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Thoughts on 2022 Herbicide & Crop Protection Shortages, Increased Demand & Higher Prices for Growers, and Expect More Supply Disruptions!

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It all started last season when Glufosinate disappeared… then Glyphosate became short.

My phone has been ringing off the hook for the past few weeks since news started creeping out that certain products like Glufosinate, which is a popular herbicide in the mid-south, was going to be in short supply, but might be available soon. The industry actually ran completely out of this product last season (which was extremely odd according to many people). Immediately following the Glufosinate shortage we witnessed Glyphosate, the most widely used herbicide in the mid-south, become short. I’m told that Glyphosate became short because the industry used up all of the existing supply that was on hand and there was no buffer in place.

My first indication that Glyphosate was short was that I started getting inquiries from brokers and dealers across the country that were wanting to purchase truckloads from myself and other members of our team. During the offseason we’ve watched as a product that we were selling last year about this time for $11.25 gallon rise to around $45 gallon (as of today) and we’ve had to put quantity limitations on purchases to make sure that every grower that’s needing product has access to it from our stockpiles.

 

It’s rapidly grown to include other popular herbicides…

Beyond Glyphosate and Glufosinate, I’ve watched as other popular products like; Paraquat, Metolachlor, Clethodim, Atrazine, Imazethapyr, Propanil, Thionil, Imidacloprid, 2,4-D, and Metribuzin all became really hot commodities as demand began to increase from all corners of the United States. I’ve personally fielded phone calls from 12 states, at last count, from people in the industry that subscribe to The Cotton Club (my email newsletter). Things actually go so crazy that FBN made the decision to pull a handful of products from our store so that we could take a step back and evaluate what was going on in the industry. Again, I’m blessed to work w/ some really smart people who are putting in the countless hours behind the scenes making sure that we have supply on these critical products. I will also say that our strategic partnership with Generic Crop Science LLC to offer Willowood’s robust product lineup that has multiple product registrations and manufacturing in place. Just to be perfectly honest, this has us, and our members, in a much better position than we were in prior to our connection to GCS.

 

How can retail prices go up so quickly?

One of the most common questions I get from growers has to do with how our prices on our own GCS / Willowood products can go up in price so quickly?… This is where it gets interesting, and was extremely eye opening for me. At the beginning of the process for manufacturing a molecule and bringing it to market is the procurement of technical product. Let’s say we are talking about Glyphosate, many of the raw ingredients used to formulate the end product are sourced almost exclusively from China. Some of these raw materials include; glycine, yellow phosphorus, liquid chlorine, methanol, paraformaldehyde and PMIDA. From what I’ve gathered, the yellow phosphorous is the big one… So, in order for us to produce and formulate products, we have to first procure these raw ingredients (commonly referred to as “technical product”) from China. Understandably, when production costs (COGS), cost of goods sold, increases, we have to obviously pivot on our end. Usually when everyone gets the big picture they understand our position.

 

What caused the spike in raw materials from China?

Okay, so why are raw materials in short supply and so much more expensive? I’ve asked this question dozens of times in meetings w/ industry experts and I’ve been given a variety of reasons, and what’s weird is that most of these factors are most likely contributors as opposed to just excuses being thrown about. It’s almost like a perfect storm or sorts where multiple factors come together and make an already dire situation even worse. Some of these include;

  • Our trade war w/ China (higher costs of doing business)
  • Obviously COVID-19 has brought it’s own unique set of challenges
  • China has a huge energy crisis on their hands
  • China has new environmental standards in place that have slowed production
  • Inter-coastal Shipping Costs have Risen Exponentially!

 

Other complicating factors in the United States…

Keep in mind that these are just a handful of reasons on one side of the equation… there are also factors on our side that have added to the magnitude of the situation…

  • Slow & Expensive Inter-Coastal Shipping has Slowed Production
  • Winter Storm that hit Texas earlier this year disrupted almost 3 months of production at some facilities.
  • Most recently, Hurricane Ida managed to take a large Glyphosate production facility offline.
  • I’ve also been told that only partial delivery of contracted amounts of technical product that was promised has been delivered.
  • We literally have hundreds of ships in a holding pattern outside of our ports waiting to be unloaded
  • We’ve also dealt w/ COVID in the United States, decreased workforce, etc.
  • Apparently on top of the ocean shipping component, trucks are also in short supply and product delivery to facilities has been stalled dramatically.

