Co-ops and Precision Ag: Finding an Advantage in a Changing Environment
The business outlook for many co-operatives offering growers retail, marketing, and agronomic services is one that has changed greatly over the last several years, writes Eric Oeth on PrecisionAg.com. Co-ops across the country are facing a variety of challenges that threaten their profitability – among them, low commodity prices, increased pressure from larger agribusinesses, and increased competition for growers’ business from increasingly large co-operatives in their areas served.
Finding an advantage in the markets they serve, in this environment of low prices and larger businesses competing for market share, is the challenge many co-ops face today. As mentioned above, this has become more challenging in recent years due to widespread consolidation in many agricultural sectors – from the blockbuster mergers of companies like Monsanto and Bayer, to increasing consolidation among co-ops themselves.
The trend towards consolidation has been a defining factor in the co-operative landscape for a number of years now, and the pressure to scale up operations through M&A isn’t fresh news – the Wall Street Journal described this phenomenon back in 1999. In recent years, however, this trend has continued to gain steam: in 2005, there were roughly 2,900 cooperatives total in the U.S.; in 2015, that number had fallen to below 2,200 (page 76).
Given the challenge for co-ops operating under these conditions, the question for these businesses is: how can they adapt their business strategies to maintain their competitiveness in the markets they serve?