Farming the Efficient Frontier
A paradigm shift is occurring in the U.S. row crop sector. Adopting efficiency-driven strategies is key.
Rabobank sees a paradigm shift occurring in the U.S. row crop sector, based on our internal forecasts, which calls for an extended period of low average returns. This shift results from the need to adopt efficiency-driven, rather than volume-driven, strategies that can maximize profitability in an environment of structurally lower commodity prices, and high seed and agrochemical input costs. Following are the three components of such strategies:
- Capital efficiency (optimal input and capital usage)
- Planting discipline (planting acreage up to, but not exceeding, the point where marginal revenues equal marginal costs, thereby maximizing profits)
- Price realization (coordination of merchandizing and hedging activities to maximize price per bushel harvested)