How will you react to the dramatic price increases on fertilizer and other commodities? Besides raising your prices and scrambling to find an affordable, effective fertilizer, what are your plans to retain customers and grow your business? We checked in with John Huber, our Sustainable Products Manager and a 35 year veteran of the green industry, to learn more.
How Are You Going to React to the Economy?
- In a volatile economy, companies that look to expand are most likely to survive and profit.
- Companies that maintain high standards are more likely to build market share.
- Companies must focus on resiliency, profitability and sustainability.
- Companies that cut back and cut corners will lose market share
If you have not secured the fertilizer you require for your round one and round two yet, you will be met with serious challenges that will have a substantial impact on your business. Spring fertilizer procurement that typically takes place in February and March has already occurred. The big spring rush happened in November and December 2021. It caused production and supply bottlenecks and a ginormous amount of stress and anxiety because fertilizer prices were, and still are, a moving target.
It you’re still trying to decide whether or not to raise your prices, ( and by how much) you’ve already missed the boat. But, it’s not too late to pivot into other areas of your business and stem the tide of financial hemorrhaging that’s staring you in the face.
First, let’s examine the reasons for the monumental spike in fertilizer prices.
- Global fertilizer demand has skyrocketed due to the massive, rapid human population growth. There are close to eight billion people on the planet. Sixty years ago, there was less than half that total. By the year 2050, there will be over ten billion people on Earth. All living near and around water. Big Ag and fertilizer manufacturing is struggling to keep up with the demand. More crops are required. Not just to feed the billions of humans, but we have to feed the livestock as well. Many developing countries are gaining an appetite for protein which requires even more crops to be grown and increases the fertilizer input requirements to support the massive increase in crop production.
- The global pandemic has altered the social and economic landscape to a point of uncertainty and disbelief, never experienced in the history of modern man. This will not end anytime soon. There are so many powerful people and companies making so much money off of the pandemic, they never want it to end. The global pandemic was the catalyst for the energy crisis in Europe that spiked the price of natural gas which is the number one ingredient required to produce urea nitrogen. Energy producers are still trying to ramp up and are proceeding slowly, with caution because of the uncertainty. This has created a shortage which led to hyper-inflated energy costs.
- The pressure to convert from cool energy to clean energy (natural gas, solar and wind) has also been a contributing factor in natural gas shortages and price increases as well.
- Unless you’ve been living under a rock the past year, you’re well aware of the trucking and supply chain crisis. This didn’t happen overnight. It all began 10 years ago when the federal government mandated a reduction in the hours a truck driver could drive without a rest break period. This created a small ripple in freight cost increases but it was business as usual because the new mandate was being governed by the honor system. Trucking companies were allowed to log their own hours in their reports to federal officials. Basically, they cheated so the federal government was compelled to issue an additional mandate that every single truck on the road must have a GPS tracking device installed and functional. This new mandate occurred three years ago and triggered a paradigm shift in the circulatory system of the American economy that has led to 100 % and more, increases in the cost of shipping. The old guard of truck drivers saw the writing on the wall. Many retired or transitioned into other industries. The younger drivers entering the industry were not enthralled about the living they could make so the ranks of truck drivers began to dwindle. Good service and predictability flew out the window and freight costs soared to record highs. Trucking company owners and independent drivers are making a fortune and loving it. It’s greed. Plain and simple.
Meanwhile, the supply chain issues and fertilizer production bottlenecks have forced big fertilizer producing countries to scale back on production and limit exports in order to preserve stock to meet their domestic requirements. This has also been a key factor in fertilizer price increases.
Additionally, we must examine what large fertilizer producers have done to manipulate government and maximize profits during this monumental crisis. Make no mistake. these are oligopolies in the fertilizer industry with serious firepower. I won’t name names but there are some rather large American-based fertilizer producers that have been planning and executing a manipulative strategy to get the international trade commission to issue a nearly 20% tariff on global fertilizer exports. These perpetrators have succeeded in raising their profits by 87%, increasing sales by hundreds of millions of dollars and launching stock values through the roof. This all started over three years ago. It’s greed. Plain and simple.
What has Central Turf & Irrigation been doing the last three years to prepare for this assault on the American economy? I can’t say we predicted the entire scenario, but we took the Boy Scout motto of “Be Prepared” to another level.
Central Turf & Irrigation has more inventory in our branches at the best possible prices than any other professional landscape supplier in the country.
Central has buying incentive programs in place that provide savings that will help you navigate the uncertainty of the unstable economy.
Central has partnered with entities that give us buying power and up to the minute intel on pricing and availability that is unprecedented in the Green Industry.
In addition at Central:
- We go above and beyond when it comes to sourcing products produced right here in the United States in order to limit freight costs and supply chain delays.
- We source and produce sustainable products that are recycled domestically that are priced competitively, work more efficiently and open up a wide range of opportunities for our customers to branch out into high margin, add on services.
- We offer marketing services that help our customers increase market share and retain existing customers by providing modern tech tools and support for internet and old school practices.
- We have a team of subject matter experts to guide our customers through the instability of the markets and provide solutions to increase efficiency and productivity, leading to higher profit margins and increased market share. It doesn’t matter if your target market is irrigation, lighting, fertilizer and chemical, full-service maintenance or hardscapes. We have solutions for all.
About John Huber
John is in his thirty sixth year in the Green Industry. John began his career as a greenhouse grower and spent 15 years guiding his own turf management company in southeastern Virginia using cutting-edge organic based technologies.
For the past 18 years, John has been involved in fertilizer manufacturing, formulation, supply chain and logistics, helping thousands of professional turf companies across the United States grow their business, increase the quality of their services and streamline their programs for optimal efficiency.