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Specialization in agriculture is the new reality

As specialization continues, specific tasks and equipment will see an increase in demand.


38aHow to define it is the confusing thing.
Some call it segmentation, others refer to it as de-coupling, and still others
refer to it as specialization. Whatever the proper term may be, the one certainty
within agriculture is that it is happening within most sectors and across much
of the industry. Time constraints, changing technology, demands for documentation,
value-added ventures and the need to attend to everything in-between is driving
services and individuals to specialize in various aspects. Crop scouts, agronomists
and advisors are finding new opportunities that arise from the fact that growers
and producers simply have less time to perform various duties on their farms.

Some may argue that the government, in retreating from research and extension
work, have precipitated at least part of the trend. But Stephen Denys, vice-president
of sales and marketing with Pride Seeds of Chatham, Ontario, points to similar
segmentation that has taken place in other business sectors. "It's no different
than what Magna is doing with auto companies. The auto companies are saying,
'Our specialization is in marketing, and developing the brands and doing the
engineering designs on what people are looking for in cars'," explains
Denys. "Now what we're going to do is out-source the production of these
parts to you, Magna."

In the short-term, it can be a little overwhelming but in a longer-term framework,
it is a recognition of strengths and weaknesses, and a decision on which business
components to keep or maintain on the farm, and which to out-source.

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Serving many masters
Wes Thompson, president of Thompsons Limited of Blenheim, Ontario, has the unique
position of being more than a service provider, he is also an employer who has
seen his share of de-coupling within his own operation. Trying to keep an applicator
busy 12 months of the year was once a challenge. "What we've done and where
it worked for us was to out-source that with someone who was interested in owning
one or several machines, and doing that custom application for us," explains
Thompson. That the applicator might perform the same job for other companies
becomes less of an issue than off-loading one business facet that could be deemed
a weakness. "As long as service and quality doesn't suffer, it takes all
of that headache off of us, and allows us to focus on things we are good at."

At the same time, Thompson does not believe creating such opportunities is
a new concept. "It may be that it hasn't been exercised as much as it could
be on a lot of farms, but this journey to be more effective in what we do brings
up these things," says Thompson, conceding that any business can sell seed
or inputs. What becomes the hallmark for Thompsons is the service, as well as
the ability to look into the future to assess the needs of the grower. "There
is no one model that's going to be successful in the future. Farms are going
to get bigger and farmers fewer, but not all are going to behave in the same
way. Some will be very good at marketing, some will be very good at production."

Specialization has also meant increased opportunities for Dale Cowan of Agri-Food
Laboratories in Guelph, Ontario. Like Thompson, Cowan insists on the recognition
of strengths and weaknesses within an organization or even at the farm level.
"You can only afford to be good at a few things," says Cowan. "If
you don't have the expertise in-house, then you seek it out-of-house."

Cowan's line of specialization is gathering data and archiving the material,
something that can be loosely deemed as 'information management'. More accurately,
he refers to it as building knowledge, realizing the two are separate, even
though they are linked. And he sees a growing base of opportunity for his highly
specific, highly technical service. "As long as there's value in the system,
as long as people value the fact that you are holding information and that you're
doing something for them," he says. "As long as the information is
creating value through having better knowledge-based decisions that make them
more money or lead them to opportunities through analysis."

Cowan's challenge is to balance that value-creation against the costs associated
with time and labour demands as well as capital expenses like computer technology
and the latest software and security components.

38bIndependents becoming dependent
Mervyn Erb is another proponent of specialization and segmentation, and like
some of the large-scale companies, he has had to shift from being a strict,
albeit independent, service provider to an employer, of sorts. As a crop consultant
based near Brucefield, Ontario, Erb agrees the pace of specialization is quickening
and is being blended into farm business as a capital cost now. "Everything
today costs dollars, and everyone has only so much capital to work with, so
you put your capital where you can earn a better return on it," he explains.

In fact, Erb's business has grown to the extent that he now contracts an outside
specialist to look after his GPS mapping for nutrient management, and assesses
it as part of the cost of providing a service. It is not competitive or prohibitive
so much as it is complementary, and it is becoming more prevalent in the industry.
Erb notes there are edible bean growers in Ontario that have expanded their
elevator operations to clean, handle and bag coloured edible beans. Others have
augmented their business by partnering with processors and marketers. The acreages
may be decreasing, and costs increasing, but businesses are increasing their
level of expertise and the value which they can provide.

Does size really matter?
The trend is not focussed on one or two segments of the industry; specialization
is occurring on the crop side, with livestock, through supply managed or open
marketed organizations. And size, in this case, does not matter, either. Gary
Bauman, technology and agronomic services manager with Syngenta Seeds Canada,
acknowledges specialization is in place within his company. "We have to
look at what we do best, and what we do best might be different from another
seed company, and their seed division allows them to do best," says Bauman,
conceding that Syngenta Seeds is not integrated beyond developing seed genetics
and acquiring registrations. "We do the research, the trade technology
aspects, and then we get the product ready to go to market. For example, on
the soybean side, Syngenta Seeds has not invested in facilities or assets that
are going to take some real capital and expertise; that's already out there."

At the same time, he adds, there are local, smaller-scale seed dealers who
are now expanding their businesses into exports, and Syngenta Seeds is working
with some of them on various aspects of their seed business. "They're really
good at working with growers and giving them the recipes for success, and they
don't just do work for us," says Bauman. "We all have to make our
decisions as to our strengths."

In the end, the issues and how they continue to unfold may be complex, but
the ultimate outcome is already a reality: de-coupling or specialization is
here and it will continue. "I think there is greater opportunity coming
for agronomists and the services they offer in agriculture," says Denys,
noting that whether it is an independent consultant or an in-house agronomist,
there are two segments of farm producers, one that buys according to price,
and the other that purchases based on value.

"If you're farming a lot of acres, you're probably going to need some
outside assistance, both in terms of agronomy expertise, and perhaps custom
application services to cover the acres on a timely basis. On the other side
are the smaller operators, the ones with the day jobs who will need outside
expertise to stay on top of production practices and trends. These farmers will
also need custom application services in order to get the work done while reducing
their equipment overhead and time required to farm."

It is not something to be feared, it is simply the next phase of evolution
for agri-business and farming in general, with opportunities still to come.

The Bottom Line
These companies all look at this from a business standpoint and we
do on our farm too. We have to produce the quality our customers demand
and our objective is to do this with the highest possible yield and lowest
cost.

Getting the job done is the focus, and if that means sharing work-load
and trading field-work with a neighbour we can get along with, that's
what we do. We also have to be prepared to order services like custom
spraying when necessary, because the cost of being late with a spray can
be greater than the money we save by waiting to do it with our own sprayer.
This approach has been essential in the last two spring seasons in this
area.

The bottom line is that if it's good for these suppliers, it has to be
good for us: their reputation is at stake. Lennie
Aarts, Wainfleet, Ontario
.