Advance planning can help farmers prune their cost of production
The long tail of 2019’s difficult growing season makes the crystal ball blurry for future outlooks — especially inputs. Uncooperative weather, record-high prevent plant acres, tight retailer margins and a late harvest all create volatility for prices in 2020. Farmers should be planning their purchases, says Jim Hedrick, general manager of Sagamore Ag Source, an ag supply consortium. Here are a few strategies to share with your customers.
1. Start the conversation.
Farmers should engage with their input providers now, says Samuel Taylor, inputs analyst with Rabo AgriFinance. His forecast calls for lower prices for seed and fertilizer in 2020 and potentially higher prices for some chemicals. If a farmer's working capital allows, lock in product as soon as possible, he says, as long as there's an the option to return.
“Good communication of your planting intentions for 2020 could offer you some level of safeguard for products and preferential pricing,” Taylor says of this opportunity for farmers.
2. Watch market signals.
The biggest factor to drive the fertilizer outlook will be corn acreage, Hedrick says. “Our outlook is for 2020 fertilizer prices to be down unless we have a spike in corn acres,” he says. “Typically, 91 million to 92 million acres of corn keep fertilizer prices in line.”
3. Price discovery should be expected.
Hedrick encourages farmers to look at a large geographic footprint when pricing 2020 needs, which could be a 50- or 75-mile radius from your farm. He also advises farmers to price at least three different locations.
With fertilizer, he is seeing a wide range in prices across the Corn Belt due to the logistical issues of the past 12 months. If freight is affordable, farmers could capture big savings by purchasing products from new or different suppliers.
4. Help farmers understand your business as a retailer.
“A lot of farmers still view their relationship with a retailer as sacred, but it’s a business,” Hedrick says.
Retailers are trying to compensate for fewer sales due to issues such as large prevent plant acres and farmers doing more of their own field applications. As a result, he says, competition for market share is fierce. Before farmers sit down with their suppliers, it's helpful to research prices at the wholesale level so they understand the price ranges retailers can offer.
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