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Managing Risk in the Livestock Business. Curt Lacy Extension Economist University of Georgia Tifton, GA. Top 10 Reasons Farmers Don’t Manage Risk. There’s no free cap or jacket I’m waiting for my neighbors to try it The media created El Nino/La Nina Crop failures build character

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managing risk in the livestock business

Managing Risk in the Livestock Business

Curt Lacy

Extension Economist

University of Georgia

Tifton, GA

top 10 reasons farmers don t manage risk
Top 10 Reasons Farmers Don’t Manage Risk
  • There’s no free cap or jacket
  • I’m waiting for my neighbors to try it
  • The media created El Nino/La Nina
  • Crop failures build character
  • It’s more fun to keep my lender guessing about my ability to repay
  • I probably deserve a total crop loss
  • Sleeping too soundly would make my spouse wonder….
  • The IRS would take the profits anyway
  • My children would just fight over the estate
  • Life would be dull without daily doses of fear

Source: Farm Futures

what is risk
What is Risk?

Risk – Uncertain consequences, particularly exposure to unfavorable consequences.

types of agricultural risks
Types of Agricultural Risks
  • Production
  • Price
  • Legal
  • Human Resources
types of agricultural risks6
Types of Agricultural Risks
  • Production
    • Weather
    • Disease
    • Genetics
    • Feed
    • Other
types of agricultural risks7
Types of Agricultural Risks
  • Price
    • Sales price goes down
    • Sales price goes up,……………..after you sell
    • Discounts
    • Input prices go up
    • Input prices go down,……..after you buy
types of agricultural risks8
Types of Agricultural Risks
  • Legal
    • Liabilities
    • Taxes
types of agricultural risks9
Types of Agricultural Risks
  • Human Resources
    • Dependability
    • Quality of work
do we want to eliminate risk
Do we want to eliminate risk?

NO!!

We want to Manage risk

managing risk in livestock
Managing Risk in Livestock
  • Price
    • Follow recommended production/vet practices
    • Use good genetics in your herd
    • Know when to sell
    • Know when not to sell
    • Become familiar with the various marketing methods
      • Video Board Sales/Internet Auctions
      • Cooperatives/Alliances
      • Retained Ownership
      • Custom grazing
      • Others
    • Learn how to use futures and options to buy and sell
    • Know your cost of production
managing risk in livestock12
Managing Risk in Livestock
  • Know your expected profit
      • Know your cost of production
      • Be realistic about prices
  • Know what price you can take
      • Cover variable costs
      • Total costs
summary
Summary
  • Producers face risk everyday
  • Managing risk, not eliminating it should be producers objective
  • There are numerous alternatives that producers can use to manage risk