The constant volatility of agriculture makes the industry essential to farmers
Los Angeles, CA (PRWEB) August 23, 2012
The Farm Management Software Developers industry has benefitted from the federal government's biofuel mixture mandate established under the Energy Policy Act of 2005 and extended with the Energy Independence and Security Act of 2007. These Acts increased downstream demand for corn – the country's single largest crop – because it is the main input into ethanol, a popular biofuel. Since 2007, the industry has grown at an average annual rate of 1.8% to $216.7 million in revenue. Year-on-year revenue depends on the agricultural price index; when farmers' prices fall, they increase their demand for software that helps mitigate revenue and profit losses. Similarly, says IBISWorld industry analyst Nikoleta Panteva, “customers seek out software to combat potential losses incurred when input costs increase.” Oil is one of the main cost components of farm operations because it is used in machinery as fuel and in the production of fertilizer. As such, with the world price of crude oil climbing at an average annual rate of 8.0% between 2007 and 2012, industry demand has grown. In 2012, with the world price of crude oil continuing its upward trajectory and the price of corn growing due to Midwest droughts, industry revenue is expected to increase 2.6% for the year.
"The number of industry participants has also increased due to the growing popularity of farm management software," says Panteva. Between 2007 and 2012, the number of establishments has grown at an average annual rate of 3.1% to 86 expected by the end of the year. Profitability (measured as earnings before interest and tax) has expanded in 2012 as industry operators have introduced products that cater to individual growers (i.e. user-input driven). The Farm Management Software Developers industry’s two largest players, Hitachi Ltd. and SST Software, generate about a third of industry revenue; a number of smaller niche operators supply software to farmers of specific crops.
IBISWorld projects that the industry will continue to grow over the five years to 2017. With mandates for biofuel set through 2022, corn farmers will continue to demand products that help them maximize output and profit while minimizing costs and losses. The stage is set for new entrants to continue offering specialized products, but the threat of industry saturation will keep the establishment growth rate slower. For more information, visit IBISWorld’s Farm Management Software Developers in the US industry report page.
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IBISWorld industry Report Key Topics
Companies in this industry manufacture components and develop software for agricultural information and management systems. Agricultural information systems can be used to gather and analyze information for field usage, crop condition, staff and fertilizer, agricultural chemical and water usage, and yield and quality.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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