The reason we got into agronomic services 6 years ago was after a good equipment customer of ours made the decision to get into an air drill with variable-rate seeding capability. He’d gone to an independent agronomist who developed a seeding prescription with both a nutrient and seed variation. When that farmer took that prescription, got into the cab and plugged it in as he was told to do, it didn’t work.

So we were in a position where the independent agronomist was pointing the finger at us saying it’s an equipment problem, and we were saying we don’t know what was on the USB stick; the equipment is fine. The customer paid a lot of money to both parties and was left hanging in the middle.

I call it our “eureka moment.” If it comes down to us as the equipment dealer or the independent third parties providing agronomic advice, we, as equipment people, are going to have the greatest capacity to ensure the equipment works. We understand the equipment; we’re fairly strong in the controls. To deliver a seamless experience when the farmer climbs into the cab, we’d need to learn the agronomy realm.

It was apparent, and became more so over time, that the bulk of the agronomic decisions producers are making are carried out through the equipment. And it’s important that we’re dialed into those agronomic intentions so that we can ensure the machine is delivering what the producer wants. Our belief has grown stronger over time that we, as an equipment dealer, must understand this space.

Hiring Agronomists or an Iron Dealership

Our intention in hiring an agronomist was to understand the relationship between the equipment and the seed, nutrient and application prescriptions. Being on staff, he’d deal with this mating of prescriptions to equipment and potentially develop prescriptions for farmers who had the technology on their seeding and spraying equipment.

The first thing that was obvious was the need for a seasoned, experienced agronomist because our reputation would be tied to the advice given out. Providing professional advice on how much of an input to put down is a significant decision and we needed someone with a good track record. That certainly was the right decision. Plus, it also helped on the revenue side to have someone come in with a plan of what they can bring to the table.

The agronomist we hired had about 10 years of experience, with a fair amount of clients who were common customers, so it was a good fit and off we went.

Key Considerations for Entering Agronomy

There were plenty of initial considerations to work through.

Functions — There are a host of things that agronomists offer in the broad agricultural world. Our intention was initially pretty narrow, to mate the seed nutrient and chemical prescriptions to the machine. Determining the core functions that you’ll offer can depend on who you’re bringing on board. For instance, if you bring someone with a lot of experience in scouting, that may present immediate opportunities in that direction.

Revenue — How will you generate revenue with this? Are you going to charge customers for services by the acre? Will you charge this person’s time as a professional, much like an accountant or a lawyer? Or is this person going to be involved in flat rate services? There are a variety of options.

Since we’ve stepped into this, we’ve shifted course on trying to collect revenue for the services. We’ve been doing a lot of things by acres, but we’re kind of coming off of that and doing more flat rate and time based charging. Again, there’s a whole spectrum to choose from.

Supporting Equipment and Technology — When we decided we were in the prescription game, it was critical to have the technology to assess a piece of land effectively and the support to gather the data, put it into something in our system and develop that digital prescription. We started off buying a soil-sampling rig and a Veris EC mapper that for our region and scale was economically efficient.

Software — You need someone with the tools to gather all this digital information, piece it together, conduct the analysis and report. There were few options when we got into it, and there’s probably 15-20 offerings today. While there are more options, it’s an important consideration and questions about who has access, being tied to a particular brand of software, which party pays for the access, etc., are important to consider The supplier we chose 6 years ago privately branded it for us and we’re using the same system today. We pay all the licensing fees and the access and then we provide access to producers as we need to.

Targeting Prescriptions for Revenue Growth

The agronomic services grew fairly quickly. Less than 2 years after the first individual came on, we hired a second who had more agronomic experience, hired another from an input supplier and since then we’ve been slowly adding people every year.

We did not initially intend to be into field scouting or consulting on production or products; we wanted to be directly related to the machine operation, namely variable-rate application development. First, it can be done throughout the year and in the offseason, so it disperses the workload.

Second, our efficiency and effectiveness improves on a given field over time. The more information we have on a piece of dirt, and the more times we play with the variables and record the results of what we’ve done improves our effectiveness over time. Finding success in that would shine through to our customers.

