Most Canadian agriculture producers have either tapped into or identified strategies to manage the key risks to their operations, according to the most recent Farm Credit Canada (FCC) risk management survey.
“Risk is an inherent part of owning and operating any successful business, especially in an industry where so many factors are beyond the producer’s control,” said Craig Klemmer, FCC’s principal economist. “But if we’ve learned anything from the disruptions caused by the pandemic, producers can’t be complacent and should be prepared to adopt new strategies to address evolving risks.”
The survey of more than 2,000 farm operators shows that 87 per cent have implemented strategies to mitigate risk in five key areas: production, marketing, financial, legal and human resources. Managing risk involves keeping tabs on markets, ensuring the business can withstand sudden changes in commodity prices or economic conditions, and securing sufficient human resources to support operations.
Livestock (beef, hogs, sheep and goats) producers used the fewest risk mitigation strategies on their operations, compared to producers from the three other sectors – grains and oilseeds, supply managed sectors, and greenhouse vegetables and fruit – included in the survey. The results for the livestock sector were consistent across the five risk areas, signaling either a higher risk tolerance or a lack of risk management options to meet the sector’s needs.
Human resource risks pose the greatest concern for greenhouse vegetables and fruit operators, primarily due to their dependency on hired labour and challenges recruiting for these sectors. Operators from the other sectors – grains and oilseeds, supply management and livestock – are more dependent on family members to support their operations, with the exception of hog operations.
Survey participants across all four sectors represented in the survey expressed moderate concern when it came to production risks, which include weather, disease, pests and other factors, while the impact of adverse weather generated the most concern.
“The agriculture sector overall has done a good job identifying and mitigating production risks,” Klemmer said, noting significant attention has been paid to both on- and off-farm mitigation measures, including the use of government programs, industry specialists (agronomists, nutritionists and veterinarians) and diversification of production.
The study showed the top risk management strategies include record keeping, insurance and government programs, as well as professional services (accountants and lawyers) to mitigate financial and legal risks. Seven out of 10 producers said they have regular check-ins with their financial institutions and nine out of 10 are working with an accountant or financial planner.
“The good news is most producers are in a solid financial position to withstand short-term impacts on their businesses,” Klemmer said. “We encourage producers to have a risk management plan that pulls together mitigation strategies, as well as identifies key risks and available solutions to manage these risks before they emerge.”
The survey, however, suggests there’s still room for improvement. Fewer than 40 per cent of those surveyed indicated they have a business plan to manage potentially increasing interest rates, yet increasing operating costs was ranked as a significant concern among producers in all sectors.
FCC Economics has produced two blog posts on the risk management survey. For more information and insights, visit the FCC Economics blog post at fcc.ca/AgEconomics.
The survey was conducted from November 5-12, 2020. All participants are primarily involved in agriculture production and are considered key decision makers for their operations. Based on the sample size, the survey has a margin of error plus/minus 2.2 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. For more results from the risk management survey, visit FCC Vision Results. To learn more about the FCC Vision Panel, http://www.fccvision.ca/.
