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

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

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
InsecticidesHow To Avoid Aphid Infestation In Winter Wheat
December 10, 2014
The best strategy for managing aphid infestations in winter wheat — and the potential yellow dwarf diseases that they transmit — is prevention, according to a South Dakota State University Plant Pathology field specialist. Read More
LegislationDufault Installed As New ARA Chair
December 10, 2014
Dave Dufault, Vice President and General Manager of J.R. Simplot Company's Retail Business, was installed as the 2015 Chairman of the Board for ARA on December 4. Read More