Five tips for navigating uncertainty in canola markets
As market access issues continue to challenge canola seed exports to China, support for canola producers is available, including additional credit through Agriculture and Agri Food Canada’s Advance Payments Program.
Jim Everson, president of the Canola Council of Canada, says this is an ideal time for Canada to bolster its efforts to provide its top quality products to other markets.
“We need to seize the opportunity to develop markets, especially in Asia, building on our trade agreements,” Everson says.
While industry and government work to resolve the situation and find alternate markets for canola, there are proactive steps producers can take to minimize the financial impact on their operations.
Robyn Morley, a farm management consultant with the accounting, tax and business consulting firm MNP, offers these five tips to canola producers affected by market uncertainty.
1. Control costs
Morley advises controlling costs through production planning. She says while it’s a bad idea to restrict nutrients and practices that provide an economic return, this is not the case for every input.
“It will be very important to analyse growing conditions and weather as we move through the growing season,” Morley says.
2. Know input and operational costs
Understanding input and operational costs for the year can help producers make sound production, management and marketing decisions through the year. Breaking the numbers down may distinguish if there are areas of inefficiency or excess spending.
Tips recommended by the experts: additional supports and resources, strategic cost control, sharpened marketing plans and financial contingency plans. Tweet this
3. Balance wants and needs
Producers should also review their discretionary spending and really analyze if a purchase is a want or a need, Morley says.
4. Sharpen the marketing plans
While efforts are underway to find alternative markets and to resolve trade barriers, it is uncertain when markets will open. Morley also recommends producers focus on their marketing plans .
“Marketing plans tie into knowing your cost of production,” she says. “If you know what it costs to grow your crop, you’ll know what your breakeven price will be when selling the grain.”
5. Know your finances
It’s more important than ever for producers to know their finances.
“If this becomes a long-term issue, proper contingency plans will have to be put in place to account for this uncontrollable circumstance,” Morley says. “Depending on the financial status of the farm operation, this drop in prices is going to be a significant hit. It could take two to 10 years to pay back this market loss of revenue. Proper planning is critical.”
Farm management consultants can help producers understand input and operating costs, breakeven prices and the financial numbers they need to be aware of.
Producers can check out the Canola Council of Canada’s centralized resource for common questions and updates for regularly updated information on trade with China.
Experts recommend a proactive plan to minimize the impact on their farms. Control costs through production planning, understand input and operational costs and a review discretionary spending are some important steps in creating a contingency plan.
Article by: Trudy Kelly Forsythe