Precision Agronomy Services Will Factor Heavily in the Future of Ag Retailing

Key Points

• Ag retailers, including farm supply cooperatives, are benefitting from crop farmers’ strong spending on inputs and agronomic services in a second year of above-average grain prices.
• While agronomy profits will generally remain favorable for the next six to 12 months, we see several emerging structural challenges that could permanently reduce farm supply cooperatives’ returns and their ability to pay patronage over the long term.
• Cooperatives’ challenges include the growing market power of suppliers (input manufacturers), larger and more sophisticated farm customers who demand new products and services, difficulties attracting skilled labor, and increasing competition from ag equipment dealers who provide competing farm technologies.
• The logical path forward for farm supply cooperatives is to expand their offerings of precision/ digital agronomy services and capture more fee income from offering advice rather than relying on product commissions and rebates.
• While buying ag tech startups and/or developing technology in house are options for farm supply cooperatives, CoBank sees revenue-sharing partnerships with proven technology service providers as the more compelling choice from a risk-reward perspective.

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