Ag industry remains strong despite turbulence

NEW ORLEANS — The lyrics of a Grateful Dead song, “What a long, strange trip it’s been,” could best sum up the past few years and the impacts continue turning toward 2023.

Jeff Cecil, Syngenta Crop Protection marketing head, kicked off a media summit Oct. 31 with a look at hot topics and trends in agriculture, reflecting on what has happened and how the company is preparing for the future.

Here is what Cecil said of the various topics:

On Farm Income

2022 was an interesting year for a lot of reasons and one of the reasons is because this is the second year in a row of record farm net income. Since 1929 there’s only been one other time when we’ve had two years in a row, we were that high. It’s been a long time and that was war related (during World War II).

We have a lot to be proud of as we came out of the year, especially considering all of the challenges that we were up against — weather, rising inflation, increasing production expenses, trade disruptions, greater demand for high quality food and increased global production and supply challenges.

It continually challenged the way we do business. We think the farm economy is still strong and that it will remain that way into 2023.

There are challenges ahead with a lot of turbulence in the supply chain, a lot of turbulence in the economy and inflation rates, but the farm economy is pretty solid at the moment.

On Supply Challenges

This really began in 2018 when we started to see some of the supply challenges start to erupt with some of the challenges that were out there to try to bring in more reasonable environmental controls in China where a huge part of the production is for farm chemicals.

As they started putting those controls in place there were more challenges for agricultural products coming to market.

Domestic freights started to increase in 2018. There was a new regulation put in place for U.S. truck drivers and as that happened freight was more and more challenging.

Then we saw COVID come and in 2020 the reality was that the economy started to lag. There was a ripple effect through the supply chain because plants were shut down.

Transportation wasn’t really an issue, but it shut everything down and it took a lot of capacity out and then getting started back up is much more difficult globally than what anybody anticipated. So, there’s been this lag affect.

We continue to see the weather disruptions. There were freezes in the southern U.S. back in 2020 and we had all of the challenges with the flooding, as well.

Add to that port congestion, packaging challenges and a little bit of inflationary pressure and you have a real mess on your hands for the supply chain. It’s not just agriculture.

If you tried to build or remodel anything, or you tried to buy a new car, all of these things were impacted by the supply chain. These challenges aren’t all gone yet, so we’ll see a continuance in 2023.

On Syngenta’s Strategy

We started taking a proactive approach to the supply chain in 2018 and we put some things in place that helped us a lot.

The main thing we did is we planned and we started planning at a different level than we had in the past.

What I mean by that is going to our customers and building a plan from the bottom up. We started looking at where we had gaps in our supply challenges and in our logistics.

The biggest overall thing we did was really start to build long-term contracts with our suppliers. So, much like we treat our customers, we treat our supplies like it’s a long-term relationship because that’s what it is.

When we did that, we secured a supply and a logistic situation to address our 2021 and 2022 challenges of the industry.

The proactive improvements made to prepare for 2022 were increased staffing and dedicated fleets, increased investments in manufacturing capacity, extended hours for production and loading at all sites, aggressive capital expansion projects to address current and future state, expanded alternative sources for raw materials, purchased additional raw materials to mitigate risks and had record levels of production and throughput at manufacturing sites.

On Ag Economy

The U.S. ag economy is resilient and strong. Demand for U.S. crops is expected to remain strong in 2023, but will face headwinds.

The impact of inflation will continue to be felt at all levels. Production and supply chain challenges will persist and the overall demand is still strong.

These things are still there, but what we’re doing about them is really trying to drive as much efficiency through the system as we possibly can.

What does come out on top is high yields and producing a good crop is absolutely critical to be able to deal with the opportunities there today. That’s what we’re really focused on.

Advanced high-performance crop protection products are critical to helping farmers achieve that potential.

On Supply Chain Outlook

Looking ahead at the crop production supply chain, we think we’ll still see raw material challenges.

One of the biggest things we’re seeing right now is the components that go into some of the products that you just simply can’t get. There are several products out there right now that are just challenging to get basic components.

The average crop protection product in the formulation you apply in the field is going to use something like 27 different components.

So, if one of those components is missing, it may be that it’s not the active ingredient, you may be able to get the active ingredient no problem, but if you can’t get the component to formulate it, you can’t make the product. Those are the challenges we’ll continue to see on different products.

We’ll see some products back in free supply as we move into 2023, but we’ll see others that you simply can’t get.

Artificial intelligence and raw material availability are supply chain dependent, but energy and COVID-related shutdowns in China, the Russia/Ukraine conflict and the global supply/demand imbalance for base chemicals will be disruptive.

We think we will still see challenges around costs and pricing. Global demand for fungicides is very high; it continues high and will remain high.

That is going to drive a challenge around fungicides in particular and then the costs are accelerated.

The supply and cost of AI catalysts (for example, iridium, palladium and rhodium) will remain heavily dependent on Eastern Europe and China.

On Cost Trends

Around the globe, the impact of oil and what could happen there is big, as we see the production out of Europe being challenged and transportation out of Europe being challenged.

If we have a really cold winter in Europe it’s going to be very challenging for that cost and that will impact supply, as well.

Global freight continues to be an issue with a continued ocean shipping price pressure trend due to limited container shipping capacity across all lane.

Although the West Coast seems to be freeing up around the backlog that they had at the ports is not really there anymore, but on the East Coast we’re still seeing a lot of backups and that will most likely get worse as we get into the holiday season.

Domestic freight seems to have changed a little bit. It’s better than it was. I don’t know how it’s going to be impacted by the holidays, but it’s certainly not as bad as it was months ago. We’ll see if that trend continues.