Special FBN™ Podcast: The State of the Australian Supply Chain in 2021

FBN Network

Dec 02, 2021

Welcome to a special edition podcast hosted by Charles Baron to discuss the current state of the agricultural supply chain in Australia. 

Charles is joined by Tristan Jones and Kevin McNew, both FBN experts who will give context to what is happening with the ag chem supply chain, why certain products are facing tight and volatile pricing and how growers and suppliers can benefit one another. 

What you’ll learn

  1. What’s going on in the Australian market

  2. What’s happening with the price of glyphosate in Australia

  3. What are the key issues specifically affecting the Australian supply chain

  4. What to anticipate for fertiliser pricing

  5. Buying behaviors of Australian farmers

  6. How FBN is supporting farmers

Listen now

About the panelists

Charles Baron

Charles is the Co-Founder and Chief Innovation Officer of FBN. His passion for farming helps him guide the development of FBN’s breakthrough farmer-to-farmer network. He’s been with FBN since we started, over 7 years ago. 

Tristan Jones

Tristan is Head of Sales with FBN Australia. He’s been in the ag industry for over 16 years and has experience in Commodity trading, Risk management and Supply chain in Grain and fertiliser with CBH Group.

Kevin McNew

Kevin has a 30-year distinguished career as an economist boiling down complex problems that empower decision makers. He served as university professor for a decade, started and ran a successful commodity intelligence and trading business for 15 years and now, in his role as FBN Chief Economist, is a thought leader at the intersection of agriculture, markets and policies. Raised on a farm in Oklahoma, Kevin holds a PhD in economics from North Carolina State University. His observations have been featured on Bloomberg TV, the Washington Post and the Wall Street Journal.

Audio transcript

Charles Baron (00:00):

Hi everyone. I'm Charles Baron co-founder of Farmers Business Network™, and welcome to a very special podcast on the state of the Australian supply chain in ag. In the U.S. we have seen farmers are dealing with a major supply chain crisis. In Australia, there's also been a series of price shocks in the market, questions about supply and availability, especially on inputs and especially in crop protection. 

With us tonight is Tristan Jones, head of sales of FBN™ Australia and Kevin McNew, chief economist of FBN in Bozeman, Montana. 

I'm here in the San Francisco bay area at San Carlos FBN headquarters. Welcome gentlemen. My first question will be right to Tristan, tell us what are Australian farmers seeing right now and what is going on in the market?

Tristan Jones (00:53):

Thank you, Charles. And it's, and it's great to be here and appreciate having the time with yourself and Kevin to discuss what is an incredibly important issue that's been transpiring through the Australian market over really the past 12 to 18 months since the pandemic kicked off. 

A few of the impacts that the growers are really starting to see at the moment is the volatility and the kind of uncertainty in supply. So when it comes to the volatility side, we've seen prices go up on key active ingredients like glyphosate, which is probably the largest part of our product portfolio at the grower level, it's starting to, it's gone up 300, 400% in the past six months, and it's just completely insane in the market. 

And it's not something that the Australian grower is really been able to digest over the speed of how much this has changed, but then also, I guess, compounding that issue beyond just the price going up, because that can be somewhat offset by the Supercycle we're seeing in commodity prices that Kevin will be very well aware of, but then we're also now starting to say, well, there's actually an inability for certain people to supply and the disruption that we're seeing at the, at the Chinese origination point,  due to a number of factors that we'll probably touch on through this podcast now is actually meaning that the peak demand that we're seeing at this point in the year that we typically do see is that asset, our key suppliers, and are constrained in their ability to produce.

Tristan Jones (02:16):

And that's now seeing that the Australian farmer, when they go into their local store or they're inquiring around Australia now, they're going well, we actually can't supply you with that product. And that is then driving some, you know, some really interesting behaviour at the farm gate, because this is probably one of the key risks as they're wrapping up what is a pretty successful 2021 season in Australia. 

Commodity prices are strong.  we're out in the field yesterday and, you know, we're seeing four, 10 week crops around Western Australia, which is phenomenal, but then they're now starting to look at what does 2022 look like for us? What are we going to do next year? And how can we ensure that we've got a great level of certainty around our ability to put our best foot forward next year?

Tristan Jones (02:59):

And we do have kind of a five to six month growing season over here, we've got one shot at a crop and, you know, the Australian farmers looking for that confidence to go well, if I'm going to be able to put my best foot forward next year, I need to be ensuring that I've got all my supplies and that's my ag chem, my fertiliser. And if those prices are elevated, what level of continents that have I got that commodity prices are going to sustain that into next year so that I can continue to be profitable as well? I mean, that's a big question mark for the Australian farmer and this level of uncertainty is bringing all these questions now to where we typically wouldn't have to deal with at this point in the year. And it is really uncertain. 

And like I said, we're going through wheat harvest at the moment. So growth is busy, there's a lot going through their mind. And hopefully, you know, through this conversation we'll have, I guess, paint this picture of what's happening in the market, what the forecast looks like for the coming three to six months and really what the Australian farmer wants to go through all this noise, what they should truly start to think about as well.

