As weather conditions allow for larger harvests and demand from biofuel producers continues to mount on government mandates, prices for warehousing services are projected to grow stronger over the next three years.
Los Angeles, CA (PRWEB) March 19, 2014
The farm products warehousing market exhibits a buyer power score of 3.3 out of 5; the closer the score is to 5, the more pricing power the buyer has over the supplier. Over the three years to 2013, the price of farm product warehouse services has grown slowly. Weak demand from the farming market has resulted from relentless droughts across the United States. “With less crop volume produced, farmers have not needed grain and crop storage,” says IBISWorld procurement analyst Nikoleta Panteva. “As such, suppliers have lowered their prices to stimulate demand.”
Over the next three years, while demand is expected to pick up and prices are anticipated to grow, buyers will still experience favorable conditions. “The low price volatility allows buyers to procure farm products warehousing services without the risk of experiencing drastic year-on-year price fluctuations,” adds Panteva. “As such, whether they sign a contract this year or next, the price of the service is unlikely to change much, so budget allocations can remain consistent.”
However, buyer power is compromised due to the high market share concentration of warehouse operators and the continuous consolidation within the market. Large agribusinesses, such as ADM and Cargill, are increasingly expanding their operations to capture a greater market base. As such, they are acquiring smaller, regional warehouses. Large operators typically do not compete on price, resulting in higher rates for buyers. The specialized nature of farm product warehousing across products and suppliers also hurts buyer power because buyers' options are limited by storage needs. For example, grain farmers can only store their products in elevators or silos, while wholesalers of packaged goods need flat storage.
Buyers should be aware of the pricing models employed by their intended supplier. Some suppliers price their services based on the market price of the stored crops. When prices increase post-harvest, buyers are charged a higher rate, incentivizing them to either sell their crops or pay the higher cost. As such, buyers must be well versed in the supplier's pricing model and plan their storage period or negotiate terms accordingly. For more information, visit IBISWorld’s Farm Products Warehousing procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of farm products warehousing. Farm product warehouses provide facilities and storage services for a number of agricultural goods, the most common of which are grain products. Warehouse providers are responsible for maintaining the security and condition of the products they store, but warehouses do not take ownership of or sell those goods.
Recent Price Trend
Product Life Cycle
Total Cost of Ownership
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Market Share Concentration
Buying Lead Time
Key RFP Elements
Buyer Power Factors
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IBISWorld is one of the world's leading publishers of business intelligence, specializing in Industry research and Procurement research. Since 1971, IBISWorld has provided thoroughly researched, accurate and current business information. With an extensive online portfolio, valued for its depth and scope, IBISWorld’s procurement research reports equip clients with the insight necessary to make better purchasing decisions, faster. Headquartered in Los Angeles, IBISWorld Procurement serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.