Ag Retailers Meet During A Time Of Extraordinary Change

The Agricultural Retailers Association held its annual meeting in San Diego from November 29 to December 1^st. This year marks the organization’s 30^th anniversary and this year’s theme was “Navigating the Channels of Ag Retail.” There were 650 registered attendees. Change was a common theme throughout the presentations manifested in the disruptive environment driven by geopolitical conflict, the advances in several technology categories, the role of shifting demographics, and the increasing sustainability data demands from the downstream food players. Some sample quotes from the podium:

· We now live in a VUCA world (Volatile, Uncertain, Complex and Ambiguous)

· “Crazy Train” would be a good song reference for today

· The only easy day was yesterday

· Chaos can draw focus

Agricultural retailers are a mix is large and small players that supply farmers with various physical inputs they need to grow their crops (fertilizers, crop protection chemicals, biological products of various types…). The retailers also provide expert advice from agronomists, horticulturalists, pest control advisors and they increasingly act as a strategic partner regarding data services. Many of these retailers are farmer-owned cooperatives, others are family owned businesses, and some are regional or national entities. All play the dual role of supplier and “trusted advisor” with a major focus on customer relationships. They are still pursuing the goal of “selling profitability, not just products” which was first articulated in 1992 when ARA was formed by the merger of two earlier organizations.

The Agricultural Retailers Association itself is a trade association. In his annual report at the beginning of the meeting, Darren Coppock, ARA President and CEO, described the organization’s three pillars as 1)Growing engagement and membership, 2)Informed stakeholders, and 3)Strong retailer-focused advocacy. The later includes lobbying and as a later speaker pointed out, the goal of informing the large proportion (~50%) of both House and Senate Agriculture Committee members who have never been involved in the Farm Bill process before. The association also seeks to communicate with key entities about aspirations such the UN Sustainable Development Goals – 10 of which have some agricultural involvement. The goals call for a 17% increase in ag productivity with a greenhouse gas reduction of 21% with no new area farmed. Their basic message in that instance: none of this is possible without technology and its rational regulation.

The presentations and side discussions covered at least 6 major themes as summarized below:

1. Disruption: The war in Ukraine and the related disruptions of shipping and sanctions led to shortages and price spikes for key fertilizer products that the Ag Retailers supply for farmers – particularly nitrogen fertilizers which are manufactured using natural gas, and Potash (potassium) a significant amount of which is mined in Russia. There have been further import and export disruptions because of historically low water levels in the Mississippi River that limited barge traffic. In the Western US farmers are facing severe water shortages. Ag retailers have been on the front line for many of these issues.

2. Technology-Driven Change: The suite of products and services that make up the ag retailers’ business is shifting towards more biological products; drones and autonomous equipment; data services to guide precision farming with A.I. to support that, and a growing focus on soil health and “regenerative agriculture.”

3. Demographic Changes: Succession planning is increasingly important as the Baby Boom generation shifts towards retirement, and it can be challenging to interest the next generation in farming or other agricultural roles. Fortunately the technology trends and sustainability themes are attractive to that age group and the industry is very active in supporting organizations like Future Farmers of America (FFA) and AFA. Of the 22 “Rising Star” award winners featured during the convention, 7 were women – a larger proportion than in the audience as a whole. Two of the four FFA officers who addressed the crowd were also women.

4. Downstream Demands: Food companies and other entities that are pursing their own ESG goals are asking their suppliers for data related to sustainability goals, carbon footprints and ecosystem services. Ag Retailers are often in a position to make this less burdensome for the farmers and to help them tell their positive story.

5. Evolution of the Sector: Online buying has been increasing for agricultural inputs rising from 8% of 2018 purchases to 18% in 2021. Farmers also increasingly gather information on-line before coming to the retail center to make purchases. There is an expectation of further consolidation within the retailer segment and there may be more partnerships with equipment companies which have traditionally been separate entities.

6. Changes in the Farmer Customer Base: The farming sector is projected to see further consolidation so that by 2040, 5% of farms (600,000) will produce 75% or more of US agricultural output. Aimpoint Research presented their study of the Farmer of The Future based on a quantitative psychographic segmentation of farmers and ranchers in the US. They identified 5 groups based on 16 parameters.

The two groups they project to be the most successful going forward were “Independent Elites” and “Enterprising Business Builders” (increasing from 41% to 71% of farmers by 2040). These individuals have high business IQ, were innovate and open to change, are willing to pursue collaborative advice and form partnerships, and are least dependent on government safety nets. Retailers were encouraged to be certain that their services align with these groups while still serving more traditional farmers.

7. Global Trends That Will Affect the Farm Sector: A tightening global food supply is anticipated because of input supply and distribution limits, “peak land use,” climate change, the lack of a replacement generation in many countries, the competition of food and fuel uses, political upheavals and limiting regulations.

In spite of the current and future challenges discussed throughout this meeting, there was a positive overall atmosphere.