Overview

•  Risk is part of the agriculture industry.
•  Risk management ensures that the best choices are made by reducing risk by choosing alternatives with the better odds.
• According to the USDA, United States Department of Agriculture, the five general risks faced in agriculture are production risk, price or market risk, financial risk, institutional risk, and human/personal risk.

Production Risk

• Due to factors such as disease, extreme weather, and pests, the production volume and quality may be compromised.
• It addresses the uncertainties linked with the growth processes of crops and livestock.

Price/Market Risk

• This risk varies from one commodity to another.
• This risk addresses the cost farmers will incur when purchasing commodities for inputs.

Financial Risk

• Financial risk exists when farms get into debt and are obligated to repay it, rising interest rates, and any restrictions on credit availability. 
• This risk can adversely affect the farm business. 

Institutional Risk

• This is a risk that stems from uncertainties in Government decisions and actions.
•  Examples here include tax laws, rules and regulations that address chemical use, animal waste disposal, and pricing levels. All these affect the profit/farm business.

Human/Personal Risk

• This risk addresses farmers in terms of their physical health, their relationships, and unexpected disasters.
•  Examples here include accidents, illness, death, and divorce.

Risk Management Programs

• The government has set up various risk management and coverage programs to mitigate the impact of any disasters that may befall the agriculture industry.
• "The Agricultural Risk Coverage (ARC) program" was introduced in the 2014 Agriculture act.
• "The Livestock Forage Disaster Program, the Livestock Indemnity Program, the Emergency Assistance for Livestock, Honey Bees, and Farm Raised Fish, and the Tree Assistance Program" protects producers from the impact of extreme adversities such as diseases, adverse weather, or other environmental conditions.
•  Federal crop insurance, established in the 1930s, protects farmers from extreme weather.