The Scoop did an online poll of its ag retail audience in June. Via almost 100 responses, ag retailers said their No. 1 challenge was the following:
60% Workforce availability/labor
21% The drought conditions/reduced product sales
14% Rising interest rates
3% Use of technology
1% Rising insurance costs
Given the time of year, early summer stretches the supply of the ag retail team as planting wraps up, spray season continues, scouting season commences, and more… So it’s no big surprise that would be top of mind for ag retail. Here are some additional insights on these five top-of-mind challenges.
1. Workforce availability/labor
Labor costs are going up, and via The Scoop’s 2023 salary survey, base salary for applicators/machine operators is up 26% in five years. Base salary for sales agronomists is up 28%
Read more from the 2023 Salary Survey
In conjunction with higher costs, the labor talent is changing. Via a case study with Ceres Solutions, retailers will be judged by their technology use. It’s the new measuring stick.
Their employee pool about 750 employees
In 2022:
- 55% were digital immigrants
- 25% were reluctant digital immigrants
- 20% were digital natives
In 2030:
- 60% are digital natives
- 40% are digital immigrants (and all the reluctant are retired)
2. The drought conditions/reduced product sales
It’s now estimated 70% of the U.S. corn crop and 63% of soybeans across the U.S. are covered in drought. While the latest U.S. Drought Monitor shows drought expanded across Illinois and Indiana over the past seven days, increased chances of rain across the Corn Belt, including those two states, could hit at a critical time. Read more.
3. Rising interest rates
Brad Oelmann with Farrell Growth Group highlights this is a large concern for the ag retailers he talks to.
“Interest expense has gone up 35% over the last two years for ag retail. The interest rate has obviously been a driver of that, but they have also pulled in product earlier than normal because of the supply challenges,” he says. “They (ag retailers) somewhat offset this by selling to the grower earlier, which was easier to do in a supply challenged environment. In a world of declining prices and more availability, they will likely wait longer to purchase product. We might be close to lows on some products, so this may not entirely be true.”
He expects the effect of the current interest rate environment to have a long tail—all the way to the farm gate.
“Any cost increase for a retailer is likely an impact at the farm level, although many times it is a lag effect. Interest rates have impacted the grower directly too. The other way retailers manage any cost increases is by continuing to look for ways to be more efficient, as they have little pricing power,” Oelmann says.
Here’s more coverage on interest rates and the effect on farmers.
4. Use of technology
Technology paints a wide swath, especially as it applies to ag retailers. They are at the intersection of deploying technology-based solutions for their own business, for connectivity to farmers, and helping farmers adopt new technologies across their acres.
As explained by our 2022 Business Innovation Award winner, they used technology to slash their overtime because everything had been digitized. While feedback from staff was the strategy “elevated” the work they are doing. The same co-op is aiming to provide 100% digital experiences for their customers and in their business.
100% digital customer experience:
- Easy to do business with
- Value-added experience
- Quality services
100% business experience:
- Decreasing resources
- Cost savings
- Automated processes
Via the Farm Journal Technology Survey in 2020, 67% of farmers expect ROI on a new technology in 3 years; 22% except ROI in 1 year; 11% 5+ years or more.
The challenge and the opportunity is via 2023 Farm Journal research, more than 1/3 of farmers are not collecting data on their planter pass.
One more topic that falls under the technology umbrella is online ordering of crop inputs/e-commerce. Our study on farmers who buy online, in five years went from 8% to 22%.
What are farmers buying online? Top two categories are herbicides (pre and post) at 46+%. And then seed and adjuvants are #3 and #4.
What does it meant for farmers to “buy online”?
- 68% say via a website/grower portal of a retailer
- 41% say it’s a marketplace
- 39% says it’s researching online and then call to order
- 5% say it’s have an adviser enter an order online
5. Rising insurance costs
In a report authored by Ken Zuckerberg lead farm supply and biofuels economist for CoBank, insurance premiums are on the rise for agricultural co-ops, and at least one company has exited the space.
The cause of the changes is being attributed to three years of more frequent, more costly floods, tornados, and severe weather events. As quoted in the report, U.S. losses to weather and climate related catastrophes totaled $170 billion in 2022; $155 billion in 2021 and $114 billion in 2020. Last year’s total is almost triple the long-term average dating to 1980.
There are now only six major players offering property and casualty insurance for ag coops/retailers. Read more from Zuckerberg.
