Are Dealer-Retailer Relationships the Future for Ag Service Providers?
The Develop with Deere meeting in Chicago in January featured much discussion around how the equipment giant’s dealer network can nab a bigger piece of the local agronomic service provider pie. It makes sense for John Deere dealers to pursue that direction for a multitude of reasons.
While the Association of Equipment Manufacturers (AEM) reported that four-wheel-drive tractor sales in the U.S. were up 38% in January over the previous year, there are also ominous signs in the market that perhaps this unexpected sales bump might be short-lived: The same data showed a 3.5% decrease in 100-plus-HP tractor sales and a 7% decrease in 40- to 100-HP tractors.
Then, consider ag lending giant Farm Credit Council’s ominous warning on Reuters.com that after four years of weathering depressed commodity prices, farmers are “coming to the end of their ability to weather it,” a notion that many other ag lending experts would likely confirm.
One would reason that difficulty in securing new credit for American farmers would hit the big equipment manufacturers where it hurts: new equipment sales.
Therefore, if America’s farmers aren’t going to be able to financially sustain participation in the two-year turn-and-burn cycle of new equipment acquisition, and the worst-case lending crisis predictions come true, equipment dealers will need to secure new streams of revenue.
It bears noting that this isn’t just an equipment industry issue at the moment. There were reports this winter of crop input retailers stuck with excess product in inventory due to farmers not being able to secure working capital for the 2019 growing season.
In so many words, many American farmers are underwater financially speaking. Indeed, this farmer lending crisis could be yet another in a long line of recent painful corrections for the U.S. ag market.
For equipment dealers living this new ag economy reality, developing a local agronomic services branch of the business seems ideal as a response to potentially flagging new equipment sales in the coming years.
Of course, it’s not that easy. Agronomy service is a trust-based business built over years, so the options for creating a program that generates revenue in the present are limited.
Equipment dealers can opt for a full hiring push and attempt to staff a brand-new agronomic department with CCAs with ag machinery backgrounds. Or they can attempt to raid the local ag input service provider and hire away some of their agronomic knowledge team.
Or they can choose to informally collaborate with a like-minded local agronomy service provider.
That’s exactly what Fargo, ND-based Deere dealership RDO Equipment Co., one of the country’s largest equipment dealers, with more than 75 outlets stretching across nine states, decided to do when it was looking to get more skin in the local agronomic services game. Agtegra Cooperative of Aberdeen, SD, the No. 8-ranked retailer by sales revenue in the CropLife 100, was RDO’s retailer of choice in the Dakotas.
“For us, it just made sense,” says Joel Kaczynski, RDO Equipment’s Product Specialist Manager, based in Moorhead, MN. “In the spring we’re, ‘All hands on deck,’ just to get the farmers’ equipment set up, the new planters and air seeders coming in. The manpower just wasn’t there for our guys to be doing planter inspections and things of that nature and installation of those liquid fertilizer variable-rate systems on the planters.”
Brent Wiesenburger, Director of Ag Technology Services with Agtegra and a long-recognized face of ag tech service at the cooperative, says that the draw in working with RDO was making sure that Agtegra’s growers are receiving top-of-the-line service in every aspect of their operations that Agtegra touches.
“When we work together, the grower wins every day of the week in that scenario,” he says. “Our agronomists are out in the field writing awesome prescriptions for growers, and they’re (RDO) leveraging the Deere platform to execute them in the field.
“Bottom line (for Agtegra) is that we want that producer to have the best experience he can. If he has an issue — if the controller file is in the wrong format or something — you don’t ever want them in that situation, because if they have a negative experience with technology, you’ve got to sell them twice as hard the next time,” Wiesenburger says.
Kaczynski says he’s witnessed the power of Agtegra and RDO’s forces combined in offseason grower meetings, where the amount of expertise present can have a bit of a soothing effect on grower-customers.
“We’re having these conversations this winter, and it’s the customer, the equipment salesman, the customer’s retail agronomist, and then the RDO agronomist there, too, talking things through for the year,” Kaczynski says. “It starts out as a conversation all as one, and then it kind of drifts into the customer getting really relaxed, knowing that these professionals are talking and working together to help them.
“For the customer, it just seemed that if they came into that meeting with any anxiety at all, they see these guys working on it, and they realize they don’t have to worry about it anymore. My agronomist can reach out to RDO and explain things, and I don’t have to do it. I can go back to farming.”
John Deere’s corporate leadership has taken notice of the RDO-Agtegra relationship. Chip Donahue, who manages strategic partnerships for Deere under the Intelligent Solutions Group division (ISG), sees the agreement as two local frontrunners joining forces to serve an underserved segment of the local market.
“I think that’s where the real synergy between the two exists: How do we do this better?” Donahue queries. “From the dealer side of things, we know that we need to get more resources, and we need to get better results from the resources we’re already deploying, and precision ag is a way to do that by getting the right prescriptions with the right agronomic insights to executing on the machine at the right time for the right purposes.
“At Deere lately we’ve been talking a lot about our (internal) Dealer of Tomorrow Initiative and what it means to look at kind of the future of equipment dealers and how that’s all going to look,” Donahue shares. “Well, we’ve got five critical success factors in that program, and one of them is, ‘How do you build relationships at the local level to better serve growers?’ I’d say this is a prime example of it.”
Multi-Colored Fleet Fun
Any ag technician can tell you how much “fun” dealing with multi-colored equipment fleets can be for both the equipment dealer and the crop input supplier.
To illustrate the power of the RDO-Agtegra relationship around agronomic services, Wiesenburger offers up a story.
“We had a grower, he had a green tractor and a green planter, and he decided to purchase a non-Deere air seeder,” he recalls. “He tells the equipment salesman that he does variable rate on every acre and he wanted to variable-rate three products through the seeder. He gets assurances that he can do it, and we end up getting the call when it arrives on the farm, and he’s not able to get it to do what he requires.”
Wiesenburger called on his team in the Agtegra Innovation Center, which specializes in, among other things, making cross-color technology dilemmas work for farmers. Agtegra’s team was able to get the air seeder unit up and working as desired.
“By 2 o’clock the next day the grower is calling me from the field as he’s running three products through the seeder,” Wiesenburger says. “It just goes to show when you work together, between us and the equipment dealer, everybody wins at the end of the day.”
Agtegra’s experience troubleshooting connectivity issues in multi-colored fleets is an opportunity to sell hardware for the RDO team as well, Kaczynski says. “It’s always a challenge for us integrating our John Deere solutions into another OEM’s platform. Working with Agtegra, they have relationships with every dealer, every OEM, it seems like, and their ability to collaborate to get to a solution, whatever that situation, is remarkable,” he says. “They have more resources than we do to make that happen, and we can generally work to leverage that, as well.
“We focus on green-on-green solutions, and we’ll work with the customer to recommend solutions that make sense for their operations,” he adds. “We’d love everything to be all green, but we’ve got to be realists and recognize that it is not in the cards for every operation.”
Wiesenburger, when asked whether he thought this type of arrangement represented a small glimpse at the future for ag service providers, doesn’t mince words.
While helping with a dealer breakout at the Develop with Deere dealer training event, when asked, “Well, what if our ag retailer in our area wants nothing to do with precision ag?” Wiesenburger replied, “You may want to find a retailer that does or step up to the plate and help to fill that void. Or the producer may find another dealer that will.”