By Brian Hefty
Last summer, I met virtually (thanks to the pandemic) with pretty much all the major ag chem companies. I went through how tough times were for farmers, with COVID crushing ethanol demand, trade issues with China, poor crop prices, flooding and prevent plant the prior year, and just overall low income. I implored them to lower their prices, which many did.
Now imagine if you were one of those executives who undoubtedly was badgered by your shareholders because your year was poor in 2019, worse in 2020, and then you lowered prices for 2021. Today, you wake up to see commodity prices almost double the levels of July/August 2020, yet you are stuck with the low prices you put out a few months ago. On top of that, your costs are rising, and in some cases rising substantially. What do you think you are going to do the first chance you get?
We knew after seeing prices go down year over year two years in a row that at some point input costs would have to rise again. Well, that time is here. If you haven’t prepaid for your 2021 crop inputs, you will already pay more than a person who prepaid in September. As we always say, September is your guaranteed lowest price of the year. This year, it’s even more so than normal. However, just because you missed the September, November, or December opportunities doesn’t mean you are out of luck. For us, like many other retailers, we’ve been loading our warehouses to almost beyond capacity because we knew this day was coming. You can still get much better prices today than you will be able to in May or June, so we highly encourage you to not only pay now, but take product now. Once product is on your farm, you can rest easy knowing your costs can’t go up anymore.
I’ve also had the question already about buying product right now for 2022. If you want to buy inputs for next year, the standard recommendation in our industry has always been to sell some of next year’s crop at the same time. No one can say whether soybeans will be $18 next year or $6. Input costs will usually follow commodity prices with a three- to nine-month lag, so keep that in mind. While on our farm we will not buy all of next year’s product right now, it won’t bother me at all if we have some carryover going into next year. I don’t advise this on seed, just in case the seed goes bad, but for ag chemicals this works just fine.
Here’s an example. Let’s say I only need 180 gallons of a herbicide, but I have a 250-gallon shuttle. Because I believe that particular herbicide may go up in price next year, I might just fill my shuttle. That way I have extra in case I need it this year, and worst-case scenario, I will just hold onto it until next season.