Charles Baron (03:58):

Well, that's all, you know part of FBN’s mission is really creating transparency, providing as much information on the market as we can to our members, whether that's through data analysis or the types of predictions that Kevin and his team does on crop markets and global commodity prices. 

And also now, you know, in this supply chain, crisis and inputs,  you know, we've really wanted to bring our expertise from our procurement teams and our international manufacturing and sourcing teams,  to bear as well. And let farmers hear exactly what we're seeing as a company. Who's out there sourcing these products, but, you know, one, one step that is just shocking.  You know, when I saw it,  compared to the same time last year, technical glyphosate prices are up almost 400%.  when you talk about the technical ingredients coming out of China and just between August and September technical prices rose 50%.

Charles Baron (04:51):

So the rate of price increases was really,  pretty stunning. And I think caught a lot of people off guard, a lot of farmers,  and that has caused folks to have to be thinking about crop protection months earlier than maybe they were normally planning to,  here in the U.S. buying. You know, normally it doesn't start until,  middle of winter.  but folks who are already starting to make purchases in September, October and November, at levels that we've never seen.  so,  you know, Tristan, talk us through the glyphosate prices that Australian farmers are seeing. What are the kinds of reactions that you're hearing from growers, as they are out there trying to source product?

Tristan Jones (05:35):

Yeah, absolutely. Charles, I mean, if we look back on what's happened in the past six months, and like you alluded to there that 50% jump in, you know, just a 30 day period at the supplier level in China, when we were looking at, you know, $3.70 to $3.80 per litre price for our 450 gram active glyphosate you know, and that is kind of consistent with what the five, 10 year average for pricing as well was going to be. 

However, we were starting to see these bubbles come to the surface in that there was uncertainty around China's messaging back to, I guess, retailers in Australia about what the next pricing points were going to be. And that's when it started to really go well, you know, something's changing here and it's a fundamental shift in how we've experienced the market before now, as we've transitioned through that, you know, you have seen to getting to the point where we are today, probably a shift in anywhere from a $1.50 a litre to $2 a litre jump every month consecutively, and what that throws about in an uncertain time in the market.

Tristan Jones (06:34):

It's where this is finally going to top out, where is this going to get to a point now where the actual cost of the active ingredient goes beyond the actual usage period on farm, and because glyphosate represents such a significant portion of their portfolio, and we're now sitting at, you know, kind of $13 to $14 a litre for glyphosate 450 at our market growers are now sitting at this point and they're going well, we have to now start seriously considering not only availability of supply, but profitability going forward. And this is what's really starting to create those questions. And, you know, those kinds of things bubbling to the surface now that we wouldn't normally have to deal with, but the growers is, yeah, they're very much at that point now where there's a high level of uncertainty and without clear and concise messaging about what's transpiring at a supply point, and what's impacting those links across the supply chain that we'll touch on today.

Tristan Jones (07:25):

And that's, you know, increasing this level of uncertainty of the ability to supply from the retailers perspective as well. You know, a grower is really unsure right now, and this is what we want to try and paint this picture is to go look, this is what's happening, this is how long it's forecast to happen for at the moment. And you should be making your informed decisions on this kind of concise information and back yourself on making the decision on the best information available on the diet. Because, you know, looking back in hindsight and three to six months, you know, you can't worry about that. It's all about ensuring that you've got the best ability to have a good crop in 2022. And that's our focus at the moment.

Kevin McNew (08:02):

Interesting. Can I ask you, I mean, you mentioned a really good thing that I know FBN is very focused on and that's, you know, profitability and ROI. And so as you think about Australian farmers, I mean, there's, there's kind of two ways you can approach escalated prices. You can respond by shifting into something else, substitute products. 

You could, you could go into crops that are less glyphosate intensive in the U.S.. I don't know that we have any options, we use glyphosate on everything. So it's not like that buys us anything to substitute for alternative crops, but you reach a point where you go at what price of glyphosate do you say, it's just not worth it. You know, weeds, weeds take over weeds, you know, weeds had their way. I'm going to plant a crop or I'm gonna, you know, do other things, but I'm not going to buy glyphosate. I mean, do you think we're there yet at these price levels? Are we still able to use it as an effective profitable chemical application?

Tristan Jones (09:00):

I think the really interesting point that we're now looking at glyphosate is that they used to be a rationale with the Australian farmer in history going well, if the price is still reasonable and they considered reasonable, probably up until that $7/litre mark,  and the time demanded for it, they might put on some extra litreage or switch to another product like Paraquat, you know, which is an effective knockdown product.  

I think even though it represents a large product, a large part of the portfolio for the Australian farmer, glyphosate going to $14/litre, it does make them start to question true profitability.  But this has been somewhat eased by the Supercycle we're also seeing in commodity prices as well. If it was a different scenario and we're sitting at desks, all three desks, all full grind process, then we would absolutely be in a different situation.

