Anyone involved in Australian agribusiness is used to the challenges of running a successful operation in an environment with cyclic demand and supply disruptions – nobody more so than our growers, who have been operating in our harsh and challenging climate for hundreds of years, writes Peter O’Keeffe*.
This is particularly true for large, corporately owned businesses, where no matter how much we talk about viewing the business using a lens of ‘performance through the cycles’, annual performance is still mission-critical. This leads to pressure to perform quarterly and then monthly. And, even more extreme, where the first job in the morning is to check the daily sales run rate in granular detail!
This can be tough going – given many of the pressures on Australian agribusiness can be big and out of our control.
The supply and demand cycles of the last seven years have been extreme, with massive peaks and troughs.
Crop protection illustrates this pretty well. Firstly, we had to contend with the stinking ‘millennial drought’ that seemed endless, meaning Australia had mountains of supply, and meagre demand.
Then, in March 2020, the drought broke and simultaneously, COVID came into our lives. So, we had real ‘on ground’ demand, whilst the supply chain had gone into ‘drought’ mode hibernating, minimising inventory in-country. Additionally, valid concerns about the fragility of global supply chains, leaving Australian farmers vulnerable, led to over-ordering. In a period of around six weeks, this meant moving from a situation of over-supply to a significant demand imbalance…globally.
What has since become evident is that positions taken during the ongoing COVID event (late 2020 and 2021) were distorting demand signals considerably, overstating actual grower requirements –even whilst confidence in normalising global supply chains was rebuilding during the first half of 2022. So, you guessed it, for the second half of 2022 and early 2023, we had to work through the unwinding of this over-zealous procurement, taking us back to supply trumping demand again!
Adding insult to injury, some of the biggest molecules have been in a pricing decline phase throughout 2022 and the start of 2023. This trend has been noted by growers and retailers, so both have been careful not to ‘go long’ on the way down, opting rather for just-in-time buying behaviour, further slowing offtake for the winter season.
And then, of course, the talk of a pending El Niño weather pattern has further encouraged growers to tread carefully. Understandably, this means the retail distributors have been hesitant to ‘load up early’ for an average season, but rather taking things one step at a time as growers gradually work through their programs.
Whilst it was slow going during the period when the supply chain is usually flat out getting ready for the winter crop, things have certainly improved in recent months. Australian farmers are well known for being eternal optimists and another big crop is now sown. Will we make up for the lost ground? I guess we’ll know come this month!
What does the future hold for crop protection? Globally supply and demand will work back into balance and then we’ll be back to managing our own local cycles in Australia. This means spending endless hours planning for what we think is going to happen, whilst knowing these plans probably won’t come to fruition due to what we like to call ‘unforeseen headwinds/tailwinds’, and then managing what actually happens. This is the only way to be successful in the crop protection market down under.
Through all these cycles, both short and long, the grower customers of the best suppliers working closely with the best retailers in Australia wouldn’t even know the challenges we face each year to get them what they want when they want it. In fact, the ultimate compliment a grower can make is to be blissfully unaware that it’s hard work getting all the planets to align on hundreds of products each year. The irony is, the better the job we do, the less Australia’s growers will actually know we are doing a good job!
*Peter O’Keeffe’s life has been spent in the agricultural industry. His market insights are thanks to growing up on the family farm on the Darling Downs; Asia Pacific and global leadership roles; and 32 years in the crop protection industry. Peter is now the commercial general manager for Nufarm Australia.
