Rock and Roll Agonomy

Trends on the Minds of Growers, Agribusiness Going into the ‘04 Growing Season

By Jason Hanson
Certified Crop Advisor
jlhanson@agriliance.com

I spent quite a bit of the winter attending or presenting meetings across the area of northwest Minnesota and North Dakota, interacting with growers and retailers. There were many interesting discussions about what went right or wrong last year, and what might be on tap for this upcoming season. Here are key trends and topics of interest that seem to be common from a grower and retail dealer standpoint.

Five Trends on the Minds of Growers Going into the ’04 Growing Season

1) Fertilizer prices -- This has probably been the most pervasive conversation topic at the grower level this winter season. Pre-pay at the end of ‘03 was a wise investment as the market has trended up since then. Growers know the value of fertilizer when it comes to production.  But coming off a year with good yields and relatively high nutrient use levels, there are a lot of questions about how to manage what looks to be a bigger fertilizer bill this spring for many.

2) Acres of potential soybeans --- If the trend holds true, it might look like Northern Brazil around here. The cost of production of other crops, price of fertilizer and bullish grain market makes soybeans the hottest thing to put into the ground. Everyday it seems acres of other crops are getting switched over to more soybean acres.

3) Positive grain market -- Strong grain prices, and the outlook for continued upside potential, helps sugarcoat the price of fertilizer, and makes profit goals more achievable. The decent prices are a good foundation for grower optimism heading into a new growing season.

4) Information on new products and production practices -- With the increased fertilizer market and bullish grain market, growers have the interest in looking at products that could help increase yield. Some of these things I have heard from growers are foliar low salt liquid fertilizers on soybeans, micro nutrient products and formulation, bacterial inoculants, seed treatments, gypsum, post-applied nitrogen for small grains, phosphate use with soybean, seed corn treated with insecticides, adjuvants for glyphosate, and banding most to all fertilizer with the seeding pass.

5) Finding qualified help -- Finding and retaining good help remains an issue. A shrinking labor force and larger farm sizes has put a strain on some to keep people in place to run the business efficiently.

Five Trends on the Minds of Ag Retailers & Dealers Going into the ’04 Growing Season

1) Devaluation of the crop protection market, particularly glyphosate -- This whole issue has made for more strategic meetings and sleepless nights than most people realize. The market has declined by about a third in the last four years, and it’s moving faster down hill. As most products come off patent, other companies start to enter the market with generic products. Glyphosate has become such a huge use product that it has become one of the top sellers at most dealerships, if not the best seller. Maintaining margins has become harder as glyphosate demand has increased and more glyphosate products have entered the market. When the days of $25 per acre herbicide treatments were replaced with $8-12 per acre treatments, guess where the margins went also.

2) Fertilizer pricing and availability -- Pricing these days changes very quickly, and trying to outguess the wholesale market is tricky. The best case scenario is to have a lot of storage and then buy in at a decent price. Inventory of a high-priced product is not a fun situation when the market gets soft into the summer. Issues with transportation, mainly railcars, have made for increased reliance on trucks and talk of more mega plants. Possession is nine-tenths of the law with fertilizer now, so that is why the managers are considering these plants.

3) Increasing seed business
-- Seed traits are driving the market, and subsequently, the traditional fertilizer and chemical dealer has had to implement seed into the business to maintain the margin needed to run the business. A declining crop protection market is pushing the chemical margin down, and it has to be made up somewhere. Seed is now determining inventory of chemical, services needed, asset improvement or addition, and additional staffing. Most dealerships have a fairly good market share on chemical in their respective geographical areas, and in comparison seed has been a small market share. However, the seed business will become more important than ever.

4) Fee-based services -- The days of making all the profit from products are slowly fading away. Some of the traditional services that dealers have charged for has been spraying, fertilizer application, and delivery. The whole market is such that most dealers offer the same or similar products to all customers, positioning themselves into a “price” market. Facing shrinking margins, more businesses are moving toward a serviced-based or “problem solving” market. Seed treatment, custom inoculation, field scouting or consulting, helping growers with their payroll for hired labor are some examples.

5) Finding qualified people -- Mergers and consolidation at both the farm level and dealer level is creating more of a need for acquiring specific people for specific tasks.  For example, sales staff to spend more time and attention with larger growers. Finding qualified people can be a challenge, however. The demand for applicators, managers, and seasonal staff is getting tougher to fill as well.

Another trend affecting growers and agribusiness alike is the need/demand for more third-party independent research, viewed as more objective than company/manufacturer sponsored information, and supplementing research by universities which don’t always have the time or resources to do some of these tests.

I find it interesting that some of these trends overlap between dealers and growers. The concern about fertilizer prices, for instance. Or the demand for skilled labor – kind of ironic given the so-called “downsizing” of production agriculture and the clamor to create jobs in the region. The common trends and concerns help illustrate again how interconnected production agriculture is here in the Northern Plains.

Hanson is a certified crop advisor near Devils Lake, N.D.