How Supply Chain Disruptions Are Impacting Agriculture Inputs, and What To Do About It, with Mat Taylor

The agriculture industry isn't the only one grappling with massive supply chain disruptions right now.

But any grower can tell you they're feeling the pinch in the cost of their inputs, which have risen as a result of a cascade of global pressures and unexpected interruptions.

So in this episode, we talk to Mat Taylor, Senior Director of Procurement at Nutrien Ag Solutions, about his experience managing the company's fertilizer supply chains.

He'll help us understand what's causing the disruptions, how ag inputs are shipped around the world, why economic sustainability is an important factor in long term decision making, and how growers can take steps today to help address tomorrow's potential supply chain issues.

Plus, Tom and Sally will discuss notable news from Indigo Agriculture, which has announced that its carbon farming program has produced 20,000 tonnes in soil carbon credits that it will sell as emissions offsets to buyers including JPMorgan Chase, Barclays and the North Face.

They are the first agricultural soil carbon credits to be verified and issued by the Climate Action Reserve, a non-profit registry with the distinction of being the largest state-level climate market.

Read more about the story here.

Episode Transcript

Mat Taylor:

With fertilizer in North America, you really got to understand that it's a global commodity. When you look at global factors, you almost got to factor everything. Lately, we've had the Ukraine/Russia situation, you've got Brazil, how many acres of soybeans they're going to plant? Just so many different factors that go into what makes up a price.

Dusty Weis:

Welcome to The Future. Faster. A sustainable agriculture podcast by Nutrien Ag Solutions with our very own Tom Daniel, director North America retail and grower sustainable ag and Dr. Sally Flis, senior manager North America sustainable ag and carbon. This is your opportunity to learn about the next horizon in sustainable agriculture for growers, for partners, for the planet. To us, it's not about changing what's always worked, it's about continuing to do the little things that make a big impact.

Dusty Weis:

On this week's episode, Mat Taylor, senior director of procurement at Nutrien Ag Solutions joins us to discuss how global supply line issues are impacting the supply of essential farm inputs. We'll talk about what's driving these supply line issues, how that's impacting the prices growers pay and what we can expect to see in the months ahead. Plus, how all this plays out in the greater sustainability context for North American farmers and how they can help lessen the impact.

Dusty Weis:

But if you haven't yet, make sure you're subscribed to this podcast in your favorite app. Also, make sure you follow Nutrien Ag Solutions on Facebook and Instagram. I'm Dusty Weis, and it's time once again to introduce Tom Daniel and Sally Flis. Tom and Sally, we haven't really talked specifically about carbon markets in some of the most recent episodes that we've done here, but there have been some pretty big news making announcements in that department lately. Can you bring us up to speed on what's happening and what it means?

Tom Daniel:

Sally, I think one of the biggest things that's happened in the last few weeks especially was the Indigo announcement that they have been the first company to actually get credits for a nature based carbon credit, which are farming credits in a scope one piece. That's new, we've been waiting for someone to get across that threshold and it looks like Indigo is going to be the first one to get to a verified credit today.

Sally Flis:

Yeah, it's exciting news Tom, to see that threshold finally achieved because it's a long process to get through that and it's been a long process for us in both our scope one and our scope three. To see that it is an attainable outcome is exciting and that we're on the pathway to achieve some of the same things over the next few months is pretty exciting to see that somebody's attained that outcome at the end of the day and there is an opportunity there for us. Indigo's been working on it for a long time. Part of the credits that they achieved in this first group were from 2018 changes. So it's a long process, but exciting to see that we're finally getting to that outcome that's been discussed for so long. It's a real, verified, validated credit that can be traded on the marketplace and hopefully helps bring additional value to all of the credits that we're generating or other people in the marketplace are generating in order to bring more value back to the growers.

Tom Daniel:

Yeah, and I was reading the article that came out, Indigo touts their verified ag carbon credits, and their CEO basically said that there were 175 farmers that would be receiving payments for basically their 2018, 2019 and 2020 practice changes that they had initiated on the farm. Most of the practice changes that we're looking at were around no till or reduced tillage cover crop. That's where the payments were being generated. Out of all the acres that they had within Indigo for those three years, it looks like roughly 19,000 carbon credits were generated and sold to corporations. To see the first transaction actually occur on what we call nature based payments farmer credits is pretty exciting.

