Nearly 500 attendees were on hand at the Sawgrass Resort in Ponte Vedra, Florida, Dec. 1-3 for the 2009 Agricultural Retailers Association (ARA) Conference and Exposition. Speakers at the event painted a generally optimistic picture for the industry in the coming year, or at least a return to more normal patterns after the volatility of 2008 and 2009.
Agrium President and CEO Mike Wilson, one of three keynote speakers on Dec. 2, said his company remains “quite bullish” on sector fundamentals, citing corn prices above historic levels and soils in need of nutrient applications after several years of rate cutbacks.
“At current prices, farmers will want to maximize yields,” Wilson said, but this comes after an “unprecedented decline in U.S. demand in all three nutrients” in 2008/09. “Record corn yields have drawn down soil reserves,” he said. “We expect increased demand due to restocking and increased application rates.”
Wilson referred to Agrium’s “aggressive growth,” which includes nine acquisitions in five years. The company is “constantly focused on lowering our cost position and diversifying,” he said. “It’s the only way, in my view, that you can survive.”
Wilson began his speech by saying he was eager not to talk about the “holy trinity” of Agrium, CF, and Terra. “I wake up in the morning wondering what I’m going to be quoted on today,” he said. The audience was not prepared to let him off the hook, however. Asked how Agrium buying CF could be good for the ag retailer, Wilson said, “If we don’t consolidate in this industry, we aren’t going to lower our costs, and if you’re going to survive, you have to improve your cost position” due to increased competition with imports.
“Don’t assume all consolidation is bad,” he said, referring to arguments that prices will go up if there are fewer players at the table. “We don’t have this control of price that some people believe.” Wilson said today’s markets are determined by global supply dynamics. “Always watch the floor price and who is setting it,” he cautioned, noting that European and Ukrainian producers are setting the urea floor price in today’s market.
Wilson also assured attendees that Agrium’s retail division is operated as a separate business. “If you want to destroy retail, send your N, P, and K guys down to run it,” he said. “That’s why our retail is run entirely separate.”
Of the three primary nutrients, Wilson said potash will be the most interesting one to watch over the next three to four years. “All you need is a raw materials supply and a foolish banker,” he said, referring to the cost and time required for a greenfield potash mine. In the near term, he said potash supply is long, and negotiations with China must be finalized before the floor price can be determined. “We have to get China behind us,” he said. “That will tell us where the floor is.”
Referring to the market boom in early 2008 and the plunge that followed, Wilson said “we should have all been smart enough to know better after a spike like that.” He cautioned, however, that the global industry is likely headed toward more volatility and higher risk. “The environment we’re in today is much more complex,” he said. “You have to understand the world, not just North America.”
Bill Buckner, North American head of Crop Protection, president and CEO of Bayer CropScience, also addressed the Dec. 2 conference crowd, saying 2010 looks “fairly promising” after the “anomaly” of 2008 and 2009. “We won’t see the growth of 2008, but it will shape up to be a pretty decent year,” he said.
Buckner said the industry must “stay ahead of the resistance game,” claiming that growers would see a 48 percent reduction in yields without crop protection chemicals, but could realize theoretical yields that are 72 percent higher than current levels through the implementation of new active ingredients and new technology platforms.
Buckner said the crop protection industry is spending more time dealing with public policy issues than ever before, however, referring to the impact of special interests and government regulation as “not the audacity of hope, but simply the audacity.” Citing legislation regarding endangered species, clean water, and climate change, he said “agriculture is a passenger on a colliding train.”
Buckner said the industry needs to talk about “crop protection products” instead of “pesticides.” He also talked about the differing definitions of sustainability, and the movement to reject biotechnology and equate organic farming with the best ag production methods. “Everybody is defining something different for agriculture,” he said. “Agriculture is in the news every day. We have real issues in front of us, and great opportunities in front of us.” He concluded by saying the public is “receptive to our message if we tell it properly.”
Alan Barkema of the Federal Reserve Bank of Kansas City rounded out the morning’s keynote addresses with a sobering look at the economic downturn, calling it the most severe since the 1930s, with extraordinary peak-to-trough declines from December 2007 to the summer of 2009, and the deepest contraction of the U.S. labor force since World War II.
He said unemployment rates are likely to ratchet up before starting to come down in 2010, but the financial markets are far more stable than they were one year ago. “The recession is over and the recovery has begun, but we have a lot of work to do,” he said.
Barkema said the $1.5 trillion in economic stimulus was “effective in pulling our economy back from the cliff.” He said consumers remain focused on balance-sheet repair and are unlikely to return to previous spending patterns anytime soon. A recovery in the residential real estate market is underway, but at a very slow pace. He said businesses and business leaders remain cautious as well, and the $3.5 trillion commercial real estate debt remains a big threat.
Barkema said agriculture is in pretty good shape going forward, but lenders are now very careful in recalibrating risk. “This recession was a wake-up call,” he said. “Consumer spending is what drives the economy, but you need to be careful if that spending comes at the expense of increased leverage.”
ARA also presented a number of awards at the conference, including 2009 Ag Retailer of the Year to Willard Agri-Service of Frederick, Md.; the 2009 ARA Distinguished Service Award to Dave Coppess, executive vice president of sales and marketing for Heartland Co-op in West Des Moines, Iowa; the 2009 Lifetime Achievement Award to the late Jack Eberspacher, former ARA president and CEO; and the 2009 ARA Legislator of the Year Award to U.S. Rep. Collin Peterson (D-Minn.).