Agribusinesses need to be careful right now. The price of inputs is going up as the cost of labor, energy and raw materials continue to rise. It’s not just the effect of the pandemic either. Many of the trends that we see today were already occurring before the crisis even hit.
Some aspects of rising costs of agribusiness can’t be controlled. But there are many that it can. In this post, we take a look at some of the reasons why your expenses are rising and what, potentially, you can do about it.
You’re Relying Too Much On Solutions That Don’t Add Value
Undoubtedly, technology is making farming more efficient. But many of the solutions work best for massive holdings covering thousands of acres. They aren’t so good for smaller plots.
If you are a small-scale operator, ask yourself whether you’re using complex solutions that don’t really add value to your firm. Be honest about the real efficiency gains that software solutions and sensors are bringing you. Try to work out whether you’re getting a return on your monthly subscription.
You’re Using Expensive Fuel
Changing red diesel suppliers can be one of the best ways to keep your ag costs down, particularly during harvest season. Some vendors are able to provide fuel for your machinery far more cost-effectively than others.
Check the price of your fuel and then get quotes from other leading suppliers. Diesel doesn’t have to be expensive.
You’re Not Vertically Integrating
Whenever you operate horizontally in an industry, you put yourself at the mercy of your suppliers. That’s why many agribusinesses are now taking control of seed supply. This way, they’re able to produce as many seeds as they need and then distribute them among their fields.
You Are Still Paying High Rent
Rents can eat into your profitability, especially if you have poor yield. So it is always a good idea to negotiate rents as low as possible.
Sometimes, farmers see the sticker price for rent and consider it reasonable. However, the rent you should be paying is relative to what you could get elsewhere. If you notice that other landowners are pricing similar patches of land much lower, that can be a powerful negotiation tool. It makes it much easier for you to demand a cut in rental costs.
If you can, cherry-pick your comparisons. Choose land being offered at the best price to make your case more compelling.
You’re Using Expensive Nutrient Sources
All agribusinesses need sources of nutrients. But the vast majority go to commercial providers instead of seeing what they can produce themselves.
Manure makes for exceptional fertilizer. And it is usually free, so long as you have the livestock to produce it. It is a cost-effective alternative to commercial alternatives.
You’re Not Using Nitrogen Apps
Nitrogen apps tell you how much fertilizer you need to use, depending on the season. Most farmers find that they can save a substantial sum of money by using these apps instead of relying on old-fashioned guesswork.