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Economy and entrepreneurship

How can farm businesses stay competitive?

May 10, 2022

The pandemic, the war in Ukraine, inflation and a risk of recession: the economic context offers very little leeway for entrepreneurs. Yet businesses in the agriculture and agri-food sector can thrive, according to broker Simon Brière at R.J. O'Brien & Associates Canada Inc.

"You can avoid the wall, but it means being alert and understanding the consequences of international issues on the markets," says Mr. Brière.

The subject is of particular concern because it was the topic of a Desjardins conference, "2022, a busy year! What are the key takeaways?", in which more than 300 people participated.

During the conference, Simon Brière pointed out how the current economic climate is "favourable" to a recession. Desjardins economists are predicting more of an economic downturn.

After 2 years in a pandemic, consumer confidence is low and supply chains are weakened, particularly by the war in Ukraine.

"Seeds are expected in Ukraine, but fertilizer, roads and fuel access are compromised. We'll have to find new markets by combining grains from Brazil, the United States and other European countries," said the broker.

"We have very little room to maneuver in terms of inventory. We're in a period of shortage rather than one of abundance. The ripple effect ends up being high prices. For example, prices are very close to historical records for corn and soy," he adds.

Anticipating and managing risk

Against this backdrop, companies can expect their production costs to increase and find it very difficult to procure the inputs they need to operate. However, one of the basic economic rules, supply and demand, could safeguard the balance sheets of some companies that will see their profits increase.

"Yes, for a field crop farmer, high input costs present challenges, but a high estimated selling price will be hugely profitable. Even so, other industry players are less amused, such as livestock farmers who must buy these products at exorbitant prices," says Mr. Brière.

It's therefore extremely important for businesses to know where there is flexibility by drawing up a plan based on expenses and income. For Simon Brière, "There's no magic formula. Every entrepreneur is in a unique situation."

"Basing a plan on facts and not speculation will always help you stay solutions oriented," he says.

Find an expert

To draw up this plan, companies can turn to their advisors from Desjardins Business comprising of nearly 200 professionals, usually agronomists, in the agricultural and agri-food sector.

"Desjardins has been in the agricultural industry since the beginning. When times are less certain, I suggest scheduling meetings with your advisors and family members. Together, we can create a production plan that protects commodities as well as budget and financing plans tailored to your business," says Sylvain Morel, Agronomist and Vice-President, Agri-Food and Agriculture Markets at Desjardins Group.

Desjardins Business professionals can help manage your businesses strategically alongside people in your circle of influence, including your millers, input suppliers and management advisors.

"There are a number of agronomists and consultants who can help the company with this plan. We at R.J. O'Brien & Associates Canada Inc. will play a role in achieving these goals. It's extremely rare when there are no solutions. If you've done risk management, you rarely find yourself in a situation with your hands tied," says the senior broker of the brokerage firm that has a referral agreement with Desjardins.

"Even when the macroeconomic environment is scary, there are some very attractive margins in agriculture. With good risk management, we can make decisions today that will be profitable in the future," Mr. Brière concludes.

Simon Brière External link. This link will open in a new window. is a graduate of HEC Montréal and specializes in risk management and derivatives for agricultural commodities as well as exchange rates. Since 2008, he has developed specific skills in the agri-food sector, from the producer to the end user. As a guest speaker, Mr. Brière works with a variety of organizations to continually contribute to industry development and outreach. Now at R.J. O'Brien & Associates Canada Inc., he provides an integrated, coherent and disciplined risk management service to benefit its partners.

See also:
10 tips for reviewing your procurement strategy