Thirty-seven years ago, 125 million people tuned in to watch the series finale of M*A*S*H. The much anticipated episode, “Goodbye, Farewell and Amen,” aired on CBS for 2.5 hours. Those loyal viewers remained glued to their seats, and when the show finally ended rumor had it that people rushed to relieve themselves as millions of toilets flushing simultaneously overwhelmed sewage systems across America. Of course, this urban myth is overblown lore. While toilet use during breaks in large-audience programs can certainly be substantially higher than average, they have never caused serious damage. Sewage systems are flexible and prepared for unique spikes in usage.
Across animal feed supply chains we are seeing a different case as spiking feed prices cause farmers to review their costs ahead of 2021. Reports suggest a range of reasons, but the primary culprit seems to be rebounding Chinese demand for grain as the Chinese animal protein supply recovers after African Swine Fever (ASF) ravaged hog herds in the last few years. In his book Antifragile: Things That Gain From Disorder, author Nassim Taleb explores the idea that rigid supply chains are in fact fragile supply chains. In a rigid supply chain, spikes in demand create spikes in price in a best case scenario and inability to procure supply in the worst case. This rigidity leads to market failures when supply and demand are thrown into an imbalance.
At Glowlit, we believe that these market failures are caused first and foremost by a lack of visibility on demand. The industry has traditionally relied on estimates of demand or proxy measurements. Even counting the number of hogs in China today is still only an estimate of the demand since this data point – though very valuable – says nothing about the varying purchasing cycles of feed components across the supply chain. There is no substitute for actual purchasing data when it comes to evaluating demand.
The addition of grains (see the price of Corn here) and oilseed prices to the Glowlit platform are important not only because they represent an expansion of our product offering, but because these are the purchases being made at the level of the farmer. Since launching these groups, entries from around the world and from various points in the supply chain have started coming into Glowlit. And as this happens, the Glowlit community is gaining clearer visibility on their most critical feedstuffs, not from governments and investors, but from fellow farmers. Only by shedding light on the fluctuations in demand can producers address the supply imbalances around the world. Until then, keep your plunger handy.
Founder and CEO of Glowlit