News

Risk management more critical in ag downturns

A product analyst with Country Financial says risk management is key for farmers as the ag economy slows down.

Brian Davis tells Brownfield…

“Crop insurance in a down price year is probably more critical than the opposite.”  He says, “When you’ve got fewer dollars to work with, your margin of error is much smaller.”

He says it’s a way to safeguard multiple facets of a farm.

“Even when farm incomes are down, your debt payments don’t change with it.”  He says, “That bank is going to want that payment. So, I think having that safety net, the crop insurance, is even more critical because you want to protect your ability to cover debt, but you also want to protect your liquidity, and working capital.”

Davis says many operations also utilize strong risk management plans to forward market grain for a profit.

“While I understand a lot of growers don’t like to make early sales until they know the crop is made,” he says, “that crop insurance guarantee is there to ensure you have bushels.  Not to insure them, but ensure them in the way that says look, if you’ve got a 200 APH and you have an 85 policy, you know there’s 170 bushels that are going to be accounted for.”

He says it’s vital farmers work closely and proactively with their agent to craft the best risk management plan for an operation’s needs.

AUDIO: Brian Davis – Country Financial