Market Overview: A Study In Contrasts

Based on pure numbers, the agricultural marketplace is enjoying its best year ever. According to Crop­Life’s® annual CropLife 100 ag retailers survey, revenue for this group has never been higher than it was during 2010. For the year, ag retailers recorded an all-time high of $20.6 billion in sales for the four major crop inputs/services categories — fertilizer, crop protection, seed and custom application — up 9% from the 2009 total. Also, all four experienced sales growth in 2010 — something that rarely ever happens.

For the most part, CropLife 100 retailers expect these good times to continue to roll. When asked to rank their outlook for the coming year on a scale of 1 to 10, the majority, 40%, said they thought 2011 would rank an 8. Nine finished second at 19%, with a 10 being registered by 9% of respondents. So, in all, 68% of CropLife 100 retailers think 2011 will be as good or better than 2010 in terms of market growth. Only 13% ranked the prospects in 2011 as a 4 or lower.

However, the high optimism ranking masks some serious concerns retailers have about future prosperity when we talked to many managers one on one. Observers would probably say that this is a by-product of the many up/down market cycles that have occurred to the industry since the end of the 1970s, and in any given year optimism would be tempered by the prospect of unforeseen challenges. But based upon comments, this cautious feeling goes deeper than historic trends.

This fall and winter’s run-up to the 2011 season has become yet another volatile time for retailers trying to effectively manage fertilizer. Just two years after ag retailers felt the sting of hyper-volatility in the market, a new and unpleasant chapter is being written in a storybook with no real end in sight. 

Seed: Growing, Competitive

As a category, seed sales continue to show year-over-year improvement as evidenced in CropLife 100 retailer research. 2010 sales reached a new revenue benchmark of 15% of total revenues, up from 13% in 2009.

For the most part, retailers are confident seed will continue to play a bigger role in their sales going forward. “The complexity and cost of seed is giving us a chance to show off expertise that we have developed,” says Rod Silver, president of Mid-West Fertilizer, Paola, KS.

“Seed should be our No. 2 revenue generator behind fertilizer, but it’s been tougher to grow that business than I ever imagined,” says Gregg Johnson, agronomy manager at Reynolds United Coop, Reynolds, ND. “In our area, there are still a lot of farmer-dealers competing against us, and grower-neighbors have felt an obligation to buy seed from them. There are plenty of challenges, but our goal is to have seed overtake crop protection in the future.”

Meanwhile, seed companies already in an all-out market battle for market share will be turning it up a notch this winter and spring.

Generational Challenges: Changing Approaches

The generational change occurring in the general population is also occurring on two fronts for retailers: the next generation of growers is slowly taking over the farming operations from their parents, and retirements within retail operations are forcing managers to cast the widest net possible for qualified help. Recruiting smart young people from urban and suburban areas in addition to traditional rural resources requires a different mindset and approach to hiring and management.

Precision: Stable But Stagnant

In particular, precision ag suffered from this study in contrasts. According to the data, retailers had precision ag sales of more than $140 million in 2010, down 3% from 2009. Despite predictions that there would be a need for more site-specific application of fertilizer and crop protection products, adoption has remained fairly flat for several years.

When asked why precision ag growth has tended to lag, retailers indicated a combination of cost and uneven results were to blame. “The time to execute and questionable results have held back our precision ag sales,” says Kyle Baltz, owner/manager at Baltz Feed Co., Pocahontas, AR.

“We do variable-rate fertilizer and lime and offer grid sampling services, but we have not seen a lot of growth,” says Kevin Meinord, sales and marketing manager at MRM Ag Service, East Prairie, MO. ” If nitrogen, phosphate and potash remain high, that could be a factor in what dictates more growth in precision. But for the last two or three years, it has been relatively flat.”

Consolidation: Slowed But Inevitable

In 2010, as profits soared, consolidation among retailers slowed down significantly. In an average year, approximately four to seven companies will exit the CropLife 100 listing via consolidation. In 2010, however, only one — Premier Ag — left via this route, acquired by Wilbur-Ellis Co. Another, Miles Farm Supply, was acquired by Agrium Retail just prior to the end of the year. (In CropLife 100 rankings, Miles is still listed independently because the deal was not complete as of our November 1 listing deadline.)

