• Robert Morris Robert Morris
  • Mar 07
  • 3 min read

The future of ag retail: part 2

Factors for change

In part one of The Future of Ag Retail, the players and their roles in the world of modern agronomy were outline. Traditional ag retailers, agronomists, and consultants are facing major challenges. Their business models are struggling due to many factors that will be addressed below in The Future of Ag Retail: Part Two.

Consolidation

Farms, retailers, co-ops, and input providers are consolidating. Major input providers, such as Bayer and Monsanto or Dow and DuPont, are merging to grow their market share while decreasing their costs.

After the merger, DowDuPont was able to cut billions of dollars in their agricultural operations. This would seemingly allow them to offer lower prices for their products, but also TerrAvion: Input provider consolidation the opportunity of a larger market share which meant more leverage with their customers. These mergers have resulted in a period of stable input prices while in the same period crop prices have declined. To gain more market power for themselves and realize economies, retailers and co-ops have also consolidated. 

The internet and new types of ag retailers

Traditionally, growers would rely on their retailers to sell them inputs at a retail price that the retailer themselves set. Growers didn’t have anywhere else to look for more information on TerrAvion: Online Ag Retailers input prices. The internet has changed that, enabling growers to access this type of information on their own and allowing them to bypass their retailers. Online retail companies like Farm Trade and Farmers Business Network are selling products directly to growers, offering a lower cost than some local retailers. Many retailers, of course, provide more than just input sales, but a significant percentage of growers are simply looking for the lowest price. Think of these new types of online ag retailers as the Amazon for ag inputs. For growers who are only looking for the lowest price on supplies, online retailers may be able to out-price branch retailers.

New precision ag technologies and practices

New precision ag practices, products, technologies, and data have significantly altered the way agronomy is done today. Farm data management platforms such as Climate FieldView,Precision Agriculture Practices and Technologies the MyJohnDeere Operations Center, and Agrian have changed how inputs are managed. Farm data itself, such as high-resolution NDVI imagery, advanced soil and moisture sensors, and crop modeling have given growers various perspectives, helping them gain a comprehensive understanding of what is happening in their fields, and why. New precision ag equipment such as precision planters and sprayers have changed the way growers apply their products. Implemented together as a precision ag program, growers are seeing higher returns with fewer inputs.

New types of remote sensing data give growers a TerrAvion Aerial Imagery Dataclearer picture of what products are going to be most effective at what specific location. Farm data management platforms bring the remote sensing data and all other inputs into one central place, allowing growers to build a more profitable management plan. The latest precision ag equipment receives that plan from the data management platform and applies inputs at the exact rate to the precise location where they will be most effective and result in the highest return on the growers' investment in their operations.

Many of the traditional inputs that co-ops and input retailers sell are under margin pressure, especially seed and fertilizer.  At the same time, there are innovations in chemistry, biology, micronutrients, genetics, biochemistry, microbiomes, bacteria, beneficial fungi or yeast, etc coming to market. These new types of inputs offer economic benefits in certain systems under certain conditions, but are worthless, or a loss under others. This may be true even in single field where, for instance, fungicide offers a very high ROI when there’s a certain precipitation and temperature pattern but should be avoided in another year where that pattern doesn’t occur. While these innovations are generally going to be more difficult to use than say a basic granular fertilizer, they are also going to offer much high margins for retailers.

The old way is no longer an option

Considering these factors that are driving the change in ag retail and agriculture, as a whole, traditional ag retail models simply are no longer a viable option for retailers, agronomists, or consultants if they wish to survive in the new world of modern agronomy.

But it’s not all bad news. As mentioned in Part One, the disruption to the traditional techmainimagemodel for ag retail presents an excellent opportunity for retailers that are willing to embrace a modern data-driven approach to agronomy. Interestingly, it doesn’t take a great deal of capital investment on the retailer’s part, mostly just commitment and management attention to getting an implementation done.  There is an attractive opportunity, even if margins on traditional inputs decrease, acres per agronomist will increase, dollars spent per acre will grow, and the number of agronomists per retailer will also rise for thriving retailers.

So what does 21st-century ag retail look like for retailers, agronomists and consultants?

Sign up for our blog to see the answers in Part Three of The Future of Ag Retail.

 

Want to learn how TerrAvion high-resolution imagery enables precision ag? Fill in the form below and we will get back to you as soon as possible.

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