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Risk Management is More Than Watching the Weather

By Brenda Stefanson, PAg., Regional Farm Business Management Specialist , Watrous

January 2018

After weeks of above seasonal temperatures, we were slammed with a cold snap during the holidays. Many of us had to change plans because of the dangerous cold and the havoc it wreaks on our vehicles, equipment and animals. We are used to cold weather on the prairies, but the sudden temperature fluctuations can cause concern for plants, livestock and infrastructure.

The calendar has flipped to a new year and planning for the next growing season is back on the front burner. Weather is top of mind in our risk assessment after last year’s drought and previous years’ excess moisture. However, there are many other factors to keep in mind.

Farmers make decisions every day. However, they don’t always have accurate information, nor can they predict the outcome with 100 per cent accuracy. The uncertainty about the outcome of our decisions is known as risk.

Risk exists in all aspects of farming. Farmers will face production, marketing, financial, legal, environmental and safety risks. These can be mitigated by having a risk management strategy. As part of your strategy, you need to identify and understand the risks facing your operation. In addition, it is helpful to determine your risk tolerance and the impact on your strategy. 

Risk tolerance is your willingness to accept risk and farm managers make better decisions when they recognize their attitudes toward it. There are three broad categories of risk tolerance – risk adverse, risk neutral and risk taker.

Risk adverse individuals are very cautious and are more likely to choose a risk avoidance strategy. These individuals may be willing to pay extra for the security of knowing a risk has been removed or minimized. Risk takers thrive on taking chances. They are excited by a challenge and may seek out uncertain ventures as long as there is the potential of a positive outcome. Between the two extremes are risk neutral individuals who recognize and carefully analyze a situation before taking action.

Regardless of your attitude toward risk or the types you face, gathering as much information as possible can help to reduce the uncertainty. The beginning of a new year is always accompanied by predictions from a range of experts. From these predictions, we can glean information that will help us to remove some ambiguity from our decisions. This January, the experts are telling us many things, such as global GDP is expected to grow, the Canadian dollar will remain relatively low and the outcome of NAFTA re-negotiations are still uncertain but CETA is providing access to Europe’s lucrative markets. They are also telling us that the world demand for food continues to grow and the changing preferences of consumers are still affecting the markets for farm products.

Awareness of these and other trends and events around the world will influence your production plans and your risk levels for 2018. What about the weather? None of this matters if we don’t get rain or get too much. We can help with some predictions there as well.

David Phillips, Senior Climatologist, Environment and Climate Change Canada is coming to Saskatchewan to talk about everyone’s favorite topic: weather. Watch for information about events in Arcola, Yorkton and Manitou Beach on February 13, 14 & 15 respectively. These presentations will be both informative and entertaining. David Phillips has many years of experience in predicting and reporting the weather and has a treasure trove of facts, trivia and stories about our wild and wacky weather and its impact on our lives and livelihoods.  Join us to recognize the importance of the agriculture industry and to celebrate our obsession with the weather.

For more information, visit your local Regional Services office, call 306-946-3230 or contact the Agriculture Knowledge Centre at 1-866-457-2377. You can also follow us on Twitter: @SKAgriculture.

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