In April, The Compass explored Just‑In‑Time (JIT) manufacturing- a system so lean that the Australian Government had to call in life support mere weeks after the Strait of Hormuz closure prevented the usual calorific feed of fossil fuel based inputs.
But agricultural outputs? Agriculture laughs in the face of JIT. Agriculture is seasonal, lumpy, temperamental - typically arriving all at once, like 50 relatives bussed in for Christmas lunch…or not at all should the bus hit a drought sized ditch.
Unlike factories, WA paddocks don’t do paced process flow. They do tens of millions of tonnes of grain in 10 weeks, a flush of spring lambs, late summer watermelons and a cyclone wiping out all of Carnarvon’s bananas in 12 hours. Even dairy - a semi-controlled environment – witnesses a spike in production coinciding with fresh spring feed for the opposite to occur during a hot summer.
Meanwhile, demand wilfully ignores seasonality. Humans, animals and machines all consume at a slow, predictable, plodding pace. A Chinese malt house imports 85,000 tonnes of barley every month, not 1 million tonnes in January. Coles wants apples on the shelf all year round, not just in May. And the uni student in a Bentley share house wants their five‑pack of two‑minute noodles one week at a time, not by the pallet load.
To meet demand, agriculture relies on three critical - and often under‑appreciated - shock absorbers.
1. Central Storage
If every farmer built enough on‑farm storage to hold their maximum production, regional WA would be littered with a dystopian landscape of corrugated‑iron structures, most of them half empty due to seasonal ups and downs. Although the grain industry has the largest central storage by volume, the same principles apply to corn storage in the Ord River region, to coldstores in Manjimup, or dairies in between. The reason Central Storage makes sense is through a combination of:
2. Working Capital
Banks cop a lot of flak but, without seasonal finance, agriculture collapses. Why? Because Indonesian flour mills do not pre‑pay for a year’s wheat in April so fertiliser can be bought at seeding. Nor do they pay at harvest time when the trader accumulates. In fact, they generally don’t pay anything until their bank has fulfilled the Letter of Credit after a shipment arrives in Surabaya and even that is likely to be paid via an overdraft.
It is not a stretch for the full supply chain financing timeline to extend over 2 years, from the first costs incurred in the production of fertiliser through to the consumption of a loaf of bread. The supply chain is dependent on a chain of working capital lines linked through the input manufacturers, resellers, growers, traders, millers and bakers (and maybe the credit card provider of the bread buyer).
3. First‑Stage Processors
Humans have been preserving food long before there was agriculture (anyone for fermented eel?) but modern agriculture has also long relied on transformations to manage harvest peaks and troughs.
Examples of taking from the ‘too much’ mountain and plugging it into the ‘not enough’ valley months from now include:
The Irony
Despite being essential, these three shock absorbers are routinely maligned by farmers. It’s human nature to look over the supply chain fence and perceive that someone else’s grass is greener.
Paying for receival fees, finance charges and interest, whilst eyeing processing margins, can build an ‘us vs them’ mindset. However, as part of the same supply chain, all participants need each other to succeed (insert ‘a chain is only as strong as its weakest link’ expression here).
Agriculture is organised seasonal chaos, and shock absorbers don’t just make the supply chain efficient - they make it possible
