Building Trends Building Back Up
The old adage goes, “If you build it, they will come.” Although this doesn’t exactly apply to all aspects of the ag retail business, it certainly seems to have been the case the past five years when it comes to facilities.
Since 2013 CropLife® magazine has, as part of its annual CropLife 100 survey of the nation’s top ag retailers, looked at the trend of new facility building. This began taking hold during the early 2000s, according to most industry insiders, as many facilities built during the 1960s and 1970s were in serious need of upgrades (or outright retirement). In other cases ag retailers had seen their businesses expand so significantly — especially as the ethanol boom boosted demand for corn during the 2006-09 time frame — that they were looking to “build out” or “build up” their outlets to keep their grower-customers supplied with all the crop nutrients, seeds, and crop protection products they needed to cater to this then-rapidly growing marketplace.
“We have never been this busy in terms of new construction and inquiries from potential customers,” Steve Anderson, National Accounts Manager, Sales and Marketing for Stueve Construction, told CropLife at a winter trade show in early 2010. Anderson said virtually this same thing to us at subsequent trade shows his company took part in during the 2011 and 2012 growing seasons. Concurrently, other construction companies and in-plant product suppliers said similar things to us throughout these years.
At this point we were intrigued. So, as part of the 2013 CropLife 100 survey, we asked respondents a rather simple question in this regard — which choice best summarizes your overall expenditure plans for plant construction and renovation in 2014 compared with 2013? The results were overwhelming — 81% of survey takers indicated their companies were planning to spend more or the same amount in this area.
Armed with this information, CropLife quickly put together its first-ever Facilities Report. This special insert was part of the July 2014 edition, featuring seven companies that highlighted their recent work on different ag retail facilities across the country.
For the next few years a majority of ag retailers continued to upgrade their facilities. In fact, during both the 2014 and 2015 CropLife 100 surveys, better than 60% of respondents each year reported their companies were planning to spend more or the same amount on plant construction and upgrades for the upcoming season. Again, Anderson pointed out to us during a 2015 interview why this continued to be the case.
“A lot of the old infrastructure is being replaced right now,” he said. “The main drivers continue to be to keep ahead of fertilizer shipment delays, both on the rail and in trucks, and overall product availability during the ‘busy’ season by retailers.”
He also pointed out that ag retailers weren’t just building bigger facilities but also a wide array of structures in all sizes. “Large buildings 20,000 tons or greater continue to go up at a good clip,” Anderson said. “Buildings in the 7,500- to 15,000-ton range are also very prevalent. But buildings in the 2,500- to 6,500-ton range are also popular right now. And plants under 2,500 tons continue to be moving well in terms of going up across the country.”
Then came 2016. As you might remember, this was the year that myriad crop protection companies announced plans to merge their operations — such as ChemChina/Syngenta, Dow/DuPont, and Bayer/Monsanto. In addition, the overall agricultural marketplace had to deal with falling commodity prices and dropping grower-customer incomes. This ultimately translated into a 2.6% decline in ag retailer revenues for the year to $29.6 billion.
Perhaps as a byproduct of these numerous market uncertainties, the appetite for facilities building seemed to also wane. When the results were tallied for the 2016 CropLife 100 survey, respondents were split almost down the middle when it came to planning to spend on plant construction/upgrades, with 51% looking to spend more or the same as in 2017 and 49% planning to spend less.
Going into the 2017 CropLife 100 survey, the question was how long would this “market hangover” continue to weigh on ag retailers and their desire to keep building new and improved facilities? The answer, luckily, was not too long. When the final numbers were added up for the 2017 survey, 58% of respondents said their companies were once again looking to increase or match their building spending plans for the 2018 season. Respondents said part of this uptick in plant construction/upgrades ties back to the domino effect supplier consolidation has seemingly had on ag retailers, particularly at the cooperative level.
“We are reducing costs and consolidating to be more profitable and, in turn, reinvesting profits to more efficiently handle smart volume through strategic assets,” said Milan Kucerak, CEO for Landus Cooperative, which was formed through the mergers of Farmers Cooperative and West Central Cooperative in Iowa. One such “asset” in this case could mean new or upgraded facilities to handle grower-customer demands in today’s agricultural environment.
Of course, it’s also possible that the same need that first drove the ag retail marketplace to begin this round of plant construction and upgrades remains in place. When asked why this trend was so popular these days, Stueve’s Anderson made the following comment in 2015: “Replacing older, inefficient facilities is keeping the market robust right now. In ag retail, it’s all about speed-to-market; that continues to be the industry’s focus.”
Here is a list of the featured slideshows in the 2018 Retail Facilities Report:
- Sackett-Waconia Builds Efficient Fertilizer Handling System for All American Co-op
- Marcus Construction Designs New Liquid Fertilizer Facility for Morral Companies
- Yargus Manufacturing Provides Fertilizer Handling Solution for Gavilon Fertilizer
- Junge Control Designs New Blend Facility for Evergreen FS
- Murray Equipment Designs Nutrien Ag Solutions’ New Ohio Facility
- Stueve Construction Increases Speed, Accuracy for Two Ag Retailers
- Feed Products & Service Expands with Fabric Structure from Legacy Building Solutions
- Luckey Farmers Gains Efficiency with Kahler Automation
- GSI Builds New CHS Colton Agronomy Center