Supply Chain Hiccups in Arizona's Ag Land
We reached out to our farm and ranch members asking them about the supply chain challenges they are facing in their businesses today. We asked two questions.
- In your farming/ranching/agribusiness efforts, what disruptions in the supply chain are you experiencing, either in getting parts and/or input costs?
- What are your future predictions for your supply chain challenges?
Common themes include extended inventory stock-up to create a buffer if an item cannot be obtained, prolonged delivery times and overall price increases on everything. Additionally, cash management disruptions are big since the farm and ranch businesses must buy much more volume at a higher price.
Kristen Nelson, Territory Manager for Corteva Agriscience and co-owner of NT Farms in La Paz County
I know firsthand that most agriculture chemical products are 1) 7 to 10% on average more expensive than last year and continuing to go up, and 2) in short supply. Growers and PCAs have had serious challenges this season with access to tools to control pests. The same is true for parts, more expensive and harder to get.
This isn’t fixing itself anytime soon. I think these challenges will continue into 2023.
Jordan John, owner of Desert Chemical, Inc. in Maricopa County
Depending on the product there are some pesticides that are either still short or not available. Some of the products we use for worm control in alfalfa are already sold out from manufacturers and we haven't started to spray. Recently sulfuric acid was in short supply and the price increased substantially but that issue seems to have been resolved. Glyphosate has started to soften in price but depending on if the supplier has it in stock and if the package size is available. Some other pesticides were short but are starting to open up on availability, but prices have increased. Fertilizer is available but prices increased substantially. Some prices are starting to come down.
Future predictions will continue into 2023 from what suppliers are telling me. Seems that most suppliers are producing products but not at the capacity they were pre-covid. China is the issue since most products are manufactured there and formulated in the United States. If China wants to stop production and shut the U.S. supply down, it can do that. These issues were supposed to be resolved in the 3rd and 4th quarters of 2020 but we're halfway through 2022. I'm hoping this isn't the new normal.
Ron Rayner, co-owner of A-Tumbling T Ranches in Maricopa County
The food and ag supply chain hiccups are truly evident in our business each day. First, we see the lack of supply in areas of inputs such as fertilizer. We have reduced our application to wheat by half so far in the crop. We know this may have a negative impact on our yields, but we are carefully monitoring the crop progress.
We anticipated the tightness of supply and higher prices, so we decided to apply a light rate of dairy manure over most of the acreage. We also applied a lighter rate of urea but ordered it with an inhibitor to slow down leaching by irrigation water and make each pound of N (Nitrogen) more efficient to promote plant growth. We are worried about the availability of some herbicides for our cotton because we plant no-till and strip-till thus depending on herbicides to control weeds without cultivation.
Our farm is planning to make additional capital investments to replace equipment instead of making repairs. In December we purchased two new tractors to replace two high-hour ones. We have ordered two more pivot sprinkler systems to supplement the one we already have, and plan to continue mechanizing as quickly as time and capital allows. Labor availability is also a concern and is helped through investment in mechanical irrigation technology as well.
Harold Payne, president and owner of Agri Services, LLC, and technical consultant for Fort McDowell Farms in Maricopa County
Regarding disruptions, plowshares, wear parts for scrapers, loaders, pecan harvesters and sweepers, and specific types of fertilizers beyond N, P, and K are part of the mix.
Reading information from other ranchers, industry contacts, and truckers shrinking supplies of diesel exhaust fluid (DEF) is occurring. DEF is manufactured from water and urea fertilizer, with a large portion of the urea being supplied to the world market from Russia. If the DEF supply becomes short, trucking across the United States will be severely limited and the panic that would ensue as food supplies become short would be incredible. I am also reading about an impending shortage of 15- to 45-weight motor oils, which are specific to diesel engines. The author of the article had done his research and attributes this potential shortage to the fact that only two companies manufacture the additives that are used in the manufacturing of diesel engine oils. His suggestion was to stock up because his analysis shows a shortage for about one year.
Vegetable producers are finding shortages of packaging materials for their products. Of course, the shortage of Roundup and its genetic equivalents has been with us for a while, causing price increases and short supplies. Baling twine is harder to get, and we have had to use types and brands that are of inferior quality or less strength. An order from a local dealer to purchase a John Deere Gator utility truck is taking almost one year to get delivered. Parts for irrigation pumps are being delayed as vendors search for the proper types of equipment.
Looking to the future, as diesel has now surpassed $6.00 per gallon at Pilot/Flying J, truckers who transport our farm products have stated that their associates are parking their trucks due to high fuel prices. When that happens to a significant extent, grocery stores run short of food products, the public panic-purchases cleaning out the shelves and chaos ensues. Some of the shortages currently and soon are caused by shortages of labor to manufacture and transport normal supplies, some are caused by delays in getting products off-loaded at the ports, compounded by the new regulations in California that only trucks that meet the new emission standards, which require the use of DEF, can enter the ports to load and unload. A visit to a local tractor dealership in Pinal County reveals bare spots on their shelves of familiar items such as hitches, antifreeze, electrical supplies, and other items commonly seen at their stores.
