Farmers are facing fast rising prices for agricultural plastics as manufacturers try to recover from February’s severe freeze in Texas.
Several distributors of bale wrap, silage covers and other plastics used by farmers have reported delays in ordering products, increased demand and rising prices.
Some of the snarl appears to be self-inflicted, with fears of a shortage prompting people to buy more and earlier than normal. But the root cause lies with Mother Nature.
Many chemical plants around Houston shut down in mid-February when the area was slammed by single-digit temperatures, ice and snow that resulted in massive power outages. The area produces most of the nation’s resin used in plastic manufacturing.
“This is about as unique as it gets for a shutdown of the plastic industry,” said Bob Confer, president of Confer Plastics Inc. in North Tonawanda, New York. “Eighty-five percent of American plastic comes from that region, and the freeze caught them off guard with no warning. Everything that was in process was shut down.”
And even when the power came back on, manufacturers couldn’t immediately go back to normal. Plant pipelines were clogged with liquefied material that had solidified during the shutdowns.
“Some of them had miles of pipe to clean,” Confer said. “This is going to be dramatic once it catches up to consumers. It’s a crisis event.”
It could take up to six months for manufacturers to catch up with the backlog of orders, he said.
The Texas shutdowns kept 3 billion pounds of resin off the market, said Mark Voss, vice president of sales and marketing for Norflex, a plastic film manufacturer in Hudson, Wisconsin.
The shortage forced manufacturers to spot buy at elevated prices, and Voss anticipates the resin shortage will last well into the summer as producers attempt to catch up with the backlog in demand.
“There is definitely a shortage in bale wrap, and it’s difficult right now to keep our customers going,” Voss said. “The price we’re paying for resin right now is ridiculous, but if you need film, this is where we’re at.”
Norflex had just ramped up production of bale wrap for the year when Texas got frozen.
“This was the worst time for it to hit,” Voss said. “It was the perfect storm.”
The situation has trickled down to farmers who use plastic for hay and silage storage.
Pat Lemin of Mountain Supply and Repair in James Creek, Huntingdon County, Pennsylvania, said he purchased extra quantities of bale wrap and other plastic because he was afraid the material wouldn’t be available.
At one point, his manufacturer postponed shipments of ag plastic because it was unsure of resin supplies.
“Resin is in high demand, and they’re not manufacturing it fast enough,” Lemin said. “But it’s not so much a shortage as it is prices are going up, and they’ve been climbing since January. I would buy as much as you can afford right now. I’m not sure what’s going to happen.”
Thanks to strong demand, resin prices were already rising before the problems in Texas.
Last year, suppliers and manufacturers were paying 40 cents per pound. By early this month, Confer said, the cost had risen to $1.20 per pound.
The challenges also apply to specialized feedstocks such as tackifier, the resin that makes bale wrap adhere.
“If you can’t get the tackifier, you don’t have the film,” Voss said. “When the storm first hit, (a major supplier) canceled three of our purchase orders of tackifier. They told us it’s done. So we had to scramble to find more sources, paying through the nose for it.”
Still, the higher prices for the end products haven’t deterred buyers, and demand will continue to grow as the spring and summer forage seasons draw near.
“The increase in demand for plastic material has been so dramatic,” Confer said. “When it comes to supply, we don’t see ourselves getting back to full amount of material until July 4. It’s going to be a tough year for pricing.”
Managing a Tight Supply
Human nature could be making matters worse.
Paul Riehl, an ag plastic distributor in Leola, Pennsylvania, suspects the plastic supply issues are a result of people trying to buy before the price goes up again and get stocked up because they are concerned that a shortage could be coming.
“That resulted in increased demand just from people buying it,” Riehl said. “It’s a tough situation. The more we tell people it’s not available, they panic because it’s getting close to the season.”
More than 90% of Riehl’s dealers bought their plastic in January. They’re reordering now, but he said those orders might not be filled until June.
Some ag plastic dealers still have material that they’ve held since January, and others are rationing what they sell to customers.
Norflex is limiting how much plastic it sells to its base customers and not taking on new customers for the time being, Voss said.
But even if farmers limit purchases to what they need, that step won’t be enough to alleviate the shortage.
“We’re still going to have only so much resin for the next couple of months,” he said.
Where Will It End?
Not every distributor of ag plastic is experiencing a shortage — yet.
Richard Strite, manager of Allegheny Ag in Hagerstown, Maryland, said he has enough plastic wrap for the spring hay season, though he’s not sure how much will be available when it’s time to harvest silage in the fall.
“The price for ag bags went up three times since the beginning of the year.” Strite said. “We had a lot of customers that bought ahead. Those that got ahead of the price increases were better off, and where it’s going to stop, who knows?”
Riehl views the current disruption as seasonal, and if resin supplies hold up, he predicts ag plastic supplies will return to normal in July or August.
“We’ll catch up. I see this peaking and then (prices) could drop like crazy in the next half-year,” he said.
Still, Riehl said farmers should plan ahead for their year’s supply of plastic. Prices have gone up 40% to 50% since January, and that might not stop any time soon.
“If I were the farmer, I’d buy the year’s worth of supply right now. If you wait, rather than paying $70 for a roll, it might be $100 a roll,” Riehl said.
Jerry McGibbon, CFO of Norflex, said shortages and price increases are expected to affect nonfarm plastic products as well, from garbage bags to milk jugs. He likened the situation to the mask and toilet paper shortages when the pandemic hit last year.
And so far, he said, increasing costs aren’t stifling demand.
“We’re paying it on our end and passing it on to our customers. It’s always a hard phone call to make, but we haven’t had anybody balk at what we need to do to keep them supplied,” McGibbon said.
He expects the outlook for ag plastic — which many manufacturers consider a seasonal specialty product — could remain questionable for some time.
“If you can’t rely on the supply coming in, you can’t promise that you’re going to be able to supply your customers,” McGibbon said.
“With bale wrap, the demand could end because of the weather. If it dries up and they stop cutting, they don’t need it. But if there’s a good rainy season, at the end of the season (bale wrap) will be hard to supply.”