How Black Swan Events Are Impacting Global Agribusiness and What to Expect in 2024
11 August 2023 While unpredictable, growers are aware, and perhaps expect to experience interruptions. It’s the unexpected events, Black Swan events, that often disrupt the industry. Bob Trogele, Chief Operating Officer/Executive Vice President, AMVAC, shared his thoughts on the Black Swan events that affected 2023 and his outlook for 2024.
Pricing changes led to huge stockpiles of primarily herbicides throughout the value chain. No one wanted to be caught without product availability. The challenge is managing that supply and deciding when to purchase new material at the right price.
Contributing the pricing issues, at least initially, is the ongoing Russian invasion of Ukraine. Both companies are suppliers of fertilizer, and the conflict caused fertilizer prices to skyrocket. While the prices have abated some, challenges continue.
Many predicted the war in Ukraine and Russia would be a short-lived event, Trogele said. Many believed it would last months. And even if ends soon the effects could last years.
“A lot of the infrastructure is destroyed; more of the infrastructure is being destroyed,” Trogele said. “And there’s still the problem of mines in the fields. There’s still the problem with transportation. From a supply side, the Ukraine will be off the radar another 36 to 48 months.”
And once the war does finally end, Trogele questioned how that infrastructure will be financed.
AMVAC COO Bob Trogele shared his thoughts on the Black Swan events that affected 2023 and his outlook for 2024.
Trogele’s next black swan concern was the U.S. banking system. Several small bans and even a couple larger ones have shown signs of instability. And challenges to the U.S.’s banking system have implications across the globe. As Trogele put it, “When the U.S. catches a cold, the rest of the world ends up in critical care.”
The next black swan event focuses on South America and the continent’s largest country.
“Brazil is in such bad shape. Money is expensive, and the industry has been financing Brazil. So, if money is tight, and money is very expensive, the manufacturing companies – Germany, Switzerland, China, the U.S. going to continue providing financing?”
Trogele is also worried about China, the second largest economy in the world.
“Where is the Chinese economy going,” Trogele asked rhetorically. “We’re all waiting for a reset.” When talking with bankers in the U.S. he’s told the U.S. is expected to experience a soft landing. “If China doesn’t come back, it will have shockwaves through the rest of the world because we’re so interconnected.”
With all these potential disruptions, Trogele offered some advice for the industry heading into 2024 suggesting they pay attention the optics. “I would really watch where I spend my money,” he said. “’Maybe I’m just an old farmer who says, when there are clouds on the horizon, you just tighten your belt.’ On the market side, focus on what you do best with intensity. Take care of your core business. Take care of your A customers.
“If there are going to be changes in the industry, I would start creating a war chest because there’s going to be disruption. And utilize that money to invest at a time when things go wrong,” Trogele suggested.
When the time comes, Trogele suggested he would use that money for market access.
“Two, it never hurts to have more technology whether you create it yourself or you buy it,” he said. “It’s not that hard.”
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