Posted May 12th, 2023

Spring in the ag industry brings a palpable sense of optimism. With crop plans buttoned up and seeds in the ground, now is the time to prepare for the weather events and market changes that will undoubtedly present themselves as the 2023 season unfolds.

Forecasting in the face of this uncertainty can be difficult. No one can predict the weather with 100% accuracy. There is also plenty of speculation around market behavior in the near- and long-term, but that information doesn’t always aid decision making. It’s helpful to turn to your circle of influence and work with people you trust, who can provide agronomic and economic resources to improve profitability, regardless of external forces.

There’s no such thing as a perfect season, but with support from experts at Nutrien, who’ve invested heavily in a variety of areas that affect growers’ profitability, you can be confident you’re doing everything possible to ensure a return on your investment in 2023.

Variables that are beyond your control

Market and commodity cycles

The global economy is coming out of a commodity supercycle. We’ve had high prices for a number of years, due in part to both geo-political instability and weather events, which have impacted supplies. Interest rates are rising. Inflationary pressures are up. With all of these recent fluctuations, you may be questioning whether we are on the down side of this cycle.

“You never know what can happen, but compared to the last few years, we’re actually starting to see a little more stability right now, and with projections for the 2023 season, a lot of experts expect supply issues to normalize a bit,” says John Maman, Director of Finance Sales & Marketing for Nutrien Financial.

There’s no way to know for certain what lies ahead in any crop year, so it’s wise to build some contingency plans to respond to varying market conditions.

Weather events

Along with the market, weather is another large force at play when it comes to variables that affect profitability. As you may already know, an El Niño is building in the Equatorial Pacific and could be quite strong by late Summer and early Fall. If the forecasts are accurate, this El Niño could rival the strength of 2015-16's El Niño event.

“During an El Niño year, there is generally less risk of having long duration heat and drought episodes in the Midwest,” says Eric Snodgrass, Senior Science Fellow at Nutrien Ag Solutions. “We typically expect more moisture and cooler temperatures during key times of the growing season which historically has led to a higher probability of trendline or above trendline yields. There were numerous factors like snowpack, river flooding, cold snaps, untimely rains, above average severe storms, and late frosts, that delayed early field work and planting, but now that crops are established, all eyes will look to the jet stream and its behavior over the next five months.”

He adds, “Even with a more favorable forecast for the primary corn and soybean belt, this does not eliminate the risk of adverse, yield-robbing weather.”

And of course there is always the risk of high-impact, localized weather events that can wreak havoc on well-intentioned crop plans. Flash floods, drought, severe wind, hail, and powerful tornadoes are all troubling events, but growers can take steps in advance to be prepared for them as they arise.

Much of this preparedness comes back to cash flow decisions. This year, growers may see a delayed harvest of summer crops such as corn, peanuts, and cotton because of increased rain. In the fall, more moisture and frequent rain may reduce tilling and yield of winter wheat. Even with the best predictive technology, growers are still at a bit of a disadvantage in terms of forecasting the weather and its impact on crop plans. Since you can’t manage the weather, your next best option is to manage your money so you can respond, whatever the circumstances.

3 tips to manage your money and respond to uncertainties

1. Manage your cash flow effectively

The team at Nutrien understands how unexpected, and usually uncontrollable, variables can directly affect your cash flow. Our team is uniquely positioned to help you to be more timely and responsive to these unpredictable changes. Focus on developing strategies to manage your cash flow to ensure you’ll have a variety of options and maximum flexibility.

As your crop plan shifts, make a point to revisit your financial plan and adjust that so you have appropriate cash flow mechanisms in place to fund your crop plan. Ask yourself, am I set up well enough to have liquidity throughout the season? If the answer is anything other than a confident “yes,” it’s worth spending some time to rethink decisions that might impact your cash flow.

2. Have a contingency plan

There are many variables that can throw your plans off course, so it pays to be prepared with a few back-up plans. Contingency planning has a dramatic impact on success.

Your financial plan only provides value and utility if it’s reflecting your current reality, which will undoubtedly shift throughout the year. The sheer number of variables that affect conditions needed to have the proverbial “perfect” season make it simply implausible. The more productive approach is to be ready with a plan B, C, and even D in the likely event you need to pivot in a new direction.

3. Manage your capital and have a sound financial plan in place

In the words of Dr. David Kohl, professor emeritus of agricultural and applied economics at Virginia Tech, “cash is queen.” Kohl describes the queen as the most mobile piece on a chess board, with freedom to make moves in any direction. You want to put yourself in that position with regard to your financial success, leveraging all financial options to provide enough liquidity to navigate whatever the season has in store. Having capital on hand – be it in the form of cash or easily available credit – gives you options.

Growers are experts at dealing with unpredictability. If you have a steady hand and work with suppliers that can aid your decision making, you’ll be in the best place to manage your operation. Effective cash flow management, sound business strategy and agronomic guidance all provide options to change course as things shift. In turn, this helps create peace of mind knowing you’ve done everything in your power to increase the chances of earning a profit in 2023 and beyond.

When you partner with Nutrien, you can rest assured that no matter what happens, you’ll have the necessary tools and insight to make the most out of your situation, no matter which way the wind blows.

Interested in learning more about Nutrien Financial? Just go to nutrienfinancial.com.  

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Posted October 8, 2021

Eric Snodgrass from Nutrien Ag Solutions breaks down data and trends he sees in weather