Trey Malone, Boehlje chair for Managerial Economics and Agribusiness, at Purdue University, says he is working to reshape the way the industry thinks about economic principles in agriculture.
In revising the agribusiness management textbook for a new edition, he went back and read the different editions through time. Key takeaway: there have been inflection points illustrating the different ways we discuss agribusiness management.
Malone gives these three examples:
In the 1970s, a lot of concentration was applied to how we define agribusiness management and set the scope for the companion businesses that are important to the farm economy.
In the 1990s, there was a great expansion in international trade.
“We now live in a globalized society. At one point, everybody talked about how the world is flat. We learned that it’s not really flat, it’s more spiky. So there are pockets that we trade with a lot because of the specialization of that industry versus ours. So those spiky relationships really define the terms of the past 20 to30 years,” Malone says.
In the current time, we are stepping into a new era, which is more nuanced.
“The push toward internationalization has a bit more nuance. While we all appreciated the low prices and stability that international trade created, we now live in a place where we think more about the geopolitical uncertainty underneath those supply chains,” he says.
So what does that mean for supply chains, specifically agricultural inputs?
Malone says it’s important to watch how the dynamics reveal themselves.
“I’ve had it described to me as moving from just time production to just in case production. So we’re now thinking how do we create stronger relationships with the people who we think are less likely to be geopolitical enemies and more likely to be geopolitical allies,” he says. “The challenge now is that it’s not abundantly clear who our allies are. From the U.S. perspective, we’ve created some interesting dynamics with some of our traditional allies and I think that that’s going to play out in a very unprecedented way over the next few years for agribusiness.”
One example he points to is potash, of which more than 85% of the potash used in the U.S. comes from Canada.
He shares more in The Scoop Podcast:
“I don’t think understand how globally interconnected the economy is,” Malone says.
How should ag retailers prepare themselves to be successful in light of these dynamics?
Malone says it’s paramount for agriculture to get as close to its customer as possible.
As an example, he points to the bull whip effect and how it was illustrated in the dairy industry during the COVID-19 pandemic.
“Everybody was afraid about dumping milk, because all of a sudden, we lost the student milk demand. And so we had to worry about that, and we had to rebuild the milk supply, and maybe we created not enough,” he says. “Until it created these nasty price volatility, swings.”
He says those swings are worse as you move up the supply chain. Volatility intensifies at the processor level, and even more so at the farm gate.
“At the farm gate, the volatility is next level—like bungee jumping,” he says. “And it’s tied to those demand changes at the end user side.”
Malone says that is why he word for the year ahead is resiliency.
“There are components of resiliency that we talk about supply chain and supply chain resiliency– how do we maintain input supply for farmers in a way that is at least as predictable as it can be in a wildly uncertain environment,” he says. “And we have hit a level of economic policy uncertainty in the world that we have never seen before, at least in my lifetime. And so from the input provider side, it’s really important to do your best to maintain some of that resiliency for the farmers and some of that dependability and reliability that we all know they value.”
Malone is part of The Scoop’s 40 Under 40 program, which is sponsored by Nufarm. You can see the full list of awardees here.
