Attention on Agronomics

A consistent trend throughout this year’s benchmark study results is an increase in activity by dealers in agronomic services, training and data management platforms. 

This comes a year after respondents had abruptly cooled on these areas as points of emphasis within their business. After nearly doubling in 2014 from 31.1% to 54.1%, the percentage of dealers offering data management service continued to increase to 62.1% in 2015. 

But last year, only 48.9% of respondents said they offer these services, and 33% said they didn’t. The numbers rebounded in 2017, with 56.7% of dealers saying they offer data management services, 26.9% saying they don’t and another 16.4% indicating they plan to add these services in the future.

“Analytics to bring all of this data together to mean something to the producer if it’s simple and intuitive is a focus,” says one precision dealer in Kansas. “We have to do more than make pretty maps to show the banker and landlord. We need to provide tools that will be used to lower cost and increase yield for our farm customers.”

How these analytical tools are being delivered by dealerships continues to be diverse, but there was a substantial increase in use of in-house agronomists. Some 42.2% of dealers who offer data management services report staff agronomists as their primary delivery method, more than double the 2016 total (20%) and ahead if the previous high of 36.5% in 2015.

Also increasing in popularity is partnering with local ag chemical firms for data management services, with 12.1% of dealers choosing this method in 2017, compared to 5.5% last year. 

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In-house agronomists and precision ag managers continue to be the most highly compensated precision staff members, but dealers are also paying entry level precision specialists a higher average salary.

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While still the most popular approach for selling and supporting data management services, use of precision specialists to do so saw a double-digit decline, from a high of 81.8% in 2016, to 68.2% this year — the lowest total since 65.5% in 2013.

Despite the dip in precision specialists being the point people for delivery of data management services, dealerships are increasing their investment in agronomic training. Some 33.7% say they require agronomic training for their precision specialists, up from 22.8% in 2016.

Some dealerships are leveraging their in-house agronomists to be internal educators throughout the sales, service and parts departments to emphasize connection between farm equipment and the data being produced and collected on farms.

Notes one in-house agronomist at a large equipment dealership, “We’re trying to develop in-house agronomic training. The idea being if we can strengthen the relationship between the customer, their agronomist and us as a dealership, it really benefits everyone.” 

The rise dealers’ delivery of data management services also correlated to increases in agronomic-related services. Dealers offering seed and fertilizer recommendations jumped 10% year-over-year to an all-time high of 28.9% in 2017. 

A bigger increase came in dealers offering soil sampling services, from 14.8% in 2016 to 27.8% this year. While not quite at the peak of 30.6% in 2015, the total is more than three-times as high as the 2013 total (8.5%).

But this year’s list of precision services also revealed some notable declines — especially for hardware-related offerings. For the second year in a row, dealers offering GPS and RTK signal subscriptions dropped to 78.4%, after peaking at 96.8% in 2015. 

Also trending downward is dealers including yield monitor calibration service, with a low of 77.3% in 2017, after topping 85% each of the last 3 years. Other 2 year declines include pre-season setup and training and in-season technology support.

Overall, percentages in 8 of 11 service categories decreased year-over-year. It will be interesting to see if certain services continue to decline or simply fluctuate, depending on the market and customer adoption. 

Earning Potential

Many dealers have packaged precision services for customers, either offering tiered annual plans or a selection of seasonal options with different price points. 

However, for the first time since 2013, the percentage of dealers offering precision service packages to customers fell below 50% to 46.5% this year. This correlates to a dip in annual contracts being the preferred method for billing out services, from 23.5% last year to 13.1% in 2017. 

Coming off a low of 67.9% last year, more dealers preferred an hourly rate (72.3%) for billing out precision service this year. However, this is well off the 85.5% average from 2013-15.

Nearly doubling year-over-year was the popularity of a per-acre fee for precision services, from 4.9% last year to 9.1% in 2017. This isn’t surprising, given the aforementioned increase in dealers offering agronomic services. 

Dealers are also willing to pay for in-house agronomic expertise, with 21.6% offering salaries of at least $86,000 for this position, more than double the total from last year’s benchmark study. However, there was about a 20% drop in dealers paying staff agronomists $71,000-$85,000 year-over-year. 

But more dealers also appear to be paying staff agronomists less in 2017, with 13.5% reporting in-house agronomist salaries of $25,000-$40,000, compared to only 5% in 2016. 

