Read untitled text version

JUNE 2010

Supply bigger issue than pricing NRI Chairman: What farmers want Precision Ag the new frontier Banker talks farm facts Sugar demand holds up

Plus Werribee CRICKET CLASH poster inside!!

NRI Business of the Month

NRI NEWSLETTER FOR SHAREHOLDERS, THEIR STAFF AND INDEPENDENT RESELLERS

GROWERS SUPPLIES

Contents

New Retail Insights Issue #17, June 2010

I Editorial: Size is not everything I Waratah leads the way I NRI Test Cricket: 2nd innings I Indepet update I Rural Hypothetical outcomes I Chairman's Big Picture:

Editorial

2 3 4 5 6 7 8 9

Size is not everything

O

What farmers want

I Driscoll Seeds diversifies at

Maryborough

I Animal health report I NRI Busines of the Month:

Growers Supplies SA

I NRI thanks alliance

10-11 12 & 17 13-16 18-19 20 20 21 21 22 23 23 23 24 25 26 27

suppliers

I NRI cricket clash panoramic

poster

I Quality Agronomics report

on precision ag

I NRI Broadacre: Supply bigger

issue than pricing

I Holiday tip for petrol heads I Kenso hands over CAT forklift I Ospray to distribute Ayrsta I Confidence up in Kimba I NRI sponsors Kimba Cup &

EP Netball

I Fishy business with Farmoz I Next gen of fishermen I Neil Clarke's rural outlook I SMS Rural opens in Horsham I Banker talks farm facts I There's something about Alice

Our cover: The winning horse "SO READY" does a victory lap at the 2010 Kimba Cup in Port Lincoln South Australia, which was sponsored by NRI Shareholders on the Eyre Peninsula

JUNE 2010

Supply bigger issue than pricing NRI Chairman: What farmers want Precision Ag the new frontier Banker talks farm facts Sugar demand holds up

Plus Werribee CRICKET CLASH poster inside!!

NRI Business of the Month

NRI NEWSLETTER FOR SHAREHOLDERS, THEIR STAFF AND INDEPENDENT RESELLERS

GROWERS SUPPLIES

Publisher NRI Limited ABN 67 096 985 956 Suite 2, 2 Enterprise Drive Bundoora, Victoria, 3083 Phone 03 9467 6300 Fax 03 9467 6311 Email [email protected] www.nri.com.au All material copyright and may not be reproduced without written consent of the publisher. Design, Copy & Artwork The Guerin Group www.gueringroup.com.au

n the topic of performance in business, sport or other human endeavour, there is a universal truism: size isn't everything. For businesses trying to weather an economic storm, it's all about being nimble and quick enough to adapt to a rapidly changing industry landscape. Often, in our private lives, there are personal difficulties to contend with as well as economic ones. No doubt the most recent global financial crisis has been more than just a storm for many people; it's been a howling blizzard. However, all storms eventually subside and the sun invariably shines again. We all know that. But knowing it and intellectualising about it are the easy part. The hard part is having the courage to take action now to set oneself up to capitalise on the sunny days ahead. On that theme, we are pleased to report several NRI success stories from around the country in this issue of New Retail Insights. Those who missed our national focus group meetings in March - which included a Couchman-style rural hypothetical ­ can read all about it on page five. To my knowledge, this initiative is an industry first ­ at least in recent times - and hopefully it has helped NRI and its suppliers gain a clearer insight into the changing fundamentals of our market. With insight, comes opportunity for growth and prosperity. On this front, some NRI Shareholders are putting their knowledge, experience and aspirations into action through business expansion moves. As reported on page eight, new NRI Shareholder, Troy Driscoll of Driscoll Seeds, has restructured a 10-year old rural wholesaler-retailer-grain-trader operation to focus on retailing a wider range of farm inputs - including farm chemicals and animal health for the first time.

By joining NRI, Troy has found the right partner to help manage that transition. He is now part of a like-minded group of rural independents who, along with his alliance suppliers, are there to support this expansion initiative. Likewise, Lachlan McDonald of McDonald Rural Services has teamed up with a couple of independents to open a green-field operation in Horsham in the heart of the Wimmera region of Victoria. See page 24 for the story on the opening of SMS Rural Services, co-managed by Campbell Smith and Darren Scott. We also welcome new NRI Shareholders in South Australia ­ Paul Ruch of Agri Services in Keith and Cooke Plains as well as Mathew Gibbins of Mid North Rural Supplies in Balaklava. In central New South Wales, we welcome Garry and Joy Paddison of Ozfarm Services in Parkes. In Victoria's Gippsland, we welcome two more BrownWigg shareholdings in Trafalgar and Yarram. Finally, I remind all Shareholders to register for the next national conference of the NRI group at Alice Springs from October 21 to 24, 2010. Given the challenge of low grain prices and a volatile dollar, resellers and agronomists need to be at the cutting edge of production efficiency. The annual NRI Shareholder Convention and our national focus group meetings in March each year are designed to keep Shareholders at the industry's forefront. Please note the latter is now confirmed for February 27 to March 2, 2011. We look forward to seeing you all at the famous outback town of Alice Springs later in the year! I

Grant McShane NRI Group CEO

2 · June 2010 New Retail Insights

Wire & Fencing

Waratah leads way on fencing front W

aratah has reinforced its valued support of the NRI group by hosting a further 17 Shareholders and fencing contractors to a two-day training and educational program at their manufacturing facility in Newcastle, New South Wales, in mid April. NRI national business manager, David Apperley, said the program gave Shareholders and their key customers in the fence-building business a first-hand view of what goes into producing the premium Waratah range. "The Waratah team stepped us through the whole process starting from the iron ore mine at Whyalla in South Australia to the steel billets that arrive at Newcastle where they go through a lengthy process of re-heating and rolling to specific diameter wire. "Quality is monitored and controlled at every point to produce the Waratah Longlife `Blue' Wire as well as the GalStar Extreme & MaxY hot dipped

posts," said David, who took control of the fencing portfolio when joining NRI management in February. Addressing the group, national sales & marketing manager (rural), Brett Howlett, highlighted how the company was committed to introducing new and improved products to their range.

"The attention to quality and detail that goes into producing the premium Waratah range should come as no surprise."

"We believe our focus on product leadership will enable NRI Shareholders to offer customers premium products that enable better, quicker and easier fence construction," said Brett. "An example of this is our new fencing calculator tool which enables

NRI resellers to offer different fencing options to their customers. "By calculating the cost benefit ratio offered by our newer products - like the GalStar post range - customers can clearly see that our range is often a better option over time than traditional pine post construction. "The tool generated much discussion among Shareholders and fencing contractors who could see the shared opportunity to upgrade farmer customers to better fencing systems," said Brett. David said the attention to quality and detail that goes into producing the premium Waratah range should come as no surprise. "With its fully integrated business model, Waratah leads the way in this market. Our business with Waratah is growing steadily and this training will strengthen our combined efforts to upsell the entire range." David thanked the Waratah team for hosting the event which included a tour of the 120 hectare site and a great dinner on the foreshore, full of the usual banter and good humour. The Waratah team involved in organising this tour consisted of Michael Van Es (Regional Sales Manager for Vic & SA), Wayne Weston (TSM western Victoria), Kieran Kelly (TSM northern Vic & Riverina) and Mark Wells (TSM Gippsland). To these guys, NRI says thanks for a job well done. I

June 2010 New Retail Insights · 3

New Retail Insights

NRI Test Cricket: 2nd innings held at Werribee

Delegates warm up for the 2nd innings of the NRI Test Cricket Series held on the sporting grounds of Werribee Mansion on the western outskirts of Melbourne.

