Does the trend towards fewer, larger players benefit growers?

The recently announced tie-up between Agrovista UK and Openfield undoubtedly makes good business sense, bringing together a leading crop protection and agronomy company and Britain’s foremost farmer-owned grain marketing and arable inputs business.

The two organisations have complementary strengths: Openfield’s seed supply, fertiliser, and end-market knowledge and Agrovista’s agronomic expertise and technical innovation.

An immediate benefit will be the establishment of joint trials and shared information. Agrovista will support Openfield’s agronomists with agrochemical supply and advice, helping deliver agronomy packages for variety-specific end market contracts, while better meeting the food chain’s quality, traceability and safety needs.

Tim Davies, group managing director for Openfield, said the development would give customers access and knowledge to the latest technology, product innovation and technical advice and allow development of independent market access for UK growers.

James Robertson, managing director and group chairman of Agrovista, said the alliance offered an alternative, independent approach to the market. “There is no doubt that the synergies that a joint partnership provides will bring widespread impartial advice and product benefits to our farmers, members and customers,” he added.

It would be hard to argue with that. Last summer Masstock and UAP – the latter until recently sharing a commercial agchem supply relationship with Openfield – said a similar thing when they merged. The move, they stated, would improve the level of research-based agronomy expertise and input supply services for its farmer customers.

But what about the many growers who remain outside such alliances? The NFU’s chief arable adviser Guy Gagen says the union keeps an eye on at what is happening with mergers and collaborations, but to date it had been decided there was no need to interfere.

“Many farmers like to use an independent agronomist while others prefer a serviced agreement. We believe there is still enough choice otherwise we would approach the Office of Fair Trading. However, we will keep talking to the Association of Independent Crop Consultants and NIAB TAG, and if there are too many more then we might need to look more closely.”

Although potentially mergers or agreements of this size could reduce competition, it could work the other way, Mr Gagen believed. Such unions also gave the resulting larger company or partnership more opportunity to spread to new territories, which might currently be dominated by one player. Farmers might also want to secure more quotes, giving other players a chance to gain market share, too, he said.

“We also need strong players in the market able to compete internationally, on a European and global level.”

Such alliances could provide a valuable stop gap to help the much-needed movement of technology into agriculture, which often entailed large projects, he added. “We need to think in different ways to keep our wheat and oilseed rape growing competitive with other countries.

“Big companies can put in bids for Technology Strategy Board funding and while the results may initially benefit members, messages do leak out eventually to the benefit of the wider world.”

However, given the increasing political importance of agriculture and rising investment and returns, he predicted a resurgence of independent research in the not-too-distant future.

“The latest CAP reform proposals suggest over €7bn (£6bn) for research over a seven-year period is on the cards. And our own government recognises a need to invest public money in research; we would like more of that to be focused on farmers’ problems.

“We need to ensure that organisations are in place to secure funding for applied research – it is the responsibility of the scientific community, agronomy companies, the NFU and plant breeders to set the foundations while CAP reform grinds away. Until they are in place, we need commercial organisations to fill the gap.”

Hertfordshire-based AICC agronomist Peter Taylor believes while large groups can work well for their members, they can cause problems for those outside the fold.

One reason is that they were more likely to obtain preferential trading terms with manufacturers. “As a general comment, this can lead to concerns over product availability,” he said.

“Bigger concerns can tie up larger volumes of product, which can restrict flows to other outlets. We saw this to an extent with Atlantis last year, when only a limited amount of product was placed with distributors, which they naturally held back for their own clients, even though they had not had specific orders.

“There is no evidence this will happen here, but there is always a danger bigger concerns begin to dictate the way it works.”

Reduced competition was another potential worry. With four big companies now effectively operating as two, it left little room for the rest of the sector, said Mr Taylor.

“We still have local merchants who do a very good job, but these might just be left picking up bits around the edges if competition and access is restricted.” It has also affected the ability of larger regional supply co-ops to source product, he added.

Both partners in the latest tie-up claim the move will lead to better creation and dissemination of impartial information through joint trials to members. Mr Taylor questioned how independent that information could be when it was done by distribution, or manufacturers.

“Both companies do some very good work and it will be a benefit to their farmers, but how widespread is it going to be? They are not a charity – they are looking to sell more product, to make more profit and to increase their membership. If I were them I’d probably do the same.”

There is also a big question over where truly independent data would come from, exacerbated by the fact that distribution was replacing independent but public-funded bodies for near-market research.

“We need a balance of independent and commercial interests to create proper competition, but perhaps we are moving towards a bias of large commercial groups which is not entirely beneficial to the wider industry,” said Mr Taylor.

Tim Davies’ reaction

What will be the benefits to growers of Openfield and Agrovista coming together?

The benefits come in many forms, but in short the partnership with Agrovista ensures our growers receive the advice and support needed to produce high quality crops while making a respectable profit and with due regard for the environment. As neither business competes in the other’s market, we both retain our independence.

Members gain access to a comprehensive suite of chemistry while Agrovista’s extensive network of field trials means we can offer unrivalled advice.

Crop agronomy is, however, just one part of the package. We recognise that farm management is a complex and time-consuming affair and with the need to cut carbon emissions across the supply chain, our growers will also benefit from Agrovista’s business advice and nutrient planning specialists, which can tailor bespoke nutrient plans, advise on precision farming solutions and give impartial environmental advice.

We do employ a small number of in-house agronomists, this agreement will also ensure they receive some of the most up-to-date, trials-backed support available ensuring their continual professional development.

Some growers may fear these tie ups/mergers will reduce competition. Is this a genuine concern?

The decision by Frontier Agriculture to move into crop agronomy was bound to fuel a wave of consolidation across the advisory sector as others sought to gain the scale of operation needed to compete. Origin’s acquisition of UAP, which it has since integrated into its Masstock division, is evidence of that reality.

There is, however, intense competition between firms in this sector and with relatively low barriers to entry for newcomers and a network of 230 independents advising on more than 1.4m hectares, we do not foresee a time when the situation – in the short-term at least – is likely to attract the attention of the competition authorities.

By driving our business forward through reflecting the needs of our customers and growers, agronomists will always be able to differentiate themselves through innovations in approach. Our partnership with Agrovista is designed to ensure we continue our lead in the sector.