Alan Guebert is an Illinois farm journalist.
Sorting through 1998 farm chemical purchasing programs is like buying a computer or a pick-up truck: as soon as you sign the cheque you immediately feel like you paid too much and dickered too little. That is especially true this winter with an unprecedented spider’s web of chemical deals and rebates. Many are so confusing that some farmers have developed computer spreadsheets to analyze their myriad of purchasing options.
And that’s the least of farmer complaints. Increasingly, farmers note some chemical rebate programs are embossed invitations to over-report farm expenses, under-report taxable income, shortchange landlords, and give global ag firms millions of interest-free money to use for up to a year or more.
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Surprisingly, farmers aren’t the only ones who hold those views. Chemical dealers, company field reps and corporate executives – none of whom would talk on the record – agree. Many dislike the paper-generating, record-heavy rebate programs. So why offer the deals at all? “Honestly?” asks an executive with a major chemical company. “Because despite the faults farmers see, rebates work. If designed right, they usually bring increased sales and the chance for increased profit to dealers and companies. Farmers win, too, because of lower chemical prices.” But, farmers lament, those lower prices usually are backloaded: to buy the chemicals they want, they must first fund the rebate. The rebates come later; often much later.
For example, many farmer complaints currently center on Harvest Partners, a very successful “marketing incentive program” begun in 1993 by chemical giant American Cyanamid. Farmers who buy AmCy crop products receive “credits” or “points” that can be converted into cash, travel, gifts, goods, or even donations to charity or community service projects.
But the points, according to program rules, are not redeemable until the end of the season in which they were accumulated. The points, gripe some of the more vocal of the 375,000 U.S. farmers in the Harvest Partners program, are really cash – their cash – which they can’t get for months or longer because all purchases of any popular AmCy or Novartis crop products are tied to the Harvest Partners program. In effect, they yelp, in order to buy AmCy and Novartis products, farmers are forced to float the big firms interest-free loans because Harvest Partners doesn’t permit rebate redemptions until after the growing season.
“One way I view it,” explains one farmer, “through the delayed rebate I gave Harvest Partners about $5,000 interest-free to use for a year, or about $3 an acre, because I couldn’t buy the chemicals without going through Harvest Partners. Now, a year later, I’m finally getting my rebate.”
Another farmer worries about the tax implications of rebates: “I spent $50,000 last year on chemicals with $6,000 of it rebated this year. I expensed the whole $50,000 last year. Now I’m getting my $6,000 back. When I do, should I file an amended return to lower that expense to $44,000? Should I declare the $6,000 rebate as income this year? If so, I’ll bet there isn’t one farmer in a thousand who does it.” And, notes a third farmer, “The rebates should be split with crop share landlords. Are they?”
A few farmers are becoming so tired of the complex programs they are shifting away from products tied to rebates. They’re not alone. The great rebate debate may push chemical companies to a cathartic climax, also. “The rebates may have gotten out of hand,” explains a chemical marketer. “My guess is the discounts and rebates will be cut back or eliminated in the coming years because it’s hard for us to make money on them. “They’re just a tool, an expensive tool, for a company to get more than its fair share of the market. When they get that extra slice, the rebates will likely disappear.”
