Do you ever get that feeling that no matter how hard you try to figure out the markets you just never know what “unknown” is going to pop up next and ruin your strategy? So often it’s the unknowns that seem to put a wrinkle in your plan or make you stop and think, “Why didn’t I see that coming!” No matter how hard you try to understand every segment, every facet of the markets and what causes market volatility, there are always the unknowns that will upset the apple cart.
In today’s global market, commodity prices can fluctuate from more than just your basic fundamentals. For example, if China decides to devalue their currency vs. the US Dollar, it can drastically reduce exports of grain into China. If the US government decides to ink legislature to halt all exports due to tightened supply and worry of major price hikes in the food sector, we could see a significant price decline in commodities. Or Russia, Australia ban all exports of wheat because of major supply issues from a major drought, you again can see potential for swings in commodity prices. These unknowns cannot be identified in advance and make planning difficult. However, if you stick to what you know and manage accordingly, you can manage through the unexpected.
So what do you know? You can prepare each year with a written marketing plan of what crops you will raise, your primary input costs, including per acre costs and gross farm costs to operate, as well as any incomes that may help subsidize the business. This will give you enough information to determine your cost of production or break-even values by crop. I understand when a producer tells me, “Well I don’t have any clue what fuel costs will be or my fertilizer costs so how can I really figure my cost of production today?” You know what? Today you can gather just about every major input cost 18 to 24 months in advance. And if it’s an item you truly are unsure about, estimate on the high-end. Remember your input expenses don’t need to be etched in stone either, be flexible and know that you can update expenses on the go if you have to. Oh and what about this comment, “You know I was going to sit down this winter and build a plan, just ran out of time!” Many of us tend to avoid that planning session because for most of us it’s worse than having dental work performed. If you think about it, there are all types of planning guides or Excel spread sheets that have been around for decades. Why don’t we use them? Because they are cumbersome, hard to read & understand and sometimes too detailed that we just end up saying, “the heck with it”. Well, with today’s advancements in technology, there are simple, easy-to-use tools for the agribusiness and their producer client’s to manage their business like a business. If you’ve been searching for that one key solution to help your producer clients get better organized and manage risk on their operation, take a serious look at the innovative software from GrainBridge. Go to www.grainbridge.com and learn for yourself.
Several studies by leading research firms have proven that most successful farm businesses produce a written marketing plan each year. In agriculture with so many unknowns you have to start somewhere and in today’s environment you can easily see a $350 swing in per acre costs in a matter of weeks! A great example of why you should consider building a marketing plan is in the past September publication of Successful Farming Magazine.
Until next time, have a safe and successful harvest season.
Pat Kroese, GrainBridge LLC