The tremendous volatility that has existed in crop and input markets the last several years has many people talking about the importance of risk management. While it is hard to argue that risk management is not important, it can mean many different things and thus it is beneficial to know which aspects of risk management we should focus on. For example, when discussing the importance of risk management as it relates to market volatility, most references have to do with buying inputs and selling crops at optimal times. That is, the common “buy low and sell high” thinking prevails. Given the extreme price movements that are becoming more common, it is easy to see why people are focusing on this and asking “what if I had bought earlier?” or “what if I hadn’t sold pre-harvest?” type of questions. While hindsight analyses make it quite easy to see what “should have been done,” making these same decisions in real time are much more difficult. It is obvious that if inputs are purchased at a lower price and/or outputs sold at a higher price, all else equal, that profits will increase. However, the question that needs to be answered is, do we have evidence that producers can consistently identify the optimal times to buy inputs and sell their crops in real time?
Organization |
Kansas State Cooperative Research and Extension Service |
Publisher |
Kansas State University |
Publication Views |
497 |
Material Type |
Written Material |