Drought and the Supply Chain: Grains
According to the U.S. Department of Agriculture, the drought of summer 2012 is "the most serious situation we've had in probably 25 years," said Secretary of Agriculture Tom Vilsack. In a press conference, Vilsack said 78 percent of corn crops are in areas that are drought impacted; 77 percent of soybeans are. The resulting numbers for production are staggering: 38 percent of United States corn and 30 percent of soybeans have been rated poor to very poor, and in 25 states.
Corn and beans represent food staples for the majority of U.S. livestock. Aside from the other implications the drought has on livestock (to be explored further in future daily stories about the drought), one of the most crucial issues is farmers cannot feed their livestock. The cost for buying feed elsewhere has skyrocketed - a 38-percent increase since June 1 to $7.88 per bushel of corn.
The U.S. government has passed some regulation to help accelerate the time it takes to declare a county disaster-stricken, and has offered low loan interest rates for farmers who can explore new land for grazing. Also, several areas usually protected by the U.S. Conservation Reserve program have been opened up for "emergency haying and grazing," Vilsack said.
Corn farmer Derek Mullin of Mount Pleasant, Iowa, told CNN that he expects to yield just 75 percent of the corn he regularly does. Like any other natural disaster, this drought has affected farmers regardless of their efforts. "... when mother nature works against you, then it all seems like it was for nothing," Mullin said in his interview with CNN.
Up the supply chain, the drought means higher prices "especially for corn," that is used as food stock for animals. " However, most critics are crediting the current jump in corn price to a lack of materials and supplies, not with a lack of corn supply, which hasn't truly reached the stores or buyers - yet.
Amanda Hamilton, director of sourcing operations at group purchasing Novation, encourages supply chain managers to think about managing supply budgets rather than budgeting. Initial spikes in prices will be more related to fears from consumers than from actual inflation. "I will say find room. Find room for next year of comfort to be able to take from other areas to move over to this area," she said.
The extension of growing season (although many farmers cut crops as soon as record highs promised stunted growth and even ruin) and the genetics of hybrid-engineered corn stalks mean that more corn could still survive.
EU and US agree end to Airbus-Boeing supply chain tariffs
The EU and US have agreed to resolve a 17-year dispute over aircraft subsidies, suspending tariffs on billions of dollars' worth of goods that have plagued procurement leaders on both sides of the Atlantic.
Under an agreement reached by European Commission Executive Vice-President Valdis Dombrovskis and US Trade Representative Katherine Tai on Tuesday, the tariffs will be halted for a period of at least five years.
It will bring an end to punitive and disruptive levies on supply chains that have little to do with the argument, which became embroiled in the trade battle. Businesses on both sides of the dispute have been hit with more than $3.3bn in duties since they were first imposed by the US in October 2019, according the EC.
The US imposed charges on goods upto $7.5bn in response to a World Trade Organisation ruling that judged the EU’s support of Airbus, its biggest aircraft manufacturer, unlawful. A year later in November 2020, the EU hit back. The WTO found the US had violated trade rules in its favourable treatment of Boeing, and was hit with EU duties worth $4bn.
In all the tariffs affected $11.5bn worth of goods, including French cheese, Scotch whisky, aircraft and machinery in Europe, and sugarcane products, handbags and tobacco in America. Procurement leaders on both sides of the fence were forced to wrestle with tariffs of 15% on aircraft and components, and 25% on non-aircraft related products.
Boeing-Airbus dispute by the numbers
- The dispute began in 2004
- Tariffs suspended for 5 years
- $11.5bn worth of goods affected by tariffs
- $3.3bn in duties paid by businesses to date
- 15% levy on aircraft and 25% on non-aircraft goods suspended
Both sides welcome end to tariffs
European Commission President Ursula von der Leyen branded the truce a “major step” in ending what is the longest running dispute in WTO history. It began in 2004.
“I am happy to see that after intensive work between the European Commission and the US administration, our transatlantic partnership is on its way to reaching cruising speed. This shows the new spirit of cooperation between the EU and the US and that we can solve the other issues to our mutual benefit,” she added.
Both aircraft manufacturers have welcomed the news. Airbus said in a statement that it will hopefully bring to an end the “lose-lose tariffs” that are affecting industries already facing “many challenges”. Boeing added that it will “fully support the U.S. Government’s efforts to ensure that the principles in this understanding are respected”.
The US aerospace firm added: "The understanding reached today commits the EU to addressing launch aid, and leaves in place the necessary rules to ensure that the EU and United States live up to that commitment, without requiring further WTO action."
This week’s decision expands upon a short-term tariff truce announced in March this year. The EC says it will work closely with the US to try and further resolve the dispute, establishing a Working Group on Large Civil Aircraft led by each side’s trade minister.
Airbus last month signalled to suppliers that post-pandemic recovery was on the horizon, telling them to scale up to meet a return to pre-COVID manufacturing levels. “The aviation sector is beginning to recover from the COVID-19 crisis,” said Airbus chief executive Guillaume Faury, adding that suppliers should prepare for a period of intensive production “when market conditions call for it.”