Agricultural producers are subject to a wide range of risks, like prices of agricultural produces and raw materials.
Those prices are dependent on a multitude of factors and are difficult to anticipate. Price volatility should not however be a fatal issue. There are solutions available, designed to reduce risk and stabilize income for farmers.
Managing fertilizer costs
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Mineral fertilizers represent an important share in the operating cost of a farm. Knowing that the price of fertilizer is mainly drawn by the cost of cereals, fertilization at the economic optimum always offers a decent return on investment. Applying fertilizers with highest nitrogen efficiency according to best agricultural practices and using precision farming technology further reduces fertilizer cost. The financial management of the operation, however, remains difficult due to short-term uncertainties in fertilizer prices. To ensure profitability, farmers need to protect their revenues against excessive changes. The easiest method, called diversification, is to spread fertilizer purchase across the whole year. When purchasing 25% of annual requirements each quarter, potential variation are flattened out.
Fertilizer price volatility is a new phenomenon, concerning the whole supply chain, from production over trade and distribution to financing.
