In times of uncertainty, focus is required!

The 2020 harvest is over for most arable farmers. It was another special year. From severe drought to considerable regional flooding and markets where, partly due to corona, hardly anything was affected and can be predicted.

Contrary to expectations, onion exports are larger than ever for the time being. But how will corona develop further nationally and worldwide? And what are the consequences for logistics when it comes to borders, but also, for example, the availability of containers? Another question is how the quality will turn out after such a growing season. The unpredictability has only increased on all fronts and the only certainty does not seem to be certainty.

Adjust building plans
In this situation, what will be your new cropping plan for next growing year? Are you sticking to your long-term strategy or are you going to make significant adjustments to the construction plan, acreage and contracts? What happens to the potatoes in your building plan? What happens to your contract share? Will the maximum tons per hectare that can be contracted go down or go up? Do you have a lot of rental land or a lot of your own land? What cultivation options do you have on your soil? What will you do at current wheat prices? And what are countries like Germany and France doing with these wheat prices? Are they going to take the risk with free potatoes or are they going for certainty of yield? And what does this do to the land market, both for rent and for sale? Much will also depend on the French fries industry, what will they come up with at the beginning of 2021? We expect that the necessary adjustments will then be made in construction plans.

Strategic choices under the microscope
It is certain that the effects of corona will be felt for a while. The weather has also presented many challenges in recent years. This has the necessary impact on your business situation and strategy. And of course also financially. Your company is usually set up for a certain size, construction plan and associated turnover. In this situation, it is appropriate to take a closer look at those strategic choices, especially if the business situation and thus the financing require special attention. 

1. What is my goal for the next 10 years?
2. What vision do I have on market developments?
3. What strategic choices will I make in my land positions and the building plan?
4. What are my financial (im)possibilities?
5. How do I shape my risk management?
6. What is my liquidity position?

If you can answer the above questions correctly and have possibly entrusted them to the paper, then also include your banker in the considerations, so that you act predictably.

Have a conversation about your future in time
Where previously profit maximization was the goal, with associated risks, it may now be wiser to focus precisely on the bandwidth of your potential result. Reducing risks will certainly be a consideration if your company lacks a piece of financial buffer. Where does your company currently stand and does the bank have the right picture of your risk profile? Therefore, talk to your bank and your adviser in good time for a sharp focus, but also ensure that you have the right ammunition!

In our next column we will discuss the correct ammunition, because "with the right ammunition you will hit more often".

Farmers Funding & Advies unburdens you in the field of business administration, business economics, tax and legal matters and realizes the most suitable financing. Would you like to get a good idea of ​​how the bank assesses your company's risk profile? We listen to you

Arjan Ausma

Arjan Ausma is senior relationship manager at Farmers Funding & Advice and he is a steward/broker. He also has his own farm.