If we’ve learned anything from the past year, it’s how to adapt in an ever-changing environment.
This has certainly spilled over into agriculture with inverses, the COVID-19 pandemic, labor shortages, etc. As we look down the road, some of these issues are likely to continue, if not be exacerbated.
As this is being written, European fertilizer companies are slowing down and shuttering plants due to high natural gas prices. It would be an understatement to say there are unknowns out of our control.
As we turn the page on 2020 and kick off the 2021 crop year, this offers an opportunity to proactively plan for some of these “what-ifs.”
If you fill your space this fall and the market structure continues, we’ll be managing inverses next spring or summer.
Do you need to incentivize farmers via a notably lower truck house bid to take the last one-third or one-fourth of the harvest to your shuttle house? Selling an extra harvest shuttle or two could end up being a lifesaver next spring, if trucking shortages and an inverse are at hand.
If fuel and trucking costs continue to rise, why not proactively take this into account in your bid structure today rather than eat the costs later? Bidding off a destination that you can actually execute is important, as well.
Worth mentioning is that replacement, repair, and insurance costs continue to rise, so ensure you are accounting for this in your bid margins.
With anything, respect the market and do not get yourself into a spot where the market is asking you to do something that you cannot do. It is a painful place to be, especially when there are inverses.
Be cautious on getting overly short the basis as the market has been very dynamic and can change in a hurry (e,g. Hurricane Ida).
The 2021 crop year is likely to be full of opportunities, so be ready to capture them by trusting the market and adapting as needed.
Prepared by Taylor Sauder, risk management consultant, Advance Trading Inc., Bloomington, IL; 309-664-2326; firstname.lastname@example.org.