Inputs
Making Input Decisions in 2022 By Galynn Beer, National Sales Strategy and Product Management Lead
Harvest has wrapped up and 2021 was a very exciting, yet volatile year in agriculture. If you evaluate production costs versus revenue, it’s been a long time since proactive growers could lock in most inputs at low prices early in the season and benefit from rapidly appreciating commodity prices to hedge revenue during the spring. This allowed for the best potential profit margins in the past several years. But, profit creates demand for inputs, which causes costs to rise. Couple increased demand with supply issues that persist for a number of reasons and now you have demand pursuing limited supplies of many inputs. This dynamic results in a buying motivation that trumps every other reason to buy…scarcity, or fear of not being able to get something that is wanted or needed. This Versus That When this happens, rational decisions often become irrational. It happens in our lives more that we probably think about, such as a limited release of something that is sought after. Heck, the other day I heard of a limited release tennis shoe that would normally sell for $150 selling for over $2,000. I wouldn’t pay it, but apparently someone will because it’s limited and they want those unique shoes. I don’t need a specific pair of 3
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shoes that badly. While alternatives to a specific tennis shoe may exist, crops need what they need to grow. Some nutrients aren’t optional. Of course, there are some alternatives to a few nutrients, but all crops need nutrients of some sort. Legumes, such as soybeans, don’t require commercial nitrogen since they have a symbiotic relationship with bacteria that provide nitrogen to them. Growing a legume would eliminate a major input cost of nitrogen that is incurred for corn.
However, a massive shift in acres from corn to soybeans may solve the cost of nitrogen problem, but have a negative effect on gross revenue unless an effective hedging strategy is utilized. The price of soybeans would likely drop if 100M acres were planted. Some crops, such as wheat, tend to be nitrogen intensive for the revenue produced. High nitrogen prices rapidly increase the amount of money needed
