Mike Straumietis: How Distribution and Supply Disruptions Affect The Hydroponic Nutrients Market

Mike Straumietis believes transporting fertilizer to retailers completes the final link in the supply chain so that growers can buy it after it has been transformed from raw material for use on farms. Currently, both fuel costs and trucking rates are rising once more. The demand for fuel is increasing beyond pre-COVID-19 levels as more people return to the roads. Other global factors have caused additional strain on the price and supply of petroleum, making completing the penultimate step in the supply chain even more expensive.

All stages of product shipping—raw, processed, and consumer-ready—have seen some form of increase. Mike Straumietis presumes that the rising demand for goods supplied directly to consumers is causing traditional distribution channels to get clogged as they try to recover from pandemic slowdowns. As more workers are needed to deliver these commodities, the strain and pace have raised shipping costs and labor demands. Additionally, global imports and exports of fertilizer have been significantly impacted. Supply chain disruptions at every point continue to see prices rise while consumer-available products dwindle in many areas.

Production and distribution have been further disrupted by hurricanes, ice storms, labor disputes, new manufacturing capacity, and infrastructural failures, particularly with rail logistics and rising freight charges. Amid these production slowdowns, COVID-delayed plant turnarounds, again, halted while plants attempted to catch up. Mike Straumietis explains that this led to more production halts, either for urgently required routine maintenance or problems that arose due to putting off care. In attempting to catch up on production backlogs, many fertilizer plants placed a high degree of strain on their equipment as well as their workers, causing breakdowns in both areas. When production slows down or stops altogether, prices tend to skyrocket as demand continues or increases, and relative supply plummets.

To maintain fertilizer production plants’ chemical processes and safety, Mike Straumietis believes these plant turnarounds are vital. The companies hired to do these turnarounds postponed visits until it was safe to bring external staff back on-site during the worst of COVID because measures at production facilities were in place. Despite spending the last few years raising the number of production plants to meet about the same number as in 2002, Mike Straumietis thinks these disruptions are enough to result in a minor decline in availability, influenced by decreasing natural gas prices from 2009 until the end of 2020.

Because they lead to diseconomies of scale, Mike Straumietis believes short-term costs like rising natural gas prices and production delays affect output. As fertilizer costs rise due to the skyrocketing price of natural gas, U.S. producers cannot compete with foreign producers who may have lower production costs. As a result, production is reduced, and supply is sought elsewhere, usually through imports. Imports are susceptible to their own array of possible setbacks. Foreign policies, conflicts, and worldwide natural disasters can all have an effect on the viability of imported materials. Increasing the distance from producer to consumer places further reliance on the already exacerbated supply chain situation.