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
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
Palmer amaranth in soybean stubble
HerbicidesWSSA: Billions In Potential Economic Losses From Uncontrolled Weeds
May 4, 2016
What losses would corn and soybean growers experience if they were forced to eliminate herbicides and other control techniques from Read More
Eric SfiligojReasons For Hope In Commodity Prices
May 2, 2016
For many months now, the doomsayers have ruled the day in agriculture. Too much supply with too little demand would Read More
Eric SfiligojMissing The Family Ties In Agriculture
April 25, 2016
By its nature, the agriculture market is cyclical. Up and down cycles come and go with a regular pattern. For Read More
Latest News
ManagementWashington Visit and Bayer/Monsanto Deal Update
May 26, 2016
Editors Paul Schrimpf and Eric Sfiligoj discusses a recent trip to DC and the latest news on the proposed pairing Read More
Fertilizer closeup in hand
Industry NewsVerdesian: Striking A Balance Between Yield & ROI
May 26, 2016
Finely tuned nutrient management plans are helping farmers throughout the U.S. improve nutrient use efficiency, increase return on investment (ROI) Read More
Crop InputsLand O’Lakes Announces Minnesota Water Quality Pa…
May 25, 2016
Governor Mark Dayton and Land O’Lakes, Inc. President and CEO Chris Policinski today announced a new public-private partnership to protect 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
Corn close up
Crop InputsArysta LifeScience Establishes Global Headquarters In R…
May 25, 2016
Arysta LifeScience has announced plans to relocate its global headquarters from West Palm Beach, FL, to Cary, NC, over the Read More
fertilizer blending and storage, Top 100
BlendersCHS Dakota Expansion Features AGCO’s GSI InterSys…
May 25, 2016
The continued growth of precision agriculture has increased farmer use of customized fertilizer blends best-suited for their soil conditions. Several Read More
ManagementAgriculture 3.5: A Bumpy Road Ahead
May 24, 2016
You may have read my article a few years ago on Agriculture 3.0, which is a term I coined to Read More
Topcon’s X30 display with CropSpec sensors
EquipmentGPS Autosteer Systems: Product Updates From Precision A…
May 24, 2016
Throughout 2015 GPS Steering solutions continued to evolve from what was once an after-market add on, to today’s cab where Read More
Trimble TMX-2050 In-Cab Display
Eric SfiligojThe Precision Ag Revolution Continues
May 24, 2016
It’s funny how much “the first time” tends to mean to someone as they get older. I sometimes can’t recall Read More
Eric Wintemute, AMVAC
Precision AgAMVAC Ups The Ante With New Precision Ag Technology
May 24, 2016
A potentially industry-changing at-plant soil treatment system from American Vanguard Corp., or AMVAC, is coming soon to large growers in Read More
Dry and Liquid Plant
CropLife 100CropLife 100 Map
May 24, 2016
The new CropLife 100 map shows the locations of each of the headquarters of the 2015 CropLife 100 retailers. The interactive Read More
Southern States Cooperative
Corn Field
Industry NewsTiger-Sul Names Veteran Account Manager To Lead Central…
May 23, 2016
With the continuing growth of the sulphur bentonite and precision crop nutrient industry, global agriculture firm H.J. Baker has announced that Read More
Bayer sign
Industry NewsReuters: Bayer Defies Critics With $62 Billion Monsanto…
May 23, 2016
German drugs and crop chemicals group Bayer has offered to buy U.S. seeds company Monsanto for $62 billion in cash, 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
Industry NewsCompass Minerals Hires Industry Veteran To Lead Plant N…
May 19, 2016
Compass Minerals has hired plant nutrition industry veteran Vatren Jurin to steer the company’s portfolio expansion into specialty liquid micronutrient Read More
ASMARK Retailers LIVE! Tour 2016 Group shot The Andersons
CropLife 100The Andersons Rejects Unsolicited Proposal From HC2
May 19, 2016
The Andersons, Inc. has announced that its Board of Directors has rejected two non-binding, highly conditional, unsolicited proposals from HC2 Read More
glyphosate
Crop InputsWHO: Glyphosate ‘Unlikely’ To Cause Cancer
May 16, 2016
Via Reuters.com reporter Kate Kelland: The weed-killing pesticide glyphosate, made by Monsanto and widely used in agriculture and by gardeners, Read More