Concept: Co-operatives have always played a role in equipment distribution, including with the majors where the co-op is the machinery dealer in town, says Russell. The idea here is that a co-op, utilizing its existing infrastructure, could provide additional services to include parts and equipment to a greater extent, if they so desired.
Appeal: Glass notes that co-ops have been very successful in some cases as alternatives for shortline dealers. He recalled several examples, including one in Tennessee that was doing several millions in sales for Woods Equipment each year. They tend to be well-funded and not present credit concerns, he says.
Russell says it's an interesting discussion because of their histories of serving member farmers and the technical service capabilities inherent through maintaining their sprayers and other equipment, which is one of the most limiting factors of all other potential models. Russell believes the progressive co-ops will continue to seek value-adding services, evidenced by the greater attention on precision ag.
"We've already started discussions with seed, feed, fertilizer, herbicide dealers, precision farming dealers and even agronomy organizations," says Boak. "They're just discussions at this point, but I would say we're seeing an encouraging level of interest. Again, it would be similar to the shortline super store idea except they'd only be looking at a haying partner or a self-propelled sprayer company. There'd be no one size fits all, and it would be negotiated region by region."
The co-ops Salford has spoken with, seem to have some interest, but nothing has gone beyond the discussion stage. "Of course, anything can happen once you drag money and the bankers into it, but they seem to be reasonably receptive to the idea."
Boak says the upside is the common interests between the co-ops and machine manufacturers and the attraction of being a one-stop shop in terms of, say, seeding and tillage. "We'd bring in a hay guy where appropriate and a sprayer guy. There'd be a lot of locations, lots of outlets because we find that - especially if there's an agronomist tied in with feed, seed and fertilizer - they work with fairly small areas and maybe only 200 or 400 customers. But everybody shops with them," he says.
He also points out that the co-ops already have experienced staff especially on the administration side and the sales side. Obviously, parts and service would need to be developed.
For a company like Monosem that manufactures planting equipment, co-ops could prove to be an ideal partner, says Bakker. "Seed and fertilizer goes very well hand in hand with planters," he says. The only issue is we would need to supply technical support. The advantage is these people are much more focused on your product because they don't have to think about 25 or 30 other products that they need to sell."
Limitations: While the extension into machinery sales and service is possible, it's not necessary for the co-op. "You'd have to convince the co-op management of some profitable opportunities that they're overlooking," says Glass.
Despite the fact that co-ops served his business well ("we had a guy that did nothing but call on co-ops"), Glass notes that the reality of sales in a co-op tends to be a 'look it up in the book' approach. "Equipment involves in-depth discussions about function, operation, how and where to use a machine. Training can address it, but it's a much different dialog to retail equipment than the other items you find in co-ops."
Boak recognizes that selling inputs and equipment are two different animals. "It's extremely rare to find a salesperson who's able to walk in both worlds. And that is one of the cons. There's a bit of a disconnect between the machinery and the input side, one doesn't necessarily understand the other. The infrastructure would have to be developed because their buildings wouldn't be appropriate and some investment would be needed."
Conclusion: Farm Equipment went to two large co-op groups to see if extending into equipment to meet members increasing machinery demands was at all possible. You never say never, but there doesn't appear to be any worry about co-ops encroaching on dealers' business.
Brent Wiesenburger, precision ag manager of the 26-location South Dakota Wheat Growers (SDWG) says, "Machinery has never been in our core competency, which was all about forming buyer's groups and ensuring crop input availability.
"Our shops are just big enough to get the equipment we own up and running for the next season. In fact, we lease facilities at local producers so we can handle facility demands. Finding people to do all the things we currently offer is a problem, too."
While SDWG offers an array of precision farming equipment and services (SDWG was Precision Farming Dealer's Most Valuable Dealership for 2014), the only iron they currently sell to farmers are spreaders (which are not inventoried). Tiling, strip-till and disc-injection fertilizer applicators are getting a look, however, because their use is very technical and variable to local conditions.
Jeff Doll, equipment sales and marketing manager, Winfield, Shoreview, Minn., echoed Wiesenburger's view. Winfield is wholly owned by Land O'Lakes Co-op, and distributes crop protection products and seed to co-ops.
"Our expertise is crop inputs," Doll says. "With the strong market, iron dealers are doing well and doing everything they can to service the customer. It's better to let them be the experts." Due to volume pricing equipment dealers see, co-ops wouldn't be able to promise any real pricing advantage, he says.
"Fortunately, there are lots of dealers we can partner with - that's where the opportunity exists," Doll says.
Wiesenburger adds that a co-op has a lot to lose by going outside of its core, which is where the machinery-selling discussion screeches to a halt. "In a large co-op situation like ours, everything you do has to significantly exceed your farmer-members' expectations. If it does not, you risk their entire seed, chemical and fertilizer purchases - they hold it over your heads and it can escalate quickly. You can end up sacrificing a $100,000 margin on your core products with a product sold that only brought you a $1,000 margin."
But Boak remains encouraged about this concept, especially teaming with co-ops that offer agronomy services. While exhibiting at an equipment show recently, he says they were introduced to a number of agronomists who had been sent by their clients to discuss his equipment. "Their questions were actually much more direct and much more focused than the farmers' questions and they leave the price out of it. They talk about what will this machine do and what else can we do with it. So I think there'd be a lot of value in that type of partnership."
Exclusively online extra
- Alternative Distribution: How Many Options Really Exist?
- Independent (No Mainline Tractor or Combine) Servicing Equipment Dealers
- Traditional Dealerships Setting Up Separate Entities to Sell Shortline Equipment
- Manufacturer-Owned Company Stores
- Joint-Venture Dealerships Owned by Several Shortline Manufacturers
- Co-Ops Adding Farm Equipment to Their Offering
- Direct to Farmer Sales; Subdealer Model for Service