AgCountry Farm Credit Services / GROW / June 2022
OUTLOOK FOR
INPUTS
Written by: Katie Tangen
Marketing Education Specialist Grain markets have been a wild ride for the past year or more, but one thing that hasn’t been discussed much is how volatile fertilizer and fuel costs have been. There’s no easy answer to any of that, but some background on where these markets have been and where they are going can help us plan for the future. There are three main items that contribute to the rise in costs, and one item that may be able to temper that rise in costs, and one item that I think may be able to temper that rise, at least in the short term. Attention to these market movers doesn’t guarantee the “right” decision, but it can help producers make the most educated decision for their operation
Inflation Price inflation coming out of the COVID-19 pandemic has been hot and truth be told, it’s a double-edged sword for farmers. Inflation has helped drive commodity and asset prices higher but not just on one side of the ledger. There isn’t much to be done here, but what is important is that producers remember they are working on a margin. High grain prices invariably bring about high input prices; that’s part of the marketplace. Making sure you
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manage sales and purchases in tandem is more important than ever. At this point in the season, fertilizer is being purchased. You may want to think about if you have sold enough grain to offset that cost. If not, it is something to consider. You can start looking ahead to next year. Seasonally, the coming months offer some of the better fertilizer pricing opportunities for the 2023 season and the same principles apply. If you buy fertilizer, sell grain. Fuel gets to be a little trickier to determine, but it is the same idea. Don’t forget interest expenses. While that’s not as easy to hedge, keeping your debt levels manageable will be important.
Shipping and Logistics Time is your friend. It is a principle that serves producers well in considering grain sales, but it is also something that can be invaluable in making purchasing decisions. Give yourself and your supplier time. Some things are moving better, some are not; but if you are open with your supplier and tell them what you need well ahead of time, they can plan accordingly. Everyone is short on things from the plastic needed to make a jug of chemical to certain salts needed in the production. Changes in certain shipping practices are underway that should help out as well (less shipping of empty containers back and forth, different inventory management practices, etc.). What producers can do is help ease the rush for “just in time.” When it comes down to it, possession is everything. Just remember you have to be able to keep whatever it is you possess in condition - especially chemical.
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