Weblog for Agricultural Risk Management

Whether you have agri-tourism and pick-your-own crops, or simply have hired labor, you have a certain amount of responsibility for the safety of those people and thus a certain amount of liability should someone get hurt or sick as a result of their activities on your farm.

Another legal consideration for farmers is environmental liability. The Environmental Protection Agency has a number of rules and regulations that directly impact farming operations such as the Clean Water Act, the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), the Food Quality Protection Act, and the Clean Air Act to name a few. Farmers should be aware of these regulations and prepared to deal with law suits or possible criminal prosecutions by State and Federal Agencies for environmental event.

For a complete list of EPA laws that affect farmers go to http://www.epa.gov/agriculture/agmatrix.pdf .

And finally, the structure of your farm business will have legal implications. Are you organized as a sole proprietorship? Partnership? Limited Liability Company? Each of these options has different consequences in terms of taxes, third-party liability, and estate planning.

Strategies for dealing with legal risk include:

* Carrying sufficient farm or business liability insurance: Many liability insurance policies do not cover pollution claims so be sure to find out if yours does and think about possibly purchasing an additional pollution policy.

* Develop employee procedures and management practices

* Develop good neighbor relations: There have been a growing number of liability suits against farms by adjacent landowners or community members asserting that the farm is damaging air and water quality. First and foremost limiting environmental risk, and then being sure to keep neighbors informed as to your farm’s production practices and desire to eliminate risks to the community can be a good way to avoid legal action.

* Use agricultural practices that will limit environmental risk: Keeping detailed records of all pesticide and fertilizer applications as well as creating a nutrient management plan will help to ensure that amounts of added inputs are sufficient, but not excessive thus reducing risk of contamination. Altering tillage practices and planting shelterbelts can reduce erosion, using Integrated Pest Management can reduce the number of pesticide applications necessary. For more ideas on limiting environmental risk check out the following:
+ Center for Sustainable Agriculture
+ Northeast Organic Farming Association
+ Natural Resources Conservation Service

* Consult with a professional in your state to find out what business entity will be right for you.

* Be sure to have all contracts in writing and to read contracts carefully before entering into them: this applies to all types of contracts including marketing contracts, contracts for sale or leasing of real estate, crop insurance coverage, mortgages, etc.

Additional Legal Resources:

"An Explanation of the Legal Risks Facing Farmers"

"Farm Transitions Assistance Offered by Mediation Program and UVM Extension" by Matt Strassberg

Center for Sustainable Agriculture. “A Legal Guide to the Business of Farming in Vermont.”
or contact the Center at:

University of Vermont Center for Sustainable Agriculture
106 Highpoint Center
Colchester, VT 05446-8800
(802) 656-5459
Email: sustainable.agriculture@uvm.edu

Posted by Jericho Bicknell at 11:14 AM | Permalink | Comments (0) | TrackBacks (0)

Many of the risks discussed on this website, although under the heading of production, marketing, financial, or legal risk, can actually be a direct result of the quality and treatment of farm labor. Unhealthy working conditions causing employees to become sick or injured can result in legal issues; careless hiring of inexperienced workers or lack of adequate training can result in damage to crops and machinery; inadequate compensation and lack of encouragement can result in employees with little pride in their work and thus little care in ensuring a quality harvest.

Effective human resource management is also an important part of keeping the farm running smoothly in the event of illness, death, or disability of farm operators.

Strategies for managing human resource risk include:

* Develop employee procedures and management practices: This should include hiring protocol, training schedules, performance review schedule, tips for good communication, development of an employee handbook,

* Disability and/or Life Insurance

* Develop a farm transfer plan or estate plan to ensure business continuity: Is there a family member or employee that wants to continue operating the farm after you retire? Are all family members and employees aware of your plan for the farm? Have the appropriate legal documents been written (wills, trusts, etc.) to ensure a smooth transition?

Additional Human Resources Risk Resources:

Department of Agricultural Economics Agricultural Labor Management Papers

University of Vermont Agricultural Labor Management Website

USDA Cooperative State Research, Education, and Extension Service Workforce Development and Safety Website

"Human Resource Considerations for the Hiring Season"

"Farm Transitions Assistance Offered by Mediation Program and UVM Extension" by Matt Strassberg

Presentation on Agricultural Labor Management

HRM Risks and Strategies in Fruit Production. by Bitsch, Fogleman, and Stup, 2004.

Posted by Jericho Bicknell at 11:01 AM | Permalink | Comments (0) | TrackBacks (0)

There are three basic components of financial risk management: 1) Managing cash flow so as to be able to pay bills on time, 2) Managing availability of credit and the cost of interest, 3) Preserving and building equity.