F

ollowing last year's launch of the NRI Test Cricket Series, Shareholders and suppliers recently gathered on the grounds of Werribee Mansion in Melbourne's west to play a 2nd innings. The half-day clash was a highlight of NRI's national market planning sessions which are held annually over four days and involve 70 Shareholders and key staff from around Australia. Of the 15 teams assembled for the match in mid March ­ three more than last year ­ 12 competed in the game, with each team made up of supplier personnel and NRI Shareholders. The rules were altered slightly to keep the momentum up and give everyone a fair go. There were no long run-ups for bowlers and each batsman faced two full overs of six balls each, even if caught, bowled or stumped in that time. Last year's winning team "Middlesex", led by John Noffke of Noffke's Rural Real Estate & Livestock in Springsure, Queensland, eventually fell to the "Fungicides", captained by Dylan Southwood of

"This year, we upped the formal side of the event. We introduced half-hour interactive seminars."

J & D Southwood in Maitland, South Australia. Appropriately, the NRI Man-of-theMatch award went to a bloke this year; Bruno Di Manno of Growers Supplies located on the outskirts of Adelaide. According to NRI CEO Grant McShane, the challenge with this kind of relationship building exercise is to create a program that delivers value to NRI Shareholders ­ plus the supplier companies that sponsor it. "Our supply partners often give up valuable time in the office or on the From left: After dinner speaker, Sam Kekovich of Aussie lamb fame, Rob road to show their Armstrong of Kenso and Michael Moroney who accepted the prize of a new CAT support of the NRI fork-lift on behalf of the WB Hunter retail network.

group so we need to make it worth their while," said Grant. "It's about striking a balance between the informal one-to-one interaction that takes place at a cricket match and the more formal sessions that tackle retailing, marketing and business issues more generally. "This year, we upped the formal side of the event. We introduced half-hour interactive seminars with eight of our major supply partners ­ Nufarm, Crop Care, Farmoz, Bayer Crop, Ospray, Merial, Coopers and Waratah ­ as a

4 · June 2010 New Retail Insights

way of delivering more value to all parties," he said. With groups of delegates rotating between each seminar over an afternoon, Grant said it was a great way to give NRI members a snap shot of the big issues impacting on the local and global farm input markets. "One of the more popular sessions was hosted by Paul Nott of Crop Care who had enlisted a senior analyst from ANZ to give an overview of Australian farm debt and its implications for property values and farm viability." "The Farmoz team headed by David Peters took a similar approach, commissioning rural consultancy group from Bendigo, Neil Clarke & Associates, to provide in-depth analysis and profitability projections for the major commodity markets. "This kind of data is particularly valuable to our Shareholders yet would be difficult for many to access." Responding to supplier interest, Grant said an order book was compiled and circulated to Shareholders in attendance giving suppliers a vehicle to promote their product specials and sales incentive plans. Several suppliers reported writing in excess of $1 million in sales with one doing $1.5 million on the day. The gathering concluded with a `Couchman' style forum involving a panel of visionary rural leaders including Doug Rathbone of Nufarm and Alister Birman of Pfizer Animal Health. With delegates describing the debate as rigorous and illuminating, NRI management is planning a similar forum at next year's gathering. For more details, ring the NRI head office on 03 9467 6300. I

Pics clockwise from top left: Wendy Rowe and Wes Flier; Bruno Di Manno (left) receives the NRI "Man of the Match" award presented by Sam Kekovich; spectators enjoying the match: the Western Australian contingent of NRI Shareholders at the match

Indepet group takes shape

N

ew buying group for independents of the pet retailing market, Indepet Limited, will begin trading from its head office at Bundoora in Victoria on July 1st, 2010. Led by a five-person board of directors, the business has employed Grant McShane as group chief executive and Blair Collins who has accepted the challenge of national business manager for the new entity. Grant said the thinking behind the group was to apply the low-cost structure and collective principles of NRI ­ which have proved to be highly effective in the rural industry ­ to the pet industry. "Our aim is to form a national group of pet industry/companion animal

retailers who are unified and professional in all their dealings, particularly in the buying and marketing area. "We are targeting the larger operators - the superstores and pet barns ­ which tend to be located in and around our capital cities and larger regional centres." Grant said a dual branding strategy would be pursued to help the group to quickly lock in some economies of scale, especially on the marketing front. "Pet industry retailers tend to spend a considerable chunk of their operating capital on advertising and promotion. They tend to have a huge product range and like hardware retailers, they often use product catalogues to stimulate enquiry and promote sales.

"A dual-branding strategy will help Indepet to establish a strong market presence and lock in some valuable cost savings through collective marketing and advertising as well as group purchasing." Grant said Indepet would also produce a retail-focused business newsletter as a way of building awareness and interest in the new group and show how it delivers financial gains to Shareholders. He said the first issue of Inside Indepet was due off the press in July. I

JUNE 2010

A newsletter for independent retailers, staff and suppliers of the premium pet market

+ Who's who on Indepe t vision + Indepet CEO: The Indepe e Indepet group + Blair Collins to manag back-end synergies + Indepet and NRI tap

t Board

June 2010 New Retail Insights · 5

New Retail Insights

"We need to employ the best technology to ensure we maximize returns..."

From left: Facilitator of the debate, Jon Lamb; Professor Tim Reeves of Melbourne University; Grant McShane of the NRI independent group; rural reseller from Esperance, Gary Waideman; and Alister Birman of Pfizer Animal Health

Innovation and technology vital to industry viability

D

Jon Lamb, facilitated the debate ­ involving a panel of industry experts ­ with the support of anchor-man Tim Reeves, international consultant and distinguished professor at the University of Melbourne. Professor Reeves said efficiency gains were critical for Australian farmers because their capital base was so much higher than other major food producers such as South American and eastern European nations. "We need to employ the best technology to ensure we maximize returns from our limited land and huge capital base, regardless of grain prices," said professor Members of the expert panel included (from left) Mick Keogh of Australian Farm Institute; Reeves. Doug Rathbone of Nufarm and Rick Roush of Melbourne School of Land & Environment According to NRI's Gary Waideman of Farm & Sponsored by the NRI independent General in WA, rural resellers also rural group, the event was attended by needed to do more on the innovation 160 people from around Australia, front by helping "road-test" new including 70 NRI resellers along with technologies for grain growers. personnel from the major companies "There are a number of precision supplying farm inputs to rural agriculture tools that could help us Australia. match crop inputs to soil type more NRI CEO Grant McShane said the accurately," said Gary. "Technologies debate was conceived with the aim of like gamma radio metrics, EM38 giving NRI Shareholders and suppliers surveys and global positioning systems a glimpse into the future of Australian all offer potential to reduce input costs agribusiness. and lift yields." Radio broadcaster turned consultant, espite a reputation for being innovative and quick to adopt new technology, Australian farmers ­ and the resellers who service them ­ must do more to raise on-farm efficiency. That was the key outcome of an agribusiness hypothetical held at the Sebel Citygate in Melbourne last March titled Tomorrow Together ­ a Critical Analysis of Where Australian Agriculture is Heading.

