; Risks Associated with Environmental Markets/Contracts | Conferences | AgRisk Library


Conference Name Risks Associated with Environmental Markets/Contracts

Raymond E. Massey


Non agricultural entities increasingly target agricultural entities for long term contract relationships. Examples include conservation easements, land lease for wind power generation, carbon sequestration contracts and sale of surface water rights. Some contracts are viewed by farmers as opportunities to supplement income from production at very little cost; others are opportunities to sell underutilized rights to others who have a greater demand for them. Several factors are common to all of these opportunities that introduce risk to farmers: multi-year uncertainties, option clauses and new markets with little historical data to indicate price trends.

This session will present the experiences and materials of a risk management educational program designed to educate farmers and landowners on the opportunities and risks associated with novel contracts being offered them.

Of particular interest in this presentation is experience of decreasing demand that occurred during the educational program. At the beginning, carbon sequestration contracts were becoming popular. At the end of the educational program, the market for carbon sequestration had died - presenting an interesting example of the risk of contracts being offered to farmers and landowners.