Farm policy enacted since 1996 has created an increasing demand that agriculture producers understand and better manage risk. The Agricultural Act of 2014 represents yet another step toward a more comprehensive risk management framework in U.S. agricultural policy. However, effective risk management is difficult, both because the concepts are challenging and because the breadth of solutions is wide. Even where concepts are well understood, few have mastery of the tools and skills needed to properly evaluate management strategies. The RightRisk education team has been involved in developing risk simulations, online courses, and decision tools since its formation in 2001. The team’s recently completed Multi-Temporal Risk Analyzer (MTRA) tool provides farm and ranch managers much-needed assistance in evaluating risk management strategies that span multiple time periods. MTRA utilizes a partial budgeting framework to evaluate changes proposed for a segment of the business. This approach incorporates four basic adjustments: added returns; reduced costs; added costs; or reduced returns. From these, the net benefit of making a change may be calculated. Partial budgeting is useful for evaluating management changes. The MTRA tool expands the approach to evaluate the impact of risk over time. MTRA offers users a chance to allow up to four inputs to vary under each partial budget category in describing proposed management changes. In addition, the user may enter a variable time horizon for each input, ranging up to 20 years. Results describe possible outcomes using a cumulative distribution graph that indicates the probability of earning a net return at or below a given value on a cash basis or when incorporating the time value of money over the period of interest.
|Conference||2017 Extension Risk Management Education National Conference|
|Presentation Type||30-Minute Concurrent|