Tom Daniel:

What's your opinion, Sally? Does this open a floodgate now for other companies to start being able to get to a verification? I know you're in the process right now of verifying some of our scope one offsets from our 2021 projects. What's your thought on the progress now of the marketplace?

Sally Flis:

I think it gets some interest back into the marketplace. I really feel like, and we were hearing this from growers as well over the last six or eight months, that none of this seemed to be real yet. I think we were starting to see some loss of interest in the field and probably some loss of interest from the buyer side as well of are you guys ever going to get to anything that's a verified and validated outcome? I think it's really great for that to help pushing that forward and show the industry on both sides, both the generators and the buyers of the credits that this is real. We can actually do this.

Sally Flis:

Unfortunately, the way that the verification validation process works and that we're verifying and validating every project individually at this point in time, it's not going to go any faster just yet. There's still some roadblocks, obstacles, pinch points on the verification validation side that won't make it a floodgate opening of credits available. But at least gives us all some hope that we're going to get through this process and there is a place for these nature based ag credits in the marketplace. But the amount of time that goes into verifying and validating that these credits are real and the practice changes happened, that the growers exist, that the fields actually are out there, which is all good to make sure that what we're bringing to the marketplace is something that has value and is real and gets us away from being accused of green washing.

Sally Flis:

There was just an article as well in the last week Tom, one of the European airlines was called out on some of the claims that they're making not being backed up by the level of data or rigor that the evaluators or the NGO side of things feels like some of these claims should have at this point in time. It's a slow process, but we're really trying to get to a place where we can show that what we did is real and actually occurred and we've made a real impact in the landscape.

Tom Daniel:

Sally, one of the initial mission statements that we had around carbon was that we were only going to work toward what we called a quality carbon credit. We're looking for something that is scientifically based and can be verified, that the information that we have is documented and validated. We don't want to get into that green wash space. Even, I have to say for Indigo's space here, they've been working since 2018 enrolling growers in their carbon program and still they've been struggling getting to a place of verification where they could actually start paying growers. But they have held tightly to the scientific side of it also. They were wanting to make sure that their credits are verified. It appears that companies buying these credits want that scientific backing and verification. They don't want to get called out either.

Tom Daniel:

You were mentioning the European airlines, but that was a KLM article that came out about their passengers being able to get to a net zero carbon footprint if you fly their airline. They got called out on that and that's going to be a problem for them. One of the reasons we chose to work with a nitrogen reduction process, or our program for 2022, is because that was a clear path to a science based target. There was a path that we could get there. As we're looking forward, we see that the value for carbon has never really been established. We've all claimed 15 or 20 or 25 different amounts for what a carbon credit. Now we actually see a carbon credit that has been sold. An actual corporation has purchased a carbon credit from a nature based source. So are we going to start seeing the true value for carbon to start showing its face and be established in the marketplace?

Sally Flis:

I think it gets us closer. I'm not sure we're quite there yet. It's a great achievement, but when you think in the large scheme of number of scope one credits that some of these companies need to obtain, it's 20,000 credits, so it's not going to meet any one company's total needs, but it is going to start to show that there should be a value placed on them. I think it's going to set a little more of a realistic impression of how many credits are really generated per acre. There was a lot of talk in the press, in the communities about how one ton per acre should be your goal or your estimate. If you look at the numbers that came out from Indigo, they're somewhere closer to half a ton or less. It puts a little more reality on what is really possible, I think, and starts to shed some light on that.

Sally Flis:

I know you and I have talked about that on the podcast before Tom, that this market is pretty fluid. It's also maybe not exactly as large an opportunity as had been discussed in the ag press or other press because the other pieces you mentioned, the number of acres, they have some of the same challenges we did. That you get growers to that signup point, but by the time you get all the way through the process of practice implementation or data collection or whatever it is, not every acre that signs up is still going to generate a credit at the end of the day. There's lots of different reasons why that happens. I hope this helps reset the vision for what the opportunity is in the ag marketplace. That maybe it's not as big an opportunity as had previously been discussed, whether it's on a per acre basis or an eligibility basis, or just all the things we see in the field that change why or if a grower actually gets a practice implemented on the ground.

