It is evident to anyone watching the commodity markets that the global grain glut is real. Almost all major grain producing countries across the globe have recorded huge harvests, with some regions even clocking a record harvest for a fourth or fifth year in a row. Some might say this was expected, considering the huge amount of focus farmers and agriculture companies have dedicated towards increasing output.
If one looks at data from the USDA, it’s not hard to see that there has been a tremendous increase in agriculture yield. From the data it’s also evident that in the last six decades, the primary factor responsible for agriculture growth has changed – from resource-intensive (such as bigger farms, more labour, etc.) to technology factors (such as better farming, better fertilizers, etc.). Over the last decade, growing population, rising incomes and changing food preferences have been steady drivers of demand for agriculture products, while factors such as climate change, water shortages and other resource constraints have necessitated a different approach to improve agriculture yield. Fortunately technology improvements in the last decade have provided some answers to the conundrum of improving yield while managing environmental and resource constraints.This has resulted in a deluge of investments in technology by players in the agriculture supply chain, both from established players as well as new age start-ups. For instance, John Deere has been an agriculture OEM company for 179 years – it now wants to be a technology company. Similarly billions of dollars have been invested in start-ups, which are focused on smart/ precision farming through sensors, mobile devices, IoT, drones and other analytical software. Against this backdrop it wouldn’t be an exaggeration to say that agriculture productivity and grain output will probably rise in the coming years – In fact one of the biggest agriculture companies in the world has explicitly stated that the grain glut is expected to last for several years. This probably isn’t good news to farmers and grain companies, as prices are expected to remain low in an oversupplied environment.
What makes this situation worse for grain companies is that investments in grain storage and logistics have not kept pace with developments in agriculture output. Over the last few years, as agriculture output increased, farmers started investing in storage bins – this gave them the flexibility to hold onto stocks when prices were low. However, even these measures have not been enough as grain storage sites are overflowing across the globe, resulting in huge demand for additional storage and thus driving up prices. A similar situation exists in grain logistics too. For instance, in Western Canada, railways transport a lot of grains, but the delivery is often delayed by several months - adding to grain supply chain costs. It’s the same story across Australia, Eastern Europe and United States as well.
This is the unfortunate reality of the market today and grain companies need to address it. One possible way would be to invest in technology to improve grain handling and storage functions. In an environment of low grain prices, it’s all the more important to squeeze out as much efficiency as possible from grain terminals. Companies need to make accurate blending decisions, optimize grain and equipment movement, automate certain grain handling functions and collaborate better with third party suppliers/logistics players. This means the ability to track and control grain and equipment movement, in real time, while measuring quantity, quality parameter of grains as it moves through the supply chain, and optimizing equipment paths to minimize resource consumption. To get this level of flexibility in tough market conditions, it’s critical for grain companies to utilize software such as Eka’s InSight platform and get real time visibility over their supply chains.
Eka's InSight CM® platform includes support for bulk stock management, process management, task execution, and business intelligence for the bulk handling industry including mining operations, grain facilities, and port terminals for all types of commodities. With Eka’s bulk handling software platform, physical assets (machinery, storage locations, ports, etc.) operate at maximum efficiency in the storage or movement of physical bulk commodities — providing the most throughput for the least amount of downtime and cost.