Agricultural producers make decisions in a risky environment every day. The two situations that most concern agriculture producers are: (1) Is there a high probability of adverse consequences, and (2) would those adverse consequences significantly disrupt the business?  With today’s economic uncertainty, producers are faced with decisions which could have major impacts on their farm operations.

Risk has always been a part of agriculture, but farming in America has changed drastically over the past few years.  Increasingly, farmers are learning that it is now a game with new risks.  Risk is what makes it possible to make a profit.  If there was no risk, there would be no return on the ability to successfully manage it.  Anytime there is a possibility of loss, there should also be an opportunity for profit.  The most successful farmers are now looking at a deliberate and knowledgeable approach to risk management as a vital part of their plan.  For them, risk management means farming in a more rapidly changing world.  It is the ability to deal with risks that comes with new farming opportunities.

One common method of classifying risk is to look at risk as it affects the various functions on the farm.  Farmers generally deal with five types of risks.  They are:

1. Production
2. Marketing
3. Financial
4. Legal Issues
5. Human Resource Issues

There are five action steps farmers can use to manage risks.  They include identification, assessment, treatment, implementation, and evaluation.  One of the most important risk management tools is purchasing crop insurance.  Crop insurance provides two important benefits.  It ensures a reliable level of cash flow and allows more flexibility in your marketing plans.  Another important risk management tool is having irrigation for your crops, which provides a constant source of water.

It is important for farmers to select appropriate tools to manage risk and select a risk management team to help implement those tools.  Free-market agriculture is a new and unchartered path for new farmers.  Clearly, we live in a global economy.  As we gaze into the future, the key to success for farmers is risk management.

For more information, please contact Nelson Brownlee, Extension Area Small Farms Agent, at  910-671-3276, by email at Nelson_Brownlee@ncsu.edu.