Business Matters: 'Tis the Season to Buy Inputs

November 23, 2017 10:22 AM
 
Business Matters_Inputs_seeds

Christmas shopping isn’t the only hit to the pocketbook during December. The best opportunities to capture crop-input discounts always seem to happen that month, too. Although you don’t want to give up a discount, you do want to be sure you’re getting the highest value for your purchase.

For some, there might be tax advantages to keeping the expense inside of this fiscal year. Additionally, you want to make sure your purchase timing matches up with your cash-flow capacity. December might be one of the most important times for quality communication with your input suppliers.

Early pay discounts are attractive, but what other advantages are there to offers we might consider? Are your decisions based purely on cost? What other benefits are included besides price?

Five Ps. As we ponder the early discount season, let’s focus on seed and crop protection because both inputs offer these kinds of opportunities. As you consider products for your operation, think of the five Ps: performance, practical, placement, peace of mind and price.

Consider performance. Do you have experience with this product or offering? If not, what credible references can you access to make sure the product is the best choice for you? Try to access third-party information about the product, not just what the manufacturer says. Ask questions such as: What could go wrong with this product? What should I look out for?
It’s easy to buy something based on its attributes, but also recognize the weak points so you can manage around them.

Be practical. There are many new technologies available for our operations. Some of these might be beneficial, while others might be unnecessary. For example, you might not need a triple-stack corn hybrid on a field following soybeans, yet the hybrid you want is only offered with the additional technologies. Be aware there are many hybrid choices available, just as there are many technologies. Be sure each purchase is feasible on its own merits.

Avoid placement inside of packaged deals. Beware of bundled products within packaged deals. Assume you have selected your seed products. Does the seed company also have the best crop-protection products? Their product offerings might be insufficient for your weed-control needs. Be leery of packaged deals and more concerned about healthy crops and dead weeds.

Ensure peace of mind. To make sure the products you choose fit your comfort level, ask questions such as: What types of guarantees are offered? What type of replant is guaranteed? What type of weed control is available? What is the cost of redoing passes? What if a product performs poorly?

Don’t let convenience get in the way. Producers too often try to get by with a one-pass herbicide program due to cost and convenience. But with better timing, placement and product choices, the two-pass option could be a higher value, yielding more profit per acre.

Assess price along with product benefits. Pay less attention to the amount you’re spending and more attention to calculating the cost per unit of each product you buy. For example, if you purchase $100,000 worth of seed for 1,000 acres with a 200-bu. yield estimate, you could produce 200,000 bu. Divide your cost by your expected production to determine your cost per unit or per bushel. In this case, your seed cost would be 50¢ per bushel. This math will help you make better purchasing decisions from one year to the next.

Prudent Versus Cheap. Purchasing decisions at any time of the year are stressful, particularly with commodity prices under pressure. It’s a fine line between being prudent and being cheap. Stay focused on your specific needs and purchase accordingly.

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