Crop Insurance Today August 2013 - (Page 20)
CropInsurance TODAY
Incorporating Crop Insurance
Decisions into a Risk Management Plan
By H. Doug Jose, Extension Farm Management Specialist
Emeritus, University of Nebraska-Lincoln and
Laurence Crane, Vice President, Program Outreach and Risk
Management Education, NCIS
Recent events
have demonstrated that many forms
of risk are prevalent
in agriculture. These
risks often compound the
financial impacts for farm
business managers. In 2012 a major drought
plagued much of the country, particularly the
Mid-West. In 2013, the same areas had excellent spring moisture while some areas have
had excess moisture. These weather oscillations have resulted in record high commodity prices in 2012-13 and declining new crop
prices in 2013 as we go to press.
For an individual farm manager, risk management involves optimizing expected returns subject to the risks involved and the risk
tolerance of the operator. The consequences
of their decisions are generally not known
when the decisions are made. Furthermore,
the outcome may be better or worse than expected. The two situations that most concern
agriculture producers are: 1) a high probability of adverse consequences; and, 2) would
those adverse consequences significantly disrupt the business?
Risk is what makes it possible to make a
20
AUGUST2013
profit. If there was no risk, there would be no
return to the ability to successfully manage
it. For each decision there is a risk-return
trade-off. Anytime there is a possibility
of loss (risk), there should also be an
opportunity for profit. Growers must decide
between different alternatives with various
levels of risk. Those alternatives with minimum risk may generate little profit. Those
alternatives with high risk may generate the
greatest possible return but may carry more
risk than the producer will wish to bear. The
preferred and optimal choice must balance
potential for profit and the risk of loss.
Because of the multiple sources of risk
faced by producers, comprehensive strategies
that integrate several responses to variability
are often necessary for effective risk management. The particular combination used by an
individual farmer will depend on the individual’s situation, the types of risk faced, and
the risk attitudes or preferences. Some risk
responses such as vaccinations, preventative
maintenance, feed inventories, and irrigation
act primarily to reduce the chance that an adverse event such as disease, breakdown, and
drought will occur. Other responses have the
effect of providing protection against adverse
consequences by transferring some of the
risk to someone else such as insurance and
forward pricing. Producers find many different ways to implement these principal risk
responses.
The products offered through the crop in-
Dr. Art Barnaby leads a discussion at a Crop Insurance Conference.
Table of Contents for the Digital Edition of Crop Insurance Today August 2013
"It could be, it might be, it is!" Baseball Insights for Crop Insurance
The PRISM Climate and Weather System An Introduction
Crop Insurance In Action
2012 U.S. Crop-Hail & MPCI Loss Ratio By State
2012 Research Review
Incorporating Crop Insurance Decisions into a Risk Management Plan
Step 10-Documenting, Sharing and Revising
Dave Snider Retires
Crop Insurance Today August 2013
https://www.nxtbook.com/allen/cint/56-2
https://www.nxtbook.com/allen/cint/56-1
https://www.nxtbook.com/allen/cint/55-4
https://www.nxtbook.com/allen/cint/55-3
https://www.nxtbook.com/allen/cint/55-2
https://www.nxtbook.com/allen/cint/55-1
https://www.nxtbook.com/allen/cint/54-4
https://www.nxtbook.com/allen/cint/54-3
https://www.nxtbook.com/allen/cint/54-2
https://www.nxtbook.com/allen/cint/54-1
https://www.nxtbook.com/allen/cint/53-4
https://www.nxtbook.com/allen/cint/53-03
https://www.nxtbook.com/allen/cint/53-02
https://www.nxtbook.com/allen/cint/53-01
https://www.nxtbook.com/allen/cint/52-04
https://www.nxtbook.com/allen/cint/52-03
https://www.nxtbook.com/allen/cint/52-02
https://www.nxtbook.com/allen/cint/52-01
http://www.brightcopy.net/allen/cint/51-04
http://www.brightcopy.net/allen/cint/51-03
http://www.brightcopy.net/allen/cint/51-02
http://www.brightcopy.net/allen/cint/51-01
http://www.brightcopy.net/allen/cint/50-04
http://www.brightcopy.net/allen/cint/50-3
http://www.brightcopy.net/allen/cint/50-2
http://www.brightcopy.net/allen/cint/50-1
http://www.brightcopy.net/allen/cint/49-4
http://www.brightcopy.net/allen/cint/49-3
http://www.brightcopy.net/allen/cint/may2016
http://www.brightcopy.net/allen/cint/february2016
http://www.brightcopy.net/allen/cint/november2015
http://www.brightcopy.net/allen/cint/september2015
https://www.nxtbook.com/allen/cint/may2015
https://www.nxtbook.com/allen/cint/february2015
https://www.nxtbook.com/allen/cint/november2014
https://www.nxtbook.com/allen/cint/september2014
https://www.nxtbook.com/allen/cint/may2014
https://www.nxtbook.com/allen/cint/february2014
https://www.nxtbook.com/allen/cint/november2013
https://www.nxtbook.com/allen/cint/august2013
https://www.nxtbook.com/allen/cint/may2013
https://www.nxtbook.com/allen/cint/february2013
https://www.nxtbook.com/allen/cint/november2012
https://www.nxtbook.com/allen/cint/august2012
https://www.nxtbook.com/allen/cint/may2012
https://www.nxtbook.com/allen/cint/february2012
https://www.nxtbook.com/allen/cint/44-4
https://www.nxtbookmedia.com