Tom Daniel:

Exactly. I think we were surprised one: of all the acres of growers they had enrolled in their program up through 2020 that only 100,000 acres actually, as we say, made the finish line and got across the finish line to verified credits. Then the fact that they were only 19,000 credits that were actually verified to the 100,000 acres. You're talking about a 0.2, a 0.19 number and that was much lower than the marketplace, or at least the marketing side of carbon has been touting for the last three to five years. I think we're going to see a reality check on some of that. I mean, even in our own discussions within our data teams we're looking at numbers that are somewhat less than what the marketplace originally thought. I think there's going to be a gut check a little bit, I'll use that phrase. That we're going to see these credits as far as their initial values, as far as tons created per acre, are going to be smaller.

Tom Daniel:

That's why the value for the carbon needs to start creeping up as companies buy these credits because we need more dollars generated on a per acre basis to offset some of the cost of cover crops or tillage changes or whatever those changes may be. It's a good move, I think we're seeing some good opportunities for growers to start looking at this as a potential. The one thing I would say though Sally, our focus has not always been just around the carbon piece. When we talk about sustainability on the farm, the attributes that come from the practice changes will have much more long lasting value than a carbon credit to the grower. When we look at things like water management, water efficiency, the ability to sequester fertility into the soil system and just the value of what organic matter and carbon does within the soil structure itself, have a lot more values to productivity and water management than just getting a payment for carbon does. I think the long-term effects agronomically are much more beneficial to these practice changes than just trying to get an impact from a carbon revenue.

Dusty Weis:

Well, and Tom and Sally, it is big news, it's worth taking note of. I think folks should always keep in mind that we're going to have the latest information on these sorts of stories for them right here on The Future. Faster. Podcast. We'll drop a link to further news coverage in the episode description for anyone who wants to learn more, but this is a discussion that'll be ongoing and we'll always have the latest on it right here.

Dusty Weis:

But hey, as long as we're perusing the headlines today, there's a story that's been in the news pretty much every day for the last six or seven months and that's some of the supply line issues that have impacted every industry, but especially us right here in the agriculture inputs space. Coming up after the break, we're going to talk to Mat Taylor, Nutrien Ag Solutions senior director of procurement, about how input supply and pricing issues are being addressed and what growers can expect going forward. That's coming up in a moment here on The Future. Faster.

Dusty Weis:

This is The Future. Faster. A sustainable agriculture podcast by Nutrien Ag Solutions. I'm Dusty Weis, along with Tom Daniel and Sally Flis and we're joined now by Mat Taylor, senior director of procurement at Nutrien Ag Solutions. Mat, thanks for joining us.

Mat Taylor:

Thanks for having me.

Dusty Weis:

Mat, product supply and pricing is something that we have seen in the headlines about every day for the last six or seven months, certainly in our industry leading up to spring planting, it was a big story. I'm sure that your role in procurement has given you a front row seat to a lot of what's happened regarding these topics. Before we get into those, can you just elaborate a little bit on what your role and responsibilities are at Nutrien Ag Solutions?

Mat Taylor:

Yeah, sure. Thanks, Dusty. Sure can. Like I said, Mat Taylor, I'm our senior director of procurement here for our commodity products. My team focuses every single day on the major farm commodities of NPK and S that we sell at our retail branches throughout North America. I have a team of seven that their sole responsibility is to understand crop mixes, what's going on in the field, forecasting, all of the logistic supply issues we have not only in North America but overseas. I've got two individuals that do nothing but focus on NP and K worldwide markets, why China, Brazil are doing what they're doing. We take that information and we make recommendations based on what risk level we want to take as a company to supply every one of our North American branches with their commodity fertilizer to service our growers.

Tom Daniel:

I'm going to start out and ask you one of the hard questions that we seem to be hearing all the discussion. Not only are supply issues a problem, but the prices that we're seeing on commodity fertilizers especially, have been the talk of the town. Can you give us some ideas as how the supply chain is driving all this today and how it's impacting fertilizer production supply? How did we get to the place we are today with the marketplace?

