Q1 2024 Agribusiness Earnings Themes, Highlights and Analysis
Over the last week I consumed more than 40 analyst call transcripts and 30 quarterly agribusiness earnings results, synthesizing the themes, trends and key takeaways across the crop protection, seed, fertilizer, retail, equipment manufacturers (irrigation, tractors) and tech providers segments of agriculture.
In this article, I share five trends from Q1 2024, another six notable quotes, images and takeaways from the transcripts and then highlights and key takeaways from more than 20 agribusinesses (listed under the index).
Index:
Quick Agribusiness Comparison Charts
Key Agribusiness Themes for Q1 2024
Notable Takeaways, Quotes and Images
Company Highlights
Bayer Crop Science
BASF
Corteva
FMC
Syngenta
UPL
AMVAC
Sharda
Lavoro
Nutrien
Mosaic
Yara
ICL
John Deere
CNH Industrial
AGCO
Lindsay
Valmont
Planet Labs
Ginkgo Bioworks
Benson Hill
Quick Agribusiness Comparisons
Equipment Manufacturer Comparison
Input Manufacturers Comparison
Bayer revenue and and EBITDA fell the least compared to all other entities.
Fertilizer Manufacturers Q1 2024
Key Agribusiness Themes from Q1 2024
1. Macro Farm Indicators in Decline
Consistent with what has been discussed and forecast for several months, there is a projection of continued decline in net farm income levels plus lower crop prices. This is topped off with some variation in weather impacts on grower sentiment, particularly in markets such as North America and Brazil.
The macro economic conditions have been contributing to lower farmer spending, increased uncertainty leading to decreased revenues and a more challenging portion of the commodity cycle for most agriculture related companies, from equipment manufacturers to input manufacturers.
Of the major crop protection, fertilizer, retail, and equipment companies looked at, 100% had their revenues decline in a YoY comparison of Q1 2024 to Q1 2023.
2. Just-in-time Input Buying
Higher interest rates and less supply chain uncertainty led to farmers and retailers transitioning to a “just-in-time” purchasing approach— purchasing right before using.
I began hearing about this from industry professionals in the early part of the year and receiving questions about it from many throughout the industry, and it played out consistently across input providers according to results.
On investor calls Nutrien Ag Solutions stated they are tightening up their inventory levels across their trade area (“to below $1.5 billion”), consistent with Brazillian retailers like AgroGalaxy and Lavoro, and had major input manufacturers such as Bayer Crop Science, Syngenta Group Corteva and FMC all commenting on this playing out as a hinderance to their Q1 revenue.
The sentiment was that farmer demand for inputs like herbicides was still in tact and expect those sales to trickle into Q2.
A quote from FMC CEO Mark Douglas on their May 7th analyst call:
In the U.S., we’re still selling products that are used very early in the season, even in May, which is unusual. What does that tell you? It tells you that the inventories of those products have been totally depleted. We’re selling for products that will be used right now.
3. Inventory in Brazil/LatAm still Normalizing + Friction Between Input Manufacturers and Distributor Relationships
Brazil was topical for almost every segment of agribusiness— input manufacturers, retailers, equipment manufacturers (irrigation and tractor). The “destocking” was still occurring, but most forecast for it to normalize through 2024. Corteva executives stated the following on their analyst call:
Available data suggests channel inventories are trending down in Brazil. While they're still higher than historical average, inventory levels have come down versus 2023 year round. So, the channels making progress towards a more normalized inventory level and the demand at the farm gate in Brazil remains healthy and the expected increase in planted area supports additional Crop Protection applications.
The increased inventory levels combined with declining input prices contributed to challenges for businesses operating in the LatAm region. This lead to some friction between input providers and retailer/distributors in the region. From FMC CEO Mark Douglas:
We talked before about being very careful how we do business in the Southern Cone and in Brazil. We’ve been very – extremely diligent in protecting our balance sheet. We saw an issue with a distributor that we had in Argentina, and we decided to take material back from that distributor and that relationship. So that’s the type of activity that, yes, it slowed down the top line. But from a balance sheet perspective, it was absolutely the right thing to do.
An exclamation point on this friction came when AgroGalaxy, the 2nd largest retailer in LatAm, and Bayer Crop Science decided to end their relationship:
The companies cease operating in the Brazilian states of Paraná, São Paulo, and Minas Gerais. In these locations, AgroGalaxy operated with distribution brands Agro100, Grão de Ouro Agronegócios, and Grão de Ouro Comércio de Insumos.
According to the companies, the end of the partnership is due to "different business strategies”