Risk – do farmers take enough?

16.01.14 – Risk, do farmers take enough or too many?

In addition to the familiar risks of weather, livestock, ill health and machinery in farming, other risks were cited as not being realistic about on-farm performance, lone working, world markets, and working with others. Risks, goals and dedication are all subjective. The consensus with regrets was that people preferred to learn from their mistakes or missed opportunities; the beauty of farming is that other opportunities are always round the corner. Farming involves risks on a daily basis, and it is this perception of risk that determines financial and personal rewards. Collaborative ventures and consulting ideas and feedback from others will be good drivers of risk analysis.

The discussion held on Thursday 16th January 2014 was a discussion about “risk”. It generated a total of 346 tweets on the topic from 90 participants. These included farmers, agri-food businesses, rural advisors, land agents, lawyers, journalists, academics and NFU officeholders, as well as members of the general public.

Q1: What is the biggest risk in any farming business?

  • Interference by environmental charities are a risk to any farm business
  • That depends on the business. Each is unique. Could be single customer, might be illness, loss of tenancy etc
  • The weather! It rules every decision in every farming business!
  • Getting injured by machinery or cattle
  • Biggest risk is not being realistic about own performance
  • Price of feed and government subsidies for ‘Green energy’ putting prices up. Straw is more expensive nowadays
  • That caught me out. (Cattle) I was thorough when it comes to SWOT analysis but didn’t anticipate personal injury
  • Taking the plunge and starting out in the industry. Realising the correct markets suited to your business in the beginning perhaps
  • Ill health in my view to man or beast
  • Weather is the biggest factor that effects British farming business more and more
  • A hostile market and a public that cares not how their bread (from where?) is buttered (with what?).
  • It’s people. Can be biggest asset and/or biggest liability.
  • Many variables on a daily basis, living animals, poss illness, fluctuating global markets, fickle consumers
  • No control over major input or output values.
  • Freak weather events…they have affected most parts of the UK over the last few months
  • Lack of cashflow…..
  • Selling up and moving
  • Are we speaking of micro risk (accidents, illness) or macro risk (marginalization by powers that be)?
  • Biggest risk- lone working in all conditions & times of the day
  • If you want big issues there’s nothing bigger than the risk of not respecting Climate Change or Population Growth
  • The effect of world markets on greater volatility of both input costs and output prices
  • Biggest risk in any business is losing sight of the bigger picture

Q2. What is the largest financial risk you have taken in your business? how did it go?

  • Starting up form nothing, buying land, machinery and then stocking it all in year one
  • Buying machinery. Don’t have enough acres to justify it all. Costs =2 contractor costs over 4yrs. Timings key though
  • Buying my farm (Q2) was my greatest risk. So far so bad, but I would never go back!
  • Installing our 3 VMS, big financial commitment, but necessary to maintain our dairy herd, things going great
  • Not renting more land in the 80s or snapping up all the open cast land we could in the 90s. Terrible.

Q3 What is the largest ‘personal’ risk you have taken, remember this isn’t always the same as financial or is it?

  • Suppose some are risk takers, others aren’t. Depends on goals and aspirations and what you’ve started with & where u want to go to
  • Starting up and asking family and friends to put up with me while i get a handle on this bad boy!
  • Giving up my job and my house to go bk to uni and study agriculture….paid off and I loved it!

Q4: Are there examples of when you have regretted taking a risk and how could you have managed it better?

  • One only regrets the risks that went wrong and were not anticipated. The rest were calculated & accounted for
  • Puddling in winter crops last year. Forged ahead hoping for the best. Should never of started. Disaster. Lesson learnt.
  • We took a risk going DD, seriously regretted it !
  • Also, should have sold grain, wanted to, and was advised not to. Sometimes you need to stick to your guns
  • Have never regretted taking risks. Whether successful or no, I have always learned from them.
  • The only decisions you should regret are the ones where you fail to learn something … not many?
  • Not taking a risk for me ie not investing in property/land/parlour earlier. Maybe risked not doing it sooner
  • I take a risk every time I sell wheat forward – I’ve regretted it many times!
  • I meet many who regret not making changes earlier. Make decisions and stick to them. Just make more right ones than wrong!
  • Not selling my business to buy a farm and go full time. Destined to be perennial part timer at this rate.