In 2011, however, most retailers polled for the State of the Industry report believed consolidation would become more prevalent once again. “Consolidation has been minimal in our market, but if it becomes difficult to make a reasonable profit, consolidation could increase,” says Frank Schumacher, agronomy division manager for Mountain View Co-op, Black Eagle, MT. “The independent dealer that is first generation is the most likely candidate to sell.”

Wade Blowers, COO for Ham­ilton Farm Bureau, Hamilton, MI, agrees. “I would expect [consolidation] to pick back up,” says Blowers. “The landscape is still overserved with retail facilities, and consolidation will increase as the overcapacity struggles to be profitable. Longer term, costs and overcapacity need to come out of the market in order to grow profitability by those who are still participating.”

Regulation: Tough And Tougher

On the regulatory front, retailers say that the hoops they must jump through are getting higher and more challenging. “In general, we are finding that compliance with government regulations is getting more time consuming and expensive,” says Mountain View’s Schumacher. These include ones dealing with fertilizer storage. “The new regulations on portable storage are going to force us to operate a little differently,” he says.

According to Hamilton Farm Bu­reau’s Blowers, EPA’s interpretation of the 1987 exemption within the SARA Tier II reporting on requirements for fertilizer held for sale by a retailer is concerning. “An interpretation change which drives an outcome of retailers being cited is troubling,” he says.

Others are worried about water. “The Clean Water Act is generating greater pressures toward regulating nitrogen and phosphorous use,” says Doug Busdeker, area general manager, farm centers for The Andersons, Inc., Maumee, OH. “The National Pollutant Discharge Elimination System permits for pesticide applications near water would be a burdensome process for spray applicators.”