Tristan Jones (09:48):

There are opportunities to go into different substitute products or potentially change their crop rotation as well. I don't genuinely believe we're right at that point yet. However, when we look at other imports that aren't specific to something that FBN provides, when we're looking at fertiliser and those kinds of things, that's really starting to shake the market when it comes to a profitability sense. I don't think glyphosate's quite there yet. It is such a key component, but I think,  you know, within good advice from independent agronomists and those kinds of things about potentially using a glyphosate with what they call kind of a spot product which is going to go in there and increase that effectiveness without having them to increase the right, if they don't have a weight problem, because ultimately we don't want to be then in a situation where due to financial constraints, we've led to also increasing the level of, I guess, rye grass in our kind of herbicide resistance as well.

Tristan Jones (10:42):

You know, that's something that we've got to be very, very conscious of is that if you use low rates, you're going to promote resistance and it's going to be a bigger problem in 2, 3, 5 years as well. So, you know, it is, we've got to change our approach. Somewhat profitability probably isn't truly impacted yet, but I think the use of spot products and I guess, product rotation that the traditional Australian farmer hasn't had to really deal with that scenario yet is something that we have to start considering. And I think that good quality agronomic advice around what options are out there is something that, you know, the Australian grower really has to start looking at.

Charles Baron (11:16):

So a lot of what's going on in the U.S. is that, you know, in the U.S. we have a series of issues. We've got a port log jam as we were talking about before we have, you know, 70, 80 container ships stacked up,  the port of Long Beach with, which has a whole host of reasons behind that.  We've had plants go offline because of bad weather. 

And in Texas went offline, I believe twice, this last year, and just this fall in the Hurricane Ida,  then we've got a tracking issue.  so, and then we've got a China issue, but in Australia, the flow, the product flow is a little different as in terms of how the product gets to Australian farmers.  

Can you walk us through how the ag chem supply chain works, for Australian growers and,  and, you know, where's the, where's the problem, you know, really arising? Is it, you know, because a lot of these things go all the way back to the source,  with these raw technical ingredients and restrictions from the Chinese government?

Tristan Jones (12:16):

Absolutely Charles and, and that's the really interesting part about what I guess the pandemic has brought to the market over the past 18 months as well. And when we talk about the Australian ag chem supply chain, I mean, we are predominantly, you know, reliant on chemicals out of China and that can be both in the raw ingredient or the technical that we talk about as well. And then also in fully formulated end use products, fully formulated end use products would represent anywhere around the 80 to 85% of the ag chem that's used in Australia for us at the moment that is old shipped out of China in say containers into ports in Australia, then disseminated into warehouses and then tracked on the farm.  We also have a growing level of toll manufacturing that also happens in Australia. We are very quality conscious of the chemicals that are produced in Australia as well.

Tristan Jones (13:08):

And the ability to toll manufacture I guess allows us as a business as FBN, but also other people in the market as well to control that quality level.  but if we look at the parts along that supply chain, when the origination point is either China or India, for a lot of our components, whether it's raw technical or a fully formulated end use product, the disruption that we've seen over the past 18 months has been, we've seen initial disruption at supply. And that has been both, you know, pandemic outbreaks, which have caused shutdowns in certain provinces through China. And a lot of this has been heavily focused on, you know, economy, production areas as well.  I've also seen the flow and impact from production and I guess the pandemic influence has been that there's also been some flooding in, in certain Chinese provinces as well.

Tristan Jones (13:57):

As well as then some  surprises from an electricity standpoint. So at different points over the past eight months, there have been these triggers that are impacting supply. Now, when we're looking at the ag chem flow of product and that equilibrium and that we like to maintain the freight distance for, you know, China into Australia is probably one of the shortest ones when it comes to ag chem supply. So it's typically one of the easier ones for us to go back into that level of equilibrium and really find that steady flow of products in there. 

If it was just one or two impacts at the supplier level, then you could probably balance that back out. And it would only take a couple of months to get back into that normal flow. However, when we're looking at the pandemic, what this has caused is not only the impact at the supply point at the manufacturer and within seeing issues at, the supply point at the port as well, when they're shut down due to pandemic outbreaks, which further extends that issue, then we're also seeing, you know, even that two to three week, shipping window between, you know, some of these south east Chinese ports through to Australia, when you start having logistics impacted by that pandemic, you know, you've got,  actual freight ships that are impacted when they've got an outbreak on there and they can't actually dock at the destination.

Tristan Jones (15:07):

You then say that that next link in the supply chain then breaks. And what we then have is the, the typical equilibrium is then we've got all these assets of fright and supply sitting at the wrong places in the globe because the links are continually being disrupted. And it's the displacement of these assets around the globe, which is starting to well, is what's continuing this issue, right. Otherwise we should have reached that point of equilibrium again.

Charles Baron (15:34):

Yeah. You know, there is a really fascinating thread on Twitter  the last couple of weeks by Ryan Peterson, the CEO of Flexport, where he went exploring the port of Long Beach and really just got to the fact that exactly like you said, the root cause was that there was nowhere to put the chassis of the empty, the chassis of the empty trucks.