Strategies for managing financial risk:

* Keep good records and a detailed budget: The budget should be updated each month as actual expense numbers are recorded. This can then be compared to projected amounts and farm expenditures can be adjusted accordingly.

* Secure loans with fixed interest rates. Whenever financially possible, pay down debt so as to reduce the cost of interest.

* Be sure that borrowed money is going toward those things that will be most likely to guarantee a return. And don’t forget to take into account the cost of depreciation.

* Insure Farm Gross Income: Insurance policies such as Adjusted Gross Revenue or Adjusted Gross Revenue-Lite insure the gross revenue of your farm operation. This can be a useful tool to ensure that you make the amount of income that you need each year.

Posted by Jericho Bicknell at 10:59 AM | Permalink | Comments (0) | TrackBacks (0)

In an ever-expanding global market predicting end of season price can be a tricky (impossible?) task. How many times have you thought, “if only I had known that the price of corn would be so low I would have planted half the acreage that I did!”? In addition to price fluctuations, marketing risk can also involve loss of market due to closing of a processing plant, or farmer’s market.

Strategies to deal with marketing risk include:

* Developing a marketing plan: How much risk can you afford? Is there a market for the crops that you are growing? What marketing tactics will you use to ensure that you get a good price for your crop? These are all questions that should be answered prior to any planting or investing in livestock, etc. You may want to consult professionals such as futures brokers, elevator operators, financial planners, and farm consultant (such as the Farm Viability Program) to help develop your marketing plan.

* Joining a marketing cooperative: Individuals farmers do not have much control on the markets, but groups of farmers joining together into a cooperative can gain bargaining power and improve competitiveness of the operations. This is also due to reduced processing costs that come from pooling the product of many farm operations. New markets that desire larger quantities of product than one farmer can provide are also opened up as a result.

* Direct marketing: Selling directly to your consumers whether through a farmstand, farmer’s market, mail-order, pick-your-own, or farm shares, enables you to keep a larger portion of the final sale price than if you are selling wholesale. Direct marketing does, however, require additional management and skill in customer service. A huge part of making direct marketing work for you is ensuring a great experience for your customers so that they will keep coming back. See the links below for more information on direct marketing and organizing a successful CSA.

* Market Contracts: There are a number of different types of marketing contracts that can be used to help stabilize prices. Click here to learn more about marketing contracts.

* Storage: If the market price for your product at harvest is low one option is to store that crop in hopes that the price will rise. This can be risky as there is no guarantee that prices will not drop instead of rising, and for some crops there is also the risk of spoilage during storage.

* Adjusted Gross Revenue or Adjusted Gross Revenue-Lite Insurance.

Marketing risk links:

“Community Supported Agriculture: Organizing a successful CSA” by Cathy Roth and Elizabeth Keen, UVM Extension SARE Bulletin #2, 1999.

"The Challenge:Reducing Your Exposure to Marketing Risk"

"Understanding Dairy Markets" website

"Farmer Cooperatives in the United States", USDA Rural Business Cooperative Service, 1990.

"Direct Marketing of Farm Produce" by Vern Grubinger, University of Maine Cooperative Extension Bulletin #7143.

Posted by Jericho Bicknell at 10:46 AM | Permalink | Comments (0) | TrackBacks (0)

Often the first thing that comes to mind when discussing farm risk is the risk of crop losses due to weather, pests, disease, genetics, machinery problems, and/or inadequate input management.

Some strategies to deal with production risk include:

* Diversification: Growing a variety of different crops can protect against some production risk, however, many specialized farms that have a large financial investment in machinery specific to one crop may not have the option to grow a variety. There are other types of diversification that may help though. For instance, diversifying income sources by getting off-farm income for yourself or your spouse, or looking into on-farm renewable energy production.
o CVPS Cow Power
o Earth Turbines
o Calculating On-Farm Renewable Energy Production: The Feasibility of Farm Energy Self-Sufficiency in Massachusetts by Jericho Bicknell
o "The Market Potential of Farm-Scale Oilseed Crop Products in Vermont" by Emily Stebbins

* Investing in new technology: Sometimes the greatest risks to your crop production can be mitigated by investing in new technologies. For example, if low rainfall is a common occurrence in your area, think about installing irrigation equipment. If early frost is an issue, think about investing in frost protection.

* Have strict maintenance protocol for all equipment.

* Purchase crop insurance: In the same way that car insurance provides the owner with a payment in case of a wreck, crop insurance provides payment in case of yield losses due to natural disasters or market fluctuations.

More on Crop Insurance

Posted by Jericho Bicknell at 10:32 AM | Permalink | Comments (0) | TrackBacks (0)