Are Ag Retailers on the Road Back to Normalcy?
For the world-at-large, 2020 was definitely not the norm. The ongoing COVID-19 pandemic across the globe kept things from operating as they normally would in virtually every sector of life. In general, the agricultural industry was able to continue its business activities without too much disruption. However, when all was said and done, the ag retailers that make up the CropLife 100 still did see their annual revenues for 2020 fall 1.9% to $31.7 billion, according to the 2020 CropLife 100 Survey.
In truth, there were hints that the ag retail marketplace would take some kind of financial hit earlier in the year, when CropLife® magazine conducted its regular CropLife 100 Mid-Year Survey. We started this now annual survey about a half-dozen years back, when it became clear that market conditions from the beginning of a growing season to the end could rapidly change. This survey represented our attempt to get a more complete picture on the entire growing season rather than just to recap its completion.
In the 2020 CropLife 100 Mid-Year Survey, when respondents were asked how they expected the upcoming growing season to ultimately play out on a revenue level, 45% thought the year would rate as “average,” falling between a five and a seven on a scale of one to 10 (with one being “poor” and 10 being “great”). Another 20% believed 2020 would rate on the “poor” side of financial scale, between one and four. The remaining 35% were more confident, rating 2020’s financial outlook between an eight and a 10.
But not to sound too cliché, what a difference a year can make! According to the 2021 CropLife 100 Mid-Year Survey, the nation’s top ag retailers are feeling much better about the road ahead for the rest of this year when it comes to agricultural fortunes. In fact, the vast majority, 55%, rate the financial outlook for the rest of 2021 between an eight and a 10 — “near great to great” in plainer English. Another 30% believe the year will rate between a five and a seven — likely strong enough for most companies to make up some of the lost revenues from the 2020 growing season. Only 15% are expecting the 2021 growing season to be “poor” in terms of finances, rating the year between one and four on the 10-point scale.
The COVID Effect
In terms of the “big issue” over the past 16 months or so — the COVID-19 pandemic — CropLife 100 ag retailers have managed to weather this storm pretty effectively. In the early days of COVID company shutdowns, ag retailers were designated as “essential businesses,” allowing them to continue conducting their operations with only minor changes, such as adopting social distancing and interacting with customers using electronic means rather than face-to-face. Still, during the 2020 CropLife 100 Mid-Year Survey, 90% of respondents were “very” to “somewhat” concerned the pandemic would have an overall negative impact on agriculture going forward.
Now, one year later, the majority of CropLife 100 ag retailers have apparently moved past these worries about COVID-19. In fact, no respondents to the 2021 CropLife 100 Mid-Year Survey mentioned COVID-19 as one of the key issues facing agriculture this year — expect in two particular facets of their businesses, labor and supply.
For several years now, labor issues have plagued virtually all CropLife 100 ag retailers. In fact, in our annual CropLife 100 surveys since at least 2000, the problem of “finding/keeping employees” has consistently ranked as one of the major challenges facing ag retailers year after year.
Naturally, CropLife 100 ag retailers are feeling both of these effects in their businesses thus far in 2021. When asked in the survey “what best describes your views on the ag market’s labor/supply outlook under the COVID-19 pandemic?,” 65% of respondents said the situation for their operations was “worse than expected” so far this growing season. Another 35% said labor/market supply conditions were “about what we expected” given the world’s COVID-19 state at the moment. Significantly, not a single CropLife 100 ag retailer in the survey said labor/supply conditions because of COVID-19 were “better than we expected.”
Elsewhere, other regular agricultural issues for 2021 are apparently not having a significant negative impact upon ag retailers and their grower-customers. For example, weather is always a wildcard for the industry. In a normal year, the marketplace tends to divide almost evenly between one-third of states enjoying good weather conditions, one-third seeing average conditions, and one-third experiencing poor conditions. So far in 2021, say CropLife 100 Mid-Year Survey respondents, this has definitely been the case. Overall, 35% of respondents say weather conditions in their areas are “better than expected,” with an equal 35% saying that they are worse. The remaining 30% say weather conditions in their parts of the country are “about what we expected.”
