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

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

Trending Articles

EquipmentAdvance Your Technology IQ At MAGIE
August 13, 2014
The Midwest AG Industries Exposition (August 20-21) is the place you need to be to see, study and evaluate how new advances in the equipment, operations, crop protection and fertility sectors can help your business prosper. Read More
HerbicidesScouting Key To Next Season’s Soybean Herbicide Program
August 12, 2014
When growing soybeans, growers need to think ahead to stay one step ahead of weeds. That means examining weed threats and evaluating which herbicides work best. Read More
StewardshipMichigan Agriculture Leaders On Toledo Water Ban: We Want To Be Part Of The Conversation
August 8, 2014
Leaders of Michigan agricultural organizations said Thursday that the government should not have a “knee-jerk reaction” based on last weekend’s water ban in Toledo due to fertilizer run-off in Lake Erie. Read More
CropLife 100BRANDT Acquires Lemon Ag Services
August 4, 2014
The acquisition of Lemon Ag fits BRANDT’s aggressive corporate strategy of providing superior agronomic advice and services for customers in central Illinois. Read More
Eric SfiligojThe Resurgence Of Crop Protection
August 4, 2014
Plenty of new offerings over the next few years should see a rebirth for the crop protection products category in terms of market share. Read More
LegislationUSDA Implements Key Farm Bill Crop Insurance Provision
July 30, 2014
The new Supplemental Coverage Option, available through the federal crop insurance program and set to begin with the 2015 crop year, is designed to help protect producers from yield and market volatility. Read More

Latest News

ManagementNCGA DuPont New Leaders Program Enters Sophmore Season
August 20, 2014
The National Corn Growers Association and DuPont are pleased to announce the second year of the NCGA DuPont New Leaders Program. Read More
FungicidesVerdesian Links Up With Mitsui, Hokusan
August 20, 2014
Mitsui Chemicals Agro, Inc., and Hokusan Co., announced the signing of an exclusive licensing agreement allowing Verdesian Life Sciences global access to its patented technology for suppressing mycotoxin contamination in wheat and barley. Read More
SprayersUniversity Of Illinois Introduces New Spray App
August 18, 2014
University of Illinois Extension has released a new smartphone app for making sprayer-related calculations. Pesticide Spray Calculator, or Spray Calc, Read More
Crop InputsSyngenta Names New Manager Of Federal Government Relati…
August 18, 2014
Laura Wood Peterson has joined Syngenta as manager of federal government relations, based in Washington, DC. Read More
ManagementExpert To Discuss Farmland Value, Rent At Farm Science …
August 18, 2014
While cropland values in Ohio increased in the past two years, they have remained flat in 2014, declining in some cases, according to an Ohio State University agricultural economist. Read More
EquipmentDeere Announces Factory Layoffs
August 18, 2014
Deere & Co. has announced it will reduce the size of its manufacturing workforce at some agricultural equipment factories in response to current market demand for its products. Read More
HerbicidesNew DuPont Afforia Herbicide Gives Crops A Clean Start
August 18, 2014
DuPont Afforia is a preplant herbicide for soybeans and other field crops that provides excellent burndown and residual control of many challenging weeds, such as marestail and waterhemp. Read More
Equipment21 Products Showcased At MAGIE 2014
August 18, 2014
The annual Midwest AG Industries Exposition is upon us. Here is CropLife IRON's look at some of the products visitors can expect to see at this week's event. Read More
EquipmentAGCO Seeks Nominations For 2014 Operator Of The Year
August 15, 2014
Ag retailers throughout the U.S. and Canada are encouraged to nominate their best applicators. Read More
EquipmentAdvance Your Technology IQ At MAGIE
August 13, 2014
The Midwest AG Industries Exposition (August 20-21) is the place you need to be to see, study and evaluate how new advances in the equipment, operations, crop protection and fertility sectors can help your business prosper. Read More
ManagementCropLife’s Buyers’ Guide Issue Now Availabl…
August 13, 2014
One of our most read issues of the year — the August Buyers' Guide — is ready to download on the iPad. This popular issue features equipment for "In The Field," "At The Plant" and "In The Office." Read More
WebinarsWebinars On Demand
August 13, 2014
Register for one of our upcoming Webinars or access our archive of past Webinars to view recordings of presentations that may be of interest to you. Read More
HerbicidesBASF: Fall Burndown Benefits Go Beyond Weed Control
August 12, 2014
While unpredictable weather may delay application timing of spring herbicides, more growers are adding a burndown application in the fall Read More
HerbicidesScouting Key To Next Season’s Soybean Herbicide P…
August 12, 2014
When growing soybeans, growers need to think ahead to stay one step ahead of weeds. That means examining weed threats and evaluating which herbicides work best. Read More
StewardshipNitrogen Efficiency Supports Environmental Stewardship
August 12, 2014
As growers prepare for another harvest, it’s important to consider how nitrogen stabilization not only supports healthy plant growth but also fosters environmental stewardship. Read More
Seed/BiotechMycogen Seeds Introduces 19 New Corn Hybrids For 2015
August 12, 2014
Many of the new hybrids feature Mycogen's SmartStax Refuge Advanced technology for maximum protection of the genetic potential and planting convenience. Read More
HerbicidesDow AgroSciences Introduces Enlist Ahead App For Enlist…
August 12, 2014
Designed for use with the Enlist Weed Control System, the app is a precision agriculture tool for maximizing weed control performance, managing weed resistance and making responsible applications of Enlist Duo herbicide with Colex-D Technology. Read More
CropLife 100CHS Announces Senior Leadership Team Changes
August 12, 2014
Current CHS strategic leadership team member Shirley Cunningham will assume a new role as executive vice president and chief operating officer, Ag Business and Enterprise Strategy. Read More