Production Risk Management from a Producer's Perspective

The evidence indicates that production risks are increasing, but there are a number of other reasons why farmers must learn to manage production and price risk. The 2 primary factors changing the risk environment are the new farm legislation and global trade patterns. The Federal Agriculture Improvement and Reform Act, commonly known as the Freedom to Farm Act, became law in 1996. Managing yield risk has always been a challenge for the US producer. Farmers and ranchers can have the best of prices, but if they have little or nothing to sell, the results can be disastrous. Production risk can be controlled somewhat by making sound management decisions, all of which can be summarized under 6 general headings: 1. capital investments, 2. crop production practices, 3. crop insurance, 4. access to inputs, 5. production arrangements, and 6. new technology.