Bringing a supplier perspective, Doug Rathbone of Nufarm said Australia was well positioned as a global food producer with stable government and great export capacity, thanks largely to modern farming technology. "For rural resellers, bringing that technology and information to farmer customers is critical. The technology of how we use water and fertilizer and other inputs to increase farm profits. There is going to be enormous demand for food so it's all about yield," he said. "The other issue is inflation. Whether it's in two years or three years, people are going to see commodities as a hedge against inflation. If we look back to the 1970's, it was inflationary forces that drove prices more than supply and demand." According to Alister Birman of Pfizer Animal Health, the nation's total livestock numbers are unlikely to increase greatly in the future. However, Alister foresees huge opportunities in the area of breeding for genetic traits that add value in the supply chain. "Buyers are becoming more specific about what they want. There are now hamburger chains having great success in selling breed-specific burgers. This is a major change in attitude and behavior that impacts on Australian producers," he said I

6 · June 2010 New Retail Insights

The Big Picture

NRI chairman: What farmers want

NRI chairman, Neil Earl of Cowaramup Agencies in Western Australia, reflects on the age-old issue of delivering service in the bush.

L

ike the character Nick in the 2000 movie What Women Want (staring Mel Gibson and Helen Hunt), you have to be a bit of a mindreader to really know what farmers want in the way of service. The story of rural service is as old as the very hills in which our farmers have produced crops and livestock with such efficiency that we now have a successful export industry that's globally-competitive. Australia's best rural salesmen see themselves as instruments of this success, willing and able to bring specialised knowledge to bear in their clients' critical production decisions around the farm. Some go beyond that production gambit to encompass a marketing role. They see it as their professional duty to assist with the presentation and direction of farm produce towards the most rewarding markets, wherever in the world these might be. However there was a time when the rural salesman was even more than all that. He was the farmer's mentor and friend, the guy who picked up the farmer's kids from the train station when they came home for school holidays. He was the one who was often there to discuss financial matters and even personal affairs. No Beyond Blue back in those days. In the name of service, he was all things that were required of him and he proudly submitted to the task.

Naturally, this breadth and depth of service was appreciated by farmer clients and, in some cases, it became an expectation. In these cases, client loyalty would take on a whole new meaning and an astute salesman could maintain that close relationship under such circumstances. It meant balancing the true value of a client in both monetary as well as friendship terms.

"Some don't seem to realise that the greatest asset of a company is a solid clientele."

Of course, loyalty is a two-way street. Mutual support and respect from both parties is essential for a resellerclient relationship to flourish. Astute farmers know that which is why they tend to be loyal to one reseller for the bulk of their purchases, only shopping around on the odd item to keep that relationship balance in check. As we all know, this is a people business; without clients we don't have a business. Competition is the name of the game. The only new client you are going to get is the one from your competitor. And the new client your competitor just won could well be the one you just lost. The problem with the recent corporatizing of the rural merchandise market is that the corporate retailers are being controlled and directed by people who don't recognise these basics of rural salesmanship. Some don't seem to realise that the greatest asset of a company is a solid clientele. They seem to think this kind of business can be run like any other

and that the only thing that counts is the big number in the credit side of the ledger at the end of the financial year. It's as if the value of business that could be written next year ­ and in the years that follow ­ count for sweet nothing. When new managers adhere slavishly to this mantra of immediacy, they have little chance of building a life-long career in the sales and service of rural Australia. Those that have that career goal in mind soon come to realise that the independent route is the best one to take. This is one reason why the corporate retailers have recently lost ground to the independent sector which continues to go from strength to strength. Many of the more "switched-on" branch managers and sales agronomists are trading the comforts of their corporate jobs for the more challenging yet potentially more rewarding sales career that comes when trading as an independent. Successful rural independents today have a view that's far-sighted enough to see past the immediate demands of idyllic financial hurdles. Yes, one must be mindful of the current-year credit ledger but one must be able to make judgements and sales decisions that factor in what will happen in the future. Independent resellers ­ and NRI independents in particular ­ have the freedom, the professional networks, the access to the market intelligence and the customer rapport, to confidently walk this line between current business demands and the future rewards for giving farmers what they want in the way of service! I

June 2010 New Retail Insights · 7

Diversification

NRI helps Driscoll Seeds diversify in Maryborough

Matt Nihill (l) sales agronomist with Merron Chalmers, animal health and general merchandise sales manager and Troy Driscoll, general manager and chemical sales manager.

A

fter 10 years as a grain buyer and wholesaler-retailer of seed and fertiliser, Driscoll Seeds of Maryborough has sharpened its focus on retail as a way of diversifying income and reducing risk. Proprietor, Troy Driscoll, said his decision in February to join the NRI buying group ­ with its focus on securing direct supplier accounts for all members - had helped to make that transition a reality. "We have a solid business despite the decade-long drought we've just been through. But like other rural wholesalers, we're vulnerable to the changing distribution landscape. New models are evolving which could pose a threat. "The way I see it, we've got a strong foothold in the local market through our seed, grain and fertiliser business built up over 10 years. The challenge is how to build on that strength. "We have people with local knowledge and a loyal customer base. The obvious growth opportunity is to offer a broader range of products. For example, if a farmer comes in for some pasture seed, now we can also offer the herbicide needed to properly establish that new pasture. "As retailers, we can capitalise on

"As retailers, we can capitalise on that knowledge and goodwill and get even better at what we do ­ servicing local farmers."

that knowledge and goodwill and get even better at what we do ­ servicing local farmers. "We believe it's important to not only service our growers with product and in-field support, but to be able to purchase back some of their grain production at harvest through our Viterra grain agency. "It's satisfying to know that we aren't always just selling to farmers, we can also offer them a valuable market for their produce. This gives us a greater insight into our customers' businesses; an appreciation of the market pressures they endure." Adapting to change Driscoll Seeds was established in March 2000 as a wholesaler of Pioneer Hi-Bred seeds, mainly focused on summer forage cropping markets. "We started out supplying summer crop seeds like Maize. We wrote a lot of business in the Elmore and Rochester area to the north before the irrigation water began to dry up. Needless to say that business went the same way."

Along with forage crops, Troy started selling pasture seeds and by 2004 he'd moved into bigger premises to cope with the growth. Matt Nihill also joined the team that year as seed & fertiliser agronomist and grain marketer for the ABB agency (now Viterra). In 2005, Driscoll Seeds took over the distribution of Pioneer Seeds for the western district of Victoria. Later, a custom pasture seed blend range was introduced to meet specific local needs. This range is packaged and sold under the Driscoll Seeds brand. Troy said his growth strategy now was to sell a more comprehensive range of farm inputs - and more of them - to local customers, which is one reason he was attracted to the NRI group. "Being part of NRI has strengthened our credentials as the local rural independent. We've successfully added animal health and nutrition to our offering and we are now entering the livestock production sector which is very buoyant." Troy said Merron Chalmers had been hired recently to manage sales of animal health and rural merchandise. "Merron comes off a family farm in northern Victoria. She studied at The University of Melbourne's Dookie campus then worked for IK Caldwell for a while before joining us earlier this year." To help out in the office, Andrea Palling had recently been appointed

