For 35 years CropLife® magazine has tried to gauge/predict the ag retail market present/future while using its own version of the Magic 8-Ball — in our case, the annual CropLife 100 survey. Each year the nation’s top ag retailers provide their individual answers to our survey form. We then compile these to get a comprehensive picture of how the marketplace has performed during the current calendar year and how this compares with past years, while making a few predictions for the upcoming growing season based on this data.
In truth, there was a lot riding on how the ag retail marketplace would do in 2018, given the overall market conditions and challenges. During 2016 the ag retail industry saw its revenues drop by 3%. It registered only a slight bump upward — less than 1% — in 2017. However, in 2018 many of the old challenges to making money remained in place — chiefly lower commodity prices. Added to this mix was uncertainty over passage of a new Farm Bill in a divided Congress and, at mid-year, a full-blown trade war with one of the country’s largest agricultural trading partners, China.
Given these circumstances, the question many experts were asking throughout 2018 was simple: Could the ag retail market overcome and profit? Luckily, according to the CropLife 100 survey, the answer to this question is “yes — definitely.”
Overall, the nation’s top ag retailers saw their revenues in 2018 increase a healthy 2.3%, growing from $29.8 billion in 2017 to slightly over $30.5 billion. This upward tick in sales volume represented the best that CropLife 100 retailers have performed year over year in almost five years.
A closer look at some of these numbers reveals just how strongly many ag retailers did during 2018. At first glance, many observers might be tempted to say this sales volume increase ties back to the host of mergers that have taken place over the past year or so that has brought many non-CropLife 100 retailers into the CropLife 100 — through direct acquisition or by opening up spots within the CropLife 100 rankings for new companies to make the list. However, subtracting this group from the totals, the other CropLife 100 ag retailers still saw their revenues improve 1.3% compared with the 2017 figures.
To appreciate just how deeply this positive sales ripple extended, one needs only look at how the companies that make up the CropLife 100 performed. During 2017 48 companies recorded lower sales figures for their crop inputs/services than they had in 2016. Only 27 companies actually grew their revenues for that calendar year.
In 2018, however, the situation was almost reversed. This year, according to the CropLife 100 survey data, 50 companies within the rankings had sales gains from 2017. Only 29 ag retailers among the CropLife 100 saw their sales decline for the year.
Signs Point to Yes
An even better indication of just how well CropLife 100 ag retailers performed during 2018 comes from looking at the sales for the crop inputs and services categories. For the past few years these four categories — fertilizer, crop protection products, seed, and custom application — have had a hard time seeing sales gains year over year. In fact, many of the industry’s overall sales doldrums have come about because the market’s largest category, fertilizer, has experienced a steady sales decline, which has brought down the entire revenue total as a result.
Did these four categories recover in 2018? Again, the CropLife 100 survey answered with a “yes — definitely.” Overall, three of the four categories had sales figures higher than they had in 2017. This included the seed category, where sales volume among CropLife 100 retailers during 2018 moved forward $100 million, from $4.7 billion in 2017 to $4.8 billion. Market share compared with all crop inputs/services within the CropLife 100 for this category remained steady at 16%. The custom application category held steady at $1.6 billion and 5% market.
Of course, the real excitement this year occurred in the other two categories — crop protection products and fertilizer. For the past few years both these categories had been headed in the opposite directions sales-wise, with crop protection product revenues going up and fertilizer sales going down. In fact, at the end of 2017 the market share difference between these two categories stood at only 3% — 41% for fertilizer and 38% for crop protection products.
In 2018 the crop protection products category continued to see its sale volume grow among CropLife 100 retailers. According to the CropLife 100 survey, revenues for this category increased 4.4% to top $11.9 billion. This marked another all-time sales high for crop protection products, and their overall market share among CropLife 100 crop inputs/services improved to 39%.
But the real surprise came from the fertilizer category. After falling sales volume and market share for at least the past five years, fertilizer finally has something to celebrate. According to the 2018 CropLife 100 survey, the fertilizer category increased its revenues by $100 million to $12.2 billion. Despite this gain, the rate of increase for the fertilizer category wasn’t as robust as that for the crop protection products category, causing its market share to drop back another 1% to 40%.
