The 2018 CropLife 100 Mid-Year Report: Reviewing the Grades for the First Half
June 4, 2018 Summer is here and school children across the country have received their end-of-year report cards by now. As always, some of the marks will be positive, others negative, with a vast majority likely falling somewhere in the middle of these two extremes.
In a similar vein, we here at CropLife® magazine thought the time was also right for us to hand out our own type of report card. Instead of class subjects, however, this one gauges how CropLife 100 ag retailers are grading the various components of the ag retail business as 2018 hits the midway point.
Welcome to the second annual CropLife 100 Mid-Year Report. For almost 35 years now, CropLife magazine has annually asked the nation’s top ag retailers how their businesses performed from one year to the next. However, as marketplace forces have evolved and “speeded up” over the course of the 21st century, we thought it made perfect sense to ask CropLife 100 respondents how things were going for them more than once per year. Therefore, starting in 2017, we began looking to ag retailers to tell us how their businesses were doing as the spring planting season had come to an end.
Overall, the news is pretty positive for 2018 thus far. As we did in the 2017 CropLife 100 Mid-Year Survey, we asked ag retailers to tell us how they would characterize the year so far on a scale of one to 10 – one being “poor” and 10 being “outstanding.” As you might imagine, the majority of these responses tended to fall within the four to six range. However, what is newsworthy are the percentages.
In the 2017 survey slightly more than half (58%) of respondents said the year ranked between a four and six on the 10-count scale in terms of their finances. Twenty-six percent characterized 2017 as a seven to 10, with the remaining 16% grading the year between one and three.
In the 2018 survey there are many more ag retailers having a “good” year vs. “strong” or “poor” ones. According to this year’s respondents, 72% would rate 2018 as between a four and a six thus far. The remaining 28% split evenly (14%/14%) between calling the year “poor” (one to three) or “strong” (seven to 10). So, overall, the agricultural marketplace in 2018 through the spring season is off to a “good start.”
The Good and the Bad, Input-Wise
With things apparently looking up for ag retailers, we next tried to determine which categories within the CropLife 100 were performing the best so far at the halfway point of the year. This question asked respondents to choose from the four major categories of the market — crop protection products, fertilizer, custom application, and seed. As regular followers of our annual CropLife 100 will remember, the crop protection products category has been performing the strongest year-over-year, growing 14% between 2016 and 2017 to top $11.4 billion. On the flipside, the fertilizer category has been in somewhat of a sales free-fall, with revenues off 10% last year, dropping from $13.5 billion in 2016 to $12.1 billion.
So how is 2018 looking for these two categories (and the rest) at the mid-year mark? According to respondents, fertilizer is outperforming expectations the best thus far. In the 2018 CropLife 100 Mid-Year Survey, 67% of the nation’s top ag retailers indicated their fertilizer sales for the spring were stronger than anticipated. Twenty-four percent wrote that the distinction of outperforming early-season expectations belonged to the crop protection products category. The remaining 9% said that their custom application services demand topped their initial projections. Perhaps somewhat surprisingly, the seed category didn’t receive a single vote as a “top-performing” category.
Given this fact, it should probably come as no surprise that the seed category led in another survey question — which category has surprised you the most in a negative way? Here, the seed category was the clear “winner,” being cited as the biggest underperformer thus far in 2018 by 38% of respondents. The crop protection products category finished a close second, being mentioned by 33% of CropLife 100 ag retailers as their biggest “negative surprise,” sales-wise. Among the remaining 29% in the survey, 19% said that the fertilizer category had been their most negative surprise so far in 2018, with the remaining 10% listing custom application in this way.
Outside of the major categories for crop inputs/services, the split among ag retailers is much greater even through the first half of 2018. When asked which outside-the-mainstream category has performed best thus far, two segments — seed treatment and precision agriculture services/products — finished tied at 32% apiece. Another 23% indicated micronutrients had performed better than expected for their companies in 2018 (perhaps another sign of an overall fertilizer category recovery for the balance of the year for CropLife 100 retailers). The remaining 13% said their adjuvant sales were doing better than forecast at the beginning of the year.
Trump, Trade, and Tariffs
From all indications — and based upon the distribution of votes throughout the nation’s heartland states — the agricultural community was behind Donald Trump’s campaign to become the U.S. President. As his first year in office came to a close, the majority of respondents to the 2017 CropLife 100 Mid-Year Survey were “good” with President Trump’s efforts to help their cause. In fact, 74% indicated their ag market outlook under the president was “about what was expected,” with another 21% saying things were “better than expected.” The remaining 5% said things had been “worse than expected” under Trump.
Since that time there have been plenty of potentially negative agricultural developments coming out of Washington. Trade discussions regarding the North American Free Trade Agreement with Canada and Mexico have reportedly stalled, there is talk of an all-out tariff war with China over important agriculture exports such as soybeans and sorghum, and debate continues over the shape the 2018 Farm Bill will ultimately take.
Given all these factors, have the nation’s top ag retailers changed their views when it comes to President Trump? It would seem so.
When asked in the 2018 CropLife 100 Mid-Year Survey to describe their ag market outlook today vs. one year ago, 32% now characterize things “worse than expected” for agriculture, up 27% from the 2017 figure. Fifty-nine percent still say the agriculture outlook under President Trump is “about what we expected.” Only 9% indicated that things were “better than expected” in today’s ag market.