You couldn't get enough empty chassis because shipping containers had nowhere to be stored. So they were being stored on chassis utilizing the chassis, therefore the chassis couldn't be offloading the fresh container. And so the whole, a lot of the long beach problem was breaking down to local zoning ordinances that were blocking stacking of containers. 

So it's exactly like you said, when you have this many links in the system, one interruption in the flow can cause all these knock-on consequences that people don't see,  which is really stunning. Well, Kevin, we were talking about profitability and fertiliser prices have also, you know, started going bananas.  What have you seen from a global commodity standpoint as far as exports go, and then also, you know, how Australian farmers can, you know, what they should be anticipating in terms of fertiliser pricing as well?

Kevin McNew (16:43):

Yeah, I mean, we're, we're getting close to near record high on fertiliser.  you know, that was set back in 2007-2008, you know, around the time when crude oil was $140 a barrel and  you know, things were really different in terms of the energy paradigm. 

Although, our energy constellation, whether it's crude or natural gas was certainly getting, getting lofty and values, which, you know, is kind of accentuating some of the problems we're having, you know, Tristan mentioned the Chinese situation and you know, those plants had to shut down, because they were kind of band-aided to not be using coal fired electricity, to clean up the carbon footprint, ahead of the patient gains. So natural gas has really taken on a premium here. 

But you know, Charles from a market standpoint grain prices are moving up and they have been moving up, but they've actually been kind of flat, wheat has gotten a little bit higher here lately, as we've really started to come to terms with a few things.

Kevin McNew (17:46):

One,  just how bad the kind of wheat was, the high quality protein wheat was in the Northern hemisphere.  That includes our farmers in Canada that just had a disastrous 50 year, worst drought ever. You know, we just happened to be up in Saskatchewan last week and the drought is just continuing to linger on, with no end in sight, even though they're passed last year's crop. There's a lack of high quality wheat in the market. That's certainly getting the wheat market a bit, canola was decimated in Canada, canola being the number one crop or Canada being the number one producer of canola. Our farmers in Australia are very fortunate. They're having a really positive,  wheat crop and a really positive canola crop,  to take advantage of these high prices.

Kevin McNew (18:36):

So as we look forward to the coming kind of crop year and, you know, in the U.S. and in Canada, I think there's going to be fairly sizable wholesale shifts in farmer acreage around these massive adjustments in prices and especially fertiliser prices. 

Farmers are sensitive to fertiliser prices. We saw it in 2007-2008 in that year when farm fertiliser prices reached record highs. We saw big reductions in corn acres and in kind of beat grain prices or feed grain acres in the Northern hemisphere. I expect the same thing to happen this year. So we're already tight-ish on the corn and feed grain balance sheet in the world. 

And I think as we look forward, it's only going to get tighter because farmers have every incentive not to plant,  you know, crops that are very fertiliser intensive, like the U.S. corn farmer or barley farmers in Canada. And I think oil seeds, you know, get more favourable. Certainly, you know, we were in the Mississippi Delta, last week for FBN farmers. There are really going to be planting a lot more beans and cotton,  you know, farmers in the Midwest. I suspect we'll be planting more beans as well. So I think there's going to be big, big changes that will have big disruptive impacts on an already tight feed grain balance sheet. Yeah.

Charles Baron (20:01):

And we were talking about how the supply chain issue that people are hearing about is kind of impacting exports, because I think the interesting thing is we're actually talking about two different systems here. We talk about the grain export system versus the container cargo system.

Kevin McNew (20:18):

The U.S. we're pretty immune to that because we're exporting bulk commodities out of the Gulf or the PNW so we're not going much out of, you know, kind of consumer centric ports, like Long Beach that you mentioned, you know, we're shipping big vessels out of either the Gulf, the PNW,  you know, maybe some of our container in our specialty crop stuff, you know, at FBN, we do do some container training of specialty types of products, whether it's pulses or specialty soybeans for tofu manufacturers, things like that. So, yeah, when you're entering into that kind of niche of container trading, it is tight and it is challenging, but the bulk of our business is in bulk transportation and bulk vessels. And that's not really disrupted right now. And Tristan, I mean, maybe your perspective in Australia is a bit different.

Tristan Jones (21:10):

Yeah. Look, it's an interesting environment here. We're much aligned with you when it comes to the proportion of our crops that are exported bulk, you know, we'd be looking at over 90% of our production that is exported in Australia, does go out on bulk vessels. It does typically just feed the food bottle of Southeast Asia. That's our key market. And that's where we go for a lot of our products. Like you mentioned before, you know,  canola production in Canada is driven by an increased volume. I mean, I've probably seen 30% of hectares up in Australia in the past 12 months of canola production. And we've been very fortunate to have a corn year.  but at this stage getting product out of port at those key areas,  although we probably don't have the luxury of too many ports around there.