Q5: Would you say you are naturally a risk taker, does agriculture encourage risk takers?

  • Ag is a massive risk with low returns relative to outlay,there r easier but less interesting ways to earn a crust
  • Definitely a risk taker. Had to be to get here. Calculated risks though. Usually. Sometimes. Na
  • Farmers must be risk takers to survive, crystal balls are notoriously unreliable, but you get it right more often than not
  • I took the risk of breeding ostrich in 1996 very interesting but made a big hole in my pocket
  • Farming involves risk on a daily basis. to get on in life you have to take few risks, calculated or otherwise
  • Depends on risk. Starting out in farming – big risk if financed, not so big if its your own cash
  • There’s a world of difference between a decision based on a calculated risk and a plain gamble
  • I think it’s essential to be a bit of a risk taker to be in agriculture: everything is a risk in farming!
  • High risks are attractive to desperate folk and fools! The entrepreneurs calculate the outcome before deciding

Q6: What would drive you to take a higher risk strategy in your farming business eg. financial reward, expansion, lifestyle?

  • Current situation expansion but even now I can see lifestyle / financial rewards resaons in the future
  • Financial reward, expansion, lifestyle, security. All would be my reason for doing something different
  • If there was a guaranteed price structure inline with input costs leaving adequate net margin. I’d take more risk
  • Risk perception varies person to person, to some a risk is £100k investment to others no risk at all

Q7. Do you think farming/agriculture has anything to learn from other industries when it comes to business risks?

  • Lots to learn from other industries as they do from farming
  • What about looking to other countries and learning from them? ie  Command of our sector? French farmers have more control
  • Collaborative ventures as a way of spreading risk are not just for farmers – there are good examples in other sectors too!

Q8: Do those who inherit take less risks in their farming business than self-starters?

  • No I think not in some cases the inheritance can be more of a risk than a new start up
  • Inheritors take as much risk ..danger of following forefathers production systems out of pride rather than viability/profit
  • Risk is relative to status so the level of risk that a land owner takes against a self starter although different in £ can be
  • Risk taking is a balance between your perception, the facts and other peoples counsel
  • No because they are risking the family silver the day they take over. Weight of family history bearing down on them.
  • Can often take more. YF going home to the family business can inherit all kinds of problems, and mindsets. Often bigger £too!
  • Possibly so, not wanting to “risk” everything generations have worked hard to build?
  • I just worry I’ll be the one to cock whole thing as I’m the third generation
  • Been farming out rite for 3yrs, its opened my eyes massively to risk. Risk needs managing constantly on a daily basis
  • You cant just inherit entrepreneurism. Some farms could be more at risk of following practice of prev generations

Q9. Who do you consult before you take a financial risk, friends, family- maybe professional advice?

  • Family conference around Sunday dinner table.
  • The more advice the better but must be from a reliable source
  • Family and the bank manager!
  • Friends and family are all well sounding boards. Starting to use accountant for advise now too. He’s better with calculator!
  • Bank manager for what you can do, accountant how you do it and family when you do it!
  • All stakeholders can have useful perspectives

Q10: Final (if a bit silly) question, what will be the biggest financial risk you take this year?

  • Buying a grain dryer for 140 acres of arable. Dosen’t seem right, but the figures stack up. Hope to have some crops to dry!
  • Going on holiday for the first time in 8 year without it involving Young farmer
  • Investing in machinery – usually the second I touch something it falls apart!
  • By far the biggest financial risk I’ll take this year is giving my wife my credit card to go shopping with on Saturday.
  • Postgraduate study. Worth it if I can work in bTB research after
  • Returning to milk production

Simon Haley, Reading Agricultural Consultants, and Alan Spedding, 19 January 2014

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