July 26, 2022
Extreme inflation can be a negative force for farm profitability, but Nelson Neale, vice president of CHS global research, shares how farmers can weather uncertainty to manage margins.
All consumer are feeling inflation’s effects. But what do rising costs mean for farmers and ranchers? Nelson Neale, vice president of CHS global research, says that while inflation can undoubtedly threaten profitability potential, farmers may see relief with near-record commodity prices.
Inflation impacts economic volatility
“External factors like inflation can play an outsize role and even outshine some of the market fundamentals that historically have driven price,” he says. He urges farmers to work closely with agronomic and financial advisors to develop a crop production and marketing plan that accounts for the current market uncertainty.
Rising commodity prices are a silver lining
While there is significant market volatility in crop inputs, which can threaten farm profitability, Neale says rising corn and soybean prices are helping hedge the risk. Prices for the commodities are near record highs, so inflation is playing out on both sides of the crop production financial equation. That helps create more balance from an operational cost perspective, Neale says.
According to Neale, farmers should pay close attention to their input costs and look for opportunities for more prescriptive management approaches to optimize efficiencies and reduce operational expenses. He also recommends keeping a close eye on the market to lock in favorable futures prices.
“There are opportunities for farmers and ranchers to secure reasonable profit margins if they have a true understanding of input and output prices,” he says.
For those who want to learn more about price volatility and risk protection, CHS is hosting an Around the Table Live online event on August 4, 2022. Join the virtual event to hear a panel of experts explain what all this means for your farm operation. Sign up at chsinc.com/markets.