Ag Retail Consolidation Trending Up

For anyone who grew up during the 1980s, a common sight in many business establishments was a video game called Pac-Man. In this game, players controlled a hungry yellow character who spent his time gobbling up white dots, scoring points along the way.

To many in the ag retail marketplace, the consolidation trend of the past few decades has, in many ways, resembled a Pac-Man-like game. Big ag retailers have systemically swallowed up smaller ones, expanding their market penetration in the process. Indeed, in an average year back in the early 2000s, approximately seven companies would disappear from CropLife magazine’s annual CropLife 100 listing via the acquisition/merger route.

But then came the market crash of mid-2008. As ag retailers were forced to write down millions of dollars in fertilizer inventory (as grower-customers pulled back on their fall orders), many of them stopped playing the consolidation game. In fact, between 2008 and 2011, only a total of six regular CropLife 100 ag retailers were acquired by larger ones.

“The last 18 months, there hasn’t been a lot going on with consolidation,” says Larry Arndt, agronomy team leader/sales & marketing team leader for MaxYield Cooperative, West Bend, IA.

The reason for this is simple, says Devin Mog­ler, vice president of agronomy operations for Farmers Cooperative Co., Ames, IA — a string of strong revenue performances by CropLife 100 retailers during the past three years. “Con­solidation has slowed somewhat in recent years,” says Mogler. “Typically, merger and acquisition activity is heightened when times are bad, and we’ve been experiencing some pretty strong years across our trade territory and across the ag sector in general.”

Turning Back On

Of course, now that many ag retailers have rebuilt their businesses from the downturns of 2008 and 2009 — and in some cases, are flush with cash as a result — they are looking to get back into the consolidation game. And in the minds of many market watchers, this is a good thing for the marketplace as a whole.

“Consolidation is a natural process,” says Jeff Tarsi, senior director, business strategy for Crop Production Services, Cordova, TN. “There’s more demand on retailers to provide bigger, faster equipment. This will probably push out the smaller retailers that don’t want to or cannot re-capitalize and invest another $2 million to $3 million to expand their services, equipment and other important supporting items such as bulk seed and fertilizer storage. Those that choose to re-invest will be the long-term players.”

MaxYield Coopera­tive’s Arndt agrees. “We think that consolidation drives efficiencies, and that’s probably okay,” he says. “There are always those that hate to see change and feel that they’re losing competition, but I don’t see it as a long-term disadvantage. I think consolidation helps drive costs out of the whole retail system.”

The past year or so, one of the hot beds for retailer consolidation has been the state of Wiscon­sin. One of the Badger State’s largest cooperative, United Cooperative of Beaver Dam, has spent the better parts of 2011 and 2012 gobbling up neighboring cooperatives, including Mid-County Cooperative, Pulaski Chase Cooperative and Cooperative Services. Put together, these acquisitions have helped the company move from No. 52 on the 2009 CropLife 100 to No. 24 today.

According to David Cramer, United Cooperative pres­ident/CEO, all of these mergers tie into the company’s long-range plans. “The world population will grow significantly in the next 30 years,” says Cramer. “As a result, the agriculture industry now puts a great deal of effort into improving efficiencies and sustainability so this generation and future generations can continue to produce food and fuel efficiently.”

Another Wisconsin cooperative, Wisconsin River Co-op, Adams, WI, appears to be taking a similar path. In October, the company announced plans to merge with Farmer’s Co-op Supply and Shipping Association, West Salem, WI. According to Scott Firlus, CFO-COO for Wisconsin River Co-op, this consolidation will help the company “to improve its facilities and equipment utilization and add efficiencies to our sales and delivery routes.”

Still, there are those ag retailers that think consolidation can present a “game over” scenario in some situations. “It potentially homogenizes the ag retail presence,” says Bill Hubbell, general manager for Wil­co-Winfield, Mt. Angel, OR. “The more markets that are supported by a single headquarters, the less uniqueness will be available and affordable by more market-specific retailers.”

Herbert Woolsey, president of Woolsey Brothers, Van­dalia, IL, shares this view. “I think retail customers will have less options for products and services with fewer dealers in their areas, and that cannot be good for them,” says Woolsey. “They need some options and some significant competitive situations, and in some cases, that’s getting a little slim.”

Then there’s the potential impact on some of the smaller ag retailers themselves. “Consolidation of retail has made it difficult for small distributors and manufacturers,” says Kyle Baltz, manager for Baltz Feed Co., Pocahontas, AR. “Having fewer suppliers is causing some interruptions in the supply chain.”

