Production risk management issues are more complex

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By Shankar Das

Regional Farm Business Management Specialist

Managing risk has always been a part of agriculture. However, it is becoming more complex with production risk, marketing risk and financial risk all part of the mix.

Farmers and ranchers are learning that agriculture is a game with new rules, new stakes, and, most of all, new risks. Take for example the current situation with respect to marketing grains from Saskatchewan. High grain production in Saskatchewan in 2013 coupled with a low grain price in 2014 and slow grain movement has resulted in a higher risk environment for farmers.

This situation has posed another set of questions regarding what and how much should be grown in 2014? Do farmers have enough storage for the 2014 crop when a significant amount of 2013 crop is still on the farm? How would they cope with the cash flow for payments for the cost of production, debt financing, wages, etc.?

There are several tools available to farmers to address the production risk. One of the oldest is enterprise diversification as it combines different production processes. Diversifying income sources, such as expanding the crop mix can be a tool to address income variability. However, the challenges to diversification can be time, cost and the skill sets needed to manage the diversity in the farm.

The Ministry of Agriculture also provides support to farmers in various ways to mitigate risks. With respect to production and business risk management, Crop Insurance and Agristability are two major tools which can help mitigate the production risks. Private agriculture risk solutions also provide another set of tools. Global Ag Risk Solutions is one such company that offers production risk insurance as a tool available for farmers.

The federal-provincial agreement called Growing Forward 2 also offers assistance to producers to gain knowledge and skills to manage risk on the farm. Application for funding under the program called Farm Business Development Initiative (FBDI) offers funding for eight different business management areas including production economics and marketing strategy.

Additional information may be obtained from the Saskatchewan Ministry of Agriculture’s website (http://www.agriculture.gov.sk.ca) or from our regional office in Outlook (306-867-5575) or from the Agriculture Knowledge Center at 1-866-457-2377.

Organizations: Crop Insurance, Saskatchewan Ministry of Agriculture, Agriculture Knowledge Center

Geographic location: Saskatchewan

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