The opportunity cost to not have a plan may never be higher, says Ken Zuckerberg of CoBank, about how ag retailers view their future with autonomy and precision agronomy solutions.
“As we have been saying for the past few years, ag retailers have a golden opportunity now to pivot their business model towards the creation and delivery of greater value to the farmer,” Zuckerberg says. “The quicker the profit cycle turns down, the more urgent it is to deliver new and recurring revenues sources.”
He points to four catalysts accelerating the changes in structure and fundamental challenges:
- Higher funding costs which will persist in an environment of higher for longer interest rates
- Persistent labor shortages in rural America
- Skyrocketing price increases for commercial property insurance, driven by high catastrophe losses emanating from ongoing weather volatility.
- Ongoing commodity price volatility, especially for energy products and fuels, driven by geopolitical disruptions.
“When the customer’s needs change, the service provided better evolve, otherwise run the risk of losing that customer to a competitor,” Zuckerberg says. “Because farm supply cooperatives have maintained a loyal customer base (for the most part) over their history, it is undoubtedly hard to change their culture overnight. But these several cascading forces occurring simultaneously could accelerate the cultural shift.”
You can read more analysis from Zuckerberg in his recent CoBank Knowledge Exchange Report.
Zuckerberg notes how XtremeAg and AGVisorPro serve as examples for the types of businesses that could disrupt the traditional ag retail model by digitally connecting communities of farmers. The proposed idea of “virtual cooperatives” has emerged as a next-generation ag retailer which provides advice as a value-added product.
As one opportunity for the future, Zuckerberg encourages retailers to consider the integrated and tailored service model.
“The ag retailer would deliver customized farmer- and field-specific solutions, derived from the combination of precision agronomy and the new data and information technologies (artificial intelligence) embedded in autonomous equipment,” he says. “These new revenues could offset a portion of declining input sales in the future.”
While the investment required to develop a future strategy will vary greatly based on the ag retailers’ scale and geographies covered, he shares a few universal first steps business leaders can take.
- Create taskforce to develop a strategic plan for inclusion in the 2024 operational roadmap.
- Engage in discussions with the major ag OEM (original equipment manufacturers) as well as the precision and agronomy divisions of those companies, for example, Raven Industries (CNH), Trimble (soon to be part of AGCO) and John Deere’s technology team.
- Seek collaboration with other partners. For example, AMVAC has decades of experience with prescriptive chemical application such as Lock’N Load, SmartBox+ and SIMPAS.
“While I am not an engineer, what I believe is needed, among other things, are a common communication protocol and stable connectivity within and beyond the farm field,” Zuckerberg says. “Usually, success is found by identifying and implementing one or two things that can have a 30% to 40% increase in productivity, profits or the reduction of risk, rather than throw 12 darts at a board hoping for one to hit the bullseye.”
