Helping Farmers Manage Risk

By Nichole Gouldie, Communications Specialist

Risk is an unavoidable element in the business of agriculture. Production can vary widely year to year due to unforeseen weather and market conditions, causing wide swings in commodity prices. But risk, while inevitable, is often manageable.

Following a storm this past June, McPherson area farmer Dennis Friesen saw green snap damage like he had never seen before. After the area received 80-90 mph winds, he soon discovered the risk management decisions he had made with TMA and MKC were bound to improve his return on his investment.

After looking over his fields following the storm, Friesen immediately called his TMA Crop Insurance Specialist, Danny Flynn. Within three days, the totaled corn field was chopped and a short-season corn was planted. “Very quickly Dennis was able to collect insurance, protect his revenue and pursue another crop,” Flynn said.

Once he received word the corn crop was 70 to 80 percent damaged, Friesen worked with Dusty Campbell, TMA grain marketing specialist, to make sure he would be okay on his marketing strategy.

Danny Flynn, crop insurance specialist for TMA, discusses

risk management strategies for 2014 with Dennis Friesen.

TMA provides producers with a multitude of risk management offerings that can be customized to fit their operations. The array of risk management strategies available to producers allows the opportunity to place their attention on making buying and selling decisions based off timing and profitability instead of price.

“There are a number of tools available and widely used to manage the economic, structural and environmental risks of farming,” said Devin Schierling, TMA grain marketing manager.

Schierling says the local cooperative plays an integral role in assisting customers manage their crop input risk, just as the TMA specialist focuses on maximizing revenue through grain marketing and crop insurance decisions.  “This approach allows our producers to focus on the timing of their marketing decisions,” he said.

“Depending upon their needs, producers will have the ability to manage their farm’s risk in multiple crop years by using traditional forward cash contracts, option based contracts, and over-the-counter contracts,” Schierling said. “TMA provides producers with a multitude of risk management offerings that can be customized to fit their operations and grain contracts as the vehicle to help them maximize their revenue potential.”

Although farms vary widely with respect to crop mix, financial situation and other business, timing and looking at trends is the most important part of creating a successful risk management plan. Schierling encourages producers to focus on their farm as an enterprise to allow them to make decisions based off revenue and not from an individual price perspective.

While producers often take the steps necessary to manage their risk, there are times when it certainly pays off and the producer learns first-hand just how important managing risk is to their operation.

Friesen stated it was reassuring to have the specialists there to help make sure he was taking the appropriate steps to make the insurance claim correctly.

“Dusty and Danny worked together, and we worked with Jared Jones right away to check availability of seed,” Friesen said. “I won’t find this type of customer service with other companies.”

While crop insurance is the most ubiquitous risk management tool used by farmers - 86 percent of total planted acres in 2012 were insured – there are other tools many farmers use as well.

“Agricultural practices, marketing and financial strategies are all critical in helping producers manage their risk,” said Jared Jones, MKC field marketer. “The TMA and MKC relationship provides numerous avenues for producers to manage their risk.”

The risk management services at MKC include programs such as MKC’s risk 12-month forward contracting on fuel, crop protection and nutrient products, and the double-crop soybean revenue program.

Friesen says he regularly works with TMA and MKC specialists to manage risk.

According to Jones, the moment a producer decides to plant, the risk management cycle begins. TMA and MKC work together to determine inputs, crop insurance and the ability to market grain.

Friesen stated risk management is a continuous cycle working with his insurance specialist, grain marketing specialist and field marketer. “It all works really well together,” he stated.

 “Every one of our producer’s definition of a successful risk management plan is different,” Flynn said. “Plans will change depending upon the customer’s operation but the focus is always on maximizing our producer’s revenue potential.”