Leave a Reply

State of the Industry Stories

Fertilizer Tender close-up
MicronutrientsHow Micronutrients Fit Into 2017 Fertility Plans
January 10, 2017
Where do micronutrients stand going forward in fertility plans? For one thing, Tim Mundorf, Field Representative with Midwest Laboratories, says Read More
Fertilizer application
State of the IndustryCautious Optimism On Fertilizer In 2017
January 10, 2017
What kind of fertilizer rates are growers and retailers looking at in 2017 and beyond? According to stakeholders CropLife magazine Read More
Asmus Farm Supply crop protection products in storage
State of the IndustryCrop Protection Products Market: Complexity Begets Opportunity
January 10, 2017
While other key market segments in agriculture continue to see tumultuous shifts in sales volumes going forward (large equipment sales are Read More
Pioneer corn seed in storage
Special ReportsState Of The Seed Industry: Better Later Than Never
January 3, 2017
Traditionally, the majority of the nation’s grower-customers made their seed planting decisions in the late fall. Normally, when folks attended Read More
Trending Articles
Crop InputsFlying Under the Radar No More, FMC Goes Big
April 13, 2017
Describing FMC as “under the radar,” admittedly, is probably a stretch. But in a snap of the fingers, FMC upped Read More
Young Corn Plants
Crop NutritionStill Hunting Yields
April 1, 2017
There’s no denying it — the agricultural marketplace today is undergoing a fundamental shift in fortunes. Not too many years Read More
Nutrients for Life Foundation Teacher
FertilizerNutrients For Life Foundation Celebrates 10 Years Teaching Fertilizer Education
March 23, 2017
Those in agriculture know fertilizer is a vital ingredient to grow strong, productive crops. In fact, fertilizer is responsible for Read More
AdjuvantsA New Weed-Control Era Begins: But First, One Last Obstacle
March 4, 2017
There is trepidation, there is reluctance, and there is excitement. Ag retailers feel it all about the new dicamba and Read More
LIFT Academy video screenshot
Crop InputsLIFT Agriculture Academy: A Q&A With West Central Distribution’s Dean Hendrickson
March 1, 2017
West Central Distribution recently launched its LIFT Agriculture Academy, a new, premiere training and professional development resource for West Central’s ag Read More
Farmer and aptop
Matt Hopkins10 Warning Signs Your Website Is Grossly Outdated
February 8, 2017
Your Website is often a visitor’s first impression of your ag retail business. A positive first impression can set the Read More
Latest News
BRANDT
CropLife 100Former PotashCorp COO Joins BRANDT Board
April 27, 2017
BRANDT has announced the appointment of another industry veteran to its board of directors. David Delaney, most recently EVP and Read More
Syngenta headquarters in Basel, Switzerland
Crop InputsFortune: Inside China’s $43 Billion Bid for Food …
April 26, 2017
(Via Fortune.com) The worst famine in human history occurred in China from 1959 to 1961. An estimated 34 million people Read More
Syngenta Sign
Crop InputsSyngenta Announces Changes in Board of Directors
April 26, 2017
ChemChina and Syngenta announced changes relating to the new Board of Directors of Syngenta following the closing of the ChemChina Read More
Crop InputsBioSafe Systems Introduces PerCarb Broad-Spectrum Bacte…
April 26, 2017
BioSafe Systems announces PerCarb (Sodium Carbonate Peroxyhydrate), a new alternative to potassium bicarbonate and lime sulfur products for use in Read More
Deere Twitter
EquipmentTop 10 Twitter Pics for #Plant17
April 26, 2017
Despite some wet weather in parts of the Midwest, growers and ag retailers are working feverishly to plant this year’s Read More
Donald Trump
Crop InputsTrump Targets Agriculture with Latest Executive Order
April 26, 2017
(Via UPI.com) President Donald Trump on Tuesday took executive action in an effort to help grow the domestic agriculture industry Read More
AGCO Ratliff featured
EquipmentAGCO Mourns Passing of Company Founder, Industry Vision…
April 25, 2017
AGCO Corp., a worldwide manufacturer and distributor of agricultural equipment and solutions, mourns the passing of founder and former President, Read More
Engenia soybeans
Crop InputsINNVICTIS CROP CARE Introduces VANDAL MOC Soybean Herbi…
April 25, 2017
INNVICTIS CROP CARE, LLC has announced the U.S. EPA registration for VANDAL MOC, a combination of sulfentrazone plus metolachlor. VANDAL Read More
Kochia
HerbicidesINNVICTIS CROP CARE Launches STAVE Post-Emerge Broadlea…
April 25, 2017
INNVICTIS CROP CARE, LLC has introduced STAVE as the newest addition to­ its expanding portfolio. STAVE will be a great Read More
Sonny Perdue
LegislationSonny Perdue Confirmed by Senate as Next Agriculture Se…
April 25, 2017
After months without a secretary of agriculture, the Senate voted Monday evening to confirm former Georgia Gov. Sonny Perdue to Read More
BPIA logo
Seed/BiotechBPIA Files Comments with USDA
April 24, 2017
The Biological Products Industry Alliance (BPIA) has filed comments with the USDA’s Animal and Plant Health Inspection Service (APHIS) Plant Read More
Eric SfiligojHope for Application Equipment Sales
April 24, 2017
The old saying goes that a “rising tide lifts all boats.” If this is indeed the case, then things may Read More
Stewardship video screenshot
ManagementNew Video Raises Awareness of 2,4-D Stewardship
April 24, 2017
A new public service video developed and produced by the 2,4-D Research Task Force, in conjunction with the American Soybean Read More
ManagementAn Inside Look at Award Winning Ag Retailer Gar Tooteli…
April 20, 2017
CropLife Editor Eric Sfiligoj discusses An Inside Look at Award Winning Ag Retailer Gar Tootelian Read More
Students Soybean Field
Industry NewsMACA Announces 2017 Young Leader Scholarship Recipients
April 19, 2017
The Mid America CropLife Association (MACA) Board of Directors selected 11 college students to receive the MACA Young Leader Scholarship Read More
Growmark FS Outlet
SoftwareKnoa Software Solution Helps GROWMARK Boost System Perf…
April 19, 2017
Knoa Software, a leading provider of user experience management (UEM) software, has announced that GROWMARK, Inc., a regional agricultural cooperative Read More
Crop InputsFBN Publishes ‘Voice of the Farmer’ Agricul…
April 17, 2017
Farmer’s Business Network (FBN) released today its “The Voice of the Farmer”, which the company is describing as “a special Read More
ManagementTalking Responsible Ag
April 13, 2017
CropLife Editor Eric Sfiligoj discusses the Responsible Ag program with director Bill Qualls. Read More