8 · June 2010 New Retail Insights

along with Ashley Matthews, who had taken over much of the labour-intensive work associated with the seed division. "Ashley also manages the seed trial sites which helped establish us in the seed market in the early days and continue to play an important market development role," said Troy. "Ash is learning on the job under Matt's leadership." Management challenge Troy said his immediate challenge

was to juggle the roles of general manager with that of the farm chemical sales manager. "It's tricky being the one driving the new farm chemical business while also trying to guide the overall direction of the business. "Ideally, we need another person with a strong broadacre chemical background who can really get this division humming." As a young business, made up of young people, Troy believes in taking a

long term approach to its growth and evolution. "Our aim is to grow steadily without putting the business at risk financially. That means we need to work closely with our customer and suppliers. "Due to cash flow demands of a growing business, we rely on the support of our suppliers. "In return, those that give us that support are the ones whose products will get our support in the marketplace. It's just the way it has to be." I

Animal Health

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"There are some excellent sales incentives in place with our alliance suppliers which will only pay off in full if we achieve all volume targets that we're committed to." David said more time had been allocated to sales training and workshops at this year's national animal health gathering. "This year, we hosted a workshop on building business and personal skills which was sponsored by Pfizer, one of NRI's alliance suppliers. "It was a mix of theory and practice which gave Shareholders a chance to critically review their skills and personal style in the important area of supplier and customer consultation. "Exploring the power of the mind and the emotional aspects of the selling process ­ is always a worthwhile exercise and can be he NRI group has lifted Presenting NRI's latest quite revealing. national animal health sales by sales and market share results "So we thank 15% during the past 12 months, at the annual focus group Pfizer Animal according to David Apperley, national meetings in Melbourne in Health for being business manager for animal March, David attributed the part of this session production and general products. growth to NRI Shareholders ­ it was "This is an excellent result for NRI, being pro-active in meeting challenging, considering the market was back 5% their local markets needs. thought-provoking for the same period," said David who "Keen interest in livestock Attending the NRI Animal Health meeting joined NRI earlier this year. and the need to rebuild sheep in WA recently were Tim Hallyburton (left) and a lot of fun." of Cowaramup Agencies and Mike Danby More recently, and cattle of Pfizer David travelled to numbers in some regions Western Australia to host an NRI looks set to continue, animal health planning meeting to especially given the cater for the growing number of profitability of livestock Shareholders there who are active in relative to cropping," he this market. said. "We spent the day work-shopping "For the good of the our business in the west with some of NRI group, it's our key supplier partners. With solid important that we really stock prices, our focus was on the look after the animal opportunities this presented and how health market at a local From left: Campbell Smith, Greg Johnson, Adam Munro, Darren Scott and we can take advantage of these." I and national level. Lachlan McDonald who attended the workshop sponsored by Pfizer.

NRI animal health reports 15% sales lift

June 2010 New Retail Insights · 9

Business of the Month

After 26 years in the family reseller business, Bruno Di Manno could have opted for the quiet life after selling to Elders a few years ago. Instead, he's gone back to his independent ways, building a new farm input business from scratch under the banner of Growers Supplies-NRI.

to people they can trust to help them. They're also very matter-of-fact so they want the best price upfront." Based at Burton near Gawler, on the northern outskirts of Adelaide, Growers Supplies sells to a mix of farmers and horticulturalists scattered across South Australia's farming regions.

T

alented sales people often talk about going the extra mile in the name of service but nobody subscribes to this maxim more passionately than Bruno Di Manno of Growers Supplies. Bruno re-entered South Australia's rural merchandising industry in December last year out of a need to return to his true calling ­ serving farmers. Over a 30-year career, Bruno reckons he's learnt a few of the basics of rural salesmanship. "Business isn't complicated or it shouldn't be," he said. "But too many people try to make it complicated. "The fact is that many farmers don't have the time or the inclination to work out their crop needs. So they look

"When you're born and bred independent, you get enormous satisfaction out of selling ­ following through on a sale from beginning to end."

A partnership between Bruno and his life partner, Charmaine Librandi, Grower Supplies is a family-oriented business as was Di Mannos before it. Shane Librandi (Charmaine's son) has been employed to run the warehouse and look after customer relations in-store. Lionel Smith is also part of the sales team, taking care of horticulture customers in the Adelaide Hills region.

Bruno also has plans to employ a sales agronomist to help him in the demanding broadacre market. "When I started out in rural merchandising, horticulture was the major market," said Bruno. "Di Mannos had a fertiliser agency but when that business dropped off we looked for new ways to fill that MarchApril sales period. "We moved into broadacre and I've been active in the crop protection market ever since." said Bruno who reckons broadacre now accounts for 70% of sales. Along with market diversity, Growers Supplies has a decent measure of geographic diversity. "We look after grain growers from here right through to the Mallee region in the east where crop yields are typically around a tonne to the hectare," said Bruno. "And we service right down to the lower Yorke Peninsula region where farmers regularly grow four and fivetonne crops. "These are very different farming systems but they all rely on the same crop inputs that we sell and service."

10 · June 2010 New Retail Insights

Independent strength you're an independent, you can't afford to let Having worked in both the people down. Word of independent and corporate sectors of mouth travels fast." the rural merchandise game, Bruno has become a strong advocate of the Why choose NRI independent model. Before joining NRI, "When you're born and bred Bruno talked to CRT independent, you get enormous and AIRR but says he satisfaction out of selling ­ following was not convinced through on a sale from beginning to these groups were right end. for him. "The trouble with corporate retailers "I've known Grant Lionel Smith takes care of horticulture customers in the Adelaide Hills region is that they often take away that role of McShane for years and I interacting between suppliers and respect his views and standing in the many have made the obvious customers. It's hard to accept that industry. Through a mutual friend, we connection back to me." approach when it's so obviously a met up to discuss the prospect of After six months of trading, Bruno people business. joining NRI. said business development was going "I only did a few years in the "The NRI people generally had a to plan with all the major suppliers corporate sector after the family better understanding of our business," eager to open direct accounts. business was sold but the longer I said Bruno. "It also had a similar Having seen Di Mannos grow to a stayed there, the more out of touch I structure to IHD which appealed to me. $40m dollar sales business in recent became with the industry." "I like the way NRI helps times, no doubt many are keen to Bruno said this experience was in independents open direct supplier support Bruno this second time stark contrast to his accounts ­ many groups around! independent days. discourage that so they can "The industry is a lot tougher and the "As an control the supplier side of margins are tighter nowadays. A lowindependent, it's the business. Yet NRI is able cost approach is the only way to your money. It's to negotiate great national succeed these days. That's something your profit. You deals on our behalf." the whole NRI group really seem to have to keep your Bruno said that NRI was a understand," he said. I finger on the pulse bit of an unknown quantity of the market. So so when he signed up, it was of course you go with some apprehension. that extra mile for "In hindsight, however, it's your customers. the right decision. Now that "The proof is that we're in and we've seen how many of our it works, we won't be getting Charmaine Librandi is Bruno's partner customers across in Growers Supplies and assumes out," he said. responsibility for managing all accounts the region could According to Bruno, buy from a store 20 adopting Grower Supplies as the or 30 kilometres away yet often they trading name for his new business has choose to buy from us even though proved to be a good marketing ploy. we're further away. Growers Supplies was the name of "Getting product to where it's Di Manno's original retail business needed on time can be challenging but located in the Adelaide markets. that comes down to having a track"For many older growers in the record and the trust of your customers. region, it's a household name and Shane Librandi provides in-store customer service "It's also about being reliable. If while also running the warehouse of Growers Supplies since its re-emergence in the market,

"Help getting direct accounts with major suppliers is the big benefit of NRI"

NRI Shareholder, Kim Gooding of Kukerin Rural Services, WA

Growing Together

June 2010 New Retail Insights · 11

2010 NRI Test Cri cket Series

Boundary Riders, Cheerleaders & Spectators

"Thanks to our supply partners "Thanks to our supply partners

for catching the independent spirit for catching the independent spirit

NRI Werribee Man

nsion March 2010

The Warriors Wa arriors

The Shinboners

Middlese Middlesex ex

The Bodyliners

T The Bushrangers

The Pesticides Pestic cides

The Tr riazines Triazines

The Buccaneers

The Cheetahs Cheet tahs

The Parasites

The Flukicides

The Fungicides ­ the winning team th he

at the second innings of the NRI Test Cricket Series" at the second innings of the NRI Test Cricket Series"

CEO Grant McShane on behalf of NRI Shareholders nationally Gra rant N y

Growi g Together Growing Together in

Technology

Precision Agriculture:

a quantum advance in crop management

Greg Warren checking variable rate file compatibility for a John Deere air-seeder

With pressure on growers to deliver more grain at a lower cost of production, rural resellers are turning to the technology of precision agriculture to give progressive clients a commercial advantage, according to one of NRI's leading agronomists.

