How to Prepare for 11 Black Swans in 2023 While Strategizing for Success in 2024

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By BOB TROGELE and JAMES C. SULECKI

In recent years the term “black swans” has been used to describe unpredictable or unforeseen events — typically those with extreme consequences. Cast your eyes to the skies of 2023 to see a darkened horizon filled with black swans.

Unforeseen events are the nature of agribusiness, and the general economy, in recent years. As we made our way through 2022 and 2021, we lived through uncertain times. Yet, here we stand, with global agriculture remaining resilient.

How do things look heading into 2023 and 2024? In a word: Challenging. As businesspeople our job is not to simply anticipate circumstances but to manage through them. So we offer our thoughts regarding prescriptive actions to take to prepare for what could be a rocky road in the coming year .

The office environment around the world still is affected by employees growing ill for intervals of up to three to four weeks. China in particular remains on various degrees of lockdown and enforcing travel restrictions, which continue to disrupt both reliable supply and consumption of raw materials and crop protection products. Work-from-home is a new reality nearly everywhere, causing companies to rethink offices or else risk losing employees.

Action: Continue to leverage and cultivate virtual business relationships where possible. Play to the strengths of a distributed workforce by capitalizing on the remote presence of your employees — your eyes and ears and “boots on the ground” — in key production and customer geographies. Emphasize a management style that’s less hands-on and more results based. Creativity in employee engagement requires new channels of interaction.

Nationalism is on the rise globally and especially in Eurasia — notably China, Russia, and Ukraine. Europe’s economic picture remains weak with double-digit inflation and an overarching energy crisis. Food and energy security, in terms of both availability and affordability, are becoming top of mind for political leaders as activism places legal and political pressure on the food and energy supply.

Action: Shore up domestic manufacturing capabilities. Secure stable manufacturing partnerships. Secure strategic partner relations. Understand, accept, and adapt to the likelihood the world is undergoing deglobalization, which is reversing a long period of post-World War II globalization.

This factor, combined with rising nationalism (see above), has the potential to make China a less predictable and reliable source and trade partner than in recent years.

Action: Seek alternative sourcing — notably India — though knowing that the key question is whether there are sufficient raw materials sourcing and capital to shift the supply.

Glyphosate and dicamba are, of course, the two most prominent lightning rods of litigation as activists have figured out how to use the legal system to restrict use of synthetic agrochemicals.

Action: This is a great opportunity for alternatives to glyphosate, both synthetic and biological. Double down on formulation and application technologies that ensure the absolute right amount of active ingredient is applied, in the right place, and at the right time. Accept that environmental, social, and governance (ESG) are a given. Bolster traceability to allay fears of “I don’t know where my food comes from.” But perhaps more than all this: Isn’t it time industry becomes as emotional and aggressive in our communications and tactics as the activists? This takes time, and money, and energy — but so do the efforts of the activists. Agriculture needs to meet them head on.

Related to Black Swan 4: Are we at a point of over-regulation? Have regulatory agencies, in the EU and the U.S. particularly, passed a tipping point in balancing environmental needs with business needs? Would this be due at least in part to a fundamental lack of understanding of agriculture in a relentlessly urbanizing world? Whatever your view, there’s little doubt our industry will continue to feel heightened regulatory pressure in 2023 and beyond.

Action: Continue to invest in the technology that not only well represents the progressive nature of agriculture but also is good for farmers and society at large: biologicals especially, and also other environmental impact products such as prescriptive application and more effective formulations that address changing consumer demands. Repeatedly drum the message that agriculture has the potential to be a major part of the solution to the carbon/climate change problem.

By all accounts the U.S. dollar will remain strong in a risky world heading into 2023, and this can cut both ways. On the negative side, U.S. multinational companies with the most international exposure can be penalized in this bear market. On the other hand, the cost of doing business is going down for those who transact in U.S. dollars.

Action: This is an opportunity for better sourcing of product, acquisitions, and investment.

Inflation is a global phenomenon of course, but are we in fact heading into stagflation — the unpleasant combination of economic stagnation and inflation — for the first time in a half-century? The costs of both energy (see below) and labor (also below) are likely to remain high, with commodity prices likewise remaining elevated as a necessary way to pay for it. This could lead to a continuing spiral of inflation that extends to the cost of crop inputs and on through the channel.

Action: Pass along costs where feasible/defensible. Manage the controllables; manage around the uncontrollables.

As mentioned above, energy costs are likely to remain high. A critical question is whether this will prove to be a major voter issue in the West.

Action: There is going to be an ongoing debate about the transition from fossil fuels to renewables — especially the timing and cost. Plan for it. How will it affect your farm or facility and how you do business?

We’ve been living with this challenge since the beginning of the pandemic in 2020 and the China/U.S. trade war that started in 2018. The question now is: Is this the new normal?

Action: Seek lower — cost logistics, dual sourcing, and manufacturing efficiencies. Have enough cash flow to carry inventories. Manage your cash flow better.

Action: Stay alert to emerging alternative markets for grain production. Seize a market opportunity for biological alternatives to synthetic fertilizers.

Now that we’ve lived through “the great resignation” and have become familiarized with “quiet quitting,” will this be a permanent issue for at least the next few years?

Action: The best offense is a good defense — reward and retain the proven players. Automate where possible. Cultivate a reputation for corporate progressiveness and an ability to evolve and change that is appealing to job seekers. Look at alternative sources of labor. Be prepared to invest time and money in training of employees who may not have the complete backgrounds you’re seeking.

In Summary

We live in an age of challenges and disruption — a volatile economic and political environment that’s been with us since about 2018 and which the COVID-19 pandemic has only accelerated. Amid the many challenges, however, are opportunities for those organizations that can adapt, can be agile in targeting opportunities faster than their competitors, and can limit their exposure and risk by hedging their businesses with more stable suppliers and customers. Cash and employee satisfaction will be key competitive resources.

In short: Manage the challenges, and resource the opportunities. Companies that can successfully do this are likeliest to weather 2023 the best and be prepared for a cloudy 2024. •

Photo of Bob Trogele courtesy of Meister Media

Photo of Jim Sulecki courtesy of Meister Media

Bob Trogele is Chief Operating Officer and Executive Vice President of AMVAC, a subsidiary of American Vanguard (NYSE: AVD). He has enjoyed a 30-plus-year career in agribusiness working for “large caps” such as Hoechst, Aventis, and Bayer, and “mid-caps” such as Schering and FMC. He also serves on the AgriBusiness Global Advisory Board.

James C. Sulecki works with AMVAC and American Vanguard communications as owner of 40 Seasons Media, a contract communications management and content development advisory with deep roots and agrobusiness and agriculture. He is former Chief Content Officer for Meister Media Worldwide.