A Fuel And His Money

Are almost one-in-three ag retailers afraid to make money? Based upon the data in the latest CropLife® 100 survey, it seems like this is the case — particularly when it comes to addressing higher fuel prices.

As everyone associated with the ag retail business is aware, two of the biggest challenges facing the industry today are tighter margins on crop protection products and higher fuel costs. Both issues ranked in the top concerns for retailers polled in our annual Crop­Life 100 survey

And while market dynamics may prevent retailers from recouping crop protection sales, fuel prices should be another matter.

Or so you would think. In the 2005 CropLife 100 survey, I was somewhat surprised to find that although many retailers were charging grower-customers more to recover their fuel costs, 24% were not. Of course, given that higher fuel prices were then a relatively recent event, I thought some of these reluctant retailers were simply adjusting more slowly to the market and that the 2006 percentages would reflect this.

I was wrong. In the 2006 survey, while 99% of retailers said higher fuel prices were having a negative affect on their bottom lines, the percentage not charging more to recoup these losses increased to 31%. Even worse, approximately half of this “no recovery” group said they weren’t exploring alternative energy sources such as the use of bio­fuels either. For these retailers, the fear of losing grower-customers/market share is apparently greater than the reality of losing money. Take it from me, this is a bad path to be on and can’t be sustained. I’ve seen it before.

As I’ve pointed out in prior columns, I used to cover the soft drink trade 20 years ago. Back then, there were roughly 1,200 small soft drink bottlers scattered across the country, all fighting for sales and market share. In this climate, margins were tight as raw material costs steadily rose, but most bottlers were unwilling to raise their prices because they were afraid to lose any bit of precious market share to competitors that wouldn’t follow suit.

Year after year, I watched as these bottlers had good market share numbers, but kept losing money. The running joke in the industry became that if bottlers ran the post office, there would still be nickel stamps. Last time I checked, there were fewer than 500 bottlers left, with virtually all of the “good market share/losing money” ones forced to sell out to other companies.

While I’m confident that ag retailers can avoid following a similar path, I am still concerned. After two years of relative quiet, consolidation returned in 2006, with seven companies exiting the CropLife 100. Although I’m certain there were many factors that led these retailers to sell their businesses, losing money for a couple of years in a row was probably involved. Looking back to see how many of these retailers were recovering fuel costs in 2005, more than half (57%) weren’t. Now they’re gone. Is this just a coincidence?

Everyone is aware that fuel prices are high, and likely to stay that way. Given this, I’m sure most grower-customers would understand a slight increase in their custom application bills without bolting to the nearest competitor. For long-term survival, retailers charging more for this important cost of doing business only makes cents.

Leave a Reply

Latest News
EquipmentDeere Announces Soucy Track Distribution Alliance
August 28, 2015
John Deere announces an alliance with Soucy Track to sell and distribute products through the John Deere dealer channel. “This Read More
FertilizerFall-Applied Phosphorus: A Rooted Investment
August 28, 2015
As commodity prices decrease and input prices continue to rise, farmers are seeking more efficient strategies for meeting a high Read More
Monsanto Sign
Crop InputsWhat’s Next For Monsanto, Syngenta?
August 28, 2015
After dropping its $47 billion bid to take over Swiss agribusiness firm Syngenta, Monsanto may be turning its focus to Read More
Golden Harvest Corn stalks
Crop InputsMonsanto: Syngenta Not The Only Horse In Crop Protectio…
August 28, 2015
Monsanto Co, having ditched an audacious $46 billion (£30 billion) offer for Syngenta AG, may downshift to a humbler strategy Read More
ManagementConsolidation hits and a miss; And a look at China’s ch…
August 28, 2015
As Monsanto suspends its pursuit of Syngenta, consolidation news at the retail and distribution level heats up. CropLife magazine’s Executive Read More
Corn Field
MicronutrientsHuma Gro Introduces New Boron Liquid Nutrient Formulati…
August 28, 2015
BORO-MAX, a new boron (B) 10% liquid nutrient formulation, has been added to the Huma Gro product line. This new Read More
Crop InputsNFU: Monsanto Decision To Withdraw Syngenta Bid ‘…
August 26, 2015
National Farmers Union (NFU) President Roger Johnson said the organization was very pleased by the news that Monsanto has withdrawn Read More
Crop InputsMonsanto Withdraws Bid For Syngenta
August 26, 2015
Monsanto Co. abandoned its latest effort to acquire Syngenta AG, the world’s top maker of pesticides, after a sweetened bid Read More
Syngenta Sign
Crop InputsSyngenta Comments On Monsanto Announcement
August 26, 2015
The Board of Syngenta confirms that it received a verbal proposal from Monsanto to acquire the company at a price Read More
Case IH Patriot 2250 Sprayer
EquipmentHigh-powered Case IH Patriot 2250 Sprayer Pushes Throug…
August 26, 2015
Engineered with more muscle, the new 660-gallon-capacity Patriot 2250 sprayer features best-in-class horsepower, along with the fuel efficiency that comes Read More
Crop InputsLand ‘O Lakes, United Suppliers Finalize Merger
August 24, 2015
According to a press release on August 24, owners of United Suppliers, Inc. and members of Land O’Lakes, Inc. “have Read More
TMX-2050 In-Cab Display Launch Run Screen
Eric SfiligojPrecision Ag Could Shine In Increased Spotlight On Agri…
August 24, 2015
By any measure, 2015 is turning into one of the most challenging years agriculture has ever experienced. All throughout good Read More
ManagementCrop Conditions In Minnesota and Traveling Time
August 21, 2015
Editors Paul Schrimpf and Eric Sfiilgoj discuss the crop outlook from a field trip to Minnesota and upcoming travel plans. Read More
HerbicidesREUTERS: Anti-GMO ‘Scientist’ Calls For New…
August 20, 2015
EDITORS NOTE: We feel that it is important to note that there are those that believe one of the lead Read More
Rendering of Syngenta Seedcare Institute expansion
Seed/BiotechSyngenta Announces Seedcare Application And Resource Ce…
August 19, 2015
Syngenta recently announced the Seedcare Application and Resource Center, a collaborative new website designed exclusively for Syngenta Seedcare customers to Read More
Winter Wheat
Industry NewsArysta LifeScience Announces Two New Regional Sales Man…
August 19, 2015
Arysta LifeScience North America recently announced Steve Vining and Phil Reding have each accepted new positions as Regional Sales Managers. Read More
West Central Cooperative, Jefferson, IA
CropLife 100Iowa Cooperatives To Explore Unification
August 19, 2015
The boards of directors at two of Iowa’s leading farmer-owned cooperatives yesterday signed a letter of intent to study the Read More
Golden Harvest Corn healthy leaves
Industry NewsAligned Ag Distributors Names Vice President, Crop Prot…
August 18, 2015
Aligned Ag Distributors LLC have appointed Warren Hragyil to VP Crop Protection. Hragyil comes to Aligned Ag Distributors LLC with Read More