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Strategic risk and its long-term impact on production agriculture

An ag economist says it’s more important than ever for producers to manage strategic risks.

Michael Langemeier is the Associate Director of Purdue University’s Center for Commercial Agriculture.

“These are shocks,” he said. “Things like political upheaval, government policy shocks, changes in interest rates, and obviously the increase in input costs that we saw in 2022.”

He tells Brownfield strategic risks have long-term impacts, and farmers and ranchers must prioritize increasing resilience.

“If the business is not in a financial position to withstand the shock, then we are going to have difficulties in terms of cash flow,” Langemeier said. “We might have difficulties purchasing assets. And so that’s where the impact really comes in is it may cause shocks to our liquidity and shocks to our solvency.”

Langemeier says producers should also consider a contingency plan so the farm can effectively respond to the departure or absence of key personnel.