65% of Farmers Lack Risk Management Plans

In a recent survey¹ conducted by Nationwide, it was revealed that a staggering 65% of farmers do not have a plan to manage or mitigate risks.

This alarming statistic highlights the urgent need for farmers to reassess their approach to risk management, especially as the challenges they face are becoming increasingly complex.

“Farmers and ranchers, like most of us, tend to focus on their current risks, but they should also be thinking about what risks or disruptions could impact their growth, transition, etc. five years from now,” said Laramie Sandquist, Sr. AVP, Nationwide Agribusiness Risk Management.

The growing complexity of farming risks

Farming is inherently risky, with numerous factors threatening a farm’s ability to achieve its goals. As we look to the future, these risks are expected to become even more intricate, necessitating a fresh perspective on how to effectively identify, analyze and manage them.

Some of the emerging risks include:

• Frequent and Severe Weather Events: The U.S is experiencing more unpredictable and extreme weather patterns.
• Labor Disruptions: Policy changes and workforce shortages can hinder essential farming tasks.
• Market Access Issues: Operational challenges at processing plants can disrupt the sale of produce.
• Technological Threats: Data breaches and ransomware attacks pose significant risks to farm operations.
• Regulatory Changes: New restrictions on fertilizer use and livestock management can create operational hurdles.
• Tax Policy Shifts: Changes in estate taxes can impact the ability to transition the farm to the next generation.

Assessing your farm’s preparedness

Given these potential disruptions, it’s crucial for farmers to evaluate their preparedness. Consider the following questions:

• How vulnerable is your farm to these threats?
• Are your assets and resources adequately protected?
• Do you need to expand or rethink your current partnerships?
• Can some risks be mitigated with simple prevention strategies?
• What is your tolerance for downtime or lack of market access?
• How would unexpected disruptions impact your long-term goals?

Financial impact of risks

The survey also highlighted the significant financial impact of risks on farmers:

• More than 80% of farmers have experienced adverse weather events, with an average loss of $250,879 per farmer.
• Half of the farmers reported supply chain disruptions, averaging $49,228 in losses per event.
• 40% of farmers lost key markets for their crops, incurring average losses of $149,626.

Proactive risk management: a necessity for long-term success

To help navigate these complex risks and limit potential disruptions, farmers must adopt a proactive approach to risk management. Here are some steps to get started:

Conduct a Risk Assessment: Identify potential risks, including safety hazards, legal liabilities and financial threats.
Develop a Plan: Create a comprehensive plan to mitigate identified risks.
Enhance Farm Resilience: Work with insurance providers to implement strategies that make your farm more resistant to disruptions.