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Risk Management May 2006

Source: www.usda.gov
Topic: Risk Management

Sort Desciption: producers face describes and evaluates current key risk management programs ... However risk management tools may be inadequately provided by the private ...

Content Inside: 1 United States Department of Agriculture2007 Farm Bill Theme Papers Risk Management May 2006 I. Introduction This paper is the first in a series of briefing papers that assess general themes advanced at the 2007 Farm Bill Forums held during 2005 by Secretary Mike Johanns as well as additional related policy ideas that have emerged in recent months. This paper describes the risks agricultural producers face describes and evaluates current key risk management programs and tools available to producers through the private sector and government and concludes with a discussion of general policy alternatives. The alternatives represent generalized approaches to addressing some of the key concerns that have been raised with regard to current programs. II. Background: Risks and U.S. Agriculture Today U.S. agriculture today continues to face a series of forces that transformed the general economy during the 20 th century. These forces include globalization of markets rapid technological change global population growth expansion of regulations and environmental pressures. These forces and other factors create a variety of risks for farmers and ranchers in the operation of their farm and ranch businesses. Risks Facing Agriculture. Key agricultural risks are generally organized into five categories. Price risk. Because agricultural prices are mainly determined in global markets unanticipated changes in global demand or supply of a commodity can lead to unexpected changes in the prices received by farmers for their products. Production risk. Production risk is usually associated with inability to plant or harvest acreage or changes in crop yields or animal production due to environmental variables such as weather pests or disease. Income risk. Income risk can be caused by unexpected changes in production or prices received by producers as well as by swings in prices producers pay for inputs such as fuel fertilizer or electricity. Financial risk. Farm f ...

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