GCP conference speaker talks ag supply chain disruptions

Posted on December 27, 2023 by Ryan Dahlman

By Heather Cameron
Southern Alberta Newspapers
Local Journalism Initiative Reporter

On December 13, 2023, Farming Smarter held their Global Crop Production Conference on Zoom and Dr. William W. Wilson, Professor of Applied Economics and Agribusiness at North Dakota State University, spoke on several topics including supply chain problems, changes in competition, Russia and Ukraine, and what that means for everyone.

Firstly, Wilson spoke about U.S. and global agricultural market and trade developments, sharing that his knowledge came from the fact that he is involved in agricultural affairs, including agricultural marketing, both in the U.S. and in several other countries around the world.

Wilson also spoke on climate change and how very serious in the world commodity market has been in the past few months and how there has been extremely constrained flows in the Pan Panama Canal due to water shortages. He mentioned that he did a lot of work for the Panama Canal and was involved in the feasibility study for the original Panama Canal expansion project in 2004 and during that time, the group had to make projections 25 years forward with and without the canal and also look at the risk of expanding. 

“We’ve had restricted flows out the Mississippi River because of water shortages,” said Wilson. “The city of New Orleans is risking running out of fresh water. And we have lower water levels in the Danon run river. And you can see what happened to barge rates in this country. I went back to my work in the Panama now 20 2004 and we estimated the probability of what’s happening today and the probability of that occurring was less than 2 percent chance. And it’s happening. And I point that out because, and I never used to pay attention to climate change. And people would ask me, “don’t you worry about climate change when you think about new GM traits or new varieties of commodities or the panel of canal or pork development?” As you know, I got 20,000 variables in a model, I can’t worry about anything else. And since about 2012, I’ve kind of realized the significance of climate change and that it’s happening in the world of economies and world agriculture and world logistics. And I think it’s something we all have to pay attention to.”

During Wilson’s presentation, he also spoke about the development of ESG(Environmental, Social and Governance) and sustainability. 

“And when I first was asked about these things, I didn’t really know for sure what it meant, so I read the book on it called ESG Investing for Dummies,” said Wilson. And I try to reach out to find out where the origins of this was. And I believe that this was a survey of consumers conducted and sponsored by Cargill, done by the Hartman Group. And they surveyed consumers in the United States and found out that 37 percent of the consumers, primarily millennials, would be more likely to produce products if they were produced with sustainable practices. And as a result of that, at least in this country, there’s been a, maybe a shift towards sustainability.”

“Everybody’s kind of on board with this effort towards ESG, but I’m sure this is going to be a rocket road in the future. Because in the past few weeks alone, the Wall Street money and the Financial Times are kind of saying there’s kind of financial backlash about this ESG movement and so there’s going to be a little fight on this,” said Wilson. “And certainly that was occurring in Covid, the COP28 Conference in Dubai the past few weeks. So that emerged to develop the carbon markets. But this is driving varying mechanisms of vary around the world to incentivize growers in the agricultural sector to reduce their carbon footprint. And we have many different types of companies and contract and contractual mechanisms moving forward in that has given rise to the development of an industry we never even had before called renewable diesel. And that’s probably we’re at the forefront of that. But other countries are as well. We have 18 projects in this country to develop new renewable diesel, renewable diesel plants.”

As a result of these renewable diesel requirements, Wilson said, he was asked to talk about supply chains. He then showed slides about how this evolved in the period of time following COVID-19 and resulted in more congestion and increasing demand for products. This, Wilson said, was compounded by labor shortages and the advent of near shoring and exacerbated by the use of certain manufacturing processes in the green and oil seed sector of in the Americas. This, Wilson said, was compounded by the adoption of precision scheduling of railroads, the Chinese trade war, and labor shortages. 

Wilson said that if the Phase One Agreement goes back into place, they can expand and there will be no problem expanding with vehicles, but the biggest problem is labor. To this day, Wilson said, they still have trouble hiring labor even though wages are very high, and this continues to be a problem in the Americas and in other places. 

“The impact of that was for reduced train speed, increased well time, but reduced velocity and adverse impact of what we call secondary real farm market values,” said Wilson. “There were congressional hearings during this time period in foster farms with these chickens. The California market testified against Union Pacific Railroad and said “Your failure to deliver is about to kill millions of chickens. There was pressure on SDB to intervene.”

Wilson showed maps of all the soybean ships that were afloat on the day that the Red Sea and Suez Canal were bombed, approximately a week ago. Wilson highlighted the moments from Brazil to China, movements from the Black Sea to the Red Sea, and the Swiss Canal to China, as well as movements from the U.S. Gulf through the Black Sea for U.S. and China. However, Wilson said, there was hardly any movement going through the Panama Canal because of the impact of the reduced water flows in their reservation system. 

“All of these ships are being impacted,” said Wilson. “The ship owners are forcing war insurance to be applied. Shipping costs go up. Ships are being diverted away from the Red Sea to go around Africa, which adds about 14 days transit time and about $2 million per vessel. Some origins are shifted to other origins. These are major repercussions on the supply chain.”

Wilson also mentioned his work with Russia and Ukraine, saying that he has been involved with both countries since 1991 when he was hired by the U.S. and the Russian governments to advise them on how to change the rules and regulations to facilitate privatizing their commodity marketing industry.