It Wasn’t Raining When Noah Built The Ark: Don't Wait for a Crisis to Change
Strong evidence suggests the crop cycle peaked in 2022. Although retailer profitability should still remain favorable in 2023, lingering labor shortages, wage inflation and higher interest rates will result in margin compression. Given the likelihood of a normal cyclical downturn in the crop cycle in 2024 or after, ag retailers should take advantage of excess cash flow now to invest in technology and partnerships that will strengthen the retailer’s value proposition in the future. What’s step No. 1? Embrace next-generation ag technology services and providers that are working together—for both the farmer and the retailer—to help upstream agriculture operate more profitably and sustainably.
Don’t Wait for a Crisis to Change
When it comes to risk management, one constant across every industry is recognizing that crisis training doesn’t work in the middle of a crisis. At that point, it is all about avoiding an extended period of business interruption, retaining customers and staff and simply surviving. Trying to execute effectively will be challenged as managers are forced to react to new and unusual stimuli—often on the fly—without having time to properly analyze what is happening on either the “macro” or “micro” level.
Several issues on the horizon suggest the emergence of a “clear and present danger.” One, the crop cycle appears to have peaked last year, and a downturn is inevitable at some point within the next two years. Two, labor challenges in rural America impact producers, ag retailers and equipment dealers, and they are not going away. The problem is structural—given an aging U.S. population, immigration policy challenges and urbanization—and it has been lurking in the background for decades. Third, an emerging body of research suggests modern professional farmers demand more from relationships with input sellers.
If there is only one point to make here, then it is this. If your customer doesn’t want to buy the product or service you provide, then you must adjust to avoid becoming disintermediated.
Earlier this year, Growers, a North Carolina ag tech services company, launched an input buying platform that links input buyers and sellers. As CEO Steven Valencsin describes, it is “a platform that helps farmers manage their quotes, compare prices and expand their access to retailers to help them—the farmer—ensure they’re getting the best prices possible on inputs.” Farmers of all ages want the ability to gather information about the inputs they are buying quickly and easily before purchasing. The Growers App is an example of a tool that simplifies a key part of the interaction between retailer and customer.
The Takeaway
Although many things are changing in the world, the one constant is businesses lose customers for one of two reasons: a bad product or a bad experience. This is illustrated with the example above of a tool that retailers can use to improve their customers’ experience.
The key, however, is to incorporate good ideas into your company’s DNA today. Work to do that before the stress of the coming cycle downturn paralyzes you from investing for the future.
Kenneth Scott Zuckerberg is an accomplished financial strategist who serves as the lead analyst for grains, farm supply and biofuels within CoBank’s Knowledge Exchange.