"When I teamed up with Andrew four years ago, we saw precision agriculture as one way to lead farmers towards higher efficiency and profitability.

P

recision agriculture may not be a revolution in crop production but it offers farmers a quantum advance in management by soil type. According to pioneering consultant in this field, Greg Warren, the concept is on par with minimum tillage cropping, in terms of its potential for widespread adoption within the next decade. Greg and his colleague, Andrew Heinrich, are the leading agronomists behind Quality Agronomics, a private consultancy that is contracted to provide comprehensive agronomy and precision ag services to broadacre clients of Farm & General, NRI independent in Esperance, Western Australia.

"The Esperance region tends to attract and develop forward-thinking farmers who operate on a large scale."

"However, it has taken until now to work out how exactly to do that," said Greg who believes all the technology is now available to make precision farming a commercial reality. Greg completed a Degree in Agricultural Science at Roseworthy Ag College in SA before moving to Esperance in 1989 where he and his dad operated a successful grain growing operation until 1997. So his practical advice to farmers draws on soil science theory and specific local knowledge. "The Esperance region tends to attract and develop forward-thinking

farmers who operate on a large scale. "When we moved to the area, the average farm was 1200 to 1600 hectares ­ now it's more like 3500 to 5000 hectares because that's what farmers need to be viable without over capitalising, given current terms of trade. "In the process of up-scaling, livestock have been sold down and fences removed to streamline continuous cropping. Although meat prices have since improved, most farmers have made a long-term commitment to grain growing "However, bigger paddocks mean wider variation in soil type and yield which begs an obvious question: how should we apply crop inputs to maximise returns?" Many believe the answer lies in precision agriculture. To apply its principles, Greg said farmers needed to determine their yield potential by major soil type across the property. "The fundamental driver of yield is plant-available water capacity (PAWC). "So the first step for farmers wanting to manage their soil types according to yield potential is to start mapping grain yields at harvest time. Yield-mapping is now standard practice on most

18 · June 2010 New Retail Insights

headers with many clients already having five years of yield data. "For farmers with that level of data ­ covering low and high rainfall years ­ we can determine what soil types produce the biggest yield variation and what factors might be driving that variation. "This process helps farmers decide what areas are likely to deliver the biggest returns from our precision ag services." Greg said the second step was to determine the PAWC in those discreetly different soil types, taking into account top and sub-soil moisture that plant roots could freely access "We're working with CSIRO Sustainable Ecosystems to develop a conditional probability matrix that can predict the PAWC of a soil. "This is done using soil survey data captured by EM 38 (which measure electro-conductivity) and gamma radiometric instruments, technologies that Farm & General has seen fit to invest in. "In our region, there are many soil types ­ the coastal sandplain consisting of deep sand through to sandy gravels, sand over clay duplexes and the grey and red clays through the mallee region. "Once we know the PAWC and we've determined the chemical and physical characteristics of our soil types to a depth of one metre, we combine all that with results of our yield data analysis." Management zones Greg said this was all the information needed to map paddocks into management zones and determine soil ameliorant application rates for each zone. "Using specific agricultural GIS software, we create a variable rate prescription map that is compatible with the controllers on our client's air seeders and spreaders. "Most seeders have three or four fertiliser hoppers so products like potash can be applied to sandy soils low in potassium and other nutrients as required.

"If the seasonal outlook is dry, we'll reduce fertiliser inputs to a bare minimum in low PAWC soils. There's a fair bet that the traditional blanket application will be uneconomic on these soils." Greg believes in checking the effectiveness of fertiliser rates by incorporating strip trials into the variable rate map. These trials - which apply the fertiliser at higher and lower rates than the prescribed zone rate - are strategically placed so that they run across the different zones. "After harvest, we analyse the resulting yield map with the GIS software to work out how close our prescription was to ideal for the season. That's when we find out whether our recommendations were in line with actual plant needs." Termed a paired T test, these strip trial analyses were only carried out for the first time last year, so it's still early days for judging the accuracy of Greg's variable rate prescriptions. "Based on last year's effort, I'd give us a score of 70%," he said. "That's not a bad result as our growing season rainfall was well below average. The next year or two will be telling, especially if there's wide variation in seasonal rain." Dollars and sense Twelve months ago, Quality Agronomics began working with LandLogic, a Western Australian GIS surveying and mapping company based in Esperance. "Their main roles are to conduct the soil surveys, soil coring, manage soil data from the laboratory and assist with data mapping. "At the time, we believed our two organisations were a great fit in terms of professional strengths which has since proved to be correct." Greg said the cost of EM38 and Gamma Radiometric soil surveys, soil core analysis, interpretation and recommendations was around $16 ­ 20/ha. Yield data analysis (incl. strip trials), would cost another $1.50 to $3.50/ha,

depending on the number of years of yield data, as the unit cost declines over time. Even at this early demonstration stage, Greg believes the concept has commercial application, at least for the large-scale farmers of Esperance and similar broadacre regions of WA. "A saving of just $20/ha in input costs in the first year ­ which is a realistic expectation ­ will cover the soil survey costs. "After year one, the input savings add directly to crop profitability. However, the bigger windfall is likely to be the extra yield produced from this targeted approach to grain growing." If the Australian climate and rainfall become more variable as CSIRO and most scientists predict, the likely savings in inputs - plus the value of additional yield - could even make precision agriculture a commercial imperative. And progressive resellers like Farm & General will be ideally placed to capitalise on this quantum advance in crop management. I

Andrew Heinrich of Quality Agronomics, a farm advisory firm contracted by NRI's Farm & General

The next issue of New Retail Insights will review the latest hardware and software packages now available for precision farming and the perennial issue of software compatibility ­ or the lack thereof - between the various harvester and air-seeder manufacturers.

