Wednesday, 8 April 2020

Good stocks as global supply adjusts to COVID shock


When fertiliser is applied this autumn, farmers are seeing the end result of a lot of hard work behind the scenes. The steps involved in getting that nutrient on to the soil depend on an inter-connected supply chain that spans the globe. 

How has that supply chain been affected by COVID and what are we seeing when looking ahead?

While we have good stocks of the main lines of NPKS products and seeing strong demand for products like N-Protect, there are many moving parts in the fertiliser supply chain as nutrients make their way around the world.

Our global suppliers are also seen as essential businesses by their governments. Our urea partner’s operation is highly automated with its own wharf and is in the middle of the Saudi desert so physical isolation is not an issue. We have a ship unloading this week, another on the water and another due in early June.

Morocco is a crucial source of phosphate rock for the world. Like New Zealand, they have seen their highly valuable tourist industry close down so the pressure on other sectors such as food creation and farm nutrients has increased. As a result, our partner OCP will take an even more significant role in their recovery.

Shipping is complex at the moment. While fuel costs have gone through the floor, exports such as logs and wood chip have stopped while forestry was deemed non-essential.  This means that offsetting the costs of a ship bringing nutrients in with revenue from the same ship taking a cargo back is not possible.

These kind of “forward load” costs are also affecting the logistics in New Zealand. Some parts of the country become expensive to transport fertiliser as the trucks are empty for half of the round trip. Increased domestic freight costs are being absorbed by the co-operative as a way to help shareholders. 

We may see more countries are closing their borders and we have to stay agile – for example our Boron from landlocked Bolivia is moved through Chile or Peru to the coast. We have to prepare alternatives in case that is disrupted.

While ports are flowing, containers are becoming an issue. A muddle of essential goods and non-essential goods in the same containers is meaning ports are having to store many more than normal. This, combined with the fact that so many containers are stuck in China, means that containers can be hard to come by.  So far, we’ve been able to manage around this with the support of our suppliers and shippers.

Minor hiccups in the supply chain can now have a much bigger disruptive effect, for example a breakdown at despatch or at a port means repairs can take longer.

We have reliable partners who are continuing to operate. We have the behind-the-scenes systems in place, robust technology and a wonderful team of people. Help us to help you by planning early and allowing for time to actually get the product on paddocks.