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Floyd Heller, General
Manager for Ag-Land FS in Hartsburg, and Pekin, says the
agricultural world is dealing with many of the supply-chain issues
that the rest of the world is dealing with.
With the agricultural market being affected by these challenges,
product and equipment suppliers have had to find ways to manage
these problems.
Supply chain problems have resulted in various impacts. For example,
an iron shortage has negatively impacted product availability. In
addition, some dealers have had problems getting steel and computer
chips for larger equipment. The shortages have affected the services
that dealerships provide as parts needed for repairs are not always
available
These problems have resulted in lengthy delays on getting supplies.
Research shows people purchasing large equipment have sometimes had
to wait a year for equipment to be delivered.
The delays on new equipment have resulted in a higher demand for
used equipment, which in turn has increased the price of used
equipment.
With these issues, the January Ag Economy Barometer survey reported
“machinery purchase plans are down for farmers, with 45 percent of
respondents saying that tight farm machinery inventories impacted
their machinery purchase plans.”
Additionally, producers say they are having difficulty purchasing
fertilizer, insecticides, and herbicides due to supply chain issues.
The skyrocketing prices of the anhydrous ammonia based nitrogen
fertilizers is another part of the problem. At the end of 2021, The
USDA Economic Research Service said they were estimating “an annual
price increase of 235 percent for anhydrous ammonia, 149 percent for
urea, and 192 percent for liquid nitrogen (32% N) using data
provided by USDA’s Agricultural Marketing Service (AMS).
Due to both short supply and major cost increases, some suppliers
are rationing input products like chemicals and fertilizers.
Local effects of supply chain issues
At Ag-Land FS it is mainly product shortages and transportation
issues [that] are having the biggest impact on business. Heller
says, “many products we use are produced overseas and covid
shutdowns have delayed production and manufacturing of these
products. Also, higher energy costs have affected freight rates and
fewer truck drivers has affected delivery dates and times.”
Jim Coop, Sales Agronomist at Sun Ag Inc. in Emden, says there are
many unknowns. They are sometimes told they are going to get certain
products, but there is a question of whether they will get them. If
they do get the products, they wonder if it will get there in time.
Price increases are connected to supply that cannot keep up with the
demand. Coop said they have seen prices increasing daily for some
suppliers or products. With each shipment they receive, prices are
higher.
Product and equipment suppliers have found some ways to manage these
challenges. Even with supply chain issues, some dealers have quite a
bit of high-quality used equipment on hand due to trade-ins.
Some dealers have been able to get what they need, still have parts,
and can continue to provide service to their customers.
Adjusting inventory management is another way of dealing with the
issue. A recent article on 2022 shortages said, “companies are
getting better at forecasting and responding to potential
disruptions.” As a result, the impact of these disruptions could be
“less pronounced.”
At Sun Ag, Coop said they are currently in good shape as far as
overall inventory of some products. They used to get the products as
needed, but now, Coop said they are trying to get products before
they are needed. Sun Ag is trying to plan ahead based on what
farmers have needed in the past. The Coop does not want to make
people wait for weeks on products due to supply chain delays.
Most equipment at Sun Ag goes out from April to June, so Coop said
they are stocking up now. Once April hits, the equipment will go out
quickly.
Before the busy planting season begins, Ag-Land FS is also stocking
up on products. Heller said, “we typically have a spring and fall
season in agriculture, so we do have time to ‘reset’ and procure
products in between seasons.”
Because they are securing products now, Heller said, “It appears we
will be adequately supplied with most of our products for this
upcoming spring season.”
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Heller said, “Unfortunately,
like everything else, we have seen inflated prices from a year ago.”
In addition, “There have been some chemicals in short supply which
may force some product switching.”
On the plus side, Heller said, “Other than some shipping delays and
a few cancellations of chemical orders, I would have to say that we
are satisfied with our inventory supply for this spring.”
Though things are looking good
for this spring, Heller feels next fall could be a different story
as the Ukraine-Russia war has the strong potential to cause dry
fertilizer and nitrogen shortages. Heller said, “A lot of fertilizer
and nitrogen products are exported from that part of the world.
Prices have already started to spike because of the conflict, and
many vessel suppliers are refusing to enter Russian ports. We
definitely need a resolution to the conflict that doesn’t impede
supply for next fall.”
Coop has worked in the agricultural business for 25 years and said
right now, planning ahead is more important than ever.
There is some hope on the horizon that the tide may start to turn
soon. The article “2022 Supply chain outlook features shortages,
high delivery costs” says, “While supply chain woes aren't projected
to disappear in 2022, this year could mark a turning point.
Companies and suppliers are making big investments to add capacity
and are increasingly adopting new technology that will drive
efficiencies and lower costs.”
In “The Big Challenge for Supply Chains in 2022,” it says a business
must “be resilient and capable of adapting to major disruptions so
that it can develop long-term strategies and solutions to these
complex challenges.” These strategies and solutions are key to
business sustainability.
As the article 'Understanding Components and Parts Shortages' says,
“No matter what the future holds for component supply, it's
important to have a robust supply chain strategy, complete with
sourcing plans and strong supplier relationships, in order to
protect your own operations. And if good times are around the
corner, it still is prudent to plan ahead for the next component or
parts shortage and big disruption.”
When facing various challenges in the agricultural industry,
resilience, preparedness and adaptability are important.
Resources:
Jabil. Understanding Parts and Components Shortages (and How to
Survive them).
https://www.jabil.com/blog/
understanding-component-supply-shortages.html
Purdue University CME Group. “Ag Economy Barometer Declines,
Producers Concerned About Rising Costs and Supply Chain
Disruptions.” February 1, 2022
https://ag.purdue.edu/commercialag/
ageconomybarometer/ag-economy-
barometer-declines-producers-concerned-about-rising-costs-and-supply-chain-disruptions/
World Economic Forum. “The Big Challenge for Supply Chains in 2022.”
January 2022.
https://www.weforum.org/agenda/2022/
01/challenges-supply-chains-covid19-2022/
USDA Economic Research Service. “Fertilizer prices spike in leading
U.S. market in late 2021, just ahead of 2022 planting season.”
February 9, 2022.
https://www.ers.usda.gov/data-products/chart-gallery/gallery/chart-detail/?chartId=103194
Zimmerman, Sarah. “2022 Supply chain outlook features shortages,
high delivery costs.” January 31, 2022.
https://www.supplychaindive.com/news/
supply-chain-outlook-2022-shortages-labor-rates-capacity/618052/#:~:text=Shortages%2C%20labor%20constraints%2C%20limited%20
storage,could%20mark%20a%20turning%20point.
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