Supply and demand dynamics are ever-present and changing, but you can use them to achieve higher profits.
The foundation of earning profit through supply and demand is to make the right decisions about what to grow and when to sell it.
Justin Shepherd, an FCC Senior Economist, says farmers usually choose what to grow based on crop rotation and crop prices. For example, if prices are high for a crop grown last year, it may be tempting to grow the same crop again.
When it comes to selling, Shepherd says farmers usually make the decision on when to sell and for how much based on cashflow needs. For example, for land and equipment payments and to pre-buy seed and inputs.
However, there are other considerations to keep in mind to make a more encompassing decision.
1. Think locally, nationally and globally
Farmers set themselves up for success when they make informed production and marketing decisions that are broad, far-reaching and at a high level. From considering local, national and global crop supplies, to judging the impact of world issues, all play a role in agricultural production and sales.
For example, consider growing conditions in other parts of the country and the world. A wet spring at home may delay your seeding plans and reduce the crop yield, but ideal spring conditions in another province or on the other side of the globe may produce a bumper crop.
That means the days of finalizing a crop plan in November and using it to seed in May don’t exist anymore for top producers, says Evan Shout, CFO of Hebert Grain Ventures, a grain and oilseed farm in southeast Saskatchewan. Instead, farmers need to think long-term and consider what’s happening on a global and national scale and what impact they could see as a result.
“We’re looking at the supply/demand impacts for both inputs and (crop) pricing and volatility, pretty much 12- to 36-months out,” Shout says.
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