In my line of work the term “risk management” is repeated so often it has become a cliche. On the farm I expect that you are starting to feel the same way. Farming is arguably the riskiest occupation in the world. Every year you face risk of drought, flood, insects, disease, frost and hail. Every day you work around large potentially dangerous equipment and chemicals that put your safety and well being at risk. Massive efforts over generations have been put forth to develop strategies to manage the risks of any of these things going wrong. Recently efforts to improve insurance products to better reflect farmers unique risks have been made. In my world use of Call and Put Options, forward contracting, production contracts or averaging tools have been developed to manage the risk of price fluctuations. Farming is risky business. The emphasis on risk management, no matter if it does feel cliche, is absolutely correct.
With that said I have one more risk for you. One which I don’t think is addressed as frequently or as well as the others I have already mentioned. The risk of things going right! Let that soak in for a minute……
If I had a dollar for every time a farmer has said “Prepare for the worst, hope for the best!” I might be writing this article from a tropical island. I am not saying this is bad advice, but I challenge you to think from a different perspective. What if our new catch phrase for the next generation of farmers was “Prepare for the best, insure for the worst!”. Would you do anything differently if that were your mantra? Instead of constantly looking over your shoulder for something bad that might happen what if you always looked forward and prepared your business and your fields for a scenario where things worked out? What if you were always in a position that you maximize all of the good things that happen?
You use Seed Treatments to reduce risks of disease and poor germination. You use rotation to manage long term risks of erosion and moisture retention. You carefully plan your chemical use to manage resistance or residual crop damage. You are prepared to apply Fungicide or Insecticide if your crop is in danger. You soil test and apply nutrients to ensure you crops have the food they need. You have studied the weather your entire career, you are prepared to seed in a strategic order to minimize risks of both late spring frost and early fall frost. You are excellent risk managers, you have massively decreased your production risks over generations of constant improvement. Weather will never be perfect, something could always go wrong, but you are as prepared as it is possible to be.
In the coming days and weeks as you complete your seeding preparations and head to the fields take the time to think differently. Imagine that every seed going in behind you will come up and reach it’s full yield potential. Consider the possibility of low Canadian grain stocks and weak Canadian Dollar maintaining strong exports. Calculate whether you have the bin space to accommodate a bumper crop. Day dream about savings and reinvestment strategy instead of worrying about paying bills.
Are you as prepared for the best as you are for the worst? I think you might be, but have you prepared for the rewards of managing risks and the possibility that your business will continue to trend into a better and better position? I wish you all the very best of luck, and ask you to take care and be safe this spring. Don’t forget to put some thought into what it will mean for your business if nothing goes wrong!