Since 2020, a series of black swan events in just a few years time resulted in sporadic product shortages and concern about how to react and plan for the future. Because of those events, the crop input industry’s supply chain has been front of mind for suppliers, distributors, retailers and farmers.
“We’ve worked through a period of time when everyone grabbed everything they could,” says Jeff Tarsi, Nutrien’s executive vice president and president of of global retail. “Inventories were way too high as product became available again.”
But full warehouses and fully stocked retail sheds are less common today. In the current economic environment, the focus has become to minimize the cost of capital. With higher interest rates than the 10-year average, inventories have been worked down to avoid draining working capital.
“Managing working capital is one of the most important things we do,” Tarsi says. “There is not unlimited capital in this industry. And as such, at Nutrien, we’ve done a good job managing our inventory down.”
What This Means for Farmers and Retailers
Matt Plitt, president and CEO of Valent U.S.A, says now is the time to refocus efforts on future on-farm needs.
“Our customers are running at low inventory levels. And growers are looking at just-in-time purchasing,” Plitt says.
To alleviate tightness in the market and potential stress, industry leaders are encouraging everyone to plan ahead.
“Forecasting and timeliness are key. Especially in light of current interest rates, everyone needs to be smarter in how they manage inventory,” Plitt says.
The team at Nutrien Ag Solutions agrees saying there is great value up and down the supply chain for communication and conversation to inform product demands.
“Collaborating with an agronomist is more important today to plan for the crop and type of chemistries needed,” says Rob Clayton, Nutrien’s senior vice president of retail North America. “The best of the best are thinking three to five years out for a crop plan.”
Manufacturers Move to Just In Time Supplies
Brendan Deck, GM of Nufarm in North America says, “With the cost of capital we are having to manage cash more than we’ve ever done before. What is going to be key in this market is surge capacity to meet demands just in time.”
Deck adds Nufarm has grown its business from $300 million to $1 billion in annual sales in 10 years. And the company has invested in infrastructure to manufacture in the U.S. and closer to where the products are used.
The forecasting is becoming critical because managing inventories and using surge manufacturing are shortening the time frames products are made and products are being applied.
Valent’s Plitt says, “Internally, we are focused on how to meet the challenges of a dynamic marketplace. We must plan to be early because retailers and distributors make decisions early. In this industry, there’s still a mindset around destocking. It’s not about reducing inventory, but more about how long we carry it. We now manufacture the products closer to the time of application, which is why forecasting is so important.”