Mat Taylor:

Tom, I think that is a challenge not only for my team to understand that does it every day, but for our branches and our growers. There's so many different factors that go into it. But end of the day with fertilizer in North America, you really got to understand that it's a global commodity. Only 10% of the commodities of the NPK and S go out in North America. When you look at global factors, you almost got to factor everything. Lately, we've had the Ukraine/Russia situation, you've got Brazil, how many acres of soybeans they're going to plant? Just so many different factors that go into what makes up a price in the Midwest or the coast, wherever you farm, that you really got to understand point A to point B. If we only use 10% of the worldwide commodities, it really has a factor on everything overseas that's going on.

Mat Taylor:

Another thing you've got to understand is about a third of the tons that were used to go on the ground in North America are imported. We are becoming more self-reliant on North American production plants. They're producing more tons than they ever have, but at the end of the day, it's still not enough to satisfy the tonnage that we need to crop everything from north, to southeast, to west.

Mat Taylor:

Long story short, Tom, there's so many factors that go into it and I think that's probably where we set ourselves apart a little different as a company, meaning we've got experts in the field, understanding what crop mixes are in every state, from every branch, all the way up through my team to understand what's happening globally. You put all those factors together and it paints a different picture of how we look at things. Supply, demand is your biggest driver of this, but over the last two years of commodity prices where they're at, we've seen a lot more tons go to the ground. When you factor all that in, needing more tons, it does put more emphasis on understanding the whole global picture than just understanding one local market.

Sally Flis:

Mat, while the marketplace for fertilizer and how we're procuring it is global, how are we determining how much we need to procure? Is that a global aspect or is it a local aspect? How do we come up with how much fertilizer we're going to buy for those NPK and sulfur tons?

Mat Taylor:

With the size of our company, it would say that, man, we buy as much as we think we're going to sell, but how do we understand how much we need? That is a thing we focus on a lot. My big emphasis for my team is forecasting. To answer your question Sally, is our forecasts come directly from our field, from our branches. To understand what commodities we need to buy, where they're at, how much to bring in, we roll that forecast in from a grower level, up through a crop consultant, through a branch, through a division. It really comes down to what we expect our grower customers to need is how we forecast that. When I talk about how do you take some of these supply chain issues out and the price, it fluctuates so much, forecasting is the biggest key we see out there. We really take it from a grower up through a branch to understand. It is not a top down, it is a bottom up collection of those data points.

Tom Daniel:

Mat, with that said, our parent company obviously is Nutrien and they are the world's largest potash and the third largest fertilizer manufacturer. You made the comment earlier, which I knew this, but it surprised me that we cannot supply all of the fertilizer needs that we have for North America just based within our own production. What are some of the driving things that lead you to purchase product or procure product outside of the Nutrien chain and what value do we see today, the fact that Nutrien is such a large manufacturer of fertilizer?

Mat Taylor:

With Nutrien being our parent company and having mines and production facilities through North America and the world, it leads you to believe that it would be easier for us to get tons and it is. We do have mines and production facilities that do help us, but if we can't forecast what our needs are and when we need them, it doesn't mean too much. So the forecast from the field of when, where, and why, what time of the month you need it, what time of the quarter you need it, is it for side dress, is it for pre-plant? All of those factors come to where we're going to purchase tons. I think everybody's got to realize that these plants aren't sitting in everybody's backyard. If we need potash in Kentucky or Indiana, that lead time could be anywhere from two weeks to six weeks, depending on logistics with railroads and different factors.

Mat Taylor:

We do feel like we've got a better handle on it, knowing that we do have in-house production sitting in North America. But Tom, without a forecast understanding it, when, where and why we need it, you're shooting in the dark. Like I say, my team focuses so much on forecasting that there is comfort level that we have our mines, but if we don't get a forecast and don't know when a grower's going to use it, that is still the biggest driving factor of making sure we have tons in place for our customers when they need it.

Dusty Weis:

Mat, if I can drill down a little bit deeper on that, I'm curious because you talk about the logistics. What's the lead time for getting a ton of potash or a ton of nitrogen fertilizer from one end of the world to the other end? And what logistical piece of the chain does that touch? I mean, I imagine we're talking about ocean shipping, shipyards, barge transportation, rail transportation, and truck transportation, the whole megillah there, right?

Mat Taylor:

It is. Dusty, I'll just do this. Where'd you grow up?

Dusty Weis:

Monroe, Wisconsin, right in the heart of corn and dairy country.