A Super-Charged Player

Good, bad or indifferent, ag retail consolidation appears to be ready to pick up significant speed in 2013 as a new super-charged player enters the game. In mid-2012, Pinnacle Ag Distribution officially launched. Financially backed by Apollo Global Management, LLC, and headed up by former United Agri Products veterans L. Kenny Cordell and Dean Williams, Pinnacle is on a mission “to be a top five retail supplier by 2017,” according to its company Website. Naturally, to do this, the company will likely go the consolidation route.

In September, Pinnacle announced it entered into a strategic partnership with Jimmy Sanders, Inc., Cleve­land, MS (ranked No. 8 on the 2012 CropLife 100 listing with annual sales in the $200 million to $999 million range). Market rumors indicate that other such deals involving Pinnacle and current CropLife 100 retailers are in the works, which should push the company’s revenues above $1 billion by the end of 2013.

Perhaps responding to these market moves, current large ag retailers are seeking to keep their own consolidation games going. At presstime, 2012 CropLife 100 No. 4 Wilbur-Ellis Co. purchased No. 97 Mott Grain. Earlier in the year, No. 5 CHS purchased the assets of Hamilton Farm Bureau (ranked No. 80 on the 2011 CropLife 100 list) while No. 1 Crop Production Services acquired Ritter Crop Service (ranked No. 46 in the 2011 CropLife 100).

As for the smaller players in the ag retail game, an uptick in consolidation in 2013 will lead to plenty of decisions. According to Wilco-Winfield’s Hubbell: “It forces us to manage our business more efficiently to remain competitive.”

For others such as Baltz Feed, the question is a matter of market fit. “Consolidation leaves us wondering if we will have a place in the new world,” says Baltz.

However, according to Cliff Love, general manager for Carolina Eastern-Vail, Auburn, NY, the ultimate outcome for retailers remains unchanged, whether the consolidation game is being played or not. “At the end of the day, any retailer’s success or failure will be based on their ability to meet the needs and desires of their market as it appears today,” says Love. “The next question is ‘what will that market be like tomorrow?’ Some issues and needs will be broad-based. However, others will be more localized. A retailer that pays close attention to the marketplace they compete in and adapts to it will have satisfied, individual customers. And these customers become some of the best salespeople they could ever have.”

Topics:

