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Risk management strategies by Australian farmers: two case studies

Author

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

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.

Suggested Citation

  • Nguyen, Nam C. & Wegener, Malcolm K. & Russell, Iean W. & Cameron, Donald & Coventry, David & Cooper, Ian M., 2007. "Risk management strategies by Australian farmers: two case studies," AFBM Journal, Australasian Farm Business Management Network, vol. 4(1-2), pages 1-8.
  • Handle: RePEc:ags:afbmau:122230
    DOI: 10.22004/ag.econ.122230
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    2. Daniel Gregg & John Rolfe, 2017. "Risk Behaviours and Grazing Land Management: A Framed Field Experiment and Linkages to Range Land Condition," Journal of Agricultural Economics, Wiley Blackwell, vol. 68(3), pages 682-709, September.
    3. Adamson, David & Loch, Adam & Schwabe, Kurt, 2017. "Adaptation responses to increasing drought frequency," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 61(3), July.
    4. Sulewski, Piotr & Kłoczko-Gajewska, Anna, 2014. "Farmers’ risk perception, risk aversion and strategies to cope with production risk: an empirical study from Poland," Studies in Agricultural Economics, Research Institute for Agricultural Economics, vol. 116(3), pages 1-8, December.

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