Early forecasts could help alleviate pesticide supply

Last summer it was blight products. In the autumn it was virtually any pre-emergence grassweed killer and Atlantis. And this spring it looks like chlormequat, glyphosate and potentially some key fungicides.

The link? All of them were, or at least suggested to be, in short supply.

It is easy to assume a manufacturer should be able to make enough of a particular product to supply the UK market. But most products are used globally, and anyone following grain prices this year will know how hard it is to predict global trends accurately. Manufacturers of crop protection products have to take into account a wide range of factors, many of which are difficult, if not impossible, to predict accurately.

Syngenta, for example, has a team that looks specifically at what might influence its products’ market size and potential share. Factors include commodity prices and cropping impact, climate patterns and influence on pest pressure, historic pest and disease levels, pesticide resistance, competitor activity, and the changing needs of its customers.

“We then run scenarios, such as a bigger pest threat, increased crop area, that could make our prediction bigger or smaller and include them in the plan as safety stock,” the firm’s Rod Burke explains.

The aim is to end up with enough product without being left with unsold products at the end of a season.

According to both BASF and Bayer CropScience planning can start up to two years ahead of sales to make sure enough raw materials have been sourced.

Consequently, at any one time, production capacity is fixed, Clive Rainbird of Bayer says. “Although globally we will develop strategic reserves, if there is a significant growth within a region, for example, in cereal areas in Europe, these reserves can soon be drawn down.”

Stock is usually held as the active ingredient rather than formulated product, allowing greater flexibility to meet global demands, BASF’s Rosie Bryson says. “Packaged, formulated goods can restrict the ability to respond to market change.”

So too can products produced in multi-purpose plants. Some products may only have one or two production runs in a season, while switching between products of certain formulations, such as sulfonylureas, can create bottlenecks.

Non-standard packaging or label requirements or small-volume lots will also increase lead times and decrease flexibility. “It is more difficult to change production levels of a small volume of a UK-specific product compared with a product sold more widely and in higher volumes in the world,” Mr Rainbird says.

Production volumes are based on forecasts made from anywhere from six to 18 months ahead of delivery. BASF works around nine months ahead to finalise a volume for the market. “The plan is then reviewed throughout the season to ensure product is available as required,” Dr Bryson explains. “But once production starts, increases in volume are subject to capacity constraints and packaging availability.”

Bayer reviews its volumes on a monthly basis based on rolling forecast figures, historical order data and using current market intelligence.

A key part of each manufacturer’s forecasts is information it receives from distributors. Most distributors use planning tools to assess what agronomists feel they will need, popularity of products among farmers, what will go out of favour, and cropping or variety shifts. Each then gives an indication of product volumes to the manufacturer – anywhere from six to 12 months ahead of the season.

Fungicides for this spring, for example, would have been committed to last autumn and fine-tuned pre-Christmas, one distributor tells Farmers Weekly. “And that’s the decision made, particularly for niche or exclusive products.”

Changing a forecast isn’t easy. “We can try, but you’re not likely to get much change. Usually if a distributor ‘gives up’ some allocation, the manufacturer either holds it back in reserve, or offers it to another distributor to take it up.”

There are incentives, or perhaps penalties, for distributors to budget accurately. Manufacturers are generally supportive of distributors who make a concerted effort to budget well, but in some circumstances they are penalised for changing, or not meeting, forecasts. “It could be a reduced product allocation in future years or a financial penalty, such as having to pay for stock and carry it through to the next season.” Post-market price increases have also been imposed, according to another distributor.

The upside is that forecasts can help secure supplies of in-demand products for distributors and big purchasing groups. “Giving suppliers a credible estimate of our needs means we can ring-fence volumes early,” Anglia Farmers chief executive Clarke Willis notes. “But forecasting can never guarantee supply as variables in the supply chain can change, such as breakdowns, raw material shortages and price hikes.”

How should growers react?

It looks unlikely product supply will ever be quite as simple as in the past. Ten years of tightening budgets means no one in the supply chain, including farmers, wants excess products left at the end of the season.

Increasingly, securing supplies will require planning. Ringing a distributor and expecting delivery of an in-demand product within 24 hours is likely to become much less frequent. That is certainly the view of Clarke Willis of Anglia Farmers. “A just-in-time strategy of purchasing will increasingly prove unwise,” he predicts.

Larger farms are already committing to products and asking for allocations ahead of the season, according to distributors.

Velcourt is among those, its chief executive James Townshend acknowledges. “Good planning prevents any issue with product supply. It is clearly critical – and also good for the suppliers to make a commitment upfront – to get the right product on farm, at the right time and at the right terms.”

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