In a business influenced by changing weather and volatile markets, only about one-third of Canadian producers and agribusiness operators have a formal risk management plan, according to a recent survey by Farm Credit Canada (FCC).
However, the vast majority (96 per cent) of those surveyed also said they use various risk management strategies 鈥� such as cash reserves and contracts for guaranteed prices 鈥� to protect their business against unforeseen circumstances and events.
鈥淭he good news is most producers are in a solid financial position to withstand short-term impacts from changes in the weather or the markets,鈥� said Corinna Mitchell-Beaudin, FCC鈥檚 chief risk officer. 鈥淭here鈥檚 also a strong appetite among producers to learn more about various risk management strategies and to bring them together into a comprehensive risk management plan for their business.鈥�
In fact, 35 per cent of respondents who reported not having a plan said they have thought about creating one and many are turning to their financial institutions for information and advice on how to protect their business from unforeseen events. Those who do have a plan say changes in commodity prices (52 per cent), a drop in quality and/or quantity of product (43 per cent) and tax implications (43 per cent) top the list of risks to mitigate.
The top five strategies used to mitigate risks, include cash reserves in a savings account, off-farm income, investments outside the farm operation, contracts for guaranteed commodity prices and assets that can quickly be liquidated.
The survey also showed farm operations and corporations with more than $500,000 in annual sales are more likely to have a formal risk management plan and had an expert assist in creating the plan.
鈥淎 risk management plan ensures measures are in place to allow producers and agribusiness operators to react quickly and appropriately to individual or multiple risks,鈥� Mitchell-Beaudin said. 鈥淲e encourage producers to have a risk management plan that pulls together mitigation strategies already in place, as well as identifies key risks and available solutions to manage these risks should they emerge in your business.鈥�
Mitchell-Beaudin recommends producers and agribusiness owners engage expert advisors, as the growing complexity of agriculture can present different risks that require more complex solutions.
FCC offers a wide variety of free learning opportunities to help producers make effective business decisions. For more information on FCC and to register for various events, visit www.fcc.ca/exchange.
FCC鈥檚 Risk Management in Canadian Ag survey captured the views of more than 1,100 FCC Vision panelists, who are mostly primary producers. Based on the sample size, the survey has a margin of error plus/minus three per cent, 19 times out of 20.
By sharing agriculture survey results, FCC provides solid insights and expertise to help those in the business of agriculture achieve their goals. To learn more about the FCC Vision Research Panel, visit www.fccvision.ca.
FCC is Canada鈥檚 leading agriculture lender, with a healthy loan portfolio of more than $28 billion. Our employees are dedicated to the future of Canadian agriculture and its role in feeding an ever-growing world. We provide flexible, competitively priced financing, management software, information and knowledge specifically designed for the agriculture and agri-food industry. Our profits are reinvested back into agriculture and the communities where our customers and employees live and work. Visit fcc.ca or follow us on Facebook, LinkedIn, and on Twitter @FCCagriculture.
