Supply chain issues that caused major headaches during the COVID-19 pandemic peak have eased, industry figures say, but challenges still exist
Advance planning across the agricultural industry will be the best way to prevent a repeat of the problems caused by machinery delays.
This is the view of outgoing Case IH general manager Pete McCann, who says supply chain delays have improved “probably one hundred-fold” since their worst during COVID-19 lockdowns.
Tractor and Machinery Association (TMA) executive director Gary Northover agrees the supply chain was “out of control” during the pandemic, with record tractor sales, combined with long delays, creating headaches for members.
“It was out of control frankly, and it was the entire supply chain,” Northover says.
“There were component supply challenges and Covid restrictions in place in factories, so getting machines built in the first instance was challenging.
“Getting them onto a boat that was coming to Australia was a challenge because a lot of the shipping got diverted from Australia as there wasn’t enough volume to support the normal number of ships.
“The demand between China and the US in particular took away ships that were being used to come to Australia traditionally.
“By the time it got to the Australian wharves we had delays with unloading and processing, and increased quarantine restrictions imposed on incoming freight.
“It got to the point where I think many members were saying they were really reluctant to actually take a physical order because they just couldn’t guarantee when it was going to get here, and indeed whether or not the price was going to be anything like the price quoted, so it was very challenging.”
An Australian Competition and Consumer Commission (ACCC) report from November 2021, to which the TMA made a submission, said that only 10 per cent of vessels arrived in their designated berth windows in 2020-21, which was the lowest rate on record.
The average length of time spent in berth by container ships at Sydney’s Port Botany during 2020-21 almost doubled from 12 to 21 hours, the report added.
It also cited data showing freight rates on key global trade routes had increased seven-fold during the 12 months from late 2020 until the report was released.
“Pre-pandemic, the sector would have likely been able to manage such a surge in containerised demand, but the simultaneous destabilisation of almost every part of the supply chain has left them without any spare capacity and struggling to cope,” then-ACCC chairman Rod Sims said in 2021.
The supply chain has improved since then, significantly in the eyes of Case IH’s McCann, but he admits a return to pre-COVID-19 conditions for ag machinery buyers and sellers may not occur.
“I think it’s improved tenfold, probably one hundred-fold to be honest, in regards to supply,” McCann says.
“We’re probably not back to where we were pre-pandemic and in all honesty, I don’t think we’ll actually get there.
“I think the world has changed so dramatically, especially from a labour standpoint and I don’t know if the days of walking in and buying stuff off the shelf will come back.
“The parts supply has improved, but we’re so far out now … regardless of what tractor brand you’re selling… I think our actual customer base is thinking so far forward now because it wasn’t just one portion of the business that was running late.”
McCann believes planning ahead with machinery purchases will become the industry norm and cites combine harvester buyers as an example.
Combines have always sold out quickly, even pre-pandemic, he says, and growers had become good at planning their purchases in advance to ensure they arrived in time.
This is now necessary for tractor buyers as well, McCann says, while manufacturers and dealers have also recognised the need for this planning.
“From a manufacturing standpoint we plan exceptionally heavily to the point of always reviewing the forecast and it is hard without a crystal ball, because we have the joys of our seasonal constraints occasionally,” he says.
“The dealers got a lot more engaged with forward planning, looking at what they’d sold previously, understanding what the customers’ needs were and then ideally getting in line for available stock that was going to come through.
“I think we’re probably better educated, and we’re probably planning better than we ever have, and that’s everybody – that’s growers, seed distributors, fertiliser manufacturers, tractor manufacturers – because I think that’s just what we have to do and this is the new world we’re living in.”
While shipping delays were certainly a major contributor to the long delivery times experienced by agricultural machinery buyers, along with all many consumer goods, they were not the only factor involved.
Shortages of products such as tyres and microchips, plus lockdowns in areas where machines are built, caused further delays earlier in the process.
While challenges still exist, Northover praised the efforts of TMA members to overcome these and create an environment where Australia has recorded two straight years of record tractor sales.
“What our members did was really order quite aggressively at the beginning of this COVID cycle, so they had an understanding that it was going to be difficult,” he says.
“That’s been borne out by the fact that tractor sales for the last two years have been at record levels, so you couldn’t have done that if you didn’t have the stock coming.
“It wasn’t due to sharp lead times; it was due to forward thinking on their behalf, and I think they got that right.”
Northover also says the TMA will continue to advocate for its members around keeping stock flowing and progressively easing the delays throughout the supply chain.
“I think our efforts to continue to try and work with the authorities at our ports is important, and maybe the industry needs to keep working on that one because we just need to get better systems in place to manage freight once it hits the wharf and get it through the system quicker,” he says.
McCann believes the scheduled end of the government’s Temporary Full Expensing Program in June will cause a slowdown in demand but will “not fall off a cliff”, while supply will progressively improve.
“I don’t know if we’ll get back to the point any time soon where there’s an abundance of stock in a broadacre sense, with Steigers, Magnums and combines etc, but with some of the more lifestyle products I think we’ll get back to being able to walk in and purchase one,” he says.
“My advice to customers would be just keep planning. The more you plan, the easier it actually is for us to supply.”