Farm Supplies

SIC 5191

Companies in this industry

Industry report:

This category covers establishments engaged in the wholesale distribution of animal feeds, fertilizers, agricultural chemicals, pesticides, seeds, and other farm supplies, except grains. Establishments primarily engaged in the wholesale distribution of pet food are classified in SIC 5149: Groceries and Related Products, Not Elsewhere Classified; those distributing pet supplies are classified in SIC 5199: Nondurable Goods, Not Elsewhere Classified.

Industry Snapshot

The range of items distributed by wholesale farm supply establishments is wide, including such disparate products as alfalfa, beekeeping supplies, flower and field bulbs, harness equipment, hay, insecticides, agricultural lime, pesticides, phosphate rock, garden flower seeds, and straw.

According to Dun and Bradstreet's Industry Reports, there were 18,022 establishments in the farm supplies wholesaling industry in 2009, total annual sales were $64.8 billion, and the segment employed nearly 120,000 people. Farm supplies represented the largest segment of the industry by number of firms. They numbered 4,494 establishments, and their combined sales totaled $11.6 billion. Fertilizer and fertilizer materials represented the largest segment by revenues, with 2,004 establishments and $21.5 billion in sales. There were 5,036 establishments in the feed and animal feeds sectors with combined sales of $10.3 billion. States with the highest number of establishments were Texas with 1,618, California with 1,331, Iowa with 989, and Illinois with 916. Of the non-farm categories, seed-related segments--including seeds and bulbs, flowers and field bulbs, grass seed, and other field, garden, and flower seeds--combined for total revenues of $6.9 billion.

The wholesale farm supplier remained small at the close of the first decade of the twenty-first century. Over 60 percent employed four or fewer people, and over 92 percent of the industry employed fewer than 25 people. Just over 3 percent employed 25 to 250 workers, and under 20 establishments, making up just a fraction of the industry, employed more than 250 people. (Approximately 4 percent of businesses did not report employee numbers.)

Seed and fertilizer prices figured strongly in the U.S. agricultural industry during the late years of the first decade of the 2000s as the proportion of each dollar spent on crop production was increasingly directed toward both seed and fertilizer costs. Fertilizer costs, in particular, skyrocketed. According to a 2008Western Farm Press report, in 1998, fertilizer accounted for 27 percent of the total operating expense for corn production, but by 2009, that number had increased to an estimated 49 percent. Driving the high prices for fertilizer was global demand, particularly in China and India, and the skyrocketing price of diesel fuel, which pushed up the price of fertilizer as well as transportation costs.

However, as fuel prices began to fall late in 2008 after setting record highs during the previous summer, wholesale fertilizer prices also fell. By January 2009, fertilizer prices had declined by 50 percent from their summer peaks. The American Farm Bureau Association reported that wholesale prices for anhydrous ammonia fell from approximately $1,000 per ton to $500 per ton; urea, from $850 per ton to $350 per ton; and diammonium phosphate, from $1,100 to $600 per ton. These precipitous declines in price coincided with similar declines in natural gas prices, which is the basis for most fertilizer products. (Although potash prices also declined, the drop was not nearly as severe, from just over $900 per ton to just over $800 per ton, because most potash used in the United States is imported.)

The sudden drop in prices at the wholesale level left the retail side of the fertilizer industry in a bit of disarray as lower prices began to trickle down to farmers. Those retailers that stocked up on fertilizer while the prices were high found themselves with their shelves still full of expensive product as their competitors filled their shelves with the same product but paid only one third the cost. Those stuck with extra extensive stock on hand had to decide whether to keep prices high to recover their investment, lower the price to meet the competition, or try to average out their losses with other sales.

Farm supplies wholesalers fared better than wholesalers in general during the economic recession of the late 2000s. In addition, according to research firm IBISWorld, "Farm supplies distributors are somewhat immune to the rising trend of wholesale bypass thanks to their ability to stockpile surplus seed and sell when demand crests." The firm predicted the industry's value added would grow 2.6 percent by 2016 and that the trend toward using genetically modified seed (which was more expensive than regular seed) would boost growth. In 2010, 90 percent of all corn, soybean, and cotton seed planted in the United States was genetically modified, according to GMO Compass.

The leading U.S. company involved in the wholesale farm supply business was fertilizer producer and supplier CF Industries Holdings, based in Deerfield, Illinois, with 2011 revenues of $3.9 billion. After several failed attempts, CF Industries acquired its main rival, Terra Industries, Inc., based in Sioux City, Iowa, in 2010. Transammonia Inc., based in New York City, was a global supplier of fertilizer as well as other petrochemicals and fuels. The company posted estimated sales of $5.5 billion in 2011.

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