Flying Blind Isn't an Option

In my April 25, 2021, column titled, “Keep an eye on the five major farm risks,” I introduced the “Five categories of risk” that farmers face:

1. Production risk
2. Marketing risk
3. Financial risk
4. Legal risk
5. Human risk

We discussed production risk. This includes the risks involved in growing crops and managing livestock. In June’s article titled, “How secure is your milk market?” we talked about marketing risk. How and to whom your milk is sold is a key part of a dairy producer’s business strategy.

In this article, we’ll address financial risk, our third category. Managing financial risk is really the culmination of managing all other risks. Eventually, having a viable farm comes down to the dollars and cents and making sure you can pay your bills. The capital-intensive nature of farming and the volatility of prices, yields, markets, and income, coupled with debt service and other factors, make financial risk one of the most important risks to consider.