Some 650 attendees were on hand in Austin, Texas, Dec. 2-4 for the 2008 Agricultural Retailers Association Conference and Exposition. The attendance was a record for the event, organizers said, and reflected the interest and concerns that industry representatives have for what conference emcee Dr. Dave Downey of Purdue University described as the “volatile, highly chaotic market we live in today.”
Attendees listened to a range of speakers during the event, from production company CEOs to a panel of both small and large retailers. Nearly all of the speakers highlighted the challenging environment facing the agri-retail industry at the moment and the abrupt change in market conditions that the industry has experienced in the last year. “It’s like somebody just dropped a bomb, and caused everything to be so different from what it was just a few months ago,” Downey said.
Jim Prokopanko, president and CEO of The Mosaic Co., spotlighted both the challenges and opportunities facing the industry. While the global financial crisis, crop nutrient market recalibration, and late U.S. harvest dominate the former category, Prokopanko said biofuels, population growth, and income growth remain positives for the industry. “People still eat during economic downturns,” he said.
Prokopanko said grain and oilseed demand has accelerated, and will continue to do so. “The world adds the equivalent of another Thailand and Laos to global population each year,” he said, and people upgrade their diets as income climbs. Prokopanko said one billion people are projected to join the middle class in China and India by 2025, and that is “good for crop nutrient demand prospects.”
Prokopanko said global nutrient use will increase to more than 230 million mt by 2020 due to the demands of biofuels and food production. The long-term outlook continues to look “rock solid to us,” he said.
Despite those positive fundamentals, Prokopanko said a “perfect storm” of negative variables has hit in recent months, including slower economic growth, the credit crunch that has limited sales, and the commodity sell-off that has eroded farm economics and nutrient demand. He cited a “free-fall” in raw materials costs, noting sulfur prices as a case study. Plunging DAP and urea prices have resulted in a stalemate at the retail and wholesale level as buyers step out of the market, he said.
Prokopanko highlighted the ongoing uncertainties facing the industry: will we see another “perfect storm” next spring; will the poor fall result in a large spring fertilizer season; will the financial markets stabilize and credit availability increase; can the supply chain move the volume needed next spring; is this the year when “the sky really is falling.” Prokopanko likened the market volatility of the last year to an Everest expedition, noting that “more people die on the descent from Mount Everest than they do on the ascent.”
Prokopanko fielded several questions from the audience, several of which focused on managing risks as well as relationships at all points along the distribution chain, from producer to farmer. “How do you finance large inventories at high prices for long periods of time? I don’t have an answer for that,” he said. Prokopanko also addressed charges that producers had decoupled themselves from their real customer – the farmer – as fertilizer prices marched up in 2008. “Many of the people in our organization have a real connection to agriculture,” he said.
Greg Page, president and CEO of Cargill Inc., used his presentation to answer questions submitted in advance by ARA members, ranging from the impact of ethanol to food safety issues. He noted that the incoming administration under Barack Obama is supportive of free trade, and referred to Rahm Emmanuel, Obama’s chief of staff designate, as an “ardent” free-trader. “We should all be encouraged by that,” Page said.
Hugh Grant, president and CEO of Monsanto, highlighted his company’s progress on new soybean and cotton platforms, as well as the development of first-generation, drought-tolerant corn seeds by 2012-13. Grant said doubling the yields of corn, soy, and cotton by 2030 remains a primary goal. “We need to produce more, with less, on a shrinking resource,” he said. “The thing that we are really focused on is driving yield.” Grant said the world “will depend on American, Argentinean and Brazilian farm production, and the ingenuity of the American farmer, for years to come.”
John Lagemann, vice president of sales for John Deere, also highlighted the need to increase agricultural productivity, and noted world protein demand and renewable energy as positive ag fundamentals. “Global food demand is a sustainable, longterm proposition,” he said. Lagemann cautioned, however, that “market volatility is here to stay,” although “hopefully not the spikes we’ve seen in the last six months.”
Jack Eberspacher, ARA president and CEO, alerted attendees to ARA’s legislative successes in 2008, including the inclusion of the Agricultural Chemicals Security Tax Credit in the new Farm Bill. Sen. Pat Roberts (R-Kan.) was the recipient of ARA’s Legislator of the Year award for his support of the tax credit bill.
Eberspacher also highlighted ongoing concerns, including the Chemical Facility Anti-Terrorism standards and efforts to revisit inherently safer technologies mandates when Congress considers permanent chemical security legislation; transportation issues such as the hours of service exemption, which expires at the end of 2009, and the railroads’ efforts to get out of their common carrier obligation to transport toxic-by-inhalation chemicals such as anhydrous ammonia; and environmental issues such as spray drift, nurse tank testing, and the prospect of cap-and-trade climate change legislation.
The conference also featured a lively and candid panel discussion by four ag retailers, including Kevin Still of Co-Alliance LLP, Johnny Council of The Lyman Group, Dean Williams of Agrium Inc., and Jim Davis of Meherrin Chemicals. The discussion focused on credit and pricing issues, as well as strategies for inventory management and price risk management. All four noted the current stalemate between retailers with plenty of high-priced inventory under the roof and farmers who are aware of the falling markets.