Ideas you can use to reduce risk

Ideas you can use to reduce risk

Here are some ways to think differently about risk:

Planting offensive and defensive hybrids or varieties in a field could be a clever weather risk-management strategy, says Michael Langemeier, associate director of Purdue’s Center for Commercial Agriculture. Planting two hybrids has been framed as a precision-agriculture strategy to capitalize on field variability, but may also represent a hedge against unpredictable weather variation. How might your drought-year (2012) yields have played out if you’d done this?

Planning for multiple alternate future scenarios is an idea borrowed from the military and various companies to manage risk. To apply “Options Thinking” at home, list as many future scenarios for your farm as you can think of. Include variables like weather, transportation, technology, geopolitical events, regulations, climate change…I bet you can think of more. Shell Oil Co. is said to have 18 future scenarios on tap.

Here are a few examples. For each one, list how you would react:

  • The transportation SNAFU in the Dakotas and resulting basis disaster caused by shale fracking tying up railcars.
  • The ban on GMO-containing hybrid imports expands globally.
  • Fertilizer-use regulations expand.
  • Our competitors adopt yield-enhancing technologies broadly and rapidly, increasing global grain supply.
  • More arable acres come online in places like Ghana, Ukraine and the Cerrado, increasing global grain supply.
  • Your most talented hired man is critically injured on your farm.
  • Your local elevators join a larger movement requiring documented tracking of sustainable farming methods used for crops delivered there.
  • A Corn+Soybean Digest editor calls, asking how you plan for the future.

This approach was presented and recommended by Purdue Distringuished Professor Michael Boehlje at last week’s Top Farmer program. “No one has a perfect crystal ball, but yet we’re required to invest large sums based on what we think will unfold,” he says. 

TAGS: Soybeans Corn
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