Likewise when it comes to another key issue — herbicide-resistant weeds — there doesn’t seem to be much variation between the 2021 growing season and the 2020 one. In the 2020 CropLife 100 Mid-Year Survey, 74% of respondents described herbicide-resistant weeds as a “major problem” in their markets, with the remaining 26% saying these field pests were a “minor problem.”
In the 2021 CropLife 100 Mid-Year Survey, the percentage of ag retailers saying herbicide-resistant weeds are a major problem for their grower-customers has increased to 75%. Twenty percent of respondents say that they are a minor problem for them. The remaining 5% say herbicide-resistant weeds are “not a problem” in their regions of the country.
Fertilizer Still Rules
Could the fertilizer category hold off the crop protection products category to maintain its market share dominance, we asked? Halfway through the 2021 growing season, the answer seems to be a resounding “yes.” When asked to point out which crop inputs/services category has performed the best during the early going of 2021, 80% of the CropLife 100 Mid-Year Survey respondents said it was fertilizer. This was a big improvement over 2020, when 65% of respondents said the same thing.
For the rest of the categories, the news is less positive so far in 2021. According to respondents, 15% say that crop protection products have performed the best for them this growing season (down 5% from the 2020 survey results), while 5% say that the seed category has done best (the same percentage as in the 2020 survey). Significantly, no respondents said that the custom application category was their best performer in 2021, down from the 10% that reported this being the case during the 2020 growing season.
As for the smaller categories of crop inputs/services, the 2021 growing season seems to be playing out much differently than 2020 did. In the 2020 CropLife 100 Mid-Year Survey, three of these smaller categories — seed treatments, micronutrients, and precision agricultural services — all were cited as performing quite well in overall sales/demand. In fact, the percentages for these three stood at 33%, 33%, and 28%, respectively. The remaining 6% said that the adjuvants category was their smaller segment performance champ in 2020.
In 2021, however, one category is easily outperforming all of the others. According to the 2021 CropLife 100 Mid-Year Survey, 55% of respondents say that their micronutrients revenues are up so far this year. A distant second is the precision agricultural services category, cited by 25% of respondents as doing best for their companies. The remaining 20% are split evenly so far in 2021 between seed treatments and adjuvants, sitting at 10% each.
A Brighter Outlook
But as the world entered 2021, the appetite for U.S.-produced corn and soybeans from other nations has grown substantially, especially in China. In fact, according to most market watchers, China has already purchased more U.S. corn and soybeans during the first half of 2021 than it did throughout all of 2019 and 2020. This increased demand, in turn, has pushed up corn and soybean commodity prices to near $8 and $15 per bushel through the end of May 2021.
With these kinds of numbers to consider, U.S. growers are planning to plant at least as many acres of corn and soybeans as they did during 2020, at 91 million acres and near 90 million acres, respectively, according to updated USDA statistics. Likewise, 65% of 2021 CropLife 100 Mid-Year Survey respondents foresee this being the case for their grower-customers in terms of crop mix for the year. Still, 20% believe that rising corn prices will convince growers to plant more corn this growing season, while 15% say more soybean acres will be in the offing because of increased demand from around the globe.
Overall, it’s these kinds of numbers that seems to be fueling a positive outlook for agriculture during the rest of 2021 and into 2022. This is definitely different than in 2020.
During last year’s CropLife 100 Mid-Year Survey, 45% of respondents said that they were “somewhat positive” 2021 would be a good year for agriculture. However, 35% were “somewhat negative” in their outlook for last year. The remaining 20% were neutral, calling themselves neither positive nor negative towards the year’s financial fortunes.
But according to the 2021 CropLife 100 Mid-Year Survey results, plenty more ag retailers have a strong feeling about next year’s overall outlook. In this year survey, 80% of respondents say that they are “very or somewhat positive” that the 2022 growing season will be profitable for their operations. Only 5% say that they are “somewhat negative” in their 2022 season outlook. The remaining 15% remain neutral when it comes to the financial outlook for the next year.