June 2010 New Retail Insights · 19

Broadacre

Supply now a bigger issue than pricing

A

t the annual focus group meetings in Melbourne last March, NRI broadacre business manager, Luke Johnston, took the opportunity to review cereal, grain legume and oilseed markets nationally. "Most broadacre regions have received good opening rains this year. As a result, excellent sales with our major supply partners for the MarchApril-May period have increased 68% on last year. "However, sadly the same cannot be said for the value of sales only

From left: Scott Bayley of Tincurrin Rural Services WA and John Noffke of Noffke's Rural Real Estate & Livestock, Qld

helping to keep NRI competitive at the farm gate. "With commodity prices down, grain growers are depending on their local reseller to give them sensible prices up-front for their essential crop protection needs. "Collated and collective buying is helping Shareholders to offer that and lock in early sales and ensure reasonable protection." Luke said the strategy of buying collectively ­ rather than individually ­ was also helping to guarantee supply in what has become a tightly-held market for most farm chemicals, but more importantly ensuring more than satisfactory profit margins for Shareholders being made despite the From left: Warren Ramsay of Nufarm, NRI's Luke Johnston and Paul Nott retail price pressure. of Crop Care recording a 21% increase. This reflects "It's not just a matter of being the long-term decline in profitability of competitive price-wise these days. We this sector due to the ongoing impact have entered a new era where we also of generics. need greater certainty of supply. Going "However, it also underscores the forward, ability to supply is becoming relevance of NRI's low-cost model and a bigger issue than pricing. the need for Shareholders to leverage "With margin pressure intensifying their buying position through our on suppliers as well, they're placing central procurement desk." more emphasis on stock control hence Luke said NRI's collated purchasing their capacity to hold ample supplies programs for pre and post-planting within the country has diminished. It's crop inputs had again been extremely now a case of importing product as and well supported in 2010. when it's needed ­ subject to "Our collective approach to availability." purchasing major herbicide volumes is While there was pressure on supply

of all chemical products, Luke said it was particularly noticeable on the major post-em crop protection range. "The pressure is due to high demand. It's been accentuated by a favorable opening to the season coupled with the

"Our collective approach to purchasing major herbicide volumes is helping to keep NRI competitive at the farm gate"

low stock levels on hand plus several suppliers having deleted unprofitable commodity lines from their range. "All of this means that we, as a reseller group, have to be more proactive and more accurate in terms of our forecasts and purchasing intentions." On the positive side, Luke said NRI was perfectly positioned to help both Shareholders and suppliers through this challenge due to its low-cost business model and collective approach to buying and marketing the group nationally. I

Anthony Ward of Crop Care (left) and Mark Hall of VBH Supplies in Langhorne Creek, SA

Holiday tip for petrol heads

I

f rural merchandising isn't quite giving you the adrenalin rush you crave, try driving Courtney's SuperV8 at around 200 kph. That's how Grant McShane gets his thrills outside of his NRI and Indepet CEO responsibilities. These pictures were taken when Grant and son Michael went Supercar racing in Queensland last month. I

20 · June 2010 New Retail Insights

Promotions

New CAT fork-lift a pretty good rebate

N

RI Shareholder, WB Hunter, took delivery of a $30,000 CAT folk-lift last month after winning the nation-wide Kenso Agcare promotion "Get the Forks". WB Hunter's director of rural operations, Michael Moroney, said the win was an apt reward for the reseller's support of the Kenso range, primarily made up of broadacre crop protection products. "It was one of the best promotions I've seen in the industry. Basically, we received a ticket in the draw for every $10,000 worth of Kenso product that we put through the business during the past 12 months. "With eight retail stores across central and north-east Victoria, we do a fair bit of broadacre business so we were always going to be in the draw with a reasonable chance." Michael said WB Hunter had traditionally been a TCM and Toyota fork user so was looking forward to

"road-testing" the new US-designed CAT folk-lift at Hunter's Echuca branch which was due for an upgrade. "I'd like to thank Rob Armstrong and his team at Kenso for what was a very effective promotion for us ­ at $30,000 it's a pretty good rebate for our selling efforts in the field," he said.

"When you're on a good thing, don't give it the fork!"

An associated prize, sponsored by Caterpillar, was a quality pair of CAT work safety boots which were awarded to NRI's Wes Flier of Mt Gambier Rural Supplies. For its part, Kenso also saw value in the promotion. The Brisbane-based company has re-launched "Get the Forks" for the 2010-2011 broadacre sales season. As the saying goes, when you're on a good thing, don't give it the fork! I

Caterpillar rep, Bill Leathem (left) and Marty Montgomery of Kenso with the folk-lift won by NRI's Michael Moroney of WB Hunter in Shepparton, Victoria

New Retail Insights

Ospray to distribute Arysta range

J

apanese-based Arysta Lifescience has appointed Ospray - part of the Cheminova group - as exclusive distributor of the Arysta portfolio of crop protection products in Australia and New Zealand. The arrangement covers Arysta's well-known brand names such as Select, Le-mat, Folimat and Orthene as well as new products in the registration and development stage. Russell Brown, commercial director for Ospray said he was looking forward to working with NRI to sell the Arysta range throughout rural Australia, with Ospray bringing marketing and technical expertise to the alliance. "Select is a leading post-emergent herbicide for grass-weed control in

various crops including canola and chickpeas," said Russell. "With canola plantings set to rise by almost 20% this season, we expect strong demand for that product in particular." Russell said many Arysta products would now be formulated at the Cheminova site in Wyong, New South Wales, which would help the company cope with the strong local demand expected. "Securing the Arysta range is a great coup for Ospray. It positions us above the generic competition, especially as there's another four new molecules coming down the pipeline, two of which are brand new to the Australian market." Russell said the sales of established

From left: Rob Richardson of Ospray, David Wigg of BrownWigg, Russell Brown of Ospray and Michael Moroney of WB Hunter.

products would initially be managed by Ian Crook, the Australian representative of Arysta. He said Ian would be closely involved during the transition phase to the new distribution arrangements. Ospray is part of the US region for Cheminova A/S, a Danish-based manufacturer of agrochemical products. It has a mission to help farmers increase yields by being a sustainable and innovative world-class supplier of crop protection products I

June 2010 New Retail Insights · 21

Broadacre

Confidence up in Kimba

Kimba farmer, Ray Cliff, with Troy Maitland of Agsave Merchandise in the wheat crop that yielded 2.5 tonnes per hectare last year

W

hile the clean canola crops and densely-headed wheat fields of the northern Eyre Peninsula looked so promising last spring, come harvest they did not deliver the record yields that many had hoped for. However, it was the best grain harvest in five or six years, boosting farmer confidence and setting the stage for a buoyant season for NRI Shareholder in Kimba, Agsave Merchandise. According to sales agronomist, Hayden Whitwell, farmers will maintain similar wheat acreages this year despite the low grain prices. "Following three inches of rain in March, we've sold a lot of knockdowns with most paddocks being hit at least once. "Unlike barley, wheat should still be profitable around here. We also expect canola, peas and lupins to be sown widely due to grass weeds being a big issue this year. "However, some farmers will opt for grass-free medic pastures instead of

break crops, especially if the current dry spell delays sowing much longer. "Medic is a low-cost option that offers a disease break and a healthy nitrogen fix plus there are plenty of livestock producers looking for grazing agistment."

"It was the best grain harvest in five or six years, boosting farmer confidence and setting the stage for a buoyant season."