Tristan Jones (21:53):

And we do have inbound consumer products at various similar locations where our outbound exporter.  We're not seeing that kind of a loggerhead that you are there.  We've had some unseasonably wet summer, which has caused some constraints with getting product to port. However, we're definitely not seeing the level of congestion and our export path. We're sitting up to having a phenomenal season this year, all around the country and the export path at the moment does seem pretty clear. So we've got all confidence that we can get the crop off in a timely manner, and that the ability to then export that crop to destinations around the globe is going to be well-maintained as well.

Kevin McNew (22:30):

Tristan kind of a follow-up to that. So, you know, the port systems are working well, the commodity flows out of your country are working well. Do you think farmers as they're harvesting their crop and kind of making post-harvest pricing decisions, are they going to sit on it and they're going to put it in the bin because it's kind of an inflation hedge at this point, or do you think they're going to be eager to sell with prices higher?

Tristan Jones (22:54):

Look, it's going to be interesting. I'd say the, the, I guess the planted hectares form economic crop was probably up 30% around Australia now. And the vision from the Australian farmer is always that that's the cash crop. You know, we also know the selling cycle from our experience in grain trading and marketing, as well as that's effectively, our window to sell canola into the global level is also kind of wrapped up by March, April, you know, until then competing origins come online. So canola would expect to be fully sold, you know, into, you know, January, February next year.  we wouldn't expect those crops to be centered on. We also know that, yeah, they're great cash crops. The yields are solid in Australia. That's the one they want to push out a bit further, obviously with good production and also a good process.

Tristan Jones (23:38):

There is going to be some impact on the ability for growth to actually sell crops as well. I mean, there's got to be tax implications and those kinds of things that they need to consider as they're going through their marketing programs. So I do there say that, you know, when we're looking at feed Bali, and then also our different protein levels of weight that will probably linger on it. And the marketing campaign will run into next year and through to August, September next year, before the harvest comes on,  for the following year. 

But I wouldn't say that being, I guess, unseasonably held out longer for periods of time, unless it was wise to, I guess, manage the influence of hot processes and also high yield, which might be affecting cash incomes on farms as well. That's probably going to be one of the shifts in, you know, which is a great opportunity for the Australian farmer, right, for them to be looking at maintaining their marketing profile based on cash flow in common and managing that as their exposure.

Tristan Jones (24:30):

Look, we are very fortunate, you know, we're out on a farm like yesterday, actually, you know, through a lot of places in Western Australia, we're talking, you know, three to four ton weight yields, which is just absolutely phenomenal for us. That's not something that we're used to. And then, you know, two to two and a half ton canola yields when the product's sitting at 800 to a thousand dollars a ton, they're going to get that crop off, straight away, get it straight into their bulk handler and sell it. And that's going to be their cash crop, get them through this time and then hit more of their traditional marketing sense for feed barley and protein weights as we head into the following year.

Charles Baron (25:03):

Well, you know, attrition, just going back on the glyphosate topic. When COVID in the pandemic started in the U.S. the image you kept seeing around the news was just mob scenes at Costco and grocery stores of everyone just getting as much toilet paper as you could. And it really was toilet paper that became the commodity that everyone was hoarding and panicking about.  

It was comical. Now looking back on it at the time, I think people were very, very nervous that they were going to run out. What is the behaviour you're seeing from farmers on the buying? Are the shortages now,  you know, hoarding by retailers or are farmers buying ahead? 

What are you seeing? And what's your advice to farmers as they position against us? I got notes from farmers saying I'm buying for 2023. They're buying two years in advance now.  and we've never seen that before. What are you seeing at the consumer level? Is this, is this a run-on run on the store?

Tristan Jones (26:08):

Yeah, look, it's an interesting environment that we're moving into. And like you talk about, you know, consumer behaviour or pharma behaviour as well in this level of uncertainty that we've touched on so far is that it does change as change people's view on what they should be doing, looking at and what level of risk that has for their business as they move forward. So, absolutely we're seeing a fundamental shift in the buying behaviour from the Australian farmer. And, you know, we'd typically see at this point in the year, as we're going through September, October, November, we're starting harvest growers are typically starting to look at. What does it mean? What does 2022 look like for me? What does the next season apply and what a price is doing on certain key components? Typically that is just fertiliser. They're not as focused on ag chem because it's been very stable.

Tristan Jones (26:53):

You know, it's a market that hasn't seen this level of volatility and uncertainty around it as FBN in Australia, you know, we're promoting transparency and understanding what might be influencing the market. And I think our entrance into the market in the past 12 months is starting to highlight the potential impacts that we're seeing. And it's given growers a greater understanding of what might be coming and also giving that information earlier, rather than being reactive and saying, well, the market's moving now and start to have a think about what to do. So it's not quite like the toilet roll kind of scenario for for glyphosate and ag chem in Australia, but, you know, fundamentally the buying behaviour is changing and that level of uncertainty, because it is such a crucial component of their product mix for next year and ensuring a quality crop that they're going to grow.