Again, these are just a handful of issues that have been shared w/ me that come to mind.

 

My advice to growers…

Okay, so here we are… what happens now? I’m thinking that there will be product available to growers that plan ahead and hustle. Again, this is only my personal opinion, but I think that growers need to take an aggressive approach to getting ready for Fy22. Here are just a few things that pop in my head..

  • It might be a good idea to have multiple crop plans, alternative spray programs using other products
  • I can also remember when we farmed w/out glyphosate. We might have to pull some plows out of the weeds
  • Availability over Price Sensitivity. If a product is slightly more than you expected, but it’s available today…
  • Pay attention… we saw a $5 per gallon increase on Glyphosate this week. Paraquat increase soon.
  • Be aware of product availability target dates. I’ve got a whiteboard full of growers that want to knkow when we release prices on Metolachlor, Clethodim, and Atrazine.
  • Take advantage of every cost reduction opportunity that makes sense. 0% financing, Cash Discounts, etc.

Keep your eye on other product categories as well… shortages are everywhere!

I recently discovered a product shortage in central Arkansas of a particular type of gummy bear… I know this is going to sound silly, but my son has autism and some sensory issues that severely limit the number of foods that he will actually eat (that’s a story for another blog post), but when I discovered this shortage of gummy bears I immediately started reaching out to family to see if they could locate them in their local supermarkets… surprisingly we were only able to secure 3 boxes. I use this scenario to encourage growers to go ahead and get an early position on the  Adjuvants, Seed, and Biologicals they also plan to use this season.

 

This is extremely depressing for everyone involved…

In closing, I want to add that it’s pretty depressing on our end when we reach out to growers to let them know that their inputs for the upcoming season are going to be 3 or 4x more expensive than last season. One of my favorite things about being a field executive w/ FBN has always been being able to work directly w/ growers and our sales team to help them reduce their input costs and increase their profitability. It doesn’t take long in the ag industry to save a grower $10k here or $20k there on just a handful of products. It’s hard to describe, but it’s something I really enjoy, even in my personal business interests, if I can change something and reduce my average monthly expenses by even a small margin, I get excited. What we are experiencing in the crop protection industry right now is the opposite of that.

 

Retailers may even have to work together… Farmers First.

I know that there’s a stereotype in the industry of the traditional chemical salesman from the big retailers driving around in their new pickups overcharging growers for their crop inputs. I know that w/ things the way they are at the moment it’s going to be really easy for growers to throw blame at these retailers for trying to take advantage of their growers. This is usually done from behind the comfort of a keyboard by someone who has little knowledge of how things work. Hopefully, this post has shed some light as to how things actually work in the industry (from my perspective). Fortunately, our field team at FBN has always been perceived much differently, we are the exact opposite of traditional ag retailers in a lot of ways, but I want to clear up a common misconception. I know a lot of sales people in the retail ag space, have known most of them my entire life. They are not bad people, they obviously have a job to do, and it’s competitive sometimes… lines easily get drawn within communities and sometimes it can get pretty crazy real quick. This is not going to be the season for that division. Personally, I think we are going to hit a critical point in the road where supply is dwarfed by demand for even the most basic products and our priorities are going to shift from trying to get the sale to helping the farmer locate what he needs. I consider this to be parallel to our “farmers first” mission.

Obviously, I’d prefer the grower do business w/ FBN because we’ve proven over the last 5 years that as the network gets bigger we are able to leverage our growth to reduce costs for growers. We pretty much have the only business model out there that really does that… but, at the end of the day we have to do what we can to support our growers and help them get down the road this season. Myself and our sales team in the mid-south will do what we can on our end.

