SMU Community Chat: Ag Business Avoids Worst of Pandemic, So Far

The company’s largest business division is livestock equipment–stock tanks, cattle feeding equipment, cattle handling equipment–that are sold through retail stores. Agricultural supply stores are considered essential businesses and Behlen is continuing to fill orders. Stock tank demand is good and Behlen is struggling to buy enough steel to meet customer needs.

Behlen’s metal buildings business serves markets in the Midwest and Northwest. In the midst of the coronavirus crisis on Feb. 7, the company acquired Trident Building Systems in Sarasota, Fla., making the transition challenging. March and April are traditionally slower times for the building business. Backlogs at the end of May and June are looking strong, however, noted Raimondo, “not record setting, but on the high side of average.”

Behlen’s grain bin business is down about 50 percent from its 2016 volume, but is selling to new projects in the Ukraine, Mexico, Taiwan and Ohio. USMCA has been huge for Behlen, said Raimondo, with Mexico and Canada its two major export destinations. The China trade deal has improved business conditions in the agriculture sector now that retaliatory tariffs have been removed. Orders for larger size bins between 250,000-500,000 bushels is becoming more common for farms. The biggest driver of depressed demand for grain bins is low commodity prices and a strong dollar that hurts exports.

“We need stronger demand for our ag commodities because the prices are depressed. As we start getting better deals worldwide, not just with China, we should start to see farmers get a little more for each of their bushels of crop and that is going to help with generating some demand for storage. We feel there are some great opportunities there and then indirectly through cattle and hog prices. As farmers are able to generate a little better dollar, they can spend more on our products.”

Raimondo is not a fan of tariffs because a tariff is a tax that causes shifts in demand. The Trump administration, however, is using tariffs to get better results in trade agreements. “If it helps to make agreements, I have to support it, but if it is just tariffs to have tariffs, we will be hurt in the long run,” he said.

Behlen maintains a fleet of 85 trucks, and drivers are being cautious to avoid infection. Truckers are also anxious to avoid mandated 14-day quarantines for traveling across state borders. “Trucking is really struggling right now except for big box store deliveries,” said Raimondo. Auto and oil are down and construction is in limbo. Behlen has not seen any substantial cancellations of orders for jobs in progress, but new projects are more “wait and see,” he added.

On steel prices, Raimondo said the market is in uncharted territory, “No one expected the wheels to fall off the economy as quick as they did.”  He applauded the steel mill community for taking out capacity quickly to support prices and align with demand. “I don’t think there will be a $400 doom and gloom number [for hot rolled], but I don’t know how quickly we will come out of this—maybe as long as the fall.”

Behlen maintains strong relationships with suppliers and customers and is keeping communication lines open. “We rely on our suppliers to take care of our customers and we work really hard to do the best we can to let them know what we are doing, give them an opportunity to help or let us know if they are in trouble. We try to work together that way,” said Raimondo.

He expects strong demand to continue at ag retail stores, but it will take more certainty in the economy before people make any big, long-term investments. “I think there are going to be all kinds of dynamics that will change the way we do things,” he said. “But most companies that we work with and that we sell to are adaptable, flexible and are trying to do the right thing.”

“November is our first month of the year, so we are already though five months of 2020 and we were having our second best year of the century,” said Raimondo. “Six months down the road our businesses will look different, but we will still be around. There are a lot of challenges and hard decisions we have to make, but we will do whatever it takes to survive.”

Editors note: Next week’s webinar will be held on Wednesday, April 22 at 11 A.M. Eastern Time and will feature Bernard Swiecki of the Center for Automotive Research (CAR). This free webinar is open to SMU & CRU members, as well as anyone in the industry. Click here to register.