Tristan Jones (27:41):

Growers are looking at buying that further out, you know, the ones that can kind of afford to do it from a cash flow perspective are definitely looking at 2023. And for a certain couple of active ingredients guys are stocking up. But then what we're seeing is that, that they'll go to the local retailer, or they'll go to the local store, the local store now saying, well, we don't have any more. 

This is kind of all you've got, you can have your five IBCs or your five, 1000 litre totes, and that's all we've got for you now. And that then is what is starting to cause a bit of chaos at the grower level. Because again, they've never been turned away before, you know, it's outside of an anomaly in the JFC, this kind of impact hasn't happened, and this is going to start driving some erratic behaviour.

Tristan Jones (28:21):

And it's going to unfortunately be likened to the toilet paper scenario because guys are going to be like, well, I know I'm going to put a crop in this year. You know, 75% of my enterprise might be broadacre farming. I can't just switch into another area. I can't just move into livestock or anything like that at the drop of a hat. So I'll have to find a new way of doing it or grower behaviour will be well, if this store doesn't have it, we're going to go to five others within a hundred K radius of my farm and try and figure out who does. That behaviour that we're going to see, and what's going to continue to flow in this, this market. That's scary because I think that's going to continue to disrupt the supply chain. And a lot we've touched on before with the issues we're seeing in China, our ability to recover from this is going to be longer and longer as the buying behaviour shifts out.

Tristan Jones (29:08):

You know, and that's why it's important for us to sit here and go, well, are we looking at a three to six month forecast? And we're going right. The uncertainty probably lies until March, April, May next year, around that seeding time,  look at what you actually truly need from that perspective and what products are truly required on farm then, because that's where the level of uncertainty at the moment goes out to beyond that point, then it's quite uncertain because there are obviously a few other things unraveling in China with the Olympics and their double control policy as well. And you know, the outcomes of that beyond six months, it's very uncertain. And we don't want to also be painting a picture where they're making decisions on very uncertain information as well, but you're right. It goes up that far ahead. It's changing the dynamic here.

Tristan Jones (29:51):

And if this kind of behaviour continues, it will be a scary outlook because people might miss out and, you know, not all suppliers have been fortunate like FBN in Australia, where we've got a global procurement team. We've been able to work alongside with what you've been doing in the U.S. and Canada, as well as landing on putting all of our heads together and understanding what's truly coming through in this market over the past 12 months, it's gone wrong. 

We can foresee there's going to be something happening here that we're really uncertain about how it's going to unravel. And once we stop being a certain round, how it's going to unravel, we need to look at the level of risk that laws have on these certain actives, which is our glyphosate. And we need to go well in the, in the eyes of the farmer, what are going to be their key risks as we move forward.

Tristan Jones (30:35):

And what is the best thing for FBN to do, to be able to position ourselves so that we're able to continue to support the Australian farmer as well. And that to us has been such a big leverage. Being able to rely on North America, being this massive component and driver of glyphosate pricing in the world, we've been able to start leveraging off a lot of that information. And that's really put us in a position where we're able to produce that market intelligence to the grower level, and then also have confidence in our ability to supply at the grower level right now, where a lot of people are being turned away. And that's what we want to be doing and trying to, I guess, stem some of this chaotic behaviour so that, like, I look, just look three to six months out, get your shorty around supply now, and then we'll start to reevaluate in a couple of months time as we get a bit more clarity on what's happening in the situation.

Charles Baron (31:24):

FBN is in a position where we do have inventory available for farms. That really started from forecasting work going on 18 months ago. Kevin, maybe you should just comment on some of the research that your group is doing to look many years out in advance for all the key indicators and signals so that we can get into the best position for our growers so that they don't deal with stock-outs. A stockout can be, as you said, Tristan, if they can't get product, that is a real, a very real issue for their livelihood. And we do not want to have farmers in that situation. 

Kevin McNew (32:12):

We started FBN and I joined it four years ago with the vision of data and analytics to help our farmers make better decisions. And we continue to do that today, whether it's agronomic decisions at the farm or in my case doing crop marketing decisions.  

But now we're getting into, how does the price of glyphosate evolve over time? You know, what are the spikes? What are the drivers, you know, we're getting into the production process of it, understanding the various key inputs. It's all these kinds of obscure things that in agriculture we don't really see or track. And so you're right, we are rolling up our sleeves at FBN and, we have a working group trying to try and analyze this and bring better decision-making to it because you're right. It's a dicey time right now. And, you know, should guys be locking in for 2023? I can't say yes or no at this point, but it's a big risk, you know, so that's what we're working on under the hood and hopefully we'll have some results shortly.

Charles Baron (33:16):

People think of data science and agriculture and they think about it and agronomics and yield maps, but there's many ways that we deploy data science here at FBN. And we have a tremendous team,  from Kevin's team of economists and market experts to our many PhDs,  computer scientists, geneticists, folks with all kinds of different academic backgrounds, but who look at these problems. And it's all about combining multiple different types of data sets, multiple different signals that you see. Whether that's,  other input prices, global economic trends, you know, multispectral hyperspectral imagery, what does that tell you, even, you know, trade intelligence that other satellite providers have? 

