As an agricultural producer, you will face a significant amount of risk. While this is true of most business owners, agricultural producers face additional risk factors related to the weather that many other business owners do not have to contend with daily. Due to the immense risk associated with agricultural business in Fort Collins, CO, crop producers should seriously consider the benefits of agricultural risk management.
What Is Risk Management?
Risk management is a term that many business owners use to describe the process of determining all the following:
- What potential risks may affect your business?
- How can these risks negatively impact the company’s equity?
- Which steps can you take to prevent these risks from happening?
- What types of tools can you use to address potential risks?
- How can tools, knowledge and understanding best be combined in order to meet your personal risk preference and financial requirements?
What Types of Risks Are Common in Agriculture?
Agricultural risk management requires a thorough understanding of the variety of ways that crop producers may be uniquely affected by risk. Crop producers face all the following types of risk:
- Production risks: Uncertainty related to natural growth cycle of crops
- Price risks: Factors related to the prices received for commodities
- Financial risk: Issues related to loans and debt
- Institutional risk: Uncertainty associated with taxes, regulations, animal waste and other agricultural laws
- Human risk: Factors pertaining to illnesses, death, divorce and other personal matters
Types of Risk Management for Crop Production
The level of risk associated with crops requires advanced types of crop production. A thorough approach to risk management in crop production includes consultation, both fundamental and technical analysis, and discussion of margins.
Compass Ag Solutions strives to improve the profitability of family-oriented cattle operations. For more information, about agricultural risk management contact us today.
