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Managing Risk in Agriculture

A Holistic Approach

image of Managing Risk in Agriculture
The sources of risk in agriculture are numerous and diverse, ranging from events related to climate and weather conditions to animal diseases; from changes in agriculture commodities prices to changes in fertilizer and other input prices; and from financial uncertainties to policy and regulatory risks. Agricultural risks are not independent, but rather are linked both to each other and as part of a system that includes all available instruments, strategies and policies designed to manage risk. A holistic approach is thus necessary.

This book examines the current magnitude and characteristics of risk-related policies in agriculture and what is known about the quantitative size of agricultural risks. It looks at the on-farm, off-farm, and market instruments available to manage risk, and it explains how the holistic approach helps clarify the role of governments.

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Executive Summary

Managing risk is an important part of farming and its management is a concern for those governments which include this as one of their agricultural policy objectives. This report presents a framework for the analysis of risk management in agriculture that can be used for the analysis and efficient design of policies in this area. The principal concept is a holistic approach as opposed to a linear approach. A linear analysis dealing with only a specific source of risk, a specific farmer’s strategy, or a specific policy measure is likely to lead to inefficient policy choices. Risk management should be analysed as a system in which there is interaction between many elements. These elements have been organised around three axes: the sources of risk, farmers’ strategies and government policies. A number of issues and concepts are crucial to the understanding of these interactions and must be discussed from all three axes.

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