Farming: A Risky Business and How Research and Extension Address Risk

CALS student and sweet potatoes.

Risk is everywhere for a farmer. Business risks could be crop failure due to extreme weather, loss of a market due to trade policies, or low commodity prices. Personal risk can mean physical injury on the farm. The CDC states “farmers are at very high risk for fatal and nonfatal injuries; and farming is one of the few industries in which family members (who often share the work and live on the premises) are also at risk for fatal and nonfatal injuries.” Personal risk also includes potential bankruptcy. How can researchers, policymakers, farmers and extension professionals better understand and ultimately reduce risk to the farmer and the food supply? To follow the cycle of risk management through its various levels we will use an anecdote from new research from the Department of Agricultural and Resource Economics professors Rod Rejesus, Xiaoyong Zheng, and Zheng Li.


Understanding risk is the first step to addressing it correctly. Many universities contribute to the body of knowledge regarding agricultural production costs, yields and risk. Rod, Xioayong and Zheng analyzed data on agricultural yields and the impacts of various factors on yield risk using a new flexible method to measure yield risk. The article “Nonparametric Estimation and Inference of Production Risk” makes a contribution by developing a modern estimation method that will provide a better characterization of production and yield risk, which can be useful for policymakers. Having a more accurate way to measure production risk in agriculture can lay the foundation for assessing the effectiveness of various risk management policies and programs, and ultimately for developing new farmer safety-net policies.


A better understanding of how various factors and policies affect yields risk has the potential to influence important legislation in agriculture, like the Farm Bill. Programs in the Farm Bill,  like the Price Loss Coverage (PLC) or Agricultural Risk Coverage (ARC), can likely be refined as new information on risk emerge. Land-grant universities, and Extension Associates like Rod, then play a role in disseminating information about these policies to their constituents. It is their responsibility to provide information about the risk implications of these policies and encourage the farmers to make choices that best is most advantageous to their business and personal interests. Extension professionals are also able to view the general outcomes of the risk management programs and policies in their region, and the effect it has on the number or types of farming operations in the area. This feedback and information offers new avenues for further research, thus closing the loop between research and extension in risk management


Subscribe to ARE Monthly Newsletter