Field of Agronomic Dreams: Rethinking the Farm Supply Co-op to Drive Value
Nov 23 2020
Farm supply service cooperatives have a long, proud history and remain the largest and most important providers of farm supplies to America’s crop farmers. However, challenging fundamentals and disruptive forces – in place prior to COVID-19 – are pressuring the business model.
In recent years, competition has intensified with independent distributors and new market entrants. Several competitors have differentiated themselves with integrated digital farming offerings that leverage modern information technologies such as data analytics and AI (artificial intelligence).
Beyond the market share battle, farm supply co-ops’ margins are being squeezed by low fertilizer prices and delayed applications of crop protection and nutrient products, due to volatile weather and weak farmer cash flow, among other variables.
A new report from CoBank’s Knowledge Exchange indicated these challenges may be a catalyst for farm supply cooperatives to rethink their business model. The report outlines several ideas for them to explore in their annual strategic planning process. Highlighted ideas for consideration include:
- Pursue the “low hanging fruit” with initiatives to improve general operational excellence and efficiency. This would include rationalization of business assets and locations, making investments in automation, active and more aggressive management of accounts receivables and inventory, and better alignment of marketing and customer segmentation.
- Align with a strategic partner, such as a local or regional competitor. Look for those with transportation or infrastructure assets (fertilizer blending and formulation facilities) or advanced automation and technological capabilities, or an expanded set of products and services that can be cross-sold to the existing customer list.
- Partner with an aerial imagery or robotics company. This step enables a co-op to offer both agronomy and precision field application services and digital agronomic advice. Depending on region, the advice could include and/or incorporate crop diagnostics, soil analysis precision irrigation, integrated pest management and various other field-specific services.
Learn more about the challenges and opportunities for farm supply cooperatives from CoBank’s Knowledge Exchange.