Farmers are always facing risks

Here at the end of July I am reminded of the burden of risk farmers carry in order to accomplish their job of producing our food. Risk is always present for farmers in a business of changing costs, variable income and unpredictable weather.

Our spring and early summer rainfall must have carved out a spot in the record books since we received two to three times our normal three inches per month during that time. While this blessed rainfall built up groundwater and made our pastures and hay grow along with early planted crops, it delayed final planting of corn and soybeans and increased disease in our small grains.

Production risk is always present for farmers and weather is one of the big factors they deal with. 

Clouds in the sky that predict rain are most often a good thing, except at wheat harvest time. I mentioned in my last article how excess rain caused some wheat to drop in quality, impacting its potential value. The complex situation in agriculture found wheat growers facing not only a potential drop in wheat quality and value due to weather, but an overall declining grain market as well. I also mentioned how weather had contributed to an unusual presence of fungal toxins in small grain. The broad heading here is micotoxins under which we look in our labs for aflatoxins and vomitoxins. Weather plays a big role with fungi and if present at all, we most often find aflatoxin in corn, cotton or peanuts and usually only vomitoxin in small grain. Test results help in making informed decisions on safe livestock diets. 

By the time you read this article farmers will already be laying plans for next years’ wheat crop and will be anticipating rain to bring up the seed they will start planting in October. Weather risk is uncontrollable and it forces farmers to adapt as best they can. They watch the reports, time their actions, anticipate conditions and hurry up when necessary. There are many other risks they must deal with in their complex farming operations.

They have little control over price and a majority of our farmers sell on the cash market. When calves are ready to sell they are hauled to town and sold for whatever price is discovered that day. Grain is harvested and then sold when the price is right, sometimes at harvest if there is no storage. The price of milk is discovered by dairy farmers each month when their check arrives from the milk co-op that markets their product for them. 

There are tools available to help minimize price risk. Farmers can control quality, they can control the timing of delivery to market, and they can forward price either in the cash or futures market. And, many farmers know the value of selling in volume. This improves their position to negotiate a price or to attract bids. However, many farmers are too small to realize advantages from volume except when they cooperate together.