 

How have we reacted at FBN®?

Unfortunately, there’s not a lot that we can do in this environment to help growers… to be honest, every member of our sales team here in the mid-south would love to offset these rising costs for our growers, it’s not a commission thing by any means. Glyphosate, for instance, is one of the smallest margin products we have in our portfolio. When we released these products last week our leadership team put together some opportunities for growers to save up to 12% on their Glyphosate purchases… here are a few of those options:

 

New Customer Discounts

New Customers receive a 5% Discount on their first purchases and an additional 5% cash discount. We also have some additional programs for growers that purchase across 3 categories; Chemicals, Adjuvants, Seed, and Biologicals

 

Existing Customers

Existing Customers receive a 5% Discount on Glyphosate if they also purchase $7k in Adjuvants or Biologicals. We are also offering a 5% cash discount for our existing customers as well as a few other incentives.

 

0% Financing from FBN®

I think it’s going to be important for growers to take advantage of every opportunity for savings this season, 0% financing is one of the best examples… Qualified applicants can lock in 0% interest on FBN Direct® purchases* through January 20, 2022! There’s no minimum order size, and no payments until January 2023 – that’s right, a year or more without any payments due! Oh, and if you want to save on interest all season long we’ll extend that 0% rate even further, through August 31, 2022, when you make qualifying purchases by January 20, 2022.†

 

Glyphosate & other products available today… more coming soon!

We released these products the other day in our store and app. Needless to say I was up well into the morning hours assisting growers that are aggressively trying to lock down these products for use immediately as part of their fall / winter burndown programs (or to just get in their sheds for use next season). I’d like to tell you that these products are going to stay the same price for a while, but I can’t… honestly, it’s the opposite of that, I’m personally confident these products will see price increases in the coming days and weeks. My advice to everyone I speak to… I’d lock down what I know I’m going to need even at an uncomfortable price just to have peace of mind… that’s my personal position.

 

Thanks for stopping by, It’s great to be back…

While this is my first post here in a really long time, I do plan on keeping periodic updates in long form like this for anyone that wants to take a deep dive into what I’m seeing and learning on an almost daily basis. Please feel free to drop a comment, ask a question, etc. I’m looking forward to getting this blog back up and running soon!

 

Additional Resources on this Topic…

I’ve rounded up a pretty good list of news stories and articles on this topic (see the links below)…

 

I want to be completely transparent, I’ve only been in the crop protection industry for 5 seasons. Many of you may remember that I’ve spent the vast majority of my career in various entrepreneurial ventures in the advertising and software industries. My roots in agriculture run deep however, my name is “Cotton”, let’s start there… I’m a third generation farmer, my family still operates a row crop and cattle operation. I left the farm to pursue other opportunities in the 90’s and never really looked back.

A few years ago I made the decision to return to agriculture in some meaningful way and that’s how I got connected w/ Farmers Business Network. I can honestly say that I’ve learned something new every single day since joining FBN. I’m blessed to work w/ some of the smartest people in the industry, some of them have decades of experience and endless wisdom and direction that they’ve always been willing to pour into me. I put all of this out there to be completely up front and honest that I’m by no means an expert. Also, this post contains my personal opinion and doesn’t represent any official position or recommendation from my employer, FBN.

I do my best to keep everyone updated via The Cotton Club email newsletter I send out bi-monthly (sometimes more or less frequently). You can view some of my most recent editions here, and signup to receive these emails yourself. Please keep in mind that all views and opinions are 100% cotton and do not represent anyone else…

† 0% financing available after January 20, 2022 to qualifying members on all orders scheduled for delivery by August 31, 2022. To qualify, an approved member must make $45,000 minimum purchase of crop protection, adjuvants, biologicals, seed or animal health and livestock feed products by January 20, 2022. A $20,000 minimum purchase of animal health and livestock feed products by January 20, 2022 will lock in 0% input financing on only animal health and livestock feed purchases through August 31, 2022. Shipping and handling charges are included in purchase minimums for purposes of eligibility.

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