Charles Baron (34:00):

And for us, it's also from getting product close to farms. That's another big way that FBN uses data science actually is to help figure out the demand signals from our growers so that we know exactly where to position our product in our fulfillment system so that they can get it as quick as they can. 

But Tristan, why don't we talk about what FBN has been doing and what you want growers to know. As folks are maybe running into a store and, and getting turned away, if that's, hopefully not happening, but if that's happening, what should they know and how is FBN going to be set up to help them.

Tristan Jones (34:38):

Yeah, absolutely. And, you know, I guess one of the things I'll touch on initially there is the reason why I joined FBN and one of the reasons, and, you know, my background being in predominantly in commodity trading and risk management is to bring out to ensure that growers are facing an increasing level of, I guess, complexity in all facets of the ag industry. And then also, as you're saying over the past 12, 18 months impacts that are coming through into the market now that they've never seen before. And as FBN here in Australia, beyond the transparency we are providing on a pricing point as well. We're also trying to provide that transparency on what are the influences in other parts of the ag sector that they may not have traditionally looked at before. And that's exactly what we're talking about today is what are the parts of the sector now that are starting to influence key active ingredients as we move forward.

Tristan Jones (35:25):

That is one of the fundamental roles of FBN in Australia and around the globe. From my perspective, it's all about ensuring that the Australia farmer are the ones that we're reaching out to now have confidence in the decision they're going to make. 

When it comes to the purchase decisions for the coming year, right? If they're making it, well-informed on the information they've got available to them on the day, and that the information on that day is clear, concise, and they can be confident that they're making the best decision for their farm. Then we've, then we fulfilled, you know, what is part of our fundamental role in Australia is we're putting the power back into the grower's hands, to be confident in the decisions they're making and really trying to bring some transparency to the market. 

As we move through these increasingly uncertain times, you know, we've got regular updates for our farmers or our account executives are putting out as much marketing intelligence as we can in a very clear and constructive way to ensure that growers maintain that level of information.

Tristan Jones (36:19):

So if there's something out there that FBN is really trying to achieve here is trying to ensure that everyone stays well-informed. So then you can be making those clear, concise decisions so that you can back yourself to setting yourself up, to have a successful 2022. As we move forward in the glyphosate market. We talked a little bit about our forecast. We're looking out to March, April, and May next year. That's where the level of volatility at the moment seems like it's really not going to AEs. So that is now flowing into the key time for the Australian farmer, where they're looking at seeding for their winter crops. So what we want to look at now for the Australian farmers, what do you need for safety? You know, typically what your product mix is going to be, whether it's going to be weight, barley, canola, oats, lentils, lupins, those kinds of things as well.

Tristan Jones (37:06):

You know, it's typically what your mix is going to be. And FBN wants to ensure that the messaging is going out there to look for secure supply, because the ability for local stores and those kinds of things that can't supply you right now, that's going to truly hinder your ability to really perform well in 2022. And, you know, continue the success they've had in 2021 as well. So we really want to go look supply at the moment is king, because you want to set yourself up to have a very successful next year beyond that point, then it's like, look, we'll reassess market evaluation on all of our active ingredients on a monthly basis, and we'll keep our growers well-informed so that they can maintain doing that as well. And that's what really we're here to do as you know, a key supplier in the market.

Tristan Jones (37:49):

Now, we're also producing a lot of product locally in Australia because we want to maintain that high level of product onto farms as well. And that also gives us a greater ability to be reactive to what's happening in the market. If there's fundamental shifts and we're producing a product in Victoria, our ability to then supply and get that product on farm is quite timely. Whereas if you're heavily reliant on too much coming out of China, we know that that window used to be 60 days. That's now looking at 120 days to get the product out of China. And by that point, you've missed a window. If a certain seasonal impact comes through early to,  or inability to supply a certain key active, you know, we wouldn't be fulfilling our role as FBN in Australia or globally. And that's really what our mission is here to do is that good market intelligence, good quality supply and beaver that reliable player in the market.

Tristan Jones (38:38):

That's really got the growers back. You know, we are trying to put them first and everything we do. And that's part of our disruption in the market as well as we're doing something that they haven't had before. However, we are bringing a lot of information to the market and like I say, it is very important for us to make sure that the level of detail we're not over complicating the issue for the Australian farmer. We're trying to bring it back down to active ingredients. What's going to be truly required for the next three to six months. 

And we'll re-evaluate the other actives as time moves on, but just focus on ensuring you're setting yourself up for success in 2022, and then you're putting yourself in the best position possible and FBN Australia have done their job. And you're ensuring that you've got confidence as well, moving forward.

Charles Baron (39:22):

Going back to things that farmers may not have had before price transparency is really fundamental to FBN and how we do business and our beliefs about how markets should work. Agricultural markets have a lot of symptoms and characteristics that we view as fundamentally uncompetitive and not really free markets when prices are hidden or when farmers have to go in and ask for a price or get told what the price is. We haven't had the situation here in the U.S. I hope it's not that bad in Australia right now, but we have growers in the U.S. getting told, just give me your purchase order. I'll tell you what the price is.

