Managing risk on your operation is a full time job! Lean on your input supplier who watches major input costs on a monthly basis to help you make key decisions on when to book your fertilizer, price your seed corn and lock in fuel needs.
As commodity prices find their range so will key inputs like fertilizer. The expectation is that on average most of your input costs will be up by 10-15% this year, according to Iowa State economist, Mike Duffy – http://www.extension.iastate.edu/agdm/articles/others/JohSept11.html
Are you and your customer prepared for $4 corn and $10 beans? Take a look at the current statistics for production costs and potential risk exposure going into the 2012 growing season. These statistics were taken on 02/01/2012 for a grower in the western cornbelt.
It’s not unusual for a producer to pre-pay two-thirds of their fertilizer and fuel needs 6-8 months in advance of the spring growing season. As you make these purchases incorporate a forward sale to cover those costs and protect your investment. With key crop input costs making up over 60% of your variable costs of production, these decisions can make or break a good year!
To learn more on this topic see the article in Corn & Soybean Digest – http://cornandsoybeandigest.com/marketing/manage-input-costs-8020-rule
As my grandfather repeatedly reminded me in the 80’s – “The only way to make a good profit in the cattle business is by buying the calves right.” I believe his theory works here as well.
Until next time,