The U.S. crop protection chemical industry is a mature yet dynamic market. Among the factors driving the 2018 market at the distributor level are flat to declining major planted crop acreage, low commodity prices on most of the major crops, and new chemistry from several major research manufacturers for resistant weeds. Ag retailers continue to adopt and market biopesticides as they increasingly show effectiveness, either alone or combined with traditional chemistry, and as consumer demand for organically-produced food grows.
Leading Distribution Trends
Growth within the distribution channel is currently shaped by market drivers, such as identifying efficiencies, managing new regulations, customer relationships, adopting new streams of revenue, and mergers and acquisitions.
Among the three types of distributors in the United States, national distributors have the largest share of the total market. The “Big Four” national distributors include Tenkoz, Nutrien Ag, WinField United, and Helena. Nutrien Ag Solutions was formed in July 2018 when Agrium merged with Potash Corporation.
The second group, regional distributors, are developing different strategies, depending if they are with retail groups or without, driven primarily by crop protection seed strategies, but also fertilizer assets, as well as proprietary product lines of crop protection chemicals.
Over 36% of all crop protection chemicals, including specialties, are sold through some connection with a buying group. The main buying groups of crop protection products include Tenkoz, IAP, Aligned Ag, and WestLink Ag. The buying groups are refocusing on high margin specialty products, such as defoliants, soil amendments, inoculants, nitrogen stabilizers, safeners, and spray oils, in 2018. Another trend is their better alignment with manufacturers of biopesticides.
Leading Retail Trends
There are over 10,000 agricultural retail outlets or storefronts estimated for the United States, serving major and specialty agricultural markets, not including retailers in professional non-crop markets, and not including lawn and garden market retailers selling to consumers. There are also around 6,100 retail locations with bulk or mini-bulk crop protection sites, according to the Agricultural Retail Alliance. Kline’s distribution studies estimate about 5,000 retail locations with dry/liquid fertilizer blending capabilities.
Commodity prices continue to be a major influencer for retailers. Among other change drivers are environmental regulations, which are adding to costs and complexity to their operations, as well as falling incomes of farmers, which they are seeking to compensate by cutting costs in inputs, including fertilizers or increasing farm sizes.
The situation for agricultural retailers in 2018 remains stable with sales revenue and margins up slightly, as the industry has gone through several turbulent market conditions over the past 10 to 15 years.
Agricultural retailers have either adapted to change or, in many cases, been at the forefront of these industry changes. Leading Distributors in the U.S. Crop Protection Industry: A Strategic Market Analysis of the leading national and regional distributors, larger cooperatives, and buying groups, which total 94% of crop protection manufacturer net sales.