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risk
Survey of U.S. farmers reveals how absorption capacity drives farm growth and resilience. Respondents were asked if they had low per unit fixed costs, a diversified enterprise mix, and a strong balance sheet.
Read MoreMichael Langemeier introduced the types of leases (cash rent, flex rent, and share rent) and discussed the advantages and disadvantages of each leasing arrangement during the August 2, 2023 Side By Side Digital Webinar. A comparison with risk/return tradeoffs between lease types was also included in the webinar discussion.
Read MoreThis article identified the optimal portfolio of corn and soybean marketing strategies for a case farm in southeast Indiana. The hedge and roll strategy had the highest net return per acre, and the lowest level of downside risk of any of the individual marketing strategies. However, downside risk can be reduced by diversifying marketing strategies. In particular, combining the hedge and roll strategy with the marketing year cash price strategy was effective in reducing downside risk and resulted in only a slight decline in net return per acre.
Read MoreWhile there have been numerous studies or articles that have evaluated grain marketing and crop insurance strategies separately, there is limited previous literature that examines these tools simultaneously. The purpose of this article is to identify which strategies contribute to an optimal portfolio of soybean marketing strategies for a case farm in southeast Indiana using a downside risk model.
Read MoreWhile there have been numerous studies or articles that have evaluated grain marketing and crop insurance strategies separately, there is limited previous literature that examines these tools simultaneously. The purpose of this study was to identify which strategies contributed to an optimal portfolio of corn marketing strategies for a case farm in southeast Indiana using a downside risk model.
Read MoreOff-the-shelf strategic risk management tools remain unavailable for farmers (unlike availability of forward pricing commodities, hedging commodities using futures and/or options, locking in input prices, etc., for financial, marketing, and production risk), furthering the misconception that strategic risks are “unmanageable”. Strategic risk management requires a more deliberate approach (i.e., enhancing farm agility and absorption capacity). Results presented in this article reveal how resilience to strategic risk relates to future growth expectations, optimism on the state of the agricultural economy, use of management practices, and financial performance.
Read MoreStrategic risk is difficult to quantify. Despite this fact, it is important to prepare risks impacting U.S. farms and build resilience.
Read MoreOver the past several years, maintaining agility and absorption capacity has been a solid mechanism to deal with strategic risk. Absorption capacity has enabled farms to maintain some sense of stability with market turbulence caused by increases in input prices, Covid-19, trade restrictions, higher rental rates, fluctuations in labor availability, ongoing geopolitical conflict, and market downturns. As farms face these obstacles there is also a greater need for agility, including innovative techniques that can reduce business costs, enable workers to shift assignments to meet changing business needs, and diversify to reduce risk.
Read MorePurdue ag economists James Mintert & Michael Langemeier shared key lessons from 2022 and help producers plan for the financial and risk management realities of 2023. Live from Orlando, Florida at the 2023 Commodity Classic Learning Center Session on March 9, 2023.
Read MoreFarming is never the same from year to year – sometimes prices are good, net farm income is high, and other times margins are tight. Planning ahead, or contingency planning for financial hardship is important for any farm operation. How to evaluate farm financials, update financial statements, analyze performance, and when borrowing makes sense.
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