Hayden said a few farmers had sought agronomic advice on growing lentils for the first time due to the attractive prices on offer relative to other grains. "Lentils are a bit risky due to the likelihood of getting hot weather in spring. However, we will support growers interested in trying the crop on a limited basis on prime country." Referring to the handsome crops grown by local farmers, Ray and Trevor Cliff (pictured) last year, Hayden said the final wheat yield came

Sales agronomist with Agsave Merchandise, Hayden Whitwell

in at 2.5 tonnes per hectare while canola went one tonne per hectare ­ about 40-50% above district average yields. "These crops had all the potential to yield far more but for a few hot days in September that really stopped seed set dead in its tracks. "However, some record yields were set west of here in the Wudina region which had almost perfect tillering conditions with about an inch of rain falling every a week for nine weeks from late June to mid August. Some wheat crops there yielded a mighty four tonne to the hectare. "Coupled with the better pricing last year, those farmers would be well positioned for years ahead," he said. I

22 · June 2010 New Retail Insights

Sponsorships

NRI flag flies at Kimba Cup

T

he NRI flag flew high and proud above the picturesque setting of the Pt Lincoln racing club grounds for the 2010 Kimba Cup meeting held in March. It's the second year that NRI Shareholders of the Eyre Peninsula have sponsored the annual race meeting and with good reason it seems. The event has grown to become a huge success with more than 1,400 people attending including a fair percentage of farmers and grain growers from the extensive broadacre cropping regions of the EP region. Troy Maitland of Agsave

NRI's Grant McShane congratulates trainer Gary Kenewell who trained the winner of this year's Kimba Cup.

Merchandise in Kimba said the NRI Shareholders initiated the sponsorship some years ago in a bid to keep the Kimba Cup alive and reduce the risk of it getting scratched from the racing calendar altogether. "The Kimba Cup has a long tradition but it was never going to survive financially if it had stayed in Kimba. "The outstanding attendance this year really vindicates the club's decision to relocate it to Port Lincoln and I guess our decision also to get behind it with some financial support."

He said the Makybe Diva room was hired so Shareholders could wine and dine some of their best farmer clients who were bused in from all over the region to be given the VIP treatment. Troy said the winning horse this year was "SO READY" trained by Gary Kenewell of Morphetville and owned by J. Martin, E.R. Davies, J. Gadomski, A.L. Croll and M.A. Ricciuto. Congratulations to all involved including NRI Shareholders Agsave Merchandise, Cleve Rural, Bawden's Rural and Carrs' Seeds. I

Oysters a la scarified

he famed oyster beds of Coffin Bay of South Australia's Eyre Peninsula may never be the same following another minor boating mishap involving Gavin Kuhlman of Cleve Rural Traders. While trip co-ordinator for Farmoz, Brenton Wilhelm, had trouble getting his boat started on the annual NRI-Farmoz fishing trip last year, this time around Gavin had trouble getting his boat to aqua plane. Notorious for boating misadventures, Gavin and his crew apparently headed out to sea without first doing what most fishermen do ­ reel in the anchor! He really does bring new meaning to the term "amateur" fisherman. Involving a dozen NRI Shareholders and Farmoz personnel, including Darren Hines (pictured), the fishing expedition was described as the "hunting and gathering" part of a business meeting convened last month to review the NRI-Farmoz trading alliance. Despite the little hiccup getting started, it wasn't long before the five-boat expedition was under way, the lines were cast and the fish were biting, according to Luke Johnston who attended on behalf of NRI's head office team. "It was pretty exhilarating being out on the high seas, up against the elements ­ and Gavin!" Luke joked. "But nobody died and we all caught something mainly whiting, snapper and gummy shark." Luke said Farmoz had become an important supplier of crop protection products to Shareholders on the EP. "Our share of the Farmoz business is now quite significant and looks set to grow more this year," said Luke. "Given the challenges we have on the supply side, it's good for NRI to be aligned with a company the caliber of Farmoz." Never mind oysters Kilpatrick. Next time you're at Coffin Bay, try some oysters Kuhlman a la scarified! I

T

Next gen of fishermen

T

he fishing prowess of NRI Independents ­ as occasionally showcased in this magazine ­ may well have inspired a new generation of fishermen or should that be rural resellers ­ the terms are synonymous. This is 5-year old Brayden McShane (grandson of Grant) proudly holding a 3.5kg Dolphin fish (Mahi-mahi) he caught in Queensland recently. I

June 2010 New Retail Insights · 23

Market Analysis

Neil Clarke adds value to rural data

heep are now more profitable that wheat. This year could be one of Australia's best in a decade. And the national farm interest bill has jumped from $2billion to $5billion in five years. These and other hard facts of rural life were presented to NRI James Finlay of Neil Clark & Associates Shareholders by Neil Clark & Associates, an agribusiness consultancy that makes a virtual art-form out of rural data crunching. Managing director, James Finlay, says he doesn't try to predict future commodity prices ­ that's better left to experts in that field. However, he can tell you in great detail what's happening in the major rural market sectors and production regions around the country and how rainfall impacts on enterprise selection, input demand and farm profitability. "When you look at comparative gross margins for the major wheat-belt enterprises, prime lamb production is now more profitable than wheat ­ due mainly to the low prices being paid for cereals. "This tells me a lot of broadacre country may go into pasture this season. And sheep producers will take more care of their flocks, which means more money will be spent on ag and vet lines at the local reseller." Held at the Sebel Citygate in Melbourne in March, the presentation was sponsored by Farmoz, one of NRI's alliance suppliers in the crop protection business and was designed to give NRI Shareholders a better understanding of the major profit drivers at work in Australia's farm input market. James said the recent widespread rains across many of Australia's prime farming regions (see map top opposite) had greatly boosted soil moisture levels which alone would generate strong demand for farm inputs this season. "Given that rainfall has been above average this season ­ particularly on the eastern seaboard ­ the total volume of grain produced is likely to be in the top ten percentile this year, driven by higher yields and bigger acreages." James and his colleagues also study longer-term trends in Australian farm production, some of which draws on data collected as far back as 1885. "For the best part of a century, wheat area and sheep populations have steadily risen. But since 1995, they've

24 · June 2010 New Retail Insights

S

parted company with wheat heading north while sheep numbers sank. In fact, they've sank so far that supplies of prime lamb have contracted. Given the long production lead times associated with sheep breeding and fattening, this is one of the reasons demand and prices are so strong at present. James said another interesting anomaly was that if you looked at the gross value of production for horticulture and wheat (see line graph above), the former had been far more stable than the later ­ not withstanding the recent woes of the wine industry. Perhaps most significant was the recent change in weighting of farm debt to farm income. "After tracking below farm income for many years, total farm debt surpassed total income in 2005 and has remained there. "From around $2billion for more than a decade, the combined interest paid by all farmers is now around $5billion." James said that given interest rates were relatively low at present ­ and would likely rise higher at some point ­ this situation was hardly sustainable and was an issue that rural

Estimated Farm Cost

6,000

5,000

4,000

$ million

3,000

2,000

1,000

-

1993

chemicals - Animal Health & Crop Protection ($m)

1994

1995

1996

1997

1998

1999

2000

2001

Year

fertiliser ($m) fuel and lubricants ($m) interest paid ($m)

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

resellers would need to keep abreast of. "We know a significant percentage of farmers are relatively debt-free, which means many of those that aren't must be quite heavily indebted. "High farm debt levels can have a big impact on the individual rural resellers who supply and service these farmers." As a percentage of total farm costs, James said interest

payments had soared in recent years (see line graph left bottom). "On average, interest paid is now the single biggest cost ­ surpassing fertiliser which has traditionally been the big ticket item. "In effect, rural resellers are competing with agribusiness lenders like NAB for their share of the farm input dollar," he said. I

Sugar demand holds up

While cereals, grain legumes and oilseed prices are in a lull, sugar remains one of the few commodities to resist the downward trend ­ at least for now. With prices still almost double what they were a few years ago, NRI Shareholder, Paul Rogers (pictured), said demand for farm chemicals and other inputs was strong and many cane growers were using futures to lock in returns on a portion of their crop. However, if ABARE projections are right, it won't be long before prices turn sour. Here we go again. I

