There are major changes taking place down on the farm and those changes will determine which suppliers will still be here 20 years from now. Realizing, and reacting to, the changes down on the farm are critical to future success on the supply side. Supplier changes in appropriate reactions to market changes have always driven not only survival, but growth.
So what are these changes?
1. Farm operator education. Nearly all future farmers will have college degrees and be very sophisticated in digital data. They’ll use both to thoroughly analyze on-farm performance and input purchasing decisions far more than today’s farmers. Suppliers will need to adopt to how and why these farmers buy as much as what these farmers buy.
2. Focus on profit. History shows us that not only do farmers focus on performance, but so do suppliers. That will change dramatically to one on profit. Economic justification will drive what gets purchased. Will suppliers move to that platform at the same speed as farmers? Financial and data analytics will impact all input purchases as well as when to sell on-farm products.
3. Farm size. Today’s farms are getting bigger. I anticipate this trend accelerating. Given today’s land owner age, there’s no question new ownership will step in. Look at animal production…all moved to production under larger operators. And some of them are actually company suppliers that took over control of production (Tyson has 24% of the beef market and three producers own 90% of the chicken market). I look for this trend to move into land ownership, management and production. Last fall, I was on a 16,000-acre farm in Indiana and another in Iowa. They have five employees each and use three 4-wheel drive tractors each to manage their cropland. A snapshot of what the future holds.
4. Marketing. Farmers will take more control of marketing. The database on crop prices is large. Future farmers will use it to determine per acre costs, margins and profits. And they’ll marginalize risk by spreading out sales. This folds in nicely with the profit focus mentioned above….suppliers need to be ready to intelligently discuss profit issues with customers.
5. Internet. This new source brings us product and information…conveniently, quickly and easily. And producer decisions made there are uninfluenced by salespeople. Today’s farmers are very frequently determining in advance of shopping what they are seeking and they shop online for it. And, often, they buy it. That affects the sales force and its role substantially in the ag industry. It will change the role these individuals play, if they play at all because of…
6. On-farm expertise. I think the critically few large farms producing 80% of today’s ag products will hire their own agronomists, who will control decisions on all crop inputs as well as a mechanic force that will control or affect all machinery inputs. They may also hire their own livestock managers, which has already happened. This displaces some of the value historically provided by local dealers and salespeople. Value provision of products will move from supplier to consumer. Not today, but in the next 10-20 years.
7. Artificial intelligence. Today’s machinery is on the verge of major breakthroughs in the use of A.I. Equipment that can actually identify a weed type and spray “just” it on the fly is about here. Spot spraying will in turn impact volume of chemicals sold. And that’s just one example. But, if A.I. can be used, it’s being developed. I anticipate in the near future we’ll see the use of equipment that is unmanned altogether. This not only increases efficiency and profits, but allows the development of even larger farms. Keep a close eye on the creation and adoption of A.I. and an even closer one on how it will affect the supply chain.
8. Micro land management. Crop input companies used to sell farmers product for the farm. Today, they sell it for a field. Tomorrow, they’ll sell it for soil types, elevations and other significant factors affecting performance and profit; i.e. for the acre. Same with variable rate chemistries and the list goes on. One can imagine the flexibility application machinery (see A.I. comments above) will need to have. This will even impact the actual product list company managers will decide to carry or drop.
9. Government. We’ll see a significant increase in water quality, erosion, chemistry, fertilizer, inheritance, wage regulation, ownership and even farm safety regulations. The alignment of farm practices approved by the government will determine government support payments, which will also become necessary as the world reaches equilibrium in production capability. (We don’t own the corn or soybean market anymore.) The government just can’t help itself from expanding its role and becoming more socialistic…it’s happening before our eyes, and we’ll see even more. That will increase costs and taxes to producers, suppliers and consumers.
10. Health. Vegan, protein-based and organic food sales are skyrocketing. There is a massive movement among society to live longer and that’s associated with healthy living. Each individual applies that to their own life, but unquestionably, traditional digestible products will be displaced by new developments; most of which won’t rely on animals or the crops that feed them.
Is all this horrible news? No, it’s inevitable news happening now. The past 100 years have produced more on-farm change than the previous 1,000 years. It’s not hard to imagine what the next 20 will do…this trend is speeding up; not slowing down. Change…a requirement for growth…and survival.
David Aeschliman is the CEO at www.growthworkllc.net and has expertise in developing growth strategies in selling and marketing. He has worked with more than 200 businesses across the country. You can reach him at email@example.com.