Despite the compensation range, dealers tend to recommend investing in experience and quality when adding in-house agronomists.

“We didn’t know what we didn’t know, so to speak, and the first agronomist we hired had over 20 years of experience in the field,” says Craig Benedict, Integrated Solutions Manager with Reynolds Farm Equipment in Indiana. “This really helped our new program to take off. It also allowed us to implement a mentorship program so we could hire more young, inexperienced agronomists and train them under the leadership of our senior agronomist.”

While recruiting and retaining precision staff is a perennial challenge for dealers, they appear to be willing to pay more for supervisors. Some 82.6% of dealers pay precision farming managers at least $56,000 per year, well ahead of the 2016 total of 73.9%. This includes 20.3% providing salaries of at least $86,000.

Some 42.4% pay experienced precision specialists $41,000-$55,000 per year, about 8% off the 2016 total (50.8%), according to the study. About two-thirds of dealers (66.2%) compensate entry-level specialists with salaries of $25,000-$40,000, ahead of last year’s total (60.9%).

Departmental Shift

During the last several years, a growing majority of dealers have either established a separate department for precision farming or designated a precision farming specialist as the primary salesperson for ag technology.

This trend continues in 2017, with a few interesting developments. Some 60.8% of respondents have a dedicated precision farming salesperson, up slightly from 57.5% last year. 

Also on the rise is use of a staff agronomist as the primary precision salesperson, from 2.3% last year to 7.2% this year. This would make sense, given the significant increase in dealers adding in-house agronomists. 

After increases in 2016, fewer dealers are using the parts department (3.1%) and farm equipment salespeople (23.7%) to sell precision hardware and services in 2017, while use of the service department increased about 2% to 5.2%.

Allocation of precision staff also changed this year, continuing a shift away from personnel being part of sales, service and parts departments. Some 24.8% of precision staff are part of a dealership’s sales department, while 6.7% of precision staff are allocated to the parts department. 

Both represent 5 year lows and continue 4 year declines in each category. The study also reveals fewer specialists being allocated to the service department, with a low of 18.1% this year, vs. 24.3% in 2016.

Those dealers operating a separate or independent precision department increased from 40.1% last year to 47.4% in 2017. While the trend is toward a more centralized structure with a precision farming business, dealers also acknowledge the need to integrate with other departments to capitalize on opportunities. 

“We need to continue working on how we fit in with other departments and how to bill and organize sales that are packaged with iron sales,” says one dealer. 

Looking Ahead

With 5 years of benchmark data to review, it’s interesting to evaluate the changes in dealers’ revenue projections for business growth. In 2013, GPS and guidance was far and away the category dealers saw the most money-making potential, with 91% identifying the area as “most important” or “important” to precision business growth.

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Application technology and variable-rate systems topped the list, while GPS and guidance fell from second in 2016 to sixth this year.

While the category held the top position for 3 years, it ranked sixth among 10 opportunities for precision growth in 2017. Some 84.4% of respondents still view GPS and guidance as having revenue potential, but only 32.2% rated it as their “most important” area for precision growth during the next 5 years. 

The overall slowdown in the ag market is certainly a contributing factor to the outlook, but it’s reasonable to believe that the abundance and diversity of products, along with dealers’ ongoing transition into more data-driven tools are having an impact as well.

That’s not to suggest dealers are abandoning hardware as potential sources of precision profit — it’s just taking different forms. Five years ago, 60.8% of dealers viewed variable-rate systems as an area of importance, ranking it eighth out of 10 categories. This year, the category ranked second, with 61.1% of respondents deeming it “most important” to grow revenue and another 34% viewing it as “somewhat important” to revenue growth.

A new question added to the benchmark study this year asked respondents to forecast the next “big leap” in precision farming technology, and several cited the advancement of variable-rate fertilizing and planting. 

Says one dealer, “More precise placement and control of inputs will provide the most value for customers in the future.”

Consistently ranking high on the list of precision revenue priorities is application technology hardware. In 2013, it ranked second, with 85.5% of dealers viewing it as an important area to growing revenue. Little has changed in 5 years, as application technology tops the 2017 list, at 96.6%, with 52.2% of dealers identifying it as the “most important” area for precision revenue growth.