New Retail Insights

SMS Rural opens in Horsham

N

RI Independent, SMS Rural, has opened its doors for business in Stawell Road, Horsham, in the heart of the Victorian Wimmera region. It's the same building and location of former NRI member, Heinrich's Merchandise, which was bought out by Graincorp a few years ago. The people behind the new venture are colleagues from the early Heinrich Merchandise days, Darren Scott and Campbell Smith, along with NRI Shareholder Lachlan and Ingrid McDonald from nearby Coleraine. Between them, they have several decades of experience in rural sales, agronomic service and retail management. At the official opening held last month, Darren said the proprietors were aiming to position SMS Rural at the premium end of the farm input market. "We are very focused on our top 100 broadacre clients who fortunately have been very supportive of us. These guys are our bread and butter," said Darren. "The business is 60% crop protection, some fertiliser sales and advice and a small amount of fee-for-

From left: At the official opening of SMS Rural last month were NRI's Grant McShane, Darren and Geraldine Scott, Ingrid and Lachlan McDonald, Sharon and Campbell Smith and Spud Francis.

service work. Lachie is involved at a board level while Campbell and I are the day to day managers. We also share the sales and agronomy workload." Given the favourable opening to the current cropping season, Darren said demand for all the usual crop establishment products had been strong. "Being aligned with McDonald Rural Services, we've had no trouble getting accounts with all the right suppliers. "Getting hold of stock though has been fairly hard going but we've worked the phones pretty hard and kept the pressure on suppliers until we

got what we needed." Darren said "Spud" Francis had been employed in-store to handle general merchandise and animal health enquiries. More recently, Matt Beddison had been appointed to work in sales. He will train under Darren and Campbell in agronomy. Geraldine Scott and Sharon Smith (Darren and Campbell's respective wives), were also active in the business, running the office and managing the accounts. Darren said one of the challenges was to stay focused on the company's core customer base. I

June 2010 New Retail Insights · 25

Rural Outlook

Banker talks farm finance

Australian farmers are entering a new era in which debt and equity are rising but not in line with farm income, according to senior agribusiness analyst with ANZ Limited, Peter Jacobs, who addressed NRI Independents in Melbourne recently. This is an extract of his speech which was sponsored by Crop Care.

I

n the past couple of years, widespread rain has fallen throughout all of Australia's major agricultural regions, greatly improving seasonal conditions and farmer confidence across the board. The prospect of better-than-usual grain yields appears to have compensated (at least partially) for the recent decline in commodity prices, fueling massive crop sowings which could deliver the largest national grain harvest in a decade. This is clearly good news for our farmers and the rural resellers and suppliers who service them. But it's not all good news. Unfortunately, the commodity price boom of 2007-2008 seems to be over before it even started! And not just for grains and oilseeds but all the major agricultural commodities ­ rice, beef and dairy ­ with the exception of prime lamb.

On balance, many challenges remain for the agribusiness sector but at least farm land valuations have performed well across Australia since 2001 (see bar chart below). Interestingly, it is this appreciation of land capital that has been the primary driver of farm wealth ­ not

1.00

"Interestingly, it is this appreciation of land capital that has been the primary driver of farm wealth ­ not farm income or cash-flow improvements."

Consequently, the industry can expect volatility in annual farm income to remain for some years with the last good year on that measure now back in 2001/02 (see line graph of farm cash income). Further, the relatively strong Australian dollar is not helping farm gate prices even at the current level of around 80 ­ 85 cents, which is still well above the post-float average of around 73 cents (see line graph right). While the market remains divided as to the future direction of the A$ over the next 12 months, it appears likely to remain reasonably strong given the relative strength of the Australian economy and some major unresolved financial worries elsewhere in the world. Looking at interest rates, these are steadily rising and look set to rise further, at least at the cash rate level. This is an issue that rural resellers may need to watch as average farm interest payments are now the single biggest cost item according to rural consultancy, Neil Clarke & Associates.

26 · June 2010 New Retail Insights

0.90 Post-float average 0.80

AUD/USD

0.70

0.60

0.50

0.40 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

Australia

1 6 %

Mallee Wimmera Central North High Rainfall

1 0 % 7 %

1 6 % 1 7 %

Qld Gulf NW Slopes and Plains SA South East WA Kimberly

1 7 % 2 5 % 2 6 %

3 1 %

Land price rises since 2001

farm income or cash-flow improvements. Perhaps more interesting is that these rising land values have made it possible for farmers to continue increasing their debt levels ­ primarily to fund land purchases at what are record high prices relative to their

income-earning capacity. It's hard to think of another industry in Australian that pays such a high premium for its primary business asset. However, it is somewhat reassuring to see that gross Australian farm indebtedness appears to have peaked with the leveling off that began in

December 2008. Whether this decline is fast enough to counter the effect of any future rise in interest rates is no doubt concentrating the collective minds of the agribusiness banking fraternity and other firms whose fortunes are closely linked to Australian farm viability. I

NRI Convention

There's something about Alice

T

here is something unique and special about outback Alice Springs. It first inspired the movie A Town Like Alice in 1956 followed by a successful remake starring Helen Morse & Bryan Brown in 1981. Today, Alice Springs is one of the most popular conference destinations in Australia, with most accommodation booked out during the peak autumnspring season. Thanks to NRI's conference organisers, the Crown Plaza Hotel has been secured and the stage is set for the first outback-styled NRI AGM & Shareholder Convention, October 21 ­ 24, 2010.

All hotel rooms have mountain views with balconies and king-size beds and there is a heated pool, spa and wading pool for the kids. As always, Shareholders are encouraged to book early to get the best prices and choice of rooms. There are several reasons why Alice Springs has become so popular in recent times. Following a recent initiative to tidy up the town and improve services for locals and tourists, there are now plenty of trendy little cafes, fine restaurants, amazing art galleries, groovy bars and good-fun nightspots to check out including the casino, which is a short walk from the hotel.

Other drawcards are the spectacular scenery and rich history of Central Australia. Framed by the MacDonnell Ranges and an intense desert landscape, the town began as a repeater station along the Overland Telegraph Line. The introduction of camels, the development of a pastoral industry and the discovery of alluvial gold, has led to a distinctive character-rich community and a wealth of quirky festivals and events. The desert climate and landscape are ideal for outback adventure - quad and mountain-bike riding, four-wheel driving, camel riding and hot air ballooning are popular activities. Or if you want some time out, try a bit of bush camping, trekking along the Larapinta Trail and swimming in lush waterholes along the way. For the full outback experience, consider a post conference tour further afield taking in world-class natural beauties such as Uluru, the Olgas, Kings Canyon, Katherine Gorge and even Kakadu National Park and Darwin further north. Remember you may not be up this way again for a while. A highlight for NRI delegates will be the Homestead Ho-down which will take place at Deepwell Station ­ one of the oldest and largest continually working cattle stations in the area. Other places of interest on the agenda are the National Road Transport Hall of Fame, Old Ghan Museum and the award-winning Alice Springs Desert Park. Tip for delegates: Brush up on your favourite Slim Dusty and Ted Egan lyrics in case there's a late-night sing-along in a noisy bar somewhere. For more details, contact NRI's Wendy Rowe on 03 9467 6300. I

June 2010 New Retail Insights · 27

Feel the pioneering spirit

in the heart of our great southern land

Come to the NRI Annual Convention in Alice Springs October 21­24 2010

Growing Together

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