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user picture Blair Bennis

Stocking up on 2022 Inputs

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As we near the middle of 2021, my retail customers are sharing with me that many growers are already looking to purchase inputs for the 2022 cropping season. What do you think of this strategy? What is driving this?

 

  • Crop Management

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I believe growers are speculating that input providers will raise prices on inputs next year since commodity prices are so much higher now than they were last August. I saw a couple graphs a few months ago that indicated that nitrogen fertilizer prices correlate much more closely to the price of corn than to the price of natural gas (the primary feedstock for synthetic nitrogen), so growers' speculation in that regard would be well founded! I wouldn't be surprised if several seed and crop protection products' pricing were also more closely correlated to commodity prices than to the costs of production for those products. I would bet that several agricultural inputs are priced according to value-based pricing as opposed to cost-based pricing. I'm curious to see how others respond - particularly TopYield users who currently or formerly worked for ag inputs suppliers.    

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I wonder if there is a scare on the ability to secure inputs next year. Better get it while you can instead of waiting. Being able to secure products that perform really matter, especially with the way these markets are moving.

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Supply is an issue right now too. Many supply chains have been impacted by COVID and many companies are struggling to meet demand. Hopefully things will be back in balance next year

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As Sean mentioned above, fertilizer prices in general are more strongly correlated to grower demand and the grower's ability to pay, than the feedstock (Nat Gas) pricing. One would have to assume they will probably also lag a decline in corn prices if we see that the 2nd half of the calendar year. The chart below shows the bushel/ton (on Y axis) for UAN NOLA barge vs. new crop corn. I believe is it important for growers to analyze large input expenses relative to the value of their output (in this case corn bushels). Inverted corn futures have cause the bushel/ton ratio to not look as great when comparing new crop vs. spot; but it is a more valid index as it is the value of the crop which is currently growing. 

 

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