues threaten to hamper agriculture on a wider scale in the not-too-distant future. Technology breakthroughs and improved practices are providing potential solutions. Read More
State of the IndustrySponsor Profiles: Simplot, SST And WinField Support CropLife State Of The Industry Report
January 8, 2014
The sponsor partners of the CropLife State of the Industry report have demonstrated ongoing leadership including their support of this report. Read More
State of the Industry2014 State Of The Industry: Agricultural Concerns Creep In
January 2, 2014
With many strong sales years under its belt, the agricultural community is hoping for another positive growth experience in 2014, but mindful of a few challenges that might keep this from happening. Read More
State of the IndustrySeed Systems Top Watch List
January 2, 2014
Retailers are closely following herbicide tolerance and drought resistance traits. Read More

Top 100 Articles

CropLife 100CHS: Driving Momentum To Help Farmer-Owners Grow
December 11, 2014
CHS Inc., the nation’s leading farmer-owned cooperative and a global energy, grains and foods company, must capture new opportunities to Read More
CropLife 100BRANDT, Verdesian Ink Distribution Agreement
December 9, 2014
The agreement grants BRANDT the exclusive right to sell and market Verdesian’s patented Steric chemistry in the Turf and Ornamental and eastern U.S. ag markets under the BRANDT Reaction product line name. Read More
CropLife 100CropLife 100: The Colors Of Custom Application
December 5, 2014
Although many color spray rigs are in the yards of the nation’s top ag retailers, the majority of them still come in only a few shades. Read More
CropLife 100Pinnacle Invests In Meridian Agriculture Distribution
December 4, 2014
Meridian will provide retailers with supplier-branded products and numerous opportunities to differentiate themselves from their competitors. Read More
CropLife 100CropLife 100: Entering A New Seed Era
December 4, 2014
The seed category has been re-vitalized during the past few years, and more good news (and varieties) are headed the industry’s way in 2015. Read More
CropLife 100CropLife 100: The Depressed State Of Fertilizer
December 3, 2014
Following downright giddy growth earlier this decade, fertilizer sales have fallen back down to earth the past two years. Read More

Latest News

Seed/BiotechKaren Arthur Joins AgriThority As Seed Treatment Produc…
December 19, 2014
Prior to joining AgriThority, Arthur directed research and development programs, overseeing laboratory and field research, to build the Valent U.S.A. seed treatment portfolio. Read More
EquipmentJohn Deere To Sell Crop Insurance Business
December 19, 2014
Deere & Co. has reached a definitive agreement to sell its crop insurance business, subject to regulatory approval, to Farmers Mutual Hail Insurance Co. of Iowa. Read More
Crop InputsNufarm Fills Regulatory VP Position
December 18, 2014
Nufarm announced today that Rob Schwehr has been promoted to the position of Vice President of Innovation & Regulatory Affairs for Nufarm Americas. Read More
Seed/BiotechReport: China Approves Viptera Corn, U.S. Officials Awa…
December 17, 2014
Chinese authorities have informed some agriculture industry officials the government has approved U.S. imports of a type of genetically modified corn developed by Syngenta. Read More
FertilizerMonty’s Plant Food Brings In New Sales Rep
December 16, 2014
Monty's Plant Food Company has hired Warren Kearns as its newest Sales Representative for the South Carolina area. Read More
EquipmentHagie Wins 2014 CropLife IRON Product Of The Year Award
December 15, 2014
The self-propelled sprayer maker has a hit on its hands with the new STS Series model. Read More
Syngenta
Seed/BiotechSyngenta Sees China Approving Contentious GMO Corn Soon
December 15, 2014
Syngenta will make an announcement when it receives official documentation from China that Agrisure Viptera corn, known as MIR 162, has been cleared for import. Read More
Crop InputsVerdesian Life Sciences Names Vice President Of Communi…
December 15, 2014
Amy Bugg will oversee the execution of all promotional strategies for the corporate brand and the complete product portfolio. Read More
StewardshipFarmers, Retailers Attend 4R Certification 4U Workshop
December 15, 2014
More than 160 farmers and ag retailer attended the “4R Certification 4U” workshop December 12 to learn more about the 4Rs of nutrient stewardship, water quality research in the area and cost-sharing opportunities. Read More
Matt Hopkins10 Best New Agriculture Apps For 2015
December 15, 2014
These new agriculture apps are certain to help ag professionals do their jobs more efficiently in 2015 and beyond. Read More
ManagementARA Learnings, Retail Buying Intentions: Welcome To Cro…
December 12, 2014
This informal video program puts news and events effecting retailers into context, and features Editors Paul Schrimpf and Eric Sfiligoj. Read More
Seed/BiotechMonsanto Herbicide-Tolerant Technology Closer To Commer…
December 12, 2014
The final EIS moves Monsanto one step closer to the introduction of Bollgard II XtendFlex cotton and Roundup Ready 2 Xtend soybeans, paving the way to provide access to dicamba-tolerant soybeans and cotton. Read More
Seed/BiotechUSDA Issues Final Environmental Impact Statement On Her…
December 12, 2014
The USDA Animal and Plant Health Inspection Service (APHIS) is issuing a final environmental impact statement on varieties of cotton and soybeans that have been genetically engineered for resistance to several herbicides, including the one known as dicamba. Read More
CropLife 100CHS: Driving Momentum To Help Farmer-Owners Grow
December 11, 2014
CHS Inc., the nation’s leading farmer-owned cooperative and a global energy, grains and foods company, must capture new opportunities to Read More
LegislationARA Applauds CFATS Passage Prior To Holiday Adjournment
December 11, 2014
The streamlined bill provides a four-year authorization of the CFATS program and guidance to DHS on key issues of chemical facility security Read More
Seed/BiotechBayer CropScience’s ILeVO Approved By EPA
December 11, 2014
EPA has approved ILeVO, the only seed treatment that protects the root system against infections caused by the Sudden Death Syndrome fungus and has activity against dangerous nematodes. Read More
Biologicals in Emerging Markets Map.
Crop InputsBiocontrols Could Quadruple By 2025; Will Regulators Pl…
December 11, 2014
The European experience with GMOs offers caution — and a promise — for biologicals. Read More
Crop InputsBASF Donates $75,000 To Feeding America
December 10, 2014
The donation will support Feeding America’s National Produce Program, an initiative that helps with planning, transportation and logistics to ensure fresh produce deliveries to the 200 member food banks around the country. Read More