Widen Your Margins Early in the Year

Going into a new crop year, you need some early wins, and February gives you the perfect chance to do that. How? By locking in lower fertilizer prices while also contracting some of your new-crop bushels in spring markets—typically some of the best of the year.

With this combination—like playing both defense and offense—you can start the planting season in a much better position, with lower risk and a known return.

Two risk management experts from ADM talk about this strategy in our new podcast, In the Driver’s Seat: Control Your Odds. Our guests are Doug Roose, Vice President of Producer Marketing for ADM, and Jake Niederer, Director of Sales for the ADM Farm Direct Fertilizer program at ADM. Listen to the interview here:

Here are the high points from Doug and Jake’s discussion:

Fertilizer markets are volatile. A derivatives market exists for fertilizer that many farmers aren’t aware of. Because price fluctuations of $50 or even $100 per ton are common, you can realize substantial savings if you capture some of those moves. Savings vary by region and farm, but some farmers have saved $130,000 by buying fertilizer in bulk at the right time, directly from ADM’s large terminals.

Look for price transparency: You need an educated opinion about when to jump into the fertilizer market. ADM keeps a close eye on world markets and provides online charts, emails, and conference calls that keep you apprised of price direction. A farmer can watch prices and lock in a purchase up to 12 months in advance, using a forward contract. Knowing costs for both spring and fall application allows you to manage your balance sheet with more confidence.

Capitalize on seasonal grain markets: Early in the production year, grain markets are volatile due to uncertainty about a new crop. Historically, about 70% to 80% of the time, prices peak in February, March and April, then slide toward harvest if crop conditions are favorable. Get ahead of this curve with a marketing plan and a forward contract such as Price Accumulator^™. When protected with crop insurance, these contracted bushels make your margin opportunities very clear and help take some risk off the table.

Discipline yourself with bids and offers: Using the ADM Offer Management app, you can bid to buy fertilizer at a price and time you like—and make offers to sell grain at a price and time frame you like. The Offer Management technology automates your decisions and adds discipline to your risk management planning.

You can download ADM Offer Management at the App Store or Google Play.