Input retailers aren’t likely to be pushed out of the business by direct sales from manufacturers and farmers in most countries, according to an international network of analysts and advisers.
As long as they hang on to their attractions to farmers, and the manufacturers don’t add major services to their offerings, farmers in most developed nations will continue to rely upon retailers for inputs and how to apply them.
“Many were quick to point out that although the price might be lower, this is rarely at the top of the farmer’s priorities when purchasing their products,” says a report by Agri Benchmark analysts Travis Jansen and Yelto Zimmer.
Read Also
Farming Smarter receives financial boost from Alberta government for potato research
Farming Smarter near Lethbridge got a boost to its research equipment, thanks to the Alberta government’s increase in funding for research associations.
“For most of them, it is more important to have access to good agronomy advice, financing, timely delivery, and good customer service. Because local retailers provide these services, they may be able to continue to successfully sell crop inputs to farmers despite manufacturers offering better prices.”
The study looked at farmers in the United Kingdom, the United States, Uruguay, Argentina, Brazil, Sweden, Japan, Ukraine, Russia, Australia and Poland. It found differences between the situation and the attractiveness of direct manufacturer-to-producer sales depending on the farming region.
In places with gigantic, sophisticated farming operations, like parts of Brazil and Russia, and with a less developed retail sector, purchasing large amounts of inputs and storing on-farm can make sense.
That’s because those farms often employ their own agronomists, have sufficient storage and own the right equipment to get everything applied.
That’s not true for many farms across North America and Europe, where an Agri Benchmark survey found that more than 50 percent of farmers rely upon their dealers’ advice on how and when to apply inputs.
Those dealers also often supply financing for input purchases, which is a key attraction for some, and something manufacturers would have to consider if they wanted to supplant local dealers.
“If manufacturers look to sell direct to farmers, it will be important for them to decide whether they are interested in taking on the administrative management and risk that come from offering financing arrangements,” says the report.
And most farms don’t have enough storage to hold all their farm’s needs for a season. Most need supplies delivered close to when they are needed.
That’s true in countries like Uruguay, Argentina and Ukraine, where on-farm storage is light, but farmers in Sweden and Russia are better resourced, often having enough room to carry six months of supplies.
For farmers, the main attraction of buying direct from manufacturers is lower prices. However, on that front manufacturers are also challenged by group-buying organizations that arrange large bulk purchases that members share.
“Unless manufacturers are able to offer better discounts, they will have a tough time competing against these platforms that are working for the farmer to drive down the cost through price transparency and competition,” says the report.
The challenge for those networks is to ensure that they can get access to supplies from manufacturers, which some have made difficult or rejected.
Farmers who now rely upon local dealers for their supplies as well as advice and financing aren’t likely to switch to direct purchases from manufacturers, Agri Benchmark concludes.
For farmers who don’t need the advice, storage and other services of local dealers, there is an opportunity for the manufacturers, however.
“Going direct can become a new marketing strategy for manufacturers, but in the foreseeable future it will not become an alternative to wholesale and local dealerships,” it says.
“In principle, this strategy is feasible in an environment in which a substantial share of the land is farmed by growers who do not heavily depend on their local dealers and the services they provide.”
