The dynamics of 2022 are shaping up to make this year a pivot point for ag retail says Brett Bruggeman, president of WinField United. He recently gave The Scoop a one-on-one interview talking about how the growing season is shaping up and what trends are pulling us into the future.
What Goes Up Must Come Down
“With the current momentum in ag, everyone feels good, but they want to manage the risk,” he says. “We’ve got the trifecta---acreage, low inventories to sell, and great commodity prices. So we are cautiously optimistic, because it’s different than 2009. Today, retailers are contingency planning and building risk into management. Everyone knows what goes up comes down,” he says.
Bringing a Wave of Change
Business management and business strategy are bringing a separation of entities in the ag retail market.
“It’s happening because even with $5 corn some businesses aren’t making money. They know that to make money and have the customer experience that is demanded of them, they need to invest in talent and technology,” Bruggeman says. “And we think a lot more consolidation will happen at ag retail because it’ll take a larger investment to play in this game.”
He says for those businesses investing in their future, it’s helping elevate the conversations they are able to have with farmers to be more strategic, less transactional.
The Cost to Serve
He says three factors are lining up to make doing business just a higher stakes proposition due to inflation, labor, and the supply chain.
“These are all real, and they aren’t going to go away any time soon. Wages won’t readjust; regulatory structure won’t readjust,” Bruggeman says. “With the fertilizer market, market intelligence has turned into a valuable marketing program. These are commodity products, but for example India is buying as much as they can, and there are some shortages. You must have market intelligence coming from what’s going on in China or India or even domestically, that’s the biggest part. Market intelligence and proper management of this segment are No. 1.”
Not Flying Blind, But Head on A Swivel
“We had a good fall. Industry numbers look good,” Bruggeman says. “We have visibility in our business, so we aren’t operating blind. And we moved up our supply chain by 60 to 90 days.”
He says there are two trends to watch:
- Farmers who are planting soybeans earlier and planting both soybeans and corn at the same time. This will require retailers to be poised and ready, and move up their supply chain by 60 to 90 days to be timely.
- Risk management is more important than ever as retailers have worked down product inventories, but having adequate supplies requires more of an investment.
Bruggeman says the WinField United team is working to adjust its own business and assisting its retail owners to see these trends, but they don’t rule out additional factors coming into play.
“I feel confident but then I know someone will humble us,” he says.
Things Stacking Up in Favor of the Business
Again referencing this past fall, he credits the favorable weather for providing the needed time windows for field applications.
“We needed this fall. I can’t imagine if we didn’t have a good fall,” he says.
Regarding farmer purchase intentions, Bruggeman sees strong farmer financials but cautions any retailer who puts too much weight on farmer loyalty to bring in purchases.
“The amount of cash in the country is crazy good. I hope it’s share growth–but it’s not. Our pre-pay is up even though fertilizer is up 2x,” he says. “We don’t take the loyalty piece for granted. But rather we’ve seen how retailers have dialed in their value proposition. We’ve hit a plateau on drilling down price. Now we have a good value proposition---no one is getting greedy, but you don’t have all your calories spent on pricing—you are talking about differentiated services like carbon or risk management.”
Why Now is the Time For Changes
As part of its Truterra carbon program, WinField United’s parent company Land O’Lakes, Inc. wrote more than $4 million in checks to farmer participants in 2021, and is finalizing its offering for 2022.
“These strategies around carbon puts us in a position of doing things different and taking advantage of those new strategies around the grower of tomorrow,” Bruggeman says.
He details the business is changing in strategy and structure with new services. This includes carbon, premium grain, and whatever else is coming next.
“It’s change, and change management can be scary,” he says. “But it’s necessary to get our system where we want to go.”
