Budgeting for 2022 with Inflation and Shortages
Thanksgiving has passed, and the weather is turning colder. Now it’s time to invest some of your schedule in thinking about next year. Yes, it’s budget time again! But this year, it comes with a twist: the unknowns of inflation and shortages.
This year might go down as the hardest in memory to budget for the upcoming season. With prices soaring and supply chains disrupted, how do you plan for a successful 2022? Here are a few things to help.
First, stay educated and informed. Keep updated on what’s happening in the industry. With tradeshow and education seminar season upon us, it’s critical to attend events and seek out the most up-to-date industry information from these sources.
Now’s the time to ask questions of industry experts and pay close attention to tight supplies and shortages. These areas are where you’ll see the greatest effects of inflation, and you’ll need to plan accordingly. Let’s take urea, for example. Urea Nitrogen Imported Prill-US Gulf NOLA was $723/ton at last view, compared to $263/ton for the same time last year. That’s almost a threefold increase over last year. Have you adjusted your budget to reflect that for 2022?
If you can’t attend local events, seek out information from suppliers like Lebanon Turf, EC Grow, and The Andersons on their websites and blogs. Remember that the agriculture industry dictates fertilizer prices, so it’s critical to monitor the agriculture market as well. One website that offers a nice view on fertilizer prices is DTN/Progressive Farmer.
Second, plan for shortages. We’re seeing many shortages and disruptions in the supply chain due to demand and overseas production. A good example of this is the current shortages in prodiamine. Prodiamine is a very cost-effective pre-emergent used in a wide range of markets. We’re already seeing unprecedented price increases and shortages in this SKU, and alternate active ingredients might need to be applied. These alternatives will be priced higher, so your budget needs to reflect these changes. Shortages also mean you’ll need to carry more inventory to stay ahead of any demand curve that could affect your cash flow.
Now that you’re armed with the most updated information, communicate with your members, boards, and customers about how inflation will affect your budget and, ultimately, their prices. The more this group knows, the less sticker shock they’ll have when you present your budget or raise prices in the 2022 season.