Efficiency sells for product marketers, farm supply stores

Stanislaus Farm Supply Marketing Manager Tony Weatherred, left, assists Modesto farmer Robert Conway with locating some parts at the company's Modesto location.

Businesses that market supplies and services to farmers and ranchers often reflect the economic well-being of the farming sectors they serve, and those businesses report a mixed outlook as they and their customers react to the economic recession, water shortages and other factors.

On the retail level, farm supply stores that sell everything from seed to fertilizer to hardware and other services say they saw a drop in sales in 2009, as farmers and ranchers tightened their belts. But businesses that focus specifically on supplies and services that improve efficiency and cost savings said their sales have tended to fare better.

Sam Bettencourt, president and chief executive officer of Stanislaus Farm Supply, a farmer-owned cooperative with locations in Modesto, Merced and Nevada, said business was down significantly last year.

"People became more cautious and watched what they were spending, and that impacted our industry," he said. "I talked to others in the industry and they seemed to be suffering the same."

With stores situated in the heart of California's Central Valley, where many of the state's dairies operate, the farm supply organization has been feeling the economic blows affecting the region's dairy farmers. When dairies don't do well, farmers who grow dairy-related crops also suffer, and all that affects his business, he said.

Scot Hillman, chairman and managing partner of J.D. Heiskell & Co., which manufactures livestock feed, said he can relate. He noted that his customers are now more price conscious, changing their feeding programs and looking for efficiencies where they can to cut costs.

"The market has changed, and we have to recognize that," he said. "That means we're going to have to really work with our customers on the economic end and find new ways to get nutrition into their animals. We're very conscious of people's ability to pay. So when people ask, how's business? Well, business is great, but getting paid is tough."

But not all sectors of California agriculture were in the same predicament. Bettencourt noted that some Central Valley crops did well in 2009, including beans, tomatoes and rice, and that translates to increased sales on products related to those crops.

To adapt to the changing economic times, Bettencourt said he's adjusting his inventory "to get more in line" with how farmers are operating their businesses, that is, dedicating more shelf space to products that are essential to farming.

"We are marketing and helping customers with things that they need to get optimum, high-quality production," he said. "In this regard, I think things are generally starting to improve."

In the case of Marrone Bio Innovations of Davis, which makes biopesticides geared for organic crop production, business has been "relatively successful," said Celeste Gilbert, a product development specialist with the company.

That's because there are relatively few effective products suitable for organic production, she said, and because growers who farm their crops conventionally are increasingly incorporating biopesticides into their pest management programs, she said while exhibiting the company's products during the World Ag Expo in Tulare last month.

Not only are farmers more choosey about the type of inputs they use, but they're also conscientious about how much they use, and that has benefited companies such as Idaho-based Western Laboratories, which does testing and analysis on everything from soil and plant tissue to feed, manure and irrigation water.

Harry Kreeft, a nematologist and plant pathologist with the company, said he's seeing more farmers doing grid sampling for precision farming, so they can target their problems and use inputs efficiently.

"With the downturn in the economy and the limited use of chemicals, grid sampling becomes more and more important," he said. "It offers farmers tremendous savings on their fertilizer and chemical bills."

He also noted that when farmers have disease or crop fertility issues, they like to take care of the problem, especially with higher-cash crops, because these problems could cost them money in the end if left untreated.

The pursuit of increased efficiencies on the farm has also helped companies that offer precision farming technologies, such as Precision Ag Solutions Inc. of Dos Palos, which specializes in sales of GPS systems, used to improve accuracy in tillage, crop treatment, spreading or harvesting.

Cory Mendes, service manager of Precision Ag Solutions, said he's seen increased sales of this equipment, with one of the best-selling items costing about $30,000.

He said even though farmers may be holding off on buying larger-ticket items such as new tractors and other equipment, they are investing their dollars in purchases that will help them save money in the long term.

And not all businesses that deal with farm equipment are hurt by the recession. Auction companies are actually doing well, said Breinn Richter, a marketing specialist with Ritchie Bros. Auctioneers. She said that farmers may not be buying much new equipment these days, but they are in the market for something used.

"Either they're fixing what they have and trying to maintain that, or they're buying used things that are already in the market so they don't have to put up a lot of capital," she said. "Traditionally, when you go to an auction, you feel like you're going to get a good deal."

Back on the retail side, Mendocino County Farm Supply manager Tim Cooper said even though his store experienced a 15 percent drop in sales last year, growth in one customer segment has helped.

"Backyard farming is picking up," he said. "We see lots of people coming in to buy six or eight chickens. We couldn't keep chickens in stock last year for all of the people doing that. We're developing garden areas and helping people grow home gardens."

Karen Ellsworth, chief financial officer of San Luis Obispo County Farm Supply Co., which has four locations, described 2009 as a "rocky year," with sales "down substantially" from 2008, because customers across the board did not spend as much on farm supplies.

She said she expects similar results for this year, in terms of sales volume and profitability.

Something that has helped business, she noted, is the many different commodities and customers that visit the San Luis Obispo County Farm Supply locations.

"Here we have grapes, row crops, cattle and dryland farming, so our diversity has really helped us and it has always helped us fare the bumpy times," Ellsworth said.

(Ching Lee and Christine Souza are assistant editors of Ag Alert. They may be contacted at clee@cfbf.com or csouza@cfbf.com.)