Charles Baron (40:02):

When the product arrives, you know, more or less saying, write me a blank check. And that is going on. These are not small retailers, large retailers, you know, who are, who are making those demands of farmers and farmers are turning around going, you know, what is this what's going on? So, you know, price transparency is fundamental to markets working. You will see their prices update in FBN,  very frequently daily. 

You know, if they are moving around with that amount of frequency, please do be checking them because,  you know, we are trying to keep it as tightly coupled to the market as we're able to source and supply new product for folks.  but we also are doing something important this year that we've, we've not done in the past, which is if a product is not available or we don't have confidence that we can get it to your farm in a narrow enough delivery window.

Charles Baron (40:49):

We're not going to show that product as available at that moment. That doesn't mean it's never going to be available this growing season or this, you know, this purchasing season. It just means we want to only show you things that we know we are going to be able to deliver and fulfill our promise. So if you come in and you see a product that you're looking for, and it's not on the store, it says current or unavailable, it doesn't mean it won't w that that situation is going to last for, you know, maybe another couple of weeks or a month or two. 

So definitely be checking frequently on the FBN site. Normally we would want to show you prices and products as much as we could, but we, if given all the uncertainties that are out there, if we're not a hundred percent certain, we can get it to your farm. No, by planting, we're not even showing it right now, but that doesn't mean we're not going to happen. So definitely when folks do pay attention to that.  Kevin, any closing thoughts to leave us here with things you're seeing globally.

Kevin McNew (41:49):

Yeah. I mean, I think it's going to be, it's going to be a challenging year. You know, we have better commodity prices, better crop prices. And I think they will continue to improve. I painted a picture for why I am particularly positive on feed grains. But I think oil seeds could get pulled up as well. We are in a new paradigm of just global inflation. And so, you know, commodity prices will be part of that global inflation story moving higher. So that's good. But, you know, as we've been talking about today, there's the cost side of that, and that's, that's going to be the squeeze. So, you know, farmers just really need to put pen to paper, you know, do the math, do the profitability, look at ROI, all those things that we preach about at the end, to not do the same thing over and over again. And, and this is going to be that year to really look at your profitability. So I just encourage farmers to do that as they're moving forward.

Charles Baron (42:44):

Please stay tuned for more FBN special podcasts. We hope to do this again. This was,  you know, hopefully about topics sometimes that aren't quite so pressing, but we want it to make sure that we were passing on as much intelligence about what we're seeing in the market directly to our growers,  who are seeing prices,  that are eye-popping shocking. You know,  many times, you know, last year's prices and to know why that's going on, what is going on and how they should be managing and reacting to that. So please do reach out to us folks. Reach out to Tristan and the team.

Tristan Jones (43:36):

Thank you, Charles. I mean, that is actually something that, you know, we've, we've seen some incredible growth and some incredible uptake from the grower level, which has allowed us to expand our team from there. When we started out, you know, August last year, which doesn't seem that long ago, there was 10 of us in Australia, and now we've actually got a team of account executives that represent 12 people all around Australia, located in, in regional areas in all the broad could growing regions of Australia as well, and our broader business, including logistics and shared service and those kind of things we've got in excess of 25 people around the country now. So our ability to supply and to provide market information transparency all across Australia. Now it has grown significantly in the past 12 months, and that has been on the back-office continued exceptional support from the Australian farmer.

Tristan Jones (44:23):

And it's a very exciting position for us to be in. And I think now business through the support of, you know, maintaining our vision of being farmers first, we're going to continue to say the level of support and growth, and I guess, access to farmers all around Australia. And they're going to continually be put in a better position by having FBN as one of the tools in their tool belt to manage risk, to ensure they can access transparency and access ad came in these uncertain times, look, the future is incredibly promising for the Australian farmer. It's incredibly, you know, economy lightning for FBN Australia, as well as we continue to grow. And yeah, absolutely, you know, reach out to us, you know, jump on to fbn.com,  and, and really, you know, start talking to our account executives out there because I live in braids in your environment you're in. And, you know, they're well-versed, we've got some incredibly skilled people out there with some great experience and, you know, we would love to start ensuring that, you know, you get this really good concept of confidence in the market and you understand what true fair market value is. And that's what transparency's here to bring.

Charles Baron (45:26):

We have dozens of community builders who are farmer partners around Australia. Lastly, if you do have questions for Kevin or our economics team questions for our data science team questions about how it all works, just go on FBN community, post a question. 

There are well over 1500 Australian members now,  plus well over 30,000 members in the U.S. and Canada, that you joined a global community with. It's free and come on and post. We have our veterinarians responding there,  Kevin jumps in sometime. You've got a question for any of us. We're a very open book, so please don't hesitate. We hope to see you all in FBN and please join the discussion online on the FBN community. Thanks so much for your time, and we will be back with more special podcasts in the future.

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FBN Network

Dec 02, 2021