Similarly, planting and seeding controls have historically been viewed as a precision revenue priority. Starting in 2013, the category ranked third, with 76.9% indicating it as an area of importance. This year, the percentage is up to 94.4% — ranking it third — with 60% of dealers seeing it as “most important” to grow revenue. 

Data management has fluctuated throughout the years in order of importance. But it’s clearly on the radar of more dealers today than in 2013 when 67.9% viewed it as important and it ranked seventh out of 10. This year, 86.7% view it as an important source of revenue in the next 5 years, placing it fourth on the list. 

How dealers view future revenue opportunities may have shifted during the last 5 years, but their priorities for where they plan to invest in precision growth during the next 5 years largely remained the same, albeit with a few interesting changes.

Employee training topped the list in 2017, with for the first time, 100% of dealers viewing this area as a critical area of investment, including more than three-quarters (75.5%) who ranked it “most important.” This emphasis is consistent with dealers’ view 5 years ago, as employee training easily topped the list in 2013 (96.3%). 

Customer training ranked a close second in 2017, with 98.9% of dealers targeting this as an area of importance during the next 5 years, including 52.2% who ranked this as “most important” — not far off the 2013 total of 48.2%.

Precision staff continues to be a priority as well, ranking third on the list in both 2017 (93.4%) and second in 2013 (91.2%). Says one dealer of the greatest challenge facing his precision business, “Employee advancement and turnover out of the department is a concern. Being able to get fresh employees up to speed and ahead of our early adopter customers is something we’re continuously working on.”

Rounding out the top four in 2017 is marketing (93.3%), including 41.6% viewing this as “most important,” again close to the 38.9% in 2013. At the 2017 Precision Farming Dealer Summit, Pete Youngblut, owner of Youngblut Ag, an independent precision dealer in Dysart, Iowa, said the first step in branding a dealership and the precision department is figuring out what you want to be in the marketplace. 

“Your branding really starts with who are you?” Youngblut says. “I have a lot of customers who tell me ‘You have a great product. I really like my monitor, but I’m not buying a monitor, I’m buying you. I bought Pete, I paid for Pete.’” 

Looking at dealers’ greatest needs to grow their precision business, this year’s responses continue the trend of prior years. For the second year in a row, customer training took the top spot, with 98.9% of respondents viewing this as the “most important” or “somewhat important” area of need.

Technician training was a close second, at 97.5%, with 58.9% of respondents ranking this as “most important,” tops on the list. These areas ranked second and third, respectively, in 2013 revealing an ongoing effort by dealers to satisfy these needs.

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Customer training took the top spot again, while precision field days jumped to third, its highest placement ever on the list.

Five years ago, additional staff topped the list of dealer needs (88.9%), but tied for fourth in 2017 (83.3%) with beginning to bill for precision service. Interestingly, precision field days ranked third in 2017 (89.9%) — it’s highest placement ever — and well ahead of the 59.3% who viewed these events as priorities in 2013. 

Rounding out the top five, was data management (83.1%), including 39.3% who identified this as “most important” ahead of 31.5% in 2013, when the category was last on the list. 

Diverse Challenges

Last year, nearly one quarter of respondents cited low commodity prices as the biggest challenge they’ll face in the coming year. While fewer dealers cited this as a concern in 2017, as revenues showed signs of rebounding, the state of the ag economy continues to be a business growth barrier.

Says one dealer, “With the low commodity prices, customers are more reluctant to spend money. We have to come up with a good way to finance equipment and technology and not give away service.”

Still other dealers cited the need to develop more robust billable precision service programs and being more proactive with pre-season support. One dealer’s solution is to implement a more comprehensive tracking system for support tickets and sales quotes. 

Perhaps a good problem noted by about a dozen respondents is the need to keep pace with customer demand, whether through a need for additional staff or staying ahead of the most progressive customers’ adoption curve.

But the most commonly noted challenge in this year’s benchmark study is being able to consistently and convincingly show return on investment to farm customers with more advanced ag technology. Getting customer “buy in” through demonstrations, training clinics and cross-training within dealerships are ways some dealers plan to approach this obstacle. 

“Margins are continuing to shrink in the production ag economy,” says one Nebraska retailer. “We are addressing this through increased focus on ROI of precision technologies and increasing the collection of data illustrating this ROI.”


 

PFD Summer 2017 Contents