It seems everyone from the Federal Government to agricultural companies and producer groups are focusing one major issue for producers – managing risk. Perhaps a better way to state this is the goal is to minimize your risk (or exposure) and to cope when risk exposure occurs. For the USDA, as Farm Bills have evolved over the last twenty years, a major key is the crop insurance program since most other risk management tools have disappeared. For companies and producer groups, it’s how to plan so your operation minimizes the risk agronomically and economically through a variety of tools and technologies. Agronomists, even though they really didn’t call it risk management, have been in the business for many decades through research and recommendations. So even though there are many high-powered and technologically advanced risk management tools today, let’s take a brief look at the older but effective tools of the last sixty plus years.
• Diverse cropping systems – Depending on a number of climate, soil, and other factors the more types of crops you plant the more spread out risk is. Splitting land between winter and summer crops further mitigates risk. Where possible and practical, mixing broadleaf with grass crops and forage with grain crops along with winter and summer crops minimizes the possibility of weather conditions totally devastating yields. It also minimizes economic risk, especially in years when one crop (as in corn this year) experiences a severe drop in prices. Rotating crops also helps through potential savings in pest control and by allowing for easier adoption and maintenance of conservation tillage systems. There are also downsides in terms of equipment costs and more extensive planning and management.
• Diversification within a single crop – even if you split your operation into several crops, you aren’t done managing risk. The adage “Never put all your eggs in one basket.” applies here. If you have more than say 200 acres of wheat, you should, after reviewing variety characteristics, select a minimum of two varieties. With significant acreage three or four is preferable or with wheat it might be wise to select a blend of several varieties. Far a given crop it may be advisable to select a range of maturities (within reason) and/or stagger planting dates. Hopefully, you get the idea.
• Gathering information on fields – Producers taking the time and energy to soil test, yield map and learn to know their fields make better management decisions on what goes where, when, and how much. If the latest planting and chemical application techniques are used, yields and input costs are optimized. Paying attention to weed patterns on fields allows producers to make more appropriate crop selections and weed management decisions.
There is so much more that can be done agronomically to minimize and manage risk. And while the items listed above are all sound, they may not be possible or practical for a given operation or in a given area.