Many people have the wrong idea about farming. It’s not always soaking in the sunshine and tending to animals. In fact, farming can be a very dicey job if you don’t know what you’re doing. This piece will overview the biggest risks that farmers need to know to be successful.
Production Risks
The first gamble farmers face is classified as production risks, which tie to the possibility that the farm’s yield will be lower than the baseline projections that have been made. Luckily, there are ways farmers can increase crop production. Some of these ways include diversifying by growing different craps, buying crop insurance, adding mitigating procedures like irrigation and drainage, and upgrading equipment to increase yields.
Marketing Risks
Marketing risks are next up on the list. Farming is a very competitive business, and these risks include increased competition, changing preferences among consumers, or changes in wholesale buyers who change the basic terms of purchasing. The best way to deal with these is to have an effective marketing plan. The tactics involved may not be all that different from those applied in other businesses, but there are some pertaining to harvests that are specific to farming.
Financial Risks
It should come as no surprise that financial risks also come into play. These, too, are similar to many of the risks in other businesses, such as cash shortfalls, falling short of profit projections, increased costs, changes in interest rates, and so on. Financial plans are the obvious solution to this, and once again, many of these will sound familiar to any business owner. But it is possible to purchase farm revenue protection plans unique to farming, and some farmers actually seek off-farm employment to get benefits like health and life insurance.
Legal Risks
Many people aren’t aware that farming is a business conducted largely through contracts, and any time contracts come into play, some risks come with them. These include liability and breach of contract, so it’s important to know the legal basics that apply to farming and hire a lawyer familiar with how they’re applied.
Environmental Risks
Finally, environmental risks are an important element of farming as well. The obvious ones relate to issues like water quality, the level of pesticide use, and soil erosion, especially when this last factor affects crop yield. Fortunately, there are established practices to deal with environmental risks, but they are one of the biggest risks that farmers need to know if they will to be successful.