Third, one agronomist can do a large number of acres when it comes to assessing the land and developing prescriptions, again by working steadily in the offseason.

Fourth, it coalesces with our equipment expertise. A large part of this service is actually building these digital files and programming the equipment to deliver those agronomic decisions. As an equipment dealer, we are good with the controls and have a stronger capability and propensity to be on top of these things and make them functional vs. third parties. So there are a lot of reasons why we initially intended to stick to that prescription development.

Field Scouting Emerges

What we experienced, however, was that demand for prescriptions was slow. In our region, I’d say we were ahead of the curve; ahead of the demand. We were selling equipment with these capabilities, but farmers were not employing it.

Once we had agronomists in the building, our established machinery customers started coming in and having conversations with those agronomists about production, about agronomy. But they weren’t interested in prescriptions; they were actively seeking help scouting, crop planting advice, disease assessment, product recommendations. As we saw slow growth in the prescriptions, we saw that our customers were looking for something different, and we had people and equipment to pay for.

So, we started programs to offer agronomic advice for a fee. It wasn’t our intention, but people were looking for that from us and were comfortable coming into our shop to pay for it.

Because customers wanted it, we got into crop scouting. It’s a recurring source of revenue, but it’s not an efficient source of revenue. With an AOR of more than 7 million acres, 6 agronomists cannot effectively scout that many acres. That’s a lot of traveling, wear-and-tear and expense, plus it comes with classifications and risks. When a producer says they want you to scout a field, some farmers out there believe someone else is now responsible for identifying every risk and pitfall in this field. And there’s also a time crunch there because this is all done in-season; a single agronomist can only cover so much territory.

For us, scouting as a source of profit is definitely not as profitable or efficient as prescriptions. But the scouting allowed us to develop deeper relationships with a lot of our customers who come into the store, not to see the salespeople, but to talk to our agronomist.

Agronomy: Can it be Profitable in an Iron Dealership?

So the question on everybody’s mind is profitability. I can tell you with a fair measure of certainty that the first 3 years are unlikely to be profitable. It’s a nontraditional fit for a dealership in a lot of ways.

As a department, we’ve reached profitability by most measures, but it depends partly on how you account for your cost. Three of our agronomists deliver a profit while the newer ones without established clientele are not there yet. Now that we have some seasoned agronomists in the ranks, we’re starting to take on junior people to come in and train with the seasoned agronomists and develop new client relationships, but it takes time.

But they are team players. A lot of the work they do daily is not necessarily in direct agronomic tasks. The agronomists spend a lot of time with customers sorting out all kinds of problems, including things like in-cab control problems that are technical, not agronomic, problems. But they like talking to these agronomists; they’re comfortable with these people. And our agronomists are well-versed in the equipment and the controls, so they’re effective in solving these problems.

One of the dealerships to our west in Alberta, Western Tractor, is also offering FieldSmart agronomic services, and making significant in-roads to competitive equipment conversions through their agronomic team.

It’s hard to capture the true residual value that these people bring from being part of the organization — there’s not a direct line you can point to. But if you talk to any of our other executive team and ownership, everybody agrees that it is right to have these people in the building — that it’s improving our business.

The Right Move for Western Sales

I can’t say our experience would be the right the step or right time for every iron dealer group, and it’d be dependent on the market and the agronomic culture that the input suppliers, applicators and co-ops have.

We aren’t getting wealthy from this service revenue yet, but we’re paying for ourselves. There should be more profits on the horizon in the next 2-3 years. We’re starting to see an increased appetite for prescription services, a service that allows profit. To be profitable as a department within the dealership over the long run, we need those prescription services.

We don’t pretend to have it figured out. This is an area that’s evolving; it’s turbulent. But I can assure you that our dealership will have agronomists working for us 5 years from now. Everyone in our dealership agrees that having agronomists in the dealership has brought significant value, though it remains tough to measure. Are more people buying equipment from us, better equipment or different equipment? Are they having a better experience doing business with our dealership?

I think so, but don’t have absolute data. We’re working on that and if we do, we’ll be happy to share that with every other equipment dealer to help you to make the decision on what you should do in this space.

April 2016 Issue Contents