Ag Retailing In Today’s Economic Climate

Most business professionals in agriculture are optimistic about the future — at least in the short run, but larger, more sophisticated growers are demanding much more from their suppliers. Volatile markets for both crops and inputs are putting greater pressure on growers to produce crops more efficiently and achieve the highest yields possible.

How retailers take advantage of these unique market opportunities was the subject of CropLife Media Group’s (CLMG) recent Webinar, “Ag Retailing In Today’s Economic Climate,” presented by Dr. Dave Downey, executive director and professor emeritus for the Center for Food and Agricultural Business, Purdue University. The Webinar was part of CLMG’s State of the Industry coverage, which is sponsored by Mon­santo’s Acceleron Seed Treatments, Raven Industries, AGCO’s RoGator and TerraGator, Specialty Fertilizer Products (SFP) and SST Software.

Our Changing Marketplace

The challenges ag retailers face today are greater than ever because of rapid changes taking place in the marketplace, Downey said.

“One of the most exciting things driving market changes has been the world population explosion,” he said. “By the year 2050, there are going to be a lot more people to feed and that’s good for agriculture. And it’s not just the population that is growing, but the income level of many countries is growing as well, particularly in India and China. It has become a global marketplace.”

Downey said there is also significant volatility in the market. “Countries like China can enter the marketplace and compete with U.S. companies for the same resources,” he said. “This can suddenly make things unstable, and we’ve seen this happen in the fertilizer industry.”

Other major changes occurring within agriculture include advances in crop protection, genetics and farm equipment, Downey said.

“More knowledgeable farmers are using better technology to get much more precise application,” he said. “Farming has moved from just a way of life to a truly industrialized process.”

Ag continues to face concerns regarding the availability of water, energy and labor, Downey added. There’s also an increased focus on sustainable agriculture, food safety and worldwide government trade policy and regulation.

How Farmers Are Changing

One of the most important issues that has impacted ag retailers has been farm consolidation, Downey said. According to one 2007 study, 42% of the acres in the Midwest were controlled by 6% of farmers — a trend Downey said is likely to continue.

“It’s purely a matter of economics,” he said. “There is significant data that shows farm size is correlated with profitability.”

In addition, more large farmers have purchased their own application equipment, according to the 2008 Purdue University Large Commercial Producer Study.

“That’s a really interesting phenomenon since a substantial portion of ag retailers’ income comes from services they offer,” Downey said. “Yet, we continue to find that larger farmers outsource services less and do more on their own.”

Downey also said larger farmers are more serious today when it comes to purchasing inputs. “We are finding larger, more industrialized farmers are spending their time planning and negotiating what they want from their suppliers,” he said. “Some farmers believe they often know more than their local supplier. Ag retailers have to make sure farmers see them as the primary source of the latest information.”

Keys To Success For Ag Retailers

Downey emphasized throughout the webinar growing an ag retail business today requires new and more sophisticated approaches.

“Historically, retailers have given away service and information,” he said. “They knew it would be covered by the margins of fertilizer, seed and crop protection products.”

Because retailers haven’t insisted on getting paid for their added-value services, it has created a culture that has been difficult to overcome. “There’s great temptation to use services and information as a negotiating tool and to give it away to our favorite customers,” Downey said. “Once that happens, it’s extremely hard to change it so you get paid for those services.”

Ag retailers have now entered an era of industrialized marketing where success is based on value created, Downey said. Those who understand who their customers are, what services they are willing to pay for, and how to communicate that value effectively can gain a competitive edge.

“Much of a retailer’s differential advantage will depend on the unique value created for targeted customers,” he said. “Ag retailers who strive to understand their changing marketplace and adapt their business proactively are in a strong position to grow.”

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