Ag retailers face tighter margins

Accounts receivable at farm supply cooperatives and other agricultural retailers are growing, and so are their challenges, according to a new report from CoBank. After an extended run of impressive financial performances, retailers are adjusting to a tougher economic environment accompanying the downward phase of the current agricultural commodity cycle.   Current headwinds are directly related to a sharp decline in commodity prices that has reduced farm income and tightened farm cash flows. A downturn in fertilizer prices and a spate of mergers and acquisitions in the seed and fertilizer industry have aligned to create adversity for agricultural retailers going forward.   “The drop in farm income over the past three years is the steepest decrease since the Depression,” said Tanner Ehmke, CoBank senior economist covering the grains, oilseeds and ethanol and farm supply sectors. “Producer incomes have fallen more than 50% from 2013 to today, and their debt-to-income ratio is on the rise. Not surprisingly, total accounts receivable for ag retailers posted an 11% gain for 2015, and that’s expected to grow in the year ahead due to ongoing farmer cash flow challenges.”