Farmers have always had to face a plethora of risks when it comes to the production and distribution process. From the rampant uncertainty of the weather to the difficulties that come with finding the right market for their agricultural products, farmers running agribusinesses don’t have it easy.
We’ve outlined some of these risks faced by farmers and how they can take steps to overcome them. There are three basic sources of agricultural risks that farmers need to address.
Let’s have a look at what they are.
These risks relate to the possibility that the output levels and the yield are lower than expected. Adverse weather conditions like drought, freezing temperatures, and excessive rainfall can affect the harvest, and consequently, the production of the farmer’s agribusiness. There’s also the risk of pesticide attack and equipment failure.
Farmers can overcome production risks by:
- Diversifying their crop variety
- Expanding production by planting more acreage
- Purchasing federal crop insurance
- Investing in a futures contract
- Regularly maintaining equipment and facilities.
Losing the market for your product because the price wasn’t set right is a huge risk for farmers. Higher prices and lower sales due to changing consumer preferences and increased competition can result in a loss of the market too.
Farmers can overcome marketing risks by:
- Developing a marketing plan with a realistic target price and forecast
- Increasing direct marketing efforts to secure a larger market share and higher price
- Conducting essential market research to keep up with customer needs
- Enacting a hedging strategy
Financial risks emerge due to insufficient resources to meet the obligation because the business is generating less profits than expected, or the farm is losing equity. Other production and marketing risks we’ve highlighted above can also lead to various financial risks. More causes include higher interest rates, lack of credit reserves, excessive borrowing, and unfavorable exchange rate fluctuations.
Farmers can overcome financial risks by:
- Developing a strategic business plan
- Controlling key farm expenses
- Conducting a trend analysis to assess changes in farm profits
- Controlling unnecessary household expenses
If you need help mitigating the risks associated with running an agribusiness, you must put a hedging strategy in place and develop a sound understanding of risk management marketing.
This is where Robinson AG Marketing comes in. We help you with trade strategy consultation and recommendations with market view reports and a profitable hedging strategy.
We also specialize in AG marketing, commodity marketing, AG trading marketing, wheat marketing, soybean marketing, oats marketing, and cattle marketing in TX.