Perhaps one Midwestern ag retailer summed it up best on their 2018 CropLife 100 Mid-Year Survey form regarding the president and his recent policies on agriculture: “We love Trump and what he is trying to do,” the respondent said. “But the farmers need help soon!”
In addition to the agricultural-oriented moves coming out of the nation’s capital, the other big market point-of-discussion the past few years has centered on supplier consolidations and mergers. Since mid-2016 when ChemChina proposed acquiring Syngenta Crop Protection, virtually all of the major crop protection and fertilizer suppliers have been involved in some form of either direct merger plans or acquired divested assets from companies looking to consolidate and gain regulatory approvals along the way.
In the 2017 CropLife 100 Mid-Year Survey, most participants (58%) described themselves as “somewhat concerned” when it came to all these product producer activities. Thirty-one percent said that they were “not concerned” or “not sure” what all these marketplace changes would mean in the end. The remaining 11% described themselves as “very concerned,” citing the loss of competition and “competitive product pricing” as negatives for ag retailers going forward.
For the most part the dust has now settled on this particular trend, with only the acquisition of Monsanto by Bayer yet to be finalized (and this will likely happen by early July, according to market watchers). Despite taking away some the uncertainty, CropLife 100 ag retailers are apparently less happy with the final consolidation picture as structured.
According to the 2018 CropLife 100 Mid-Year Survey, 73% of respondents describe themselves as “somewhat concerned” by all the supplier mergers and what they will mean for their businesses going forward. Nine percent said that they were “very concerned” by these newly-formed entities. Only 14% said that the rash of consolidation within agriculture was “not a concern” to them. The remaining 4% weren’t sure yet what to make of all the merger moves.
Weeds and Dicamba Use
Within the crop fields themselves, the biggest topic of conversation (and activity product-wise) has centered on the continued spread of herbicide-resistant weeds. According to the statistics, there are currently some 490 weed species across the globe that show some form of resistance to one or more herbicides. In the U.S. alone, experts say that more than 120 million acres of farmland contain herbicide-resistant weeds, costing growers “billions upon billions” each year in added application costs and lost crop yields.
In the 2017 CropLife 100 Mid-Year Survey, the majority of ag retailers (74%) indicated that herbicide-resistant weeds were either a “major problem in their area” or had “become a major problem” during the 2017 growing season. For 2018 this problem has moderated somewhat. In this year’s survey 50% of respondents still describe herbicide-resistant weeds as a “major problem” in their parts of the country. Another 18% say that these crop pests have become a problem since the 2017 survey took place.
However, 23% of 2018 CropLife 100 Mid-Year Survey respondents indicated herbicide-resistant weeds were a “minor” problem for their grower-customers. The remaining 9% said these kinds of weeds were “no problem” for them — which is significant since no respondents indicated this was the case for their market areas during the 2017 mid-year survey.
Perhaps part of the reason more CropLife 100 ag retailers said herbicide-resistant weeds were less vexing in 2018 for them was because of some of the new herbicide options now available to the market. In 2017 and again this year custom applicators have the opportunity to spray such products as dicamba and 2,4-D on new crop varieties to combat weeds.
Still, one of the big stories coming out of agriculture in 2017 was the off-target damage reported by grower-customers related to some of these newer applications — particularly dicamba. By the end of 2017 there were almost 3,000 complaints lodged by growers with their state agencies regarding reported drift damage from this application work. Plenty of new regulations and restrictions were put into place to make this process less problematic for the 2018 growing season.
Thus far the results from this effort haven’t been that positive for ag retailers. According to the 2018 CropLife 100 Mid-Year Survey, 36% of respondents that have used dicamba in their operations have found the experience of working with it “worse than expected.” Only 23% said dicamba application work had gone “better than expected.” The remaining 41% indicated they weren’t currently using dicamba in their operations.
Crop Mix and 2019
As the agricultural market headed into the 2018 growing season there were plenty of planting intention surveys done that showed growers would increasingly shift their crop mix from corn to soybeans. This was being done, the reports indicated, to take advantage of the higher commodity prices for soybeans and the lower input costs to produce.
But according to CropLife 100 retailers, this trend hasn’t shown up with their grower-customers. When asked to tell if “corn was king,” “soybeans were king,” or “acreage was the same as in 2017,” 70% indicated the latter was the case in their markets. Only 25% said that “soybeans were now king” among their growers, up 4% from the results from the 2017 mid-year survey. The remaining 5% said corn continued as the “crop king” among their customers.
Finally, while ag retailers apparently feel pretty confident in the overall outlook for 2018 agricultural fortunes, the views for 2019 are decidedly less rosy. According to the 2018 CropLife 100 Mid-Year Survey, slightly less than half of respondents (45%) were “somewhat positive” that 2019 would be a good year for the marketplace. Another 9% were neutral in their views on the year to come.
However, the majority (46%) described their outlook for the 2019 growing season as “somewhat negative” to “very negative.” In fact, according to Dave Coppess, Executive Vice President of Sales and Marketing for Heartland Co-op, there are a number of factors that could negatively impact agriculture going forward.
“Farmers have burned through their cash reserves, and credit risks are escalating,” Coppess wrote. “Also, cash-and-carry suppliers continue to shrink the chemical margins for traditional ag retailers.”
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