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Risk management strategies by Australian farmers: two case studies

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Author Info

  • Nguyen, Nam C.
  • Wegener, Malcolm K.
  • Russell, Iean W.
  • Cameron, Donald
  • Coventry, David
  • Cooper, Ian M.
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    Abstract

    Australian farmers operate in one of the most risky farming environments in the world. They have to cope with numerous sources of risk including weather uncertainty, variable market prices, and institutional changes in their business management. This paper reports results from two case studies undertaken to examine the issues of farming risks and risk management strategies in Australia. The first case study found that unpredictable weather, financial risk, marketing risk, and personal risk were regarded as the major sources of risk among farmers in the Upper Eyre Peninsula of South Australia. The main risk management strategies used by farmers in that region included diversifying crop varieties, adopting minimum tillage farming practices, minimising the area of risky crops and maximising the area of less-risky crops. They also regarded high equity, having farm management deposits, and other off-farm investments as appropriate risk management strategies, and mostly ‘left marketing to the experts’. The second case study among dryland cropping farmers in southwest Queensland revealed that weather uncertainty was ranked as the most important source of risk in farming in that area. The risk from weather uncertainty was then followed by financial risks, government policy, and marketing risks. The main risk management strategies used by farmers in that area were enterprise diversification, moisture conserving farming practices and using zero till planting, planting at the optimal time, selling only part of the farm’s production at any one time, and investing off-farm. The paper compares the results from these two case studies with results from other studies in the United States of America, Canada, Netherlands, and New Zealand.

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    File URL: http://purl.umn.edu/122230
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    Bibliographic Info

    Article provided by Australasian Farm Business Management Network in its journal AFBM Journal.

    Volume (Year): 04 (2007)
    Issue (Month): 1/2 ()
    Pages:

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    Handle: RePEc:ags:afbmau:122230

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    Web page: http://www.csu.edu.au/faculty/science/saws/afbm
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    Related research

    Keywords: farming risks; sources of risk; management strategies; dryland farmers; Australia; Farm Management;

    References

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    1. Martin, Sandra, 1996. "Risk Management Strategies in New Zealand Agriculture and Horticulture," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 64(01), April.
    2. Ritchie, John W. & Abawi, G. Yahya & Dutta, Sunil C. & Harris, Trevor R. & Bange, Michael, 2004. "Risk management strategies using seasonal climate forecasting in irrigated cotton production: a tale of stochastic dominance," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(1), March.
    3. Nguyen, Nam C. & Wegener, Malcolm K. & Russell, Iean W., 2006. "Decision Support Systems in Australian Agriculture: State of the Art and Future Development," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25581, International Association of Agricultural Economists.
    4. Hardaker, J. Brian, 2000. "Some Issues in Dealing with Risk in Agriculture," Working Papers 12912, University of New England, School of Economics.
    5. Marra, Michele & Pannell, David J. & Abadi Ghadim, Amir, 2003. "The economics of risk, uncertainty and learning in the adoption of new agricultural technologies: where are we on the learning curve?," Agricultural Systems, Elsevier, vol. 75(2-3), pages 215-234.
    6. Ada, Tim & Malcolm, Bill & Williams, John, 2006. "A Survey of Price Risk Management in the Australian Cotton Industry," Australasian Agribusiness Review, University of Melbourne, Melbourne School of Land and Environment, vol. 14.
    7. Kay, Ronald D. & Edwards, William M., 1999. "Farm Management: Instructor's Manual," Staff General Research Papers 1373, Iowa State University, Department of Economics.
    8. Cooper, Ian M. & Nguyen, Nam C. & Hancock, Jon, 2003. "Rotations, Risk and Reward: Farming system choice on the Eyre Peninsula of South Australia," 2003 Conference (47th), February 12-14, 2003, Fremantle, Australia 57852, Australian Agricultural and Resource Economics Society.
    9. Knutson, Ronald D. & Smith, Edward G. & Anderson, David P. & Richardson, James W., 1998. "Southern Farmers' Exposure To Income Risk Under The 1996 Farm Bill," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 30(01), July.
    10. Just, David R. & Wolf, Steven & Zilberman, David, 2003. "Principles of risk management service relations in agriculture," Agricultural Systems, Elsevier, vol. 75(2-3), pages 199-213.
    11. Kay, Ronald D. & Edwards, William M., 1999. "Farm Management," Staff General Research Papers 1374, Iowa State University, Department of Economics.
    12. Harwood, Joy L. & Heifner, Richard G. & Coble, Keith H. & Perry, Janet E. & Somwaru, Agapi, 1999. "Managing Risk in Farming: Concepts, Research, and Analysis," Agricultural Economics Reports 34081, United States Department of Agriculture, Economic Research Service.
    13. Meinke, H. & Baethgen, W. E. & Carberry, P. S. & Donatelli, M. & Hammer, G. L. & Selvaraju, R. & Stockle, C. O., 2001. "Increasing profits and reducing risks in crop production using participatory systems simulation approaches," Agricultural Systems, Elsevier, vol. 70(2-3), pages 493-513.
    14. David C. Hall & Thomas O. Knight & Keith H. Coble & Alan E. Baquet & George F. Patrick, 2003. "Analysis of Beef Producers' Risk Management Perceptions and Desire for Further Risk Management Education," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 25(2), pages 430-448.
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