There are a lot of uncertainties in the agricultural sector.
Agriculture is never smooth sailing at the best of times but at the moment there are a lot of outside influences across the world that could affect the industry in a material way. Just what plays out is anybody's guess.
The obvious ones from my limited view are input costs, supply of inputs - including fertilisers, fuel and machinery - and the interest rate outlook.
Some of the supply chain issues will take quite a while to get back to some sort of normality. This is particularly true in the agricultural machinery sector.
My understanding is factories are back running at full capacity and it will take many months, if not years, to catch up the backlog of orders.
There is also a lot of uncertainty in inflation and what it means for interest rates.
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While there are a lot of uncontrollable factors in farming, there are opportunities to mitigate risks. This is where the good operators come into their own.
For these agribusiness owners these conversations would have started a long time ago. Questions would have been asked, and research done. Based on what was learnt from this fact-finding mission, a medium-term plan would have been formulated.
It seems self-evident that open honest conversations need to happen with all the relevant suppliers to an agribusiness - the rural merchandise retailer, machinery dealership and the bank.
The sooner this happens the better, as there have been businesses that have been left in the lurch by a lack of forward planning in the past.
The days of "she'll be right" are surely gone.
Probably the issue I have the most exposure to is the interest rate conundrum.
There are many drivers that can affect interest rates.
Some are in control of the banks, others are outside their control.
Banks are sitting on record levels of customer deposits, and they are able to leverage against these to generate loans.
Other sources of money are normally from the overseas money markets.
I am no expert on this subject, but suffice to say there are enormous volumes transacted daily in this market. All the banks have specialised divisions that take care of this function.
Other factors that affect interest rates are bond yields. This is a separate market by itself, and small changes can have a significant effect on the market - even the sentiment of the sector can cause material changes.
All of this means agribusinesses should consider closely their funding requirements into the future, and possibly look at locking in access to funds, or even having options on fixing portions of debt. There are lots of flexible products available.
In some ways this uncertainty is an opportunity for the savvy agribusinesses to fine tune their production analysis and make decisions in a multi-layered way, rather than on an ad hoc basis.
Detailed planning is a prerequisite for success.
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