Leave a Reply

State of the Industry Stories

State of the IndustryFertilizer Bracing For Slower Demand In 2015
January 5, 2015
Following a rough 2014, ag retailers expect 2015 to remain a challenge for crop nutrient sales for a variety of reasons. Read More
Crop Protection Bulk Storage
State of the IndustryCrop Protection Rise To Continue
January 4, 2015
Economics may tempt growers to reduce pesticide use, but ensuring yields may be more important. Read More
State of the IndustryYields Start With The Seed
January 3, 2015
There’s a reason seed sales were up in 2014 — new varieties are delivering the goods. Read More
USDA
Special ReportsUSDA Announces Funding To Train And Educate Next Generation Of Farmers
April 14, 2014
Nearly $20 million in grants to help train, educate and enhance the sustainability of the next generation of agricultural producers is available through the Beginning Farmer and Rancher Development Program. Read More
Top 100 Articles
CropLife 100Allied Ag Distributors Adds Four New Owners
July 30, 2015
Aligned Ag Distributors LLC has announced the addition of four new customer/owners to Franklin Holding Co. LLC. They are: The Read More
CropLife 100Pinnacle Purchases California-Based Specialty Crops Retailer
July 20, 2015
Pinnacle Agriculture Holdings has successfully acquired California-based NH3 Service Co.  Operating as part of Pinnacle’s Performance Agriculture brand, the new locations Read More
Asmus Farm Supply liquid fertilizer facility features 20,000 square feet
CropLife 100Slideshow: Asmus Farm Supply Shows Off Its New Liquid Fertilizer Facility
July 15, 2015
Asmus Farm Supply, Rake, IA, recently added a new liquid fertilizer facility to its company operations. The new liquid fertilizer Read More
CropLife 100Wilbur-Ellis Feed Division Facilities Receive Safe Feed/Safe Food Certification
July 13, 2015
Wilbur-Ellis Co.’s Feed Division, a marketer and distributor of value-added feed ingredients for the aquaculture, livestock and pet food industries Read More
CropLife 100BRANDT Expands To Brazil With Acquisition
July 8, 2015
BRANDT has acquired a majority interest in Target Brasil Fertilizantes Ltda. through its Brazilian subsidiary. Target Brasil manufactures, distributes and Read More
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
Latest News
CropLife 100Allied Ag Distributors Adds Four New Owners
July 30, 2015
Aligned Ag Distributors LLC has announced the addition of four new customer/owners to Franklin Holding Co. LLC. They are: The Read More
FungicidesReport: Sudden Death Syndrome Symptoms Appearing In Soy…
July 30, 2015
Last week, symptoms of sudden death syndrome (SDS) began to appear in April 15-planted soybeans at the University of Illinois’s Read More
Seed/BiotechAdvanta Seeds Adds New Phoenix Corn Hybrids
July 30, 2015
Corn growers in the High Plains and Western states have new options available for the 2016 growing season from Advanta Read More
ManagementTechnology and agriculture: a Futurist’s Perspective
July 30, 2015
Futurist David Zach, speaking at this week’s InfoAg Conference in St. Louis, shared thoughts on the benefits and limitations of Read More
Biofuels Plant in Lousiana
Industry NewsIdle Biofuels Plant In Louisiana To Reopen As Ammonia F…
July 30, 2015
A Lithuania-based company plans to spend $265 million to reopen an idle biofuels refinery in Grant Parish as an ammonia Read More
FFA at Monsanto Booth at the 2015 National Farm Machinery Show
Industry NewsFive Students Receive The 2015 Monty’s Plant Food Compa…
July 29, 2015
This fall, five college-bound students will have financial support through the Monty’s Plant Food Company FFA Scholarship. All five scholarship Read More
GYPSOIL Blendable Pellets
Crop InputsBeneficial Reuse Management Launches Pelletized Gypsum …
July 29, 2015
Beneficial Reuse Management (BRM) announced this week at Ag Media Summit that its GYPSOIL Pelletized Products Division will open a Read More
StewardshipOhio Water Quality Project To Determine How Much Phosph…
July 27, 2015
Researchers with the College of Food, Agricultural, and Environmental Sciences at The Ohio State University are looking for farmers in Read More
FertilizerKoch Agronomic Services Launches N-TEGRATION Technology
July 27, 2015
Koch Agronomic Services, LLC (KAS) has launched  N-TEGRATION Technology, a process technology platform designed to enable production of enhanced efficiency fertilizers at Read More
HerbicidesExpert: IARC Herbicide Classifications Leading To Confu…
July 24, 2015
Few people in the crop protection industry had heard of the International Agency for Research on Cancer (IARC) before this Read More
ManagementFCI Trade Summit Update & Precision Tank Turns 50
July 23, 2015
Editors Dave Frabotta and Eric Sfiligoj discuss the upcoming FCI Trade Summit in Las Vegas, NV, and how Precision Tank Read More
Palmer pigweed seedhead in cotton
HerbicidesUSDA Deregulates Dow AgroSciences’ Enlist Cotton Trait
July 23, 2015
The USDA today issued its decision deregulating Dow AgroSciences’ Enlist cotton trait in the U.S. The USDA has now completed its Read More
Industry NewsVerdesian Life Sciences Showcases Versatile Product Por…
July 23, 2015
Technology has revolutionized agriculture by bringing farmers, retailers and distributors to the forefront of the digital age. To meet the Read More
FertilizerWSJ: Cf Industries Exploring Merger With Dutch Chemical…
July 23, 2015
U.S. fertilizer maker CF Industries is in advanced merger talks with Amsterdam-listed chemical company OCI NV, the Wall Street Journal Read More
HerbicidesNufarm Releases New Panther SC Herbicide
July 23, 2015
Nufarm has announced the availability of new Panther SC herbicide. Panther SC is the first liquid formulation of flumioxazin available Read More
EquipmentFarmLink Launches Farm Equipment Sharing Program
July 23, 2015
FarmLink has introduced a new online farm equipment sharing community – MachineryLink Sharing – leveraging this new economy business model Read More
HerbicidesCould The South’s Most Troublesome Weed Represent A Thr…
July 22, 2015
Palmer amaranth is undoubtedly the most troublesome weed in the southern United States, taking a devastating toll on both cotton Read More
Industry NewsH.J. Baker Hires New Director Of International Sales
July 22, 2015
Global Agriculture firm H.J. Baker announced today that Steve Langley has joined the company’s Crop Performance Division and Animal Health Read More