How retailers can guide their farmer customers through a fluctuating ag economy
John Brubaker
No matter how you spin it, recent net farm income predictions haven’t been pretty.
The forecast for 2024 is $140 billion — a 4.4% drop from 2023. This comes after net farm income already declined 19.5% from 2022 to 2023. In some pieces of the Midwest, net farm income is at its lowest point in the last three decades. And economists don’t exactly have an optimistic view of how the next two or three years will play out.
There’s a long list of macro-level factors impacting these predictions:
Input costs
Labor costs
Interest rates
Lower (and/or fluctuating) commodity prices
Expected drops in direct government payments
The challenges of this era in agriculture are obvious. And these challenges don’t stop at the farmgate: they trickle back to retailers, distributors and manufacturers in the input value chain. When farmers make less money, they prioritize purchases and rely on their relationships with their retailer to make the best purchase decisions.
But these times are never without opportunities.
For retailers, it’s time to meet the moment. Those who are better prepared to guide their grower customers through further fluctuations in the farm economy will be the most successful long term.
How retailers can add value in an era of declining net farm incomes
1. Proactive planning with your stronger grower customer relationships
Farmers have always been frugal, yet they have historically preferred to make crop protection purchase decisions at the time of need.
Input costs are a major strain for any operation. When a grower writes a check for an input, they want to be sure they get their money’s worth. Of course, this means ensuring they get the right product for their acres’ specific needs.
As net farm income tightens, growers are increasingly likely to adopt just-in-time purchasing for inputs. This approach will lead to an even more unpredictable year, further jeopardizing your ability to turn a profit in an already challenging environment.
Retailers who take the initiative to plan with their core grower customers well before the season begins will put their growers and themselves in a position for success in an unpredictable situation.
As a retailer, it’s critical you know your net cost much earlier this year and are able to take full advantage of all manufacturer and supplier programs to make a plan for your growers with a competitive price for each product.
2. Prioritize finding the best cost
Offering the best input prices to farmers — especially when they need those prices the most — doesn’t happen in a vacuum.
To feel comfortable offering lower prices, you need to be confident you purchased products from the manufacturer at the best possible cost.
With tools to optimize pricing, you can pass those savings on to farmers. They’re happy because they’re saving money. You’re happy because you’ve minimized upfront costs and avoided overpaying for product.
Having better data in hand lets you understand a product’s true cost and see where there’s room to adjust in the marketplace. This data should include all manufacturer and distributor rebate programs to help maximize rebate opportunities.
3. Use market segmentation to better serve your grower customers
As margins tighten up and down the ag value chain, you need to use every available tool to mitigate that impact. Market segmentation is one strategy still underutilized by retailers.
By categorizing your customer base (by level of service required, region, or farm size, for example), then assigning customized pricing to each bucket of customers, you ensure better margins. But importantly, you’re also giving your growers a better, more tailored buying experience — which will keep them coming back to you.
Related content: How optimizing your internal pricing processes can improve your profitability.
How Smartwyre enables retailers to more proactively handle an unstable farm economy
In agriculture, there’s never been a time where it hasn’t been true that “every dollar counts.” But as net farm income predictions continue to drop, that sentiment might be truer than ever.
Those larger trends at the farmgate eventually trace back to input retailers and distributors. This could lead to lower revenues. Or, this era could be a chance for agribusinesses that have the tools to find more opportunity, optimize margins, and further strengthen their grower customer relationships.
Smartwyre offers those exact tools through:
More real-time visibility over manufacturer and distributor programs so you can optimize rebate opportunities and offer programs that customers are more likely to take advantage of
Tracking and verification of program payments to ensure accuracy and maximize rebates
Better costing processes, so you can get products at the best price from manufacturers upstream — and you don’t have to pass on extra costs to customers through higher pricing downstream
Customer segmentation that empowers more competitive pricing and more personal buying experiences
More streamlined pricing processes and communication, so your salespeople are better equipped to win customers and build better relationships
If you’re looking for the tools to empower your business to meet the moment — reach out to the Smartwyre team today.
