RISK AND UNCERTAINTY IN AGRICULTURE Every day farmers have to face a number of risks which occur with high frequency in agriculture. Types of risks include everything directly affecting the quantity and quality of a farm’s production: , diseases, equipment breakdowns and, of course, natural catastrophes, whose frequency and severity have increased in recent years. Indeed, climate variability and change are responsible for losses in crops – and sometimes in livestock – caused by higher temperatures, unpredictable rainfall, severe droughts, floods and cyclones. Production risks pests huge concern uncertainty in the market, since price expectations often fluctuate greatly from year to year, depending on stock levels and demand trends. Marketing risks commodity are closely linked to the above two, and include the risk of inflation and changes in . They concern the firm’s ability to meet its financial obligations (liquidity) without compromising its normal business operations, and to survive in the future ( ). Financial risks interest rates solvency include the farmers’ for environmental problems resulting from their farming practices, as well as being , or penalised for breaking the law or a regulatory standard, or for accidents involving visitors, customers or workers due to improper safety procedures on the farm. Legal risks liability sued fined include death, divorce, disagreement, disability and accidents at work, and can have a huge impact on the of the business with long-lasting financial and personal consequences. Human resources risks viability Risk management Risk management is much more than just a question of health and . It also means identifying the various risks and finding ways to minimise, avoid or manage them. The best way risks is to be proactive. In the case of climate risk, for example, it would be advisable to make use of weather forecasts and warnings to protect the area with dams, or animal shelters. Financial risks may be faced by diversifying production, using financial instruments such as insurance, sales contracts or . Safety risks may be minimised by wearing protective clothing , storing hazardous chemicals safely and equipment regularly. taking out disability insurance to tackle wind breaks hedging 1 1 maintaining MORE A type of hedging helpful for farmers is the future contract: buyer and seller agree to trade a specified quantity of an agricultural commodity at an agreed price on a given future date. 1 DO Why is it important to wear protective clothing in farming? 1