Risk exposure at the farm level

Risk assessment is a necessary first step to develop a good risk management strategy. It is important that this assessment be made at the relevant risk and management levels. In the case of agriculture, this implies the assessment of risks at farm level. This chapter uses valuable farm-level data to analyse the risk exposure of individual farms in nine countries. The data reveal that many farmers benefit from some correlations to manage their risk, including natural hedging between prices and yields, and simultaneous changes in output and input prices. Imperfect correlations between prices and yields of different commodities allow farmers to diversify their portfolio of activities and to use this diversification as a risk management strategy.