A recent survey of 300 U.S. farmers by L.E.K. Consulting highlights the implications of trends that are changing the competitive dynamics for manufacturers, retailers and other suppliers to growers.
"The very definition of the American farm has changed over the past 20 years, which is having a profound effect on how growers think about crop yields, input choices and farming technology," says Peter Walter, Managing Director at L.E.K. Consulting and author of 2018 Grower's Survey: Perspectives on Shifting Input Purchase Decisions. "Amid the demographic changes in the sector, growers are certainly investing their dollars with maximized crop yields top of mind."
The growers' landscape is changing dramatically due to an aging grower population, an increase in farm size but a steady decline in total farmland and number of farms, emerging disruptors in the agribusiness supply chain, and increased consumer enthusiasm for non-GMO and organic foods (in fact, certified organic farmland grew 6.6% per year from 2011 to 2016).
L.E.K.'s survey results bring to life the following new realities for companies that rely on growers:
- Growers will spend more per acre in order to get higher output, and they will spend it on branded products. More than half of growers say they spent more on inputs ― any product used for pest control or soil fertility management ― per acre in 2018 than in 2015. Further, more than half of growers expect to increase spend per acre through 2019, even if commodity prices remain at current levels. The biggest winner: branded products, which are valued by growers for their trustworthiness in performance despite higher prices. Growers say they expect to increase their use of branded inputs by quantity to 55% in 2019, up from 49% in 2015.
- Precision agriculture is a growing area of focus ― because it works. Nearly half of growers today say they use precision agriculture services (e.g., soil sampling, monitoring and mapping; equipment positioning and guidance), with about 25% taking advantage of nine or more different applications of precision agriculture. Growers that use these products say that yields improved by nearly 60%. Almost one third of growers who use precision agriculture say reduced input costs and improved yields were the key benefits.
- Ecommerce is reshaping supply chain channels. Sixty-seven percent of growers say they are aware of ecommerce disruptor Farmers Business Network (FBN), a farmer-to-farmer network that provides aggregated analytics to subscribers and also sells input products. Notably, half of millennial and Gen X growers say they use FBN, while only 7% of baby boomers do. In fact, millennial growers say they expect to increase their spend through FBN by about 30% from 2015 to 2019. While FBN's share of growers' spend is trending upward, their spending through other supply channels (e.g., online, local/regional suppliers) has remained relatively flat over the past two years.
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