Crop budgeting for the upcoming year requires estimating production costs, yields and commodity prices. Out of the three, estimating production costs are the most accurate. Yields and commodity prices can, and likely, will change in value, possibly to undesirable levels. Farm survival focuses on surviving low yields and/or low prices. Low yields and low prices are rarely observed, likely causing us to put little weight on the event. The intention of the revenue risk tool that we have developed is to put credibility on low yields and low prices by inspecting realized historical events and theory. Our program links these events to the producer’s financial investment, providing an estimate of how much money is needed to survive rare events. The tool provides a framework to consider rare, financially devastating events and their financial implications. The tool provides flexibility for producers to put in their own rare events.
In this session, we will guide participants on the methods and steps used to produce the risk analysis. Here we combine observed historical outcomes, theory, and logic to produce a forward-looking view of revenue risk and how this impacts profitability. Our approach can be modified to be applied for others to use in their area.
|Conference||2022 Extension Risk Management Education National Conference|
|Presentation Type||30 Minute Concurrent|