Buying Intentions Survey: Retailers Taking A Prudent Approach In 2016
The CropLife® magazine Buying Intentions Survey made its debut last year to gauge current industry trends against the retailer’s plans for major purchases, including all the major inputs along with seed, in-field equipment, facility construction and enhancements, and software. The intent to invest should serve to provide some additional insight into the level of confidence, or lack thereof, retailers are feeling headed into the 2016 season.
The survey was conducted electronically during the fourth quarter of last year, and consisted of eight questions related to a variety of anticipated 2016 expenditures. The results reported here represent the responses of 169 organizations serving the crop production channel, including 131 dealers and/or distributors of fertilizer, crop protection and/or seed products.
While not scientifically projectable to the entire base of U.S. retailers, the survey seems to mirror the cautious, prudent approach retailers have been telling us they are taking to 2016. Retailers are preparing to weather what will certainly be a challenging year, with the hope that 2017 will usher in a year of cyclical recovery for the distribution channel.
Below are the results of the survey, segregated by expenditure category.
Of course, fertilizer continues to be the predominant revenue driver for retailers. The CropLife 100 report last month showed among the country’s largest retail organizations, fertilizer accounted for 48% of total revenue in 2015.
The Buying Intentions Survey asked respondents to break out their fertilizer expenditures into the major product areas, starting with dry macronutrient fertilizer. Overall, 36% of respondents said they would be spending more, and the same percentage said spending would be less in 2016. Nearly half said they would be spending more than $5 million on dry macronutrient products.
Retailers purchasing liquid macronutrients were somewhat less bullish, with 43% of respondents saying purchasing would be flat in 2016. Still, more than a third expected to spend more, with 45% putting that number at more than $5 million.
Micronutrient purchasing intentions were similarly stratified. Some 47% of retailers said their purchase of micros would be flat in 2016 vs. last year, with 30% indicating they would be purchasing more. As far as ranges for total expenditures, nearly a third intended to spend $100,000 or less on micros in 2016, with another third projecting within a range of $250,000 to $1 million.
Nitrogen and phosphorus stabilizers continue to be of high interest to retailers as part of total nutrient stewardship programs. Among respondents, 36% indicated increased expenditures in 2016 over 2015, and 40% said expenditures will keep pace with last year. Total anticipated expenditures ranged from $100,000 to $500,000 for about 45% of the respondents.
Seed revenue has grown slowly and fairly steady over the past decade, now at about 14% of total revenue according to the CropLife 100 report. The Buying Intentions Survey asked respondents to indicate purchasing plans for corn, soybeans, and wheat, as well as any plans for selling of conventional seed.
Precisely half of the respondents indicated that corn seed expenditures would increase in 2016. Nearly 40% believed expenditures would remain flat, and just over one in 10 saw decreased expenditures on the horizon. One-quarter of respondents will spend more than $10 million on corn seed in 2016.
Soybean numbers fell along virtually identical lines, with 48% pointing to an increase and 41% remaining steady year over year. About 18% will exceed $10 million in soybean seed expenditures in 2016.
Spending on seed for wheat is a fraction of the big two for respondents, with nearly half anticipating spending at $100,000 or less on the crop. In 2016, 47% believe sales will be flat this year, and another one-third expect a down year for wheat overall.
In a down year, grower expenditures will tend to take a “back to basics” approach to crop care, and 2016 is no exception. The “mother’s milk” products that minimize risk and generate yield should serve to stabilize crop protection revenue overall, but Buying Intentions Survey responses also point to, at a minimum, a maintenance of sales levels in all categories of products.
Among survey respondents, herbicide expenditure increases led all other products, with 57% of those surveyed anticipating an increase in 2016. More than one in three expected to spend $10 million or more on herbicide products.
Fungicide expenditures were listed as second, with 47% anticipating an increase in expenditures this year and about 28% saying those expenses would exceed $5 million. One third of respondents expected expenditures to remain flat for both herbicides and fungicides in 2016.
Half of respondents said insecticide, adjuvant and seed treatment expenditures would remain the same year over year. And out of the five product categories mentioned in this section, insecticides had the lowest number of respondents projecting an increase in expenditures at just 36%.
Slightly more than one-fourth of respondents believed that expenditures on biologicals and biostimulant products would increase in 2016, while about 60% said spending would stay at 2015 levels.
When times are challenging, retailers will naturally look to reduce internal expenses to preserve capital, while being sensitive to maintaining customer service.
Not surprisingly, retailers appear to be holding the line on equipment and software spending, in particular mixing/blending equipment (52%), enterprise and agronomy software (60%), fertilizer spreaders (51%), and precision ag equipment (50%).
No equipment or software category exceeded 30% of respondents indicating increased expenditures in 2016. Among the top finishers were buildings/structures (30%) chemical/fertilizer storage (27%), and precision ag equipment (28%).