Mat Taylor:

All right, let's just take Wisconsin. If you have to get your NP and K and sulfur for when you need it from your farm, the answer is it's not the same for every product. When you look at potash, a company like Nutrien is the largest potash producer, as Tom said, that's fairly simple. It's just across the border up there for you, so a two or three week time from when production to get it to our facilities, that's best case scenario. But you need to have enough there to satisfy all of our growers so that lead time, just from point A to point B is a few weeks, but we give ourselves two to three months to fill our system.

Mat Taylor:

When you look at the nitrogen side of it, it depends on what product. Fifty percent of the urea into the US is imported, so you could be talking three months by the time you make a ton of urea in Saudi Arabia, to put it on a vessel, go to NOLA, up through the river system on up to it. When you look at the phosphate, it's the same thing, a lot of imported tons from overseas. Every single product operates independent of itself on a logistics basis, so six to 12 months is how we do our business planning to make sure we have those tons available.

Mat Taylor:

Next question for you, I guess, would be when are you going to start planning what the weather's going to do? That can be either two weeks before or two weeks after. To understand that whole value chain of point A to point B, it's not just a two week window. It's normally a three to four month window because how many imports we have to bring in. Then you throw in railroad strikes and political issues, all of that comes into play when you look at when you need the tons and where you need it. I'll say it probably a million more times on this podcast, having not only our branches understand how many tons they need and when they need them, but for a grower, when do you need your tons, where do you need them? It's not just as simple as picking up the phone and calling and saying, "Hey, I need it tomorrow," we do need that lead time to make sure we have tons in place to satisfy your needs.

Dusty Weis:

I'll say it again and again and again, but logistics is nothing short of magic from where I'm sitting, I'll tell you that. It's remarkable that we're able to make those supply chains work at all.

Mat Taylor:

It is and I'm not saying that if you looked up tomorrow we wouldn't have fertilizer for a grower. But in these high prices, we really do focus on how many tons we're going to sell and that directly comes from the field of what we are being told, whether planting corn or soybeans or how it all looks. Application rates play into a lot of it. But the best information we can get and plan only helps us in the long-term.

Sally Flis:

This comes back to the discussion I think we have on every podcast of the value of that data from the grower side, from the retail side. It's not only valuable in the grower and the crop consultant making a good decision in the field for the right source, right timing and placement of fertilizer, but it plays into this whole whether or not they can get what they need. We often get asked by the environmental side of things, "Why won't growers just make a fertilizer change? Why don't all growers just use a stabilized fertilizer product?" There's just so many things that go into that decision and availability to be able to have the product when you need it, where you need it and in the form that that grower or crop consultant is looking for. We probably should have named our podcast something about data Tom, and not sustainability, I feel like.

Tom Daniel:

Yeah, yeah. That would get a lot of listeners.

Sally Flis:

Yeah. Thinking about your answer to Dusty's question Mat, on what's the timeline and how many different types of logistics come into getting fertilizer to the time and place that we need it, how much more stress or how much more challenging has the marketplace become over the last definitely three years, but probably 10 years as this really has grown to be more of a global market? As you mentioned, all of the other factors; political or labor or social that also impact the movement of fertilizer.

Mat Taylor:

I've been doing this 20 years and I'm going to say that it's still point A to point B. It's just your equation has changed a lot of where your tons sit. As North America has become more self-reliant on itself of new production plants coming up, it's that lead time that we talked about Dusty, about the logistics. When do you need it, how do you need it, where do you need it? Farming practices have changed a little bit of maybe less at pre-plant and more spoon feeding the crop as it goes. All of that plays into the factor of what we're going to buy and when you're going to buy it. You got to remember what the biggest thing is, is even if the lead time is two or three weeks to get it, we don't have enough storage and North America does not have enough storage to hold it all at once. All of our tanks and our bins, we're turning those things two to three times.

Mat Taylor:

I guess Sally, when it goes back to it, do you need all your tons in March because you're going to put it on a pre-plant or you're going to side dress it towards the end of the crop season? All of those things, the better data that you can give us, essentially should turn into better pricing, better service, better everything, because we're able to take out some of the headaches that we've had in the past of holding stuff for four or five months, hoping you come in and buy it. Rather than having it there in I guess the right time in the right place. We're really focused on movement of product just to make sure we can service the growers. Price, I don't want to say it's irrelevant in a lot of ways, but if we don't have product for a grower when they need it, it doesn't matter what the price is. It does come down to our buying cycles are really focused on when a grower needs it and not having too many tons left over. All that forecasting, all the logistics comes into a big piece of that.

