Eric Sfiligoj and I spent a lot of time preparing and talking about what might happen at our PACE® Advisory Council Meeting last month. The Council serves as an editorial sounding board for CropLife® magazine, and each October it gathers in Chicago for a full day of discussion about the season past and the season ahead.
Leading up to the meeting, the 24 Council members, representing a cross section of top leadership from the industry, were keenly interested in knowing where the discussion might head.
We drafted an agenda for member review just a handful of days before the beginning of the stock crash, and by the time we sent it out, the financial crisis had become THE topic of discussion. Some members sent us e-mails back with the message, “well, of course we’re going to cover the credit crisis, right?”
At the meeting, it was clearly the thing keeping most people up at night in combination with its effect on the different sectors of the industry. We acknowledged it, and it certainly got its due in our discussion, but Eric and I were determined to steer the discussion away from fear and hand-wringing and toward “what can we do about this?” Fortunately, the Advisory Council was on board.
At this writing, it wasn’t clear how significantly the credit crisis was going to affect lending at the grower and retailer level (although if the government is willing to consider bailing out the automobile industry, you’d think there’d be pretty keen interest in ensuring farmers could get the credit they need, no?).
But since retailers can’t control this aspect of the business, what can be controlled? One interesting discussion centered around retailer risk — or more accurately, the increased share of the risk that retailers are being asked to take on, even as agriculture grows ever more risky as an industry.
One of the Council members suggested that retailers are at a disadvantage with growers on this front. In September’s CropLife, we focused our editorial efforts on the fertilizer market, and one expert suggested that many retailers have not had a serious discussion about fertilizer volatility and risk. It was suggested that retailers need to share risk with their growers.
It hadn’t really struck me that the trusted advisor relationship that retailers have with growers, doing business with a handshake rather than a triplicate contract, might be a deterrent to moving the relationship something more akin to the binding contracts growers willingly sign on to with grain elevators. Heh, imagine ADM sealing futures deals with a handshake …
Yet the risk to retailers in this wildly volatile market is real, severe, and under the wrong circumstances, a threat to the survival of the business.
Another panel member suggested that growers would certainly be willing to lock in on input orders with the understanding that it would allow them to create a more complete and iron-clad profit plan from planting to harvest.
But for that to happen, retailers do need to open up the discussion. That can be tough to do when the relationship has been maintained at the local church, Rotary Club meeting, or in the stands at the baseball game. But risk mitigation must be a part of the retailer’s survival plan for now, and into the future, and the grower is key to the plan.
