Farmers not spared from global supply chain disruptions
Virgil Shockley, a farmer in Worcester County, Md., sees consequences of the world’s supply chain crisis everywhere he looks. He thinks about fuel costs, which have nearly doubled in the last year, and considers the average combine, which burns 12 gallons of fuel an hour. Fertilizer, seed and pesticides are also more expensive if not in short supply.
But the severity of the economic chaos was clearest to him when he broke a hydraulic line on a skid-steer loader in August. Shockley called his Hoober dealership in search of one and received a call back after an employee finally located a replacement, albeit with a complication: He wasn’t sure the seller would part with it.
“There’s only one,” the employee said.
Not one in the state or the region — one in the country.
“It scared the hell out of me,” said Shockley, who ultimately bought the line. “If you break something you’re screwed.”
It’s a reality that farmers may encounter more often over the next year as the global economy recovers from a pandemic that hobbled production plants, cleared store shelves and then left producers across many industries unprepared for a buying spree that accompanied an economic rebound. Agricultural professionals across the Delmarva region said the uncertainty is affecting their business in varied ways, but many said they fear conditions may worsen before they improve.
“It’s only October. A lot can change between now and planting time,” said Mike Twining, head of sales at Willard Agri-Service, a crop services company in Frederick, Md. “If anyone tells you they know what’s going to happen, I’d sure like to know their number because I’d like to talk to them.”
At Willard, he said, business typically worked a little differently pre-crisis than it does now. Salespeople often sold product the company didn’t technically possess yet, on faith that suppliers would supply as they always had: right on time at a predictable price. That faith doesn’t necessarily exist anymore, he said. The wait for repair parts, such as a 2-inch valve, is six to nine weeks, which is unheard of. Twining said he’s advising his customers to order earlier than normal on everything from fertilizer to soil amendments.
“The grower or retailer who waits to the last minute is going to have a very difficult time if not impossible,” he said.
At T.S. Smith & Sons, an 800-acre produce farm and market in Bridgeville, Del., deliveries to the farm’s deli, such as meat and cheese, have been delayed because vendors can’t find enough truck drivers, owner Charlie Smith said. The farm is also selling fewer jarred items such as jam or jelly because small, local producers who sell at the market can’t locate enough glass jars. Inconveniences, however, have been small.
“Overall we’ve managed to find other suppliers or other sources, and we’ve made due,” Smith said.
National agricultural leaders and commodity groups have been less sanguine. In early September, the American Farm Bureau Federation urged the USDA and the federal government to consider the rising cost of farm inputs when evaluating tariff rulings, and to make sure scientific data is used during the pesticide registration process. It advocated for rail and port improvements and regulatory flexibility to ensure agricultural haulers and the rest of the trucking industry can provide timely delivery of critical products. The federal government must also streamline the application process for guest workers and resolve outstanding trade issues with China, a critical buyer of U.S. agricultural goods, the federation said. (China has not met agreements to purchase U.S. agricultural goods.)
Late last month, the National Corn Growers Association and 51 other commodity groups lobbied the U.S. Transportation Department requesting similar changes to the trucking industry as well as improvements to the rail industry and inland waterways. Erkut Sönmez, associate professor of supply chain management and analytics at the University of Nebraska–Lincoln, said he doesn’t expect these problems to abate anytime soon.
“What we are experiencing currently is a perfect storm, as we are having both supply shocks and demand shocks simultaneously in several different industries,” he said in a statement. “The disruptions to the agricultural supply chains are more apparent and important compared to other supply chains. On one side, we have a shortage of food supply while people are looking for food, and on the other, we have food actually rotting or going bad in containers in some parts of the world.”
And while grain prices remain high, input costs will continue to pressure profit margins locally, said Robert Harper, grain division manager at the Virginia Farm Bureau. He said he noticed the price of generic glyphosate at a Virginia co-op over the last year rise from $18 a gallon to $50. At Willard, Twining said he’s had no problem supplying farmers with glyphosate, despite a global shortage, but supply is tight.
Harper and Shockley said they feared the high grain prices might motivate farmland owners to increase rents. That and other cost concerns could be disastrous for some farmers, Shockley said.
“If the price of corn drops to $4, and if the price of beans drops to $8, by 2023 there’s going to be some out-of-business people,” he said.
Local meat producers may be the exception. Mike Doran, who produces beef, row crops and hay in Whiteford, Md., said supply chain issues have pushed more customers to him.
“We’re hearing from customers that it has to do with shortages in the grocery stores of food,” he said.
It’s a silver lining to the crisis — so long as he doesn’t need new or used equipment, which has risen in cost.
Shockley said he’s ahead of potential shortages by anticipating his needs now. When he saw the price of diesel rising in the spring, he filled his tanks with 2,000 gallons, which should help his farm operation, including several poultry houses.
“From everything I’m reading now, (fuel) is going to be up 100 percent by spring. You’re going to feel it. The bigger you are, the more you’re going to feel it,” he said. “And the only thing right now that’s saving anybody is the price of grain.”