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The Ag equipment industry.

Like a shopping cart pushing a combine, demands of today's consumers pose challenges and opportunities that the agriculture industry has never seen before. Consumers demand more food that is safe and low in cost, creating the need for efficiency and traceability. Additionally, consumer and government demand for renewable fuels creates a parallel but different challenge for the industry.

Agricultural equipment manufacturers will find challenges and complexity in multiple drivers of change, including technology, energy, producer consolidation, environmental regulations, and the ever-increasing availability and complexity of data. Understanding and responding proactively to these factors can help agricultural equipment manufacturers turn challenges into opportunities.

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CHANGE IN TECHNOLOGY

Technology will continue to change in response to consumer demands and ultimately, the need for more, safe food. As our global population grows, more food must be produced on less available land and water due to increased urbanization and industrialization.

For example, total water withdrawal is projected to increase by as much as 50% by the year 2025.

The seed industry will lead changes in agriculture as innovations in germplasm and traits shift how crops are grown and open new markets for specialty products, disease and insect control, and even drought- or salt water-tolerant crops.

The integration between a farmer's seed decision, tillage practices, and crop protection that began with the introduction of Roundup Ready soybeans will continue as new traits enter the market, providing agricultural equipment manufacturers unique opportunities to integrate with other aspects of the production system, such as irrigation, seed bed preparation, harvesting, handling and storage.

The demand for safe food will require accountability, likely through increased traceability. Consumers will expect reliable information regarding chemicals, seed, harvesting, and storage of their food. Farmers will look to new information technologies to integrate their tractability requirements, decrease their costs, and monitor the quality of their harvest.

Environmental concerns of consumers, along with oil price volatility and government policy, have perpetuated an increasing demand for biofuels. Although skepticism remains around commercial success in cellulosic ethanol, a byproduct of grasses and other plants, many organizations continue researching and the development of alternative fuels.

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As cellulosic ethanol becomes more viable, cellulosic ethanol may be obtained largely through corn stover or other high volume feedstocks, such as swithgrass.

Agricultural equipment manufacturers need to be poised and ready to capture the new technology with handling, harvesting, and storage equipment that comes with the increased viability of cellulosic ethanol.

CHANGE IN FARMER CUSTOMERS

Changing farmer customers makes technology changes more complex. As the aging Baby Boomer generation retires, an increasing number of farm operations will become available for sale or cash rent opportunities. The larger farmer customers that result have different needs than the traditional farmers agricultural equipment manufacturers have served in the past.

Although many larger operations use a single brand of agricultural equipment, our conversations with large producers indicate that they use a single brand for efficiency, not brand loyalty, and that they are willing to switch brands when economically viable.

Different distribution, sales, and even on-site service models should be considered to better serve the needs of larger farming operations and decrease the likelihood of large producers switching to a different brand of equipment.

THE OPPORTUNITY

Changes in technology and farmer customers bring as many opportunities as challenges for agricultural equipment manufacturers. Information technologies and integrated production practices will be critical for farmers to succeed, creating unique partnership opportunities with technology providers.

The sophistication of technology of agricultural equipment will continue to grow, and manufacturers must become more innovative in how they provide and support that technology in the field.

Finally, agriculture equipment manufacturers will need to sharpen their brand strategy and value proposition to target a younger generation hungry for access to capital, trusted partnerships, efficiencies through technology, and aggressive growth in their own operations. The dealer network of agriculture equipment manufacturers will need to be equipped with the latest skills in delivering technology, communicating and quantifying brand differentiation and value, and maintaining strong customer intimacy.

John Demerly is Director of Business Development for Adayana Company. E-mail: jdemerly@adayna.com
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Title Annotation:OUR WORLD HAS CHANGED: PARTY THREE IN A SERIES
Author:Demerly, John
Publication:Agri Marketing
Date:Jun 1, 2009
Words:678
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