Tom Daniel:

Mat, one of the things we concentrate on is making recommendations at the field level, really around sustainable source products. A lot of the fertilizer products we're seeing so many changes in the fertilizer industry. The way we deliver fertility and nutrition to a particular acre, lots of new technologies. You're seeing nitrogen put on multiple times during the year, you're seeing phosphate put on with an optimized biological, for instance. There just seems to be a lot of discussion around sustainable fertilizer and nutrition for the crop. How do you see that? Do you see changes in the marketplace today? Are we using less of any of the particular commodities and maybe going more to maybe inferno type fertilizers, those type things? Are you seeing any trends at all in the marketplace?

Mat Taylor:

Yeah, we are. Like I said, I've done this 20 years and right when I came on, you were starting to see some of the phosphates with zinc built in and homogeneous products. On the phosphate side of it, you've seen a lot of changes. I think a lot of it is being more efficient of where you're placing your fertilizer, make sure you're not getting a bunch of loss and just slinging it out there. We do feel that the sustainable practices that not only we are doing, but other companies as well, is very vital in the future of the fertilizer world. It just doesn't make sense to run the same program that you have because of some of these high prices and what we're doing for the sustainable side of the world.

Mat Taylor:

I think these things are great. I think they're going to continue to get bigger. I think the question from someone like us to a grower is what value do you see? Because there's so many different flavors of stuff being offered out there that I think it still comes back to knowing what you want, where you want it and how you want it. A company like us can really put that in a plan through your team, Tom, to make sure that we are doing what's not only right for a grower, but what's right for our industry as a whole. But I do see this being more talked about. Every supplier out there has a sustainable group now. Four or five years ago, I couldn't say that they did. The question is what is right for your farm and how do we help you provide that sustainable option to help you maximize your yields and be more efficient?

Sally Flis:

Mat, as we come to the end of our podcast today, we really would like to know some of your insights going forward. I know we'd all love to have a crystal ball to know where prices and supply chains and logistics are going over the next six to nine months. But what would be some advice that you can give our crop consultants and growers in the field as they're getting closer and closer to harvesting that 2022 crop and making plans and purchases for the 2023 cropping season?

Mat Taylor:

I think it's just continually to put focus on when, where and why you need and how you're going to apply something. Like I say, that is the biggest thing that I feel like my team can control, our branches can control. As a grower, if you know your business like we know that you do, being able to tell us when, where, and why is probably the biggest thing.

Mat Taylor:

Some of these price fluctuations, there's a lot of things that go into it and it's not just point A to point B. You've got the government sanctions, you've got different things to it, but the things that I really want to focus on is what you can control and what we can help you control. If you tell us where you need it, we can take out some of the noise of the market and hopefully help you make the right decision. I'm not going to say that we're going to be short fertilizer. Yeah, we may be snug, but when the time comes of snug fertilizer is having a plan of when, where and why you need it is the most crucial point.

Dusty Weis:

Well, Mat I've said it before, and I'll say it again. I think that there are a lot of folks who whether they're ordering fertilizer or just getting a new pair of shoes on Amazon or what have you, take for granted a lot of the work that goes into getting things from A to B. What you have done today is you have very literally drawn a line from A to B for us and shown us how that magic happens. Thank you for that. Mat Taylor, senior director of procurement at Nutrien Ag Solutions. Thank you so much for joining us on this episode of The Future. Faster.

Dusty Weis:

That is going to conclude this edition of The Future. Faster. The pursuit of sustainable success with Nutrien Ag Solutions. New episodes arrive every other week, so make sure you subscribe in your favorite app and join us again soon. Visit futurefaster.com to learn more. The Future. Faster. Podcast is brought to you by Nutrien Ag Solutions with executive producer Connor Erwin and editing by Larry Kilgore, III. It's produced by Podcamp Media, branded podcast production for businesses, podcampmedia.com. For Nutrien Ag Solutions, thanks for listening, I'm Dusty Weis.