Farm Futures Logo

Purchasing strategies: How buying companies aim to save

Let someone else buy and deliver inputs, and save up to $50 per acre.

Bob Burgdorfer

March 18, 2019

5 Min Read
Two men standing in warehouse with boxes of inputs
Jim Weldon (left) and Matt Oman own Integrity Ag in Nebraska. The company pools farmers’ money to buy crop supplies in bulk, saving them money and time. “We can take that workload off of them — the shopping and the pricing,” Weldon says.Andrew Carpenean

Farming takes a lot of time in planting, harvesting and marketing crops. Equipment must be fixed or replaced, and records need to be updated. Among all that is the need for personal and family time.

That is a full schedule.

So in Nebraska, when a company said, “Hey, for a fee we can buy the chemicals and fertilizers for you at low prices and deliver them to your fields when you need them,” a lot of farmers — about 120 — said, “Where do we sign up?”

Taking a page out of the traditional co-op playbook, Integrity Ag pools farmers’ money to buy crop supplies in bulk — primarily chemicals and fertilizers. Integrity and two farmer-members say savings on input supplies easily lowers a farm’s cost on average by $50 per acre, even when factoring in the upfront service fee.

“The other advantage is I am able to spend more time on the marketing side,” says Doug Rainforth, a Nebraska farmer and longtime customer.

The company was founded in 2012 and a year later started serving farmers near Hastings in south-central Nebraska.

How it works

Integrity Ag officials meet with each farmer individually in December, January or February to assess crop needs, whether it be corn, soybeans or wheat. The meeting determines if the farmer uses conventional tillage or no-till, preferred application rates, and the intended acreage for each crop.

“We break it down for them so they can see their cost per acre, whether it be chemicals or fertilizers, on each field,” says Matt Oman, Integrity co-owner with Jim Weldon.

Once those details are sorted out, the products are ordered and available ahead of the spring crop cycle. The farmer only pays for the product when it arrives, and that payment can either be to Integrity or to the private supplier.

“Once we get them signed up for the savings, we can take that workload off of them — the shopping and the pricing,” Weldon says. “Most of the farmers here are aged 55 to 65. They don’t want to deal with that anymore.”

It’s like Fed-Ex

Products are delivered and stored at the company’s facility in Hastings, a former World War II ammunition depot. From there, they are trucked to the farms.

“It is kind of like Fed-Ex, where everything comes into our warehouse; we get it staged and then ship it out on semis,” Weldon says.

Integrity’s business has created competition from local retailers, which have begun offering competitively priced supplies as a result. Weldon encourages farmers to accept better prices from a competitor, and the farmer can cancel the order with Integrity. His or her account will be credited for the amount.

Integrity also maintains records of chemical and fertilizer use for future orders and future cost comparisons. Also, last-minute deliveries are part of its service.

“I was spraying Status [herbicide]. I called Jim and said I needed some more. I had a couple of quarters to spray, and when I came back, there was a load of chemicals sitting by the trailer,” says Nebraska farmer Mason Hoffman.

Hoffman says the products he orders through Integrity may not be the brand names he has used, but they worked just as well. “The prices are extremely cheaper. It is not like it is seconds or that it has sat around the warehouse for five years. It is new manufactured stuff at a wholesaler’s price.”

Hoffman likes that no upfront money is paid before receiving the products. He feels Integrity treats him the same as bigger farmers.

Trust is a must

Both Hoffman and Rainforth say farmers considering a buying group, or any entity in which money is exchanged, must trust who they are dealing with.

The two farmers knew Weldon before Integrity was formed, so relationships had already been established. “Back in the ’70s or ’80s, my dad and uncle prepaid for chemicals from a local supplier, and the supplier went broke. Since Dad and my uncle were unsecured creditors they did not get their money back,” Hoffman recalls.

Gary Schnitkey, ag economist at the University of Illinois, echoes that advice. “You have to make sure there are some safeguards on those relationships. It is just a due diligence thing. Anytime you are going into business with a new individual or a new entity, you need to ensure you will receive the product.”

Bonus content: This buying company also provides analysis

Early this year Jim Hedrick told his farmer-members to delay purchases of ammonia because he expected wholesale prices to drop.

The price did drop — about $70 a ton. More savings could happen if the basis between the Midwest and Gulf markets should continue to narrow.

Hedrick and his Lafayette, Ind., company, Sagamore Ag Source LLC, deals in information, specifically price information for key farm inputs, such as fertilizer, fuel, chemicals, seed and sometimes equipment.

Farmers using his information can buy their products through his company or from other vendors. Hedrick is fine either way because he sells information and alternative market access. Farmers pay Sagamore $2,500 a year for a weekly newsletter, which includes the latest price trends for a number of agriculture goods, plus recommendations on price direction and when farmers should buy or wait.

Hedrick claimed a Texas farmer saved $100,000 on two deals involving 32% UAN. “We had been tracking the market; we knew it was in a trough. He bought, and about two weeks later, the market was about $30 to $40 a ton higher than where he bought it.”

Hedrick tracks other products, too. Phosphates could be the next product that moves higher. “We are really concerned that there is a lot of upside risk,” he said of phosphates in January. “We are concerned that phosphate supplies this spring could be tight to very short in the U.S.”

His reasoning: A Mosaic fertilizer plant shut down last year; not much fertilizer was applied last fall due to late harvest; the supply pipeline was less-than-full; and this year has higher-than-expected corn acres.

“I think from March to April is when the price could spike quite a bit,” Hedrick predicted. “We see fertilizer prices fluctuate by $100 or more per ton each year, so knowing when to buy can mean saving $100 or more per ton. That can translate into $20 or more cost savings per acre.”

About the Author(s)

Subscribe to receive top agriculture news
Be informed daily with these free e-newsletters

You May Also Like

Aug 29 - Aug 31, 2023
Farm Progress Show annually hosts more than 600 exhibitors displaying new farm equipment, tractors, combines and farm implements; seed and crop protection products; and many additional farm supplies and services.