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CoBank: Ag Mergers Alter Landscape for Farm Retailers
USAgNet - 04/20/2018

Three market-influencing mergers are reshaping the crop protection and seed industry, and that transformation has important implications for the farm supply sector, according to a recent report from CoBank's Knowledge Exchange Division. Many agriculture retailers will likely face operational decisions due to these changes.

"Mergers in the seed and crop protection industry will likely further complicate business in the farm supply sector," said Will Secor, CoBank economist. "Farm retailers are already facing new competitors and business models that challenge their success and way of doing business. Meanwhile, their farmer-customers are becoming larger and beginning to come from a new generation-factors that are changing what they need from their local grain and farm supply company."

Combined with the tight margins of the stressed farm economy and fierce business competition, this confluence of dynamics has ratcheted up the pressure on the agriculture retail sector.

Still, farm retailer objectives must remain the same regardless of these challenges or merger activity: gain efficiencies and remain relevant in the face of a changing industry.

Divestments by the parties involved in each of the three mega-mergers-Dow-DuPont, ChemChina-Syngenta and Bayer-Monsanto-will likely maintain significant competition in the seed and crop protection markets - and should ease price increase concerns, according to Secor.

However, questions remain regarding manufacturer rebates and the changes the merged companies are expected to bring to the rebate process. These rebates are often the key to agriculture retailer profitability so they are keeping a keen eye on the process.

The report suggests that merged companies will want to capitalize on their size and greater link between seed and crop protection products. Rebate changes will likely provide incentives for larger volume thresholds and tie discounts together across seed, crop protection and farmer data products.

CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture, rural infrastructure and rural communities.

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