Even in 2020, there are many farming operations that simply don’t have the bandwidth to have dedicated individuals in place to manage tasks such as marketing, accounting, or risk management. What’s more, razor thin margins due to softened commodity prices and depleted equity have placed even greater emphasis on these categories.
Enter, COVID19. The economic destruction this pandemic has caused has rippled across multiple key industries, the crash of crude oil demand being the most notable. For agriculture, if fuel demand is low, then so is the demand for blends of ethanol and biodiesel. The sector of our food chain to be most mortifyingly hard hit is for our livestock producers, which has forced the mass euthanizing of animals ready for harvest with no processing plants to take them to. Aside from the fact that between the collapse of biofuel and meat demand, there’s also considerably less demand for the grains needed to produce them. So where will this put us in the coming months? If you’re concerned with your financial and risk projections for the current growing season and beyond, keep these tips in mind:
- Make sure that your crop insurance policy levels, APH, and acres are accurate
- Make sure that you are correctly signed up with the FSA
- Understand where your floor of insurance coverage is and the resulting cash flow
- Stress test cash flow with $2.75 – $2.30 corn and $8.60 – $7.60 soybeans given the above
- Understand that FSA payments will likely be a necessary part of cash flow
- Prepare to take marketing risk off the table should a summer volatility opportunity arise
- Make sure you are applying for all possible government assistance payments. Seek help if you are not sure.