Even more encouraging, this market performance spread out into the nine individual segments — crop protection products, adjuvants, fertilizer, micronutrients, custom application, traditional seed, biotech seed, seed treatment, and precision agriculture — tracked as part of the CropLife 100 survey. During 2017 only five of these segments — adjuvants, crop protection products, seed treatment, custom application, and precision agriculture — showed sales increases for more than half of the CropLife 100 companies. The rest were primarily flat or down in sales volume year over year.
In 2018, however, seven of the nine segments increased in sales between 1% and more than 5% for more than half of the CropLife 100 retailers. An eighth segment — biotech seed — just missed this group, with sales up 1% to more than 5% for 49% of CropLife 100 companies.
According to the survey, the segment that performed best during 2018 was adjuvants, which was up for 64% of respondents vs. the year before. Crop protection products and fertilizer finished tied for second place, each up between 1% and more than 5% with 61% of respondents. Other segments finishing in the 50% range for sales increases included seed treatment (58%), micronutrients (55%), precision agriculture (54%), and custom application (52%). As usual, the traditional seed segment performed the worst among CropLife 100 retailers, with sales improving for only 33% of respondents.
Reply Hazy, Try Again
Although the overall numbers for the 2018 CropLife 100 were pretty positive, the survey did note some areas of concerns. Not surprisingly, four of the top five items had also plagued the nation’s top ag retailers during the 2017 growing season. The percentages, however, have changed significantly, especially at the top of the list.
First, low commodity prices coupled with distressed grower-customer finances has been a consistent concern among CropLife 100 ag retailers for more than a decade. In the 2017 survey this concern topped the list as the major worry among companies doing business in the crop inputs/services industry at 41%. Given that crop prices have remained low throughout 2018, this concern still finished as the king of the challenge pile, being mentioned by 48% of respondents on the 2018 survey.
“The continued weakness in commodity prices at the grower level continues to pressure our customer base and their purchase decisions,” wrote Travis Rowe, Director of Marketing and Special Projects, Heritage Cooperative Inc., West Mansfield, OH.
After price worries, the next biggest concern for CropLife 100 ag retailers is simply finding/keeping enough quality employees to provide service to their grower-customers. In the 2017 survey, labor challenges were mentioned as the chief concern by 13% of respondents. This year that percentage doubled to 26%.
“We continue to see a lack of qualified labor available throughout all our markets — more specifically truck drivers,” wrote Raquel Fuentes, Director of Corporate Communications, Pinnacle Agriculture Distribution, Loveland, CO. “This shortage impacts not only the delivery of our products to our farmers but also getting products from our suppliers.”
As for the other holdovers among top concerns for ag retailers, both had lower percentages among respondents in 2018 vs. 2017. Finishing in fourth place was e-commerce, which was cited by 7% of 2018 CropLife 100 survey respondents as their major concern (compared with 14% in 2017). In fifth place was worry about industry consolidation, which was mentioned by 4% of 2018 respondents (vs. 16% in 2017).
The new item to appear on the top concerns list for the year among ag retailers was trade tariffs. This was mentioned by 8% of respondents as their major worry from 2018. In fact, CropLife asked the following question on this year’s survey as a result of this: In general, how concerned are you that the tariff wars between the U.S. and other countries could negatively impact your business in the next two to three years? According to the 2018 CropLife 100 survey results, 85% of respondents believe this would “negatively impact” their bottom lines going forward. Only 15% said that they were “not concerned” regarding the tariff wars.
Looking into the near future, the CropLife 100 survey wondered how the nation’s ag retailers believed the agricultural marketplace would perform going into the 2019 growing season. Here, the data shows that the majority of respondents (59%) think the industry will rank between a five and a seven on a one to 10 scale. Another 23% believe 2019 will rate an eight to 10. The remaining 18% think next year will be between one and a four.
In this case, the CropLife 100 survey forecast for the near future would probably be best summed up as, “Ask again later.”