A24-lancaster Farming, Saturday, October 30, 1990
TYPES OF RISK
MOST IMPORTANT
TO PRODUCERS
John Berry
Penn State
Lehigh County
Extension
Sources Of Risk
In Farming
Some risks are unique to agri
culture, such as the risk of bad
weather significantly reducing
yields within a given year. Other
risks, such as the {Mice or institu
tional risks discussed below, while
common to all businesses, reflect
an added economic cost to the
producer.
Production or yield risk occurs
because agriculture is affected fay
many uncontrollable events that
are often related to weather,
including excessive or insufficient
rainfall, extreme temperatures,
hail, insects, and diseases. Tech
nology {days a key role in produo-
NOTICE!! NOTICE!! NOTICE!!
NEW OSHA LAW
If you presently operate a forklift loader or skid
steer as a lifting device you are required by
OSHA to have training prior to Dec. 1,1999.
The minimum fine for non-compliance is $5,000.
For OSHA Certified Training call:
A. I. HCAR & BR<Pk
Quarryville, PA • 717-786-3521
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don risk in Cuming. The rapid
introduction of new crop varieties
and production techniques often
offers the potential for improved
efficiency, but may at times yield
poor results, particularly in the
short term. In contrast, die threat of
obsolescence exists with certain
practices (for example, using
machinery for which parts are no
longer available), which creates
another, and different, kind of risk.
Price or market risk reflects
risks associated with changes in
the price of output or of inputs that
may occur after die commitment to
production has begun, in agricul
ture, production generally is a
lengthy process. Livestock pro
duction, for example, typically
requires ongoing investments in
feed and equipment that may not
produce returns for several months
or years. Because markets arc gen
erally complex and involve both
domestic and international consid
erations, producer returns may be
dramatically affected by events in
far-removed regions of the world.
Institutional risk results from
changes in policies and regulations
that affect agriculture. This type of
risk is generally seen as unantici
pated production constraints or
price changes for inputs or for out
put For example, changes in gov
ernment rules regarding the use of
pesticides (for crops) or drugs (for
livestock) may alter the cost of
production or a foreign country’s
decision to limit imports of a cer
tain crop may reduce that crop’s
price. Other institutional risks may
arise from changes in policies on
the disposal of animal manure,
restrictions in conservation prac
tices or land use, or changes in
income tax policy or credit policy.
Fanners ate also subject to the
human or personal risks that ate
common to all business operators.
Disruptive changes may result
from such events as death, divorce,
injury, or the poor health of a prin
cipal in the firm. In addition, die
changing objectives of individuals
involved in the farming enterprise
may have significant effects on the
long term health of die operation.
Asset risk is also common to all
businesses and involves theft, fire,
or other loss or damage to equip
ment, buildings, and livestock. A
type of risk that appears to be erf
growing importance is contracting
risk, which involves the reliability
of contracting partners.
Financial risk results Cram the
way the firm’s capital is obtained
and financed. A fanner may be
subject to fluctuations in interest
HAY. STRAW
& GRAIN
SALE
Every Thursday
at 12 NOON
Vintage Sales
Stables, Inc.
(Rt. 30,10 miles east
of Lancaster
in Paradise, PA)
For info.
(717)442-4181 bus.
(610) 458-8518 home
rates on borrowed capital, or face
rash flow difficulties if there are
insufficient funds to repay credi
tors. The use of borrowed funds
means that a share of the returns
from the business must be allo
cated to meeting debt payments.
Even when a farm is 100-percent
owner financed, the operator’s
capital is still exposed to the proba
bility of losing equity or net worth.
Survey Results
Several surveys have asked far
mers about the most important
types of risk that they confront in
their farming operations. In 1996,
USDA’s Agricultural Resource
'Management Study, (ARMS), a
USD A Proposes Fee Increase
WASHINGTON, D.C.
USDA proposes to increase Lives
tock and Seed Program’s seed
inspection fees.
Kathleen Mcrrigan, administra
tor of USDA’s Agricultural Mark
eting Service, said the fee increase
will cover the cost of testing and
issuing Federal Seed Analysis Cer
tificates. Major factors contribut
ing to the need for die changes in
fees are increased employee sala
ries, rent, and supplies.
Ibe proposal would raise the
hourly fee for testing and issuing
certificates from $40.40 per hour
to $44.40 per hour. It would abo
raise the fee for Issuing additional
duplicate certificates from $lO.lO
nationwide survey of farm opera
tors, questioned farmers as to their
degree of concern about factors
affecting the operation of their
farms. The concerns cited in the
survey varied from “uncertainty in
commodity prices” to “ability to
adopt new technology.”
Wheat, com, soybean, tobacco
and certain other producers
answering the survey were more
concerned about yield and price
variability than any of the other
categories. Producers of other field
crops, nursery and greenhouse
crops, beef cattle, and poultry were
relatively more concerned about
changes in laws and regulations.
to $ll.lO.
The seed inspection program is
conducted under the Agricultural
Marketing Act of 1946g0 a volun
tary, fee-for-setvioe basis. Since
the act requires that fees for ser
vices must be equal to the cost of
providing service, die proposed
fee increases would ensure that the
program is self supporting.
The proposal will be published
in the Oct 29 Federal Register.
Comments, should be received no
later than Nov. 29 and should be
sent to Richard C. Payne, Acting
□lief. Seed Regulatory arid Test
ing Branch, Room 209, Building
306, BARC-E., Beltsvillc, MD
20705-2350.