We are approaching an extreme situation for farmers nowadays. What makes me say that?
Did you encounter lately any challenges finding what you need on the supermarket shelves? What if I would tell you that what you see on the supermarket shelves, it’s exactly what your suppliers experience.
This situation is more visible in the UK than in the rest of the world. However, don’t get too excited that this is not happening in your country.
Well, it’s actually around the corner. Major ports from the USA (Los Angeles, California) and Europe (Rotterdam and Hamburg) are overwhelmed; therefore, consumers and industrial goods don’t reach their final destination.
On top of this, there is a lack of truck drivers in the US and UK and even in the EU. These goods that are in ports now can’t be transported on the land. When it happens to consumer goods, it is transparent to us, but I can assure you that it’s the same with industrial goods. These have even lower priorities than food!
These industrial goods are raw materials for your suppliers. It’s a lack of raw material in every sector. Therefore fewer and fewer companies will be able to provide goods and services to their customers.
Multinational corporations (MNC) have a very complex supply chain. Through these supply chains, MNCs take advantage of the financial benefits from all around the world. Because of this, many industrial goods are traveling around the world until they are assembled as a final product.
And with all these considerable delays in the ports worldwide, the situation becomes even more challenging.
Farmers are part of the economic environment
The problem is that: farms are part of the economic environment.
No shocking news here: your farm doesn’t operate in a protective bubble, completely isolated or independent. On the contrary: your farm is integrated into the economic environment and influenced by what is happening outside. To better understand what I mean, read this blog.
To return to the main idea, I will give you an example that is easy to understand. When we buy a new car, we receive the car from the dealership in 30 days. Since different parts of the vehicle (like engine, seats, steering wheel, electrical cables) are built in other parts of the world, it isn’t easy to have all the spare parts in time for assembly. Therefore the supply chain doesn’t work anymore.
You will tell me that with the car is a shortage of semiconductors.
OK! Agree!
But.
Instead of a car, take another example as a tractor or combine harvester.
You will have the same result!
At the end of the day, what matters is that this situation can impact your farm when you don’t have all the parts of critical machinery.
You will face a difficult situation because you invested a fortune to have the leading technology on your farm, be productive, be efficient, and cut costs. But this approach works well when the system that created it is working well. And now, as you can see with the naked eyes, the system has difficulties.
My concern is that you will have an extreme situation where you will look at your expensive machinery sitting in the yard, not being able to use it because of critical components missing. On top of that, you pay your loan to the bank for this piece of equipment!
Farmers can mitigate these effects with proper actions
What I recommend you to think of:
- What is critical equipment on my farm?
- What can I do to have them up and running no matter what?
- Is there any substitute that I can rely on?
- Can I find a local supplier/ manufacturer that can provide me with what I need?
Many individual factors shake the system. One of them is Evergrande. The other is the increasing price of crude oil that badly influences farmers’ operations because we farmers use huge quantities to grow our crops. Even more, it impacts every single economic sector.
Our job as farm owners is to look at the things that can negatively influence our business and eliminate them. It’s easier to prevent than to be a firefighter!
