Tips for managing today’s market, input price volatility

AURORA, Colo. — The latest Purdue University-CME Group Ag Economy Barometer indicates producers remain apprehensive about farm profitability this year and into 2023, with just over half of respondents expecting their farms to be worse off financially next year.

High input prices, commodity price fluctuations, global unrest and weather variability leave many growers uncertain how to manage market risk while maintaining profitability.

“Risk is in every aspect of commodity production, and different growers have different levels of risk they are willing to assume and manage,” said Justin Bash, CEO of Ag Consulting Group, which was acquired by Wilbur-Ellis Agribusiness in 2017. “It’s a global marketplace with many factors and decisions to make.”

As growers seek to maximize farm profitability, it is often a good idea to engage advisers who can help them understand and navigate their risk levels toward crop marketing and crop management.

Establishing A Crop Marketing Plan

A financial planner or risk management adviser can help growers quiet the noise that can spark emotional reactions and poor grain marketing decisions.

They work with growers to understand production costs, identify variables through scenario buildouts and factor in growers’ strengths and weaknesses.

They also monitor commodity markets and use local knowledge to help each grower make informed risk management decisions.

“When building a crop marketing plan with growers, we plug in their production costs and then explore the ‘what ifs’ so we can help them decide the best way to lock in returns,” Bash explained. “When growers know their costs, it is easier to tailor a plan to lock in profitable sales prices in advance.”

Another component of an effective grain marketing plan is understanding strengths and weaknesses.

Generally, growers know their strengths and require little direction in using them for the good of the farm.

Identifying weaknesses, such as the lack of grain storage, the need to upgrade record-keeping systems or the right amount of insurance, can be a difficult exercise — and one that Bash said benefits from the assistance of experienced risk management professionals.

“We work with growers to help them define their biggest frustrations with their operations and how we can help alleviate them,” Bash said. “Growers are writing bigger checks for inputs right now, and at the same time they have opportunities to lock in sales at higher prices.

“Those can be tougher financial decisions for growers than when costs are on the lower end. Bringing marketing knowledge to the farm increases grower confidence and leads to more consistent success in grain marketing.”

Managing Crops To Boost Profitability

When profitability weighs on growers’ minds during the season, Wilbur-Ellis Sales Representative Wes Hotchkiss advises growers to strive for efficiency and capturing high-quality yield.

“To capture maximum net profits, growers should pinpoint how to be more efficient with the dollars they’re spending,” Hotchkiss said.

He recommends the following tactics to improve on-farm efficiency:

• Protect nitrogen investments with a nitrogen stabilizer.

• Make fertilizer pounds more efficient with the addition of humic acid.

• Consider the value of splitting the season’s nitrogen application with a foliar application during the summer or at the crucial growth stages.

• Scout for insects and diseases and make timely applications based on thresholds to help preserve grain quality and crop standability.

• Utilize adjuvants to optimize pesticide performance.

• Add biologicals to make plant nutrients more efficient.

Another aspect is managing crops to maximize yield and quality.

“Anything we can do to either capture premiums or avoid dockages are things we don’t want to miss,” Hotchkiss said.

“Optimizing test weight on corn is critical, for example. Or, if you can add even a half point in protein to wheat with a late-season foliar nitrogen application, it can be worth a lot of dollars.

“All these changing variables require us to be flexible and ready to adapt our programs as needed. Do whatever you can to capture as much high-quality yield as possible.”