In short, farmers are having to think through very carefully the supplies they need to grow next year’s crops. Compounded by the severe water shortage in parts of our state, the economic pressure on local growers is unprecedented and many Arizona growers are facing a very uncertain future. The supply chain concerns are just one of many production components to be monitored and dealt with as the national politics are causing great uncertainty and chaos in a previously stable and predictable economy.
Adam Hatley, Owner of Associated Farming Company in Maricopa County (recent testimony before the U.S. House Committee on Ag)
While cotton prices are stronger than in recent years, higher input prices and severe supply chain issues have resulted in significant increases in production costs. Most producers are expecting a 25% to 40% increase in input costs for 2022 largely due to higher fertilizer, energy and pesticide costs. As compared to a year ago fertilizer prices have increased by 55% to 120%. Supply chain and logistical challenges have wreaked havoc on our ability to get necessary inputs and equipment parts while creating major disruptions in delivering cotton to our customers. As producers, we must have an effective safety net. This includes a commodity policy that provides either price or revenue protection for prolonged periods of low prices and depressed market conditions. It also must include a strong and fully accessible suite of crop insurance products that producers can purchase and tailor to their risk management needs. The non-recourse marketing loan program for upland cotton remains the cornerstone for our industry regardless of market conditions. The marketing loan is important to multiple industry segments to effectively market cotton and provide cash flow for the producers.
There are important policy considerations for extra-long staple (ELS) cotton, or Pima cotton, grown here in Arizona. Overall, the ELS cotton competitive program and the ELS loan program should be maintained with potential enhancements in the next Farm Bill.
Perspective from the Retail/Direct Market Farmer
Joseph Dominguez, Produce Farm owner of Hillside Farms in Yuma County
Besides the cost of shipping that is hitting hard, the one product I need is 200 cell plastic growing trays. The company says it will be the end of the year before they order more. So now I am stuck paying outrageous prices if I want growing trays. I need the trays at the beginning of September. My price has doubled per tray. I am up to $1.50 to $2.00 per tray if I get them in bulk from my normal vendor. Getting trays from small vendors raises the cost of trays.
Robert McClendon Owner of McClendon Select in Maricopa County
Packaging, corrugated cartons, plastic bags, clamshell containers, and bottles for honey. All these ite have increased in price by as much as 60 to 70%, and the lead time has extended from 30 days to 90 to 120 days.
Carrie Schnepf, co-owner of Schnepf Farms in Maricopa County
So many different things that it absolutely is affecting us. So, we are just improvising or doing without.
Here are some things that are really making us re-think what we must do:
- First Hay prices are $25 a bale. That's a killer with a petting zoo.
- To-go containers for our bakery are never in stock, so we are just using paper bags.
- We have been ordering things for Christmas since February in hopes that we get them in time for our Christmas event.
- We have ordered seeds for extra plantings. Just in case there is low stock. Our vegetables are important for our wedding catering.
- We have ordered extra of EVERYTHING. So, if we order typically one set of Wheels, we are ordering 5 sets, just to have plenty of backups.
- When I order my bottled product, I must order it earlier, and give it time to get to me. So instead of 2 weeks, it will be 4 weeks.
- We are continually listening to what is happening and adjusting as needed.
- In the wedding business, we do all the catering, so we are really watching the cost of food.
- We are asking our employees to do more with less, and they understand.
- We are tightening the belt and making sure we don't have a lot of waste.
Everywhere you are seeing higher prices, higher food prices, higher gas prices and more.
We just made it through the pandemic and people were going stir crazy staying home. Now they are being asked to watch what they spend. So, whatever we do, we must be aware of the rising cost of everything. We want people to still be able to come to the farm for a day of fun without breaking the bank. Cutting some things out because we can't get them is not going to make my life miserable. We just need to be smart.
Chaz Shelton Founder and CEO of Merchant Gardens in Pima County
Yes, we have had issues with fertilizer and growing media. We don't use soil but substitute with something like coconut husk and that has been extremely difficult to obtain. Lead times on material are extremely long and, we are trying to stock up on material as best we can to get ahead of it. This really disrupts our cash management because we need to buy much more volume at a higher price, but our customers aren't willing to accept a price hike.
International production of nitrogen and packaging material has made it difficult to get too.
Sharla Mortimer co-owner of Mortimer Family Farms in Yavapai
Supply shortages and major cost changes are making growing and raising food ever more challenging! From seed to strawberry packaging, we have found many things we need to farm unavailable this year. When the products we need are available, prices and shipping have increased substantially. To feed our ever-growing population, supply shortages need to be mitigated.
When everything shut down due to Covid-19 it created an unprecedented disruption to our supply chains, it created a global catastrophe. When ports shut down and shipping containers weren’t being transported and this created a bottleneck situation. Limited trade has also created problems for import suppliers, and ultimately the consumer faces the extra cost.