5 ways your crop can work harder for your farm business - here's how
Your crop is a major asset. It may only just be sown but you can already leverage it to maximise the benefits to your farm business. Here are five things you should consider if you want to make one of your biggest assets work harder for you.
1. Your crop can give you easy access to cashflow - right now!
Access to cashflow can be a saviour for many farm businesses and many growers do not realise that production advances and pre-harvest payments are an easy-to-access alternative to bank loans and debt financing. What is more, it’s simple and quick to apply. The other benefit of some pre-harvest payments is that it gives you flexibility to use those funds where your business needs it most – not limited or restricted to participating suppliers.
2. Diversify your marketing strategy to optimise your returns
As your crop is your income, you will want to get every dollar from it. There are some strategies to help with this, including choosing products that are active in the market for a longer period of time to capitalise on pricing opportunities. If you sell all of your crop for cash at harvest, you are potentially missing out on favourable price events. This is why growers include forward contracts and pools as part of their marketing strategy. Remember, having a diversified marketing strategy is a sound approach. Even if you put just five or ten percent in a pool it will help diversify your marketing risk and allow you to leverage other benefits that fit your business. Most growers choose to market a portion of their crops from planting and may market up to forty percent of their crop before it is harvested using a mix of forward contracts or pools. Participation in pools also gives you access to a team of experts who will use hedging tools with the aim of adding dollars to your overall return.
3. Limit your exposure to market downside
Just as you want to be exposed to upside price movements, it is an equally good idea to use tools that set a floor price that limit exposure to downside price movements. Price risk management is an important part of running a farm business, and ensuring your returns do not drop below a certain point can give you peace of mind and the operational certainty you need. Some growers think that locking in a floor price for your crop can limit your overall price - but the opposite is also true - you can get still benefit from upside movement and still have a safety net. In years where weather patterns change quickly, crop production and grain prices can swing suddenly, features like this are very useful. Not all marketing tools provide a floor price, so be sure to check what you are putting under your early season crop sales.
4. Look at past performance
Invest some time to check how your marketing strategies have performed and don’t be put off by the need to make changes and trying new products to improve the longer-term performance of your business. That may include having others market part of your crop. Strong past performance does not guarantee future performance but it does act as a good indicator. Importantly, don’t be afraid to ask questions, your cropping revenue is at stake.
5. Control the cash flow from your crop - where and when you need it
Every farm business has its unique set of needs when it comes to cashflow so make your crop work to your business requirements. Whether it is taking cash at harvest, spreading cashflows, deferring until a later time or accessing it when you most need it.
It’s your farm business and you will know what is right. Take five minutes to consider if you’re really making the most out of your assets. If you need more information or would like to talk to someone, AWB are always available for a call.
Over the next few weeks leading up to Season Starter’s contracting window in the last week of June, we’ll be sharing insights on how growers are using pre-harvest pools and other marketing tools to benefit their business.
AWB has a range of solutions to help your farming business achieve a better result and the AWB Season Starter program is one of those tools that can provide you access to all of these potential benefits. For all program information regarding Season Starter please click here
Originally published 13 June, 2018
For further information call the AWB Grower Service Centre - 1800 447 246
Canola Market Outlook
As we know, the dry start to the season has resulted in many planned Canola plantings being cut, so what does this actually mean for the Canola market outlook and prices going forward?Read More
AWB 2017/18 Season Starter Pool May EPR Update
AWB today are pleased to announce a 2017/18 Season Starter Estimated Pool Return for the 31st May 2018. On average returns are up $5.53 per tonne across the program.Read More
New ways to unlock cashflow for your farm business
Putting in a new crop can squeeze the farm finances for many farm businesses. That’s why we are creating new ways for farmers to get access to much-needed cashflow.Read More
Survey shows top reasons growers take out crop insurance
Have you ever wished you could start the year all over again? Many farmers know this feeling as a result of operating in a competitive sector and in a challenging climate.Read More