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When Weather Interferes

By: Karen Smith, PAg, Regional Farm Business Management Specialist, Tisdale

October 2016

The story is the same across much of the province; combines sit lined-up by the approach in the field, waiting for the snow to disappear.  Farmers tap their fingers on the kitchen table each morning as they see the forecast, wondering when they will finish this year’s harvest.  Not only are their thoughts on how they will manage to get the last of the crop in the bin for the year, they also reflect on bills and payments, and what could happen if the weather doesn’t turn around.

Weather is, unfortunately, one of many things a farmer has no control over.  Each year farmers plant a crop with the hope that Mother Nature cooperates.  But what if she doesn’t? Though farmers cannot control the weather, there are a few things they can do that will help ease the stress and worry when things don’t go as planned.

You start the risk management process by assessing the amount of risk you are willing to take.  Everybody has their own comfort level when it comes to the amount of risk that is acceptable, so it’s important each farmer ask what they as individuals can live with and what impact their choices will have on the farm.  Risk identification, assessment and prioritization then need to be completed.  This means taking time to recognize what risks are on the farm, how they affect the operation and what their impact could be.  A plan can then be created based on this information which can help manage some or all of the risk.  Since there are many approaches that can be taken to manage risk, every risk management plan will be unique.

Understanding your insurance options is an extremely useful tool when considering risk. There are several types of insurance options and key considerations to think about are the type of insurance, coverage, availability and cost.  Be sure to understand how the insurance works, and how it is best suited to the overall operation. Saskatchewan Crop Insurance offers an extension of insurance if farmers are unable to harvest their crop by November 15. 2016 And customers may receive compensation for both yield loss and quality loss.

A strong risk management plan will include tools and strategies that respond to different scenarios, such as the inability to bring in a full crop.  A “hope for the best” approach for weather and uncontrollable situations is not the best option and here should be contingency plans to help mitigate risk. Understanding the farm’s cost of production and other financial or debt ratios will help to identify areas of potential risk and overall performance. Objectively look at the farm’s financial position and examine how the farm’s debt is structured.

If finances are a concern, talk to your bankers, accountants and other consultants and have an honest conversation discussing what options may be available to you. The earlier these conversations take place, the more willing lenders will be and the better the chance you have to avoid a more serious outcome.

There are some things a farmer will never be able to control in their business; that is the nature of farming. Being aware of these situations, and creating plans and contingencies can help ease the financial stress when these situations occur. And although adverse weather will set farmers back, proper planning should ensure they can continue on and take on the risks associated with next year’s crop.

For more information on risk management, or other farm business management related topics, please contact Karen Smith, at 306-873-8841, call the Agriculture Knowledge Centre at 1-866-457-2377, or visit our website, www.Saskatchewan.ca/agriculture .

For information regarding Saskatchewan Crop Insurance and their programs, please contact your local office, call Toll-free at 1-888-935-0000, or visit their website, www.saskcropinsurance.com .

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