They say that when you hear something three times, it must be important.  Well, we’ve heard three different references in as many days to rising input prices in 2022, so it must be on the radar of many in the industry.  The most recent DTN/The Progressive Farmer Agriculture Confidence Index was released this week, and farmer confidence is down since the spring due to “…concerns about keeping costs in line with static profits”.  Inflation of all goods in general, China’s chemical manufacturing market share, and energy-based products supply levels are three drivers that will squeeze profits on the farm next year.  While these factors are largely out of your individual control, there are strategies you can implement to reduce costs and manage for profitability.

Many of the strategies are based on promotions or opportunities that are already offered to you and become available during this time of the calendar year.  Even though harvest is a busy time, seed sales representatives are eager to ride the combine and talk about early season discounts, which can be accomplished with cash in October through December. Negotiating input prices during the winter will save money and get an early start on the crop plan too. Consider putting a purchasing plan together that is built on an operating margin goal. Much like forward contracting crops, this process helps uncover gaps and reveals opportunities to reduce costs.  Speaking of crop markets, fuel and fertilizer are energy bi-products, and can be analyzed using the same principles implemented with the commodities markets, although the ability to hedge or lock prices depend on your supplier, much like your local basis, there are seasonal opportunities that might keep your costs in line when the markets are low.     

Executing these strategies is more effective with a plan, but managing the plan takes time too. This is a situation when historical data from your farm management systems will enable you to jumpstart the crop loan process for next season. Get that data to your banker in the form of an early budget, even though crop acreage for next season might not be set in stone.  That might provide you with the ability to get an early loan, so you can leverage the power of cash with your retailers and supplier partners. If these strategies are utilized year over year, the data will stack up, helping to provide insight into successes and missteps, which you can build on for growth and managing for profits…even in